What To Know About Retirement Plan Committees

By Anthony L. Scialabba IV, Esq., QKA

 

Why should a plan have a retirement plan committee (“committee”)?

 

Regardless of the size of a plan, it is beneficial to establish a committee. A committee may be the most optimal way to ensure plan participants will be prepared for their retirement futures. In addition to the aim of retirement readiness, plan participants may file lawsuits against plan fiduciaries on the ground of a breach of their fiduciary duties. The existence of a committee (and documentation the committee may possess) may act as a defense against plan participants who file lawsuits against plan fiduciaries in this regard.

 

What is the structure of a committee?

 

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), provides that a fiduciary is one who exercises discretionary authority or control over the management of a plan or in the administration of a plan. In addition, ERISA sets forth that plan fiduciaries have a duty to act prudently and exclusively in the best interests of plan participants. In order to perform these duties, plan fiduciaries commonly form and comprise a committee.

 

Why is a committee regularly composed of plan fiduciaries?

 

In addition to the aim of satisfying their duties, plan fiduciaries generally make up a committee as they are the ones who collectively possess the most knowledge of the plan and the provisions of the plan document. Thus, plan fiduciaries are the best suited to make decisions in the best interests of plan participants. Through the establishment of a committee, plan fiduciaries may generally produce documentation to show why they believe their decisions are in the best interests of plan participants.

 

What positions should members have on a committee?

 

Each member should have a specific role. Examples of such roles are reviewing plan investment selections or reviewing plan document provisions. The importance of the role each member plays should be emphasized to ensure there is a process for sound decision-making to be undertaken.

 

How should a committee meeting be organized?

 

It must be decided when the meetings should occur (often, monthly or quarterly). These meetings should have one member chosen to lead while another member takes the minutes. At the start of each meeting, the minutes from the previous meeting should be reviewed and approved. Various topics should then be addressed. Examples of topics are reviewing: 1) the non-discrimination testing and compliance report for the prior year; 2) the fees of the plan to determine their reasonableness; and 3) the procedures the plan has for distributions and contributions.

 

For a more in-depth discussion on committees, please read: A. Scialabba, Esq. “Protecting Retirement Plan Fiduciaries From ERISA Liability” The Journal of Pension Planning and Compliance (2021). If you have any questions or comments with regard to committees or wish to have a copy of the “Protecting Retirement Plan Fiduciaries” article, please call 856-396-0499 or email clientservices@retirewelltpa.com.