Is your 401(k) investment committee doing everything it should? With the feds starting to take a more active role overseeing companies’ retirement plans, that’s a question that needs to be examined on a regular basis.
As employers are well aware, the DOL has said a few execs acting as a plan sponsor isn’t enough to constitute an “independent review” of the plan and satisfy a plan sponsor’s fiduciary responsibilities.
Committees should be made up of a broad sample of the company. Example: A few senior execs (CFO or vice president), some department heads and HR or benefits reps.
The big 3
Here’s what a committee should be tackling on a regular basis, according to Mercer senior defined contribution consultant Bill McClain.
1. Government regs. In recent years, the feds have taken a strong interest in employers’ retirement plans. So committees must be able to understand exactly how these complex regs apply to their situations.
Because this often requires expert understanding, many committees go to a plan advisor for a simple breakdown of confusing reg issues.
Another best practice that helps with this topic: Looking at actual lawsuits and what the companies being sued could’ve done differently.
2. Investments. A committee must look at its investments and make sure they’re still in line with the investment policy statement.
How often should the committee review performance? At least on a quarterly basis, according to McClain.
3. Fees. As high-profile lawsuits like Tibble v. Edison have proven, not paying enough attention to plan fees is a huge mistake.
The committee needs to examine whether the plan should rely on per-account flat fees or be based on assets as well as how reasonable those fees are for employees.