If you've been searching for a roadmap on how to better administer your workplace retirement plan and in understanding fiduciary obligations, you could have gone to the recent American Society of Pension Professionals and Actuaries conference outside of Washington, D.C.
Or you can click through these pages, which offer excerpts from a presentation on best practices for plan committees by (and in the words of) Sheldon H. Smith of Bryan Cave LLP.
1. Administrative committees
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a. The committee should include at least some members who have skills particularly suited to performing the duties of the committee, such as:
- At least one individual with a financial background should serve on the investment committee.
- At least one senior member of human resources should serve on the administrative committee.
b. Clear rules concerning rotation off of each committee should be adopted and followed, to keep members interested.
Note: Rarely is there a pay raise or a promotion for serving on a committee. However, there is customarily a pat on the back and — oh, yes — personal liability.
2. Documentation of fiduciary decisions
Document all actions, and reasons for such actions, through written minutes or other means.
a. Minutes from the committee's last meeting should be approved.
b. Supporting information that contributed to the fiduciaries' decisions should be retained with the corresponding minutes.
3
. Investment policy statement
The investment committee should have an IPS that provides guidelines and considerations for selecting and monitoring investment options.
a. The investment committee should monitor the IPS at least once a year, and keep it current to ensure investments are made in a rational manner that further the purpose of the plan.
b. The committee should review investment performance quarterly against standard market indices.
c. If the IPS contains a policy for monitoring managers or placing funds on a "watch list," follow the policy and document all actions.
Note: An IPS may be consider a governing plan document. Failure to follow it leaves a "roadmap" for the plaintiff.
4. Retention of service providers
Documents should clearly delegate roles and responsibilities to plan fiduciaries, including delegations regarding the retention and monitoring of service providers.
a. The appropriate plan fiduciary should carefully evaluate candidates, review any potential conflicts of interest and document the selection of service providers.
b. Plan fiduciaries should implement, follow and document a regular, formal review of service providers' performance, fees/costs, etc.
c. Plan fiduciaries should fully understand that both selection and monitoring of a service provider are fiduciary functions.
5. Internal controls
a. Segregate responsibilities for payroll, human resources and business functions.
b. Have an effective and accurate IT system.
c. Ensure that plan records are maintained by knowledgeable and responsible people.
d. Ensure that the system reflects that transfers between parties are "good transfers."
e. Ensure that the 5500 is accurate and reconciled to plan records.
f. Remember that the IRS wants procedures in place for plan operations review and plan document updates.
6. Fiduciary training
Provide formal fiduciary training to all ERISA plan fiduciaries. Many employers have established one or more special "fiduciary training" sessions for committee members so that they may understand their fiduciary duties under ERISA.
a. Committee members should fully understand what it means to be an ERISA fiduciary, and the exposure associated with their status.
b. Structure training into four modules and present one at each quarterly administrative committee/investment committee meeting.
c. Don't make it too hard or boring.
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