- A recent Survey conducted by the Plan Sponsor Council of America (PSCA) found that the majority of plan sponsors have a formal committee in place that is responsible for plan administration and investments. This survey reveals that there is a fair amount of commonality in approaches with larger plans, not surprisingly, tending to have more formality to their process.
- There were 255 responses to this survey. Many were larger plans – almost 50% of respondents have a plan with a 1,000 or more participants. Those who responded to this survey skewed towards sponsors with a formal process in place.
- ERISA does not require that plan sponsors establish a formal committee to oversee the operation of their retirement plan. In fact, there are no formal legal requirements around the process that fiduciaries should follow in making decisions. This means sponsors are free to set up their committee in a way that best satisfies their needs. The challenge is there are no standards to follow beyond what other plan sponsors are doing.
- Although establishing a formal committee is not required, this is, without question, a best practice. Many of the court decisions in the class action lawsuits brought against plan fiduciaries in recent years make it clear that judges do not want to second guess the decisions of plan fiduciaries and will defer to them if:
- There is a formal process in place for decision making;
- This process is documented; and
- It is documented that the fiduciaries have followed this process in their decision making (e.g., committee records and meeting minutes).
- The findings of the survey are not surprising.
- Number of Committees: Majority of respondents have one committee / some larger plans have two committees or sometimes more;
- Number of Committee Members: The majority of respondents have five or fewer committee members / for sponsors with 5,000 or more participants 78% have five or more members;
- Criteria for Selecting Committee Members: The most common criteria for selecting committee members are job position, expertise and willingness to participate with gender and racial diversity a distant fourth / larger sponsors tend to identify committee members by job position;
- Participation of Legal Counsel: Two thirds of respondents have legal counsel participate in committee meetings / this rises to 92% for plans with more than 5,000 participants; and
- Frequency of Meetings: Almost 90% of respondents hold meetings either quarterly or semi-annually.
For any further questions, please do not hesitate to contact your Wellspring Financial Partners at (520) 327-1019 or email@example.com.
This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. [A proud member of RPAG]