Tips for Plan Committee Best Performance

Plan committees serve an important role, helping plan sponsors provide benefits, as well as protecting the plan and plan sponsor. A recent blog entry offers tips on how a plan committee can best perform its duties.

In “Plan Checkup for Maximizing Outcomes,” consulting firm Portfolio Evaluations suggests actions a plan committee can take and factors it should keep in mind in order to meet its responsibilities and help make sure the plan sponsor is fulfilling its fiduciary duties. 

Plan Design. Assess plan features, their effects and how they compare to the features included in other plans. 

Auto Features. Consider auto features and the impact they can have on participation and saving. 

Target Date Funds. In considering target date funds, they caution, it is important: (1) to remember that investment management firms differ from one another regarding glide paths and asset classes; and (2) to determine what target date fund would best suit the plan and participants.

Investments. The current trend, they say, is consolidation of investments and a streamlined menu. And they suggest that this can help increase participants’ engagement and the wisdom of their choices. 

Documentation. Having a record of meetings, and even documenting the procedures by which minutes and policies are noted and filed, can be helpful in establishing and demonstrating prudent processes, they argue. 

Metrics. Consider how the plan defines success; set goals and metrics by which performance can be measured. They suggest working with service providers in crafting a plan to meet those goals. They further advocate year-end assessments: reporting on progress and making any necessary adjustments to the plan and/or metrics. 

Benchmarking. Be aware of when the plan fees were more recently benchmarked, they suggest, observing that many experts suggest that this comparison be performed every three years. They call this “a fundamental fiduciary responsibility” and argue that it should be conducted in a “comprehensive manner.” 

Pricing Model. Understand the fee arrangements that are the most common—which they say include bundled, basis point/per participant and flat dollar—and know which the plan follows. They suggest considering whether it is the best fee arrangement for the plan to use. 

Revenue Target. It is important to know the revenue target, they argue. But if revenues do not match that figure, they stress that it is important: (1) to verify that if what the plan is making from fees exceeds the target, that any expenses paid from the excess are eligible and that an appropriate method is being used to return the excess to the participants; and (2) that the plan sponsor verify how participants and the company are charged if there is a deficit. 

Fiduciary Training. They suggest holding a session that provides refresher training concerning ERISA and fiduciary duties. 

Recordkeeper Report. An annual report from the recordkeeper concerning plan administration can be helpful in plan administration, they suggest; for instance, in identifying features and services that could be beneficial to the plan but are not present due to poor communication between parties relevant to the plan. 

Policy Review. They suggest reviewing policies and documents such as the investment policy statement and committee charter with experts to gauge adherence to guidelines, and to identify updates that may need to be made. 

Operational Compliance. They suggest reviewing how well the plan’s operational procedures comport with the plan document. This can entail meeting with the recordkeeper and ensuring that the plan’s administration manual is up to date and reflects any new design features that may have been added. Such review is a “fundamental responsibility” of a plan fiduciary, they argue.