With the Department of Labor’s release of its proposed conflicts of interest rule and recent court cases involving fiduciary duties, fiduciary responsibilities are getting a lot of attention. If you are a fiduciary for your company’s retirement plan, now is a good time to review what your role is and make sure you are meeting your obligations.
In our recent Employee Benefit Plan Benchmarking Survey, Aronson asked retirement plan sponsors about their governance practices, specifically whether they use an outside advisor and if they have a 401(k) committee. Not surprisingly, 80% of respondents indicated they did use an outside advisor, and 71% of those met at least annually. However, only 44% of respondents reported having a 401(k) committee.
Best Practice: The plan sponsor should establish a committee that meets regularly to discuss topics of importance to the plan, including a review of the investment options, investment performance and fees. Meetings should be held no less than annually, but semi-annual or even quarterly meetings can keep the importance of the plan at the forefront. Meetings that involve a discussion of the investments should include an outside investment advisor if investment expertise is not found on the committee. The committee should make changes to underperforming funds where appropriate and monitor investment fees. Keep minutes of these meetings that include the information reviewed and any fiduciary decisions made.
Fiduciaries must act prudently and manage plan assets solely in the interest of the plan’s participants and beneficiaries. With the heightened attention being focused on fiduciaries, it is important that those in this role understand their responsibilities. Many organizations offer fiduciary training, and it would be best practice for such training to be provided to members of the retirement plan committee.
For more information on fiduciary responsibilities and effective plan governance, please contact Aronson’s Employee Benefit Plan Services Group at 301.231.6200.