Overview of the drafts and practices of the Pension Plan Committee

While pension plan committees, also known as plan trustees or plan supervisory boards, are as diverse in structure as the companies they sponsor, new research shows important consistencies in how committees are designed and operated.

Pension plan committees are entrusted with a variety of decisions related to the operation, benefits, and costs of a retirement plan, and ensure the prudent implementation and management of retirement plans. As plan trustees, committee members are expected to:

  • Pay only reasonable planned costs.
  • Monitor for prohibited transactions.
  • Answer inquiries about the plan.

You will also receive a plan fiduciary bond that insures plan participants against losses due to fraud or dishonesty. The bond is segregated from the trust insurance, which protects committee members if they are sued for a breach of their fiduciary duties.

How committees are structured

“Construction, supervision and maintenance by” a planning committee [member] Rotation and training are critical to its effective operation, ”said the nonprofit Plan Sponsor Council of America (PSCA). In April, the council conducted a survey of pension plan committees with responses from 255 employers who sponsor defined contribution plans and a number represented by industries and planned sizes.

“Regardless of the committee structure chosen, a documented prudent process remains best practice – and litigation – for retirement trustees,” said Nevin E. Adams, chief content officer and head of research for the American Retirement Association, which includes PSCA.

The survey found similarities between the committees of different organizations as well as differences based on the size of the plan sponsor. The key survey results are highlighted below.

Number of committees

Most companies have at least one formal committee that oversees pension management, and many have two that split roles like asset selection and service provider oversight.

Although the majority of respondents indicated that their company has a committee (64 percent), there is a great deal of diversity in the structure of these committees, with larger organizations not only having more committees but also having more formalized and structured committees.

Formalized committees

Almost 80 percent of respondents said their organization has a document that formally sets up their planning committee, and almost all large organizations do (93 percent of plans with 5,000 or more participants), although smaller organizations do so much less often ( 53 percent of the plans.). with less than 200 participants).

Organizations are less likely to have a formal document indicating which bodies are represented on which committees (38 percent of plans). However, the size correlation also applies here – twice as many (54 percent) large organizations have one as smaller organizations (26 percent).

Job titles of the members

Job titles were the most common method for companies to select committee members, followed by expertise.

Committee members often come from areas of the organization that are responsible for financial management and performance management. In addition, about two-thirds of organizations attend legal counsel meetings, although only half of organizations with fewer than 1,000 plan participants do, compared with 92 percent of organizations with more than 5,000 participants.

Number of members

Most committees have between five and ten participants. Few organizations have more than 10 participants per committee, and only large organizations do this.

Number of sessions

Regardless of the size of the plan sponsor, the pension plan committees usually meet quarterly.

[SHRM members-only toolkit:

Designing and Administering Defined Contribution Retirement Plans]

Advice on supervisory duties

“If you’re like most 401 (k) plan sponsors, you worry about whether your retirement plan committee is discussing the right things at your committee meetings,” said Robert C. Lawton, president of Lawton Retirement Plan Consultants in Milwaukee. He recently advised pension plan committees to focus their meetings on key tasks, including the following:



Ensure fiduciary compliance.

For the purposes of the Employee Retirement Income Security Act (ERISA) and the US Department of Labor (DOL), the committee members are plan trustees and as such their main responsibilities are:

  • Loyalty: to act solely in the best interests of the plan participants and their beneficiaries.
  • Wisdom: In order to carry out their tasks carefully, to show care and to think for the future.
  • Diversity: To offer a variety of investment offerings on plan.

Committees should “devote part of at least one meeting each year to fiduciary training,” Lawton said. “Your investment advisor should be able to lead this discussion.”



Check the vendor’s cost and performance.

A primary purpose of a planning committee is to oversee the cost of the entire 401 (k) plan, not just the investments, Lawton noted. “Although sizable litigation has centered on the use of the cheapest share class of any mutual fund, the pension committees must also closely monitor the costs of all providers,” he said. “This includes the trustee, custodian, accountant, investment advisor, accountant and any other adviser.”

Committee members should keep in mind that “your plan does not have to use the cheapest provider to a function or the cheapest mutual fund in each asset class. You can choose to pay more for a provider that offers more.” Services or a mutual fund that you think will perform better. All you need to do is demonstrate that your decision to hire a more expensive provider or use a more expensive mutual fund was made through a careful decision-making process. ”



Understand new cybersecurity policies.

In April, the DOL issued guidelines on how employers and service providers can reduce the cybersecurity risk related to participants’ data. “In consultation with your information systems department, either develop a cybersecurity policy for your 401 (k) plan or ask them to include a plan in their existing cybersecurity policy,” advised Lawton.

“Create a review request document that includes the tips and guidelines shared by the DOL and submit it to your secretary,” he suggested. “Put the answers on your plan file as evidence of your due diligence.”

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