Though most companies that sponsor a defined contribution (DC) plan like a 401k agree that they should have a Committee to run their plan, there is a lot of debate about whether it makes sense to include rank and file employees on the Committee. The CFO at a 150-person real estate and construction company attending a TPSU program held at Vanderbilt University explains why his company decided to include mostly employees on their Committee.
The concern about including employees on a company’s Investment Committee is lack of knowledge by less sophisticated workers making decisions about the company’s DC plan. Committee members are concerned about the fiduciary liability that comes with being part of the group.
But the CFO at the Nashville real estate company wanted to include employees which ranged from construction workers, maintenance people and accountants to get more buy-in from their workers who might trust the plan more if run by peers. There’s a sense of excitement about the plan with these Committee members which bubbles over into the rest of the workforce.
The key is setting up a repeatable structure with help from professionals. The first task of the Committee was to select an investment advisor who attends the meetings along with the CFO who is also part of the group. That advisor attends all of the quarterly meetings as well and began with outlining the fiduciary responsibilities of the committee with a 2-3 hour education meeting.
There was hesitancy at first but now the employees on the Committee are excited and the rest of the workers are more trusting and engaged with a plan designed and run by peers. Another key was getting fiduciary insurance important for all types of Committees.
The reality is that most people on toady’s DC plan Investment Committees are not experts so including employees is not so radical as decisions are ultimately approved by the CEO or Board anyway.
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