ERISA Examination | Published in May 2017

Performance Review

Monitoring—and enriching—your plan committee members

By Contributing Writer | May 2017

PSErisa_Article-Image_Conley-Rosenbaum_JoeCiardelloArt by Joseph Ciardiello Life as a member of your company’s retirement plan committee, and a fiduciary under the Employee Retirement Income Security Act (ERISA), is certainly becoming more challenging. In our December 2016 column we encouraged you to review the governance structure of your company’s retirement plan and your role in it. In our January column, we discussed who should be part of the retirement plan committee, and in February we focused on when the committee should meet and the topics to cover. In this column, we address how plan committee members should act, and we suggest standards by which to review their performance.
An effective retirement plan committee needs engaged and interested members. Usually, committee members are appointed by the board of directors or by its designee—often the CEO. Plan sponsors need to look at the company’s retirement plan documents—typically the summary plan description (SPD) and committee charter—to confirm who has the authority to make these appointments. Whoever has this duty also likely has the ongoing responsibility to monitor his appointees’ performance and to replace them when they step down.
How does a committee member know if he is properly enacting his role? In addition, we are often asked, how should the board or CEO evaluate the performance of the individual committee members? The questions below provide some standards by which to measure:
• Does the member routinely attend all regular and special meetings on a timely basis, missing them or arriving late only occasionally and when absolutely necessary?
• Does the member thoroughly review all materials and handouts circulated before the meeting and come prepared with any questions, ready to discuss the subject matter?
• Does the member participate meaningfully in discussions and deliberations with fellow members?
• Does the member consistently analyze fiduciary issues, keeping an exclusive focus on the best interests of the plan participants and beneficiaries and without regard to any ulterior motives or factors?
• Has the member made it a priority to understand the terms of the plans’ governing instruments, as well as charters, investment policy statements (IPSs), etc.?
• Does the member work effectively with his fellow members, treating them with respect and showing an appreciation for their concerns?
• While showing respect for the opinions of others, does the member analyze issues and problems independently and try to avoid group think?
• Is the member willing to ask tough questions of the many service providers to the plan and to avoid merely rubberstamping their recommendations?
In addition, it may be helpful to the effective performance of each individual retirement committee member, and to the operation of the committee as a whole, to keep in mind the following:
• Periodically, each member’s performance should be reviewed, confidentially, with the chairman of the committee. The chairman should be evaluated by whoever appoints, and monitors the performance of, committee members—perhaps with input from another experienced committee member.
• Each member should identify potential educational areas that he would like to pursue in the coming year and then determine how he will receive such education. That exploration can be aided by adding “committee education” as a regular agenda item—i.e., as part of your annual committee work plan.
• An environment should be fostered where each and every member, regardless of experience level, feels comfortable suggesting further process enhancements.
• A focus on identifying potential committee member candidates should be maintained, as necessary, to replace resigning members, taking into account candidates’ professional and educational credentials, job performance and likely ability to bring new perspectives to the table.
• Underperforming members should receive constructive, confidential feedback and be removed if performance fails to improve.

Summer Conley is a partner in the Los Angeles office of Drinker Biddle and Reath LLP, and Michael Rosenbaum is a partner in the firm’s Chicago office.