Starting a Retirement Plan Committee: 4 Simple Considerations. Previously, we wrote an article that discussed 8 tips to build and manage a retirement plan committee. For plan sponsors in the early stages of forming a committee, or for those who want to restructure theirs, this article will offer a deeper dive into the process of building and structuring a retirement plan committee.
The idea behind having a retirement plan committee, of course, is to make sure an organization has more than one person calling the shots when it comes to making important decisions about the plan. In other words, having a committee made up of multiple members with varying yet complementary areas of competence helps ensure there’s a system of checks and balances when it comes to plan governance and oversight.
There are many factors to consider when putting together your committee, but for simplicity’s sake, we’re going to focus on four of them here: the committee’s size, the make-up of the membership, cadence/scheduling of meetings, and ensuring that every member has a voice. We admit, these may not be the most riveting topics, but they’re important ones to consider nonetheless.
Let’s drill down into each in more detail:
Size: The size and structure of your plan committee should be dependent on the size of your organization and retirement plan, as well as the demographics of your participant population. For example, between two and four members may make sense for a smaller company and plan, whereas five to seven may be more appropriate for larger plans and organizations.
Additionally, it’s important to make sure the committee has a tie-breaking mechanism built in so it doesn’t become deadlocked in its decision-making process. Some options are to create a committee with an odd number of members, or assign additional voting rights to the committee chairperson.
Membership: Committee members should have a diversity of expertise, skills, and tenure, and reflect representation from across the organization. Many companies will default to appointing senior management to the committee, or membership will end up being mostly HR and finance employees due to the nature of their job functions related to the retirement plan. However, we have found that having a good mix of younger and older employees on the committee from different departments across the company results in more “out of the box” thinking and may, in fact, be more representative of the needs of the participant population.
Further, it isn’t necessary to limit membership to those who are savvy about investing and ERISA regulations. In fact, in participating in committee meetings with hundreds of plans, we have found that employees who have knowledge outside of regulatory and financial topics often have the most innovative and worthwhile ideas when it comes to representing participants’ desires and best interests.
Meetings: Coordinating busy employees’ schedules isn’t easy. Everyone’s calendars are packed, and urgent projects and last-minute conflicts will inevitably arise. As such, scheduling retirement plan committee meetings in advance, and on a fixed date — say, the first Tuesday of the quarter — may help minimize scheduling conflicts.
If everyone on the committee knows way ahead of time when the meetings are scheduled, they are more likely to honor the commitment. Ideally, all committee members should attend every meeting. A little, advanced, planning may save someone the headache of having to scramble to re-schedule a meeting at the last minute.
Make sure every member has a voice: Put another way, make sure all committee members make an equal contribution. It’s important to make sure that your retirement plan committee isn’t filled with “yes-people.” Avoid the tendency for less senior employees to defer to leaders in the organization and look to them to make all of the key decisions. If just a few members are driving the entire agenda, it defeats the committee’s purpose, which is making sound decisions about the plan and watching out for participants.
Keep in mind, it’s impossible to serve two masters: Members can’t serve the committee and participants at the same time. The committee is there to help participants and improve retirement outcomes, so it’s important that decisions are made fairly, and that its top priority is the best interests of the employees.
