Elements of Retirement Plan Committee Education

Training new retirement plan committee members, as well as providing ongoing training throughout the year for all members, is critical, industry experts say.

“Because their responsibilities are so enormous, we need to do a better job of training these fiduciaries to make better decisions,” says Joshua Itzoe, a partner and managing director with Greenspring Advisors.

“One of the first questions that the Department of Labor [DOL] asks when conducting a plan investigation is whether the plan provides ongoing fiduciary training for committee members,” says Joan Neri, counsel in Drinker Biddle & Reath LLP’s financial services ERISA (Employee Retirement Income Security Act) practice.

“The starting point for training is educating the committee members about their role,” she says. “As fiduciaries under ERISA, they have a duty of loyalty and to act in the best interest of plan participants and their beneficiaries—not the employer or themselves personally. ERISA also has the ‘prudent man standard of conduct,’ which requires that they carry out their duties in a prudent manner.”

From there, Neri says it’s helpful to develop a formal charter for the committee that clearly “identifies the committee members’ duties and responsibilities and sets forth guidelines on the coordination of those responsibilities with others to manage the plan. It should include a summary of the various roles of the plan service providers like the recordkeeper or the third-party administrator.  Committee members should also understand that if they do not have the capacity to carry out a particular responsibility, such as oversight of investments, they need to hire an expert to assist them.”

Next, Neri recommends that new committee members review all plan documents, including the summary plan description, trust agreement and investment policy statement (IPS).

When overseeing the investments, she says, “committee members should make sure they consistently meet the investment criteria set forth in the IPS. Likewise, they need to ensure that the plan is being run in line with other policy documents.”

Unified Trust has new committee members study all the handouts provided to them and then attend a meeting before undergoing training so they can better understand their forthcoming roles, says Diana Jordan, senior retirement plan consultant. Unified Trust’s committee training is based on Fi360’s handbook of 21 best practices.

Fi360’s “Fiduciary Essentials” training program takes a participant through eight fiduciary precepts, says Blaine Aikin, executive chairman. “These are best practices based on law.”

These are:

• knowing what the laws and governing documents provide;
• understanding their fiduciary obligation to offer diversified investments;
• adhering to an investment policy statement;
• prudently selecting fiduciary and non-fiduciary service providers;
• controlling and accounting for expenses;
• managing and mitigating conflicts of interest;
• monitoring and prudently managing service provider relationships and overseeing investment managers in the portfolio; and
• critiquing their own performance.

Ongoing Training

Besides the initial training for new committee members, Itzoe recommends ongoing training for all committee members be conducted throughout the year at their meetings. Working with Drinker Biddle ERISA attorney Fred Reish, Greenspring has developed an online fiduciary training program consisting of videos. Each of the 10 segments includes quizzes at the end. Once a committee member has gone though all of the segments, they must take a final exam.

The goal, Itzoe says, is to help the committee members “develop the competence and the mastery that enables them to be effective in their role.”

Neri suggests that committee members pay attention to the issues raised in current lawsuits against retirement plans. “Ongoing training could be about getting into the weeds on those issues, such as prohibited transaction issues or litigation issues, like participant claims about excessive plan fees and revenue sharing,” she says. “It is helpful to have sessions on that and on what the courts are looking at.”