How Many Retirement Plan Committees Does Your Organization Need?
Retirement plan committees can help plans function more efficiently and effectively. They aren’t a requirement under ERISA, though many organizations choose to establish committees for the many advantages they offer.
A Host of Benefits
Committees can assist retirement plans in any number of ways, including:
Delegating plan responsibilities
Providing greater clarity about fiduciary roles and responsibilities
Promoting accountability
Allowing more diverse voices to weigh in on plan management
Establishing transparent procedures to maintain appropriate oversight and strengthen plan governance
Monitoring for ERISA compliance and providing documentation in the event of an audit
Helping ensure the plan benefits all participants
Serving as a vehicle for members to gather employee feedback to aid in decision-making
None, One — or Some?
According to Voya, 94% of plans with more than 5,000 participants have a retirement plan committee; however, this number drops to only 53% for plans with less than 200 participants. Most retirement plan committees have five to 10 members, which often includes representation from the finance, legal, human resources, benefits and/or payroll departments.
Committee functions are occasionally divided up, with various areas of responsibility assigned to different groups. For example, an investment committee will provide ongoing management of the plan’s lineup. Sometimes you may also find an oversight committee charged with monitoring the plan’s service providers and advisors, a Somewhat less common are settlor committees, which handle business-related decisions that don’t fall under the usual rules of fiduciary duty.
How many committees should your organization have? When it comes to ensuring the right amount of oversight and guidance, should it be one and done — or is more better?
More Does Not Mean Better
While committees can help you run your plan more efficiently, too many can overcomplicate processes and produce the opposite effect. If you have employees or board members serving on several committees, it could become more challenging for them to meet all of their responsibilities.
Small companies with fewer resources likely won’t have the time or personnel necessary to staff and run multiple committees. While it might seem having several committees could especially benefit larger plans, too many cooks in the kitchen can hinder committee productivity and coordination. Communication may begin to break down, and it can take extra time and resources to ensure decisions coming out of multiple committees are consistent and mesh with organizational objectives. For the majority of organizations, one committee is often enough.
Your Advisor as a Resource
Your advisor, often in consultation with an experienced ERISA attorney, can be invaluable in assisting plan sponsors with the set-up and operation of your retirement plan committee. They can make recommendations regarding the size of the committee, and the staff and members of your workforce who should serve on it. They can also help draft the retirement plan charter and provide the necessary fiduciary training to committee members.
In the end, when it comes down to how many retirement plan committees is best — one committee done right is usually all you need. If you have questions about your organization’s retirement plan committee, get in touch with a KerberRose Trusted Advisor.
Sources:
(2021, September 1). Here's what many retirement plan committees have in common. Voya Financial. https://www.voya.com/voya-insights/heres-what-many-retirement-plan-committees-have-common
Miller, CEBS, S. (2021, June 10). Reviewing Retirement Plan Committee Designs and Practices. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/reviewing-retirement-plan-committee-designs-and-practices.aspx
Pivirotto, S. (n.d.). Best Practices for 401k Committees. 401k Best Practices. https://401kbestpractices.com/best-practices-for-401k-committees
Moore, R. (2019, June 12). PSNC 2019: Best Practices for Your Retirement Plan Committee. Plan Sponsor. https://www.plansponsor.com/psnc-2019-best-practices-retirement-plan-committee/
Barney, L. (2020, October 20). Advisers Can Spearhead Retirement Plan Committee Setup and Training. Plan Sponsor. https://www.plansponsor.com/advisers-can-spearhead-retirement-plan-committee-setup-training/