At a TPSU program held at Loyola University in Maryland, the HR Director at a DC area association discusses how her Investment Committee runs and how they were able to negotiate automatically decreasing fees as the plan grew.
The association with 110 employees which represents chiefs of police in existence since the late 1800’s uses a combination of internal staff as well as members of the association to run their defined contribution plan’s Investment Committee including their CFO, Executive Director, HR Director and two member CEOs. They meet twice a year and generally include their plan advisor and a representative from their record keeper.
New members of the Committee receive hands on training as well as any available outside programs. Fiduciary training for Investment Committees has become a more important issue for many plan sponsors attending TPSU programs with the rash of lawsuits and increasing regulatory scrutiny by the DOL which will only increase with their new fiduciary rule. The problem for lay people on the Committee as well as company professionals is finding the time for training outside of Committee meetings which is why many rely on their advisor to help.
One of the important issues that many Committees tackle is plan fees which plan sponsors struggle to understand with the many layers of fees both direct and indirect, especially revenue sharing. Plan sponsors have a fiduciary duty to make sure fees are reasonable which may change as assets grow as well as industry developments. Many excessive fee lawsuits could have been avoided if plan sponsors were engaged with regularly benchmarking plans and renegotiating when necessary.
The police chief’s association plan fees are automatically as the plan grows because they negotiated reductions upfront. Record keeper fees which are often based on a percentage of assets can be reduced when assets grow but most plan sponsors have to either go to market through an RFP to get lower fees or renegotiate. Including a clause in the contract that triggers automatic reductions is very wise but it does not alleviate the duty to benchmark and go to market just to make sure the fees are still reasonable.
