A few key problems I have seen over the years in the operation of plan committees:
- Not reporting up to the board (the failure to oversee). This is number one on my list because I have seen it so many times. Appointing a committee or individual committee member is not a once-and-done for a board of directors. The board has a responsibility to oversee and monitor its appointments. This news comes almost as a shock to corporate attorneys and others trying to protect a board’s valuable time but appointing committee members is a fiduciary task that makes the board ERISA fiduciaries. The board is therefore owed and should demand reports that contain sufficient enough detail to fulfill the monitoring obligation. If this is not something that is palatable for the full board, then shunt the work off to a subcommittee.
- Committee collapse. This is something similar to colony collapse in bees, there being no apparent explanation for it. But at some point the committee just stops operating. Meetings stop happening and committee responsibilities devolve in a haphazard way to HR staff or are ignored entirely. This can go on for years. I think this can be prevented only by strong commitment to the committee at the c-suite level and by leadership.
- Failure to fully utilize the plan adviser & other experts. Plans, in particular larger plans, have significant resources available to them, but sometimes these resources are underutilized. Advisers and other plan service providers can be significant sources of intelligence and expertise plan committees can use to their advantage. How is the plan doing against its peer group in terms of plan effectiveness (participation, salary deferrals & participant investment allocations) and fee reasonableness?
- Not keeping track of required plan amendments. This should be an easy one but for some committees it is not. I have seen plans that have not been amended for years because the committee was not asking the question, “do we need to do an amendment this year?” This is a must on each year’s calendar.
- The committee does not control its meetings. This was mentioned in a previous post but it is worth mentioning again. The committee should be setting the agenda and making sure its objectives for the meeting are achieved. Ceding control to someone whose objectives are not the same as the committee’s, however competent that person may be, is not a good idea.
- Not enough staff work done before the meeting. Committees really work best when the hard work is done before the meeting. If that work is done, the committee can use the actual meeting to bring plan matters to decision points and to address any new developments. Committees should always be looking for ways to delegate that work down to a subset of the committee, HR staff, or to plan service providers.
Just joining us? Start at the beginning with Part One of this series on Plan Committees!
For a comprehensive discussion of ERISA fiduciary responsibilities and valuable day-to-day resources, there is the Fiduciary Responsibility eSource. Learn more at ERISApedia.com.
Chuck Humphrey is principal of Law Offices of Charles G. Humphrey, a firm concentrating its practice in the field of employee benefits and fiduciary law. He is the author of the Fiduciary Responsibility eSource available at ERISApedia.com.