Maintaining Successful Committee Requires Continuous Education, Right People

Members of a retirement plan committee serve a critical role in the decisionmaking process of any company’s benefits program—from investment lineup decisions to provider partnerships and, ultimately, upholding the Employee Retirement Income Security Act.

Not only are committee members key decisionmakers, but they are also fiduciaries and must ensure prudent management of the plan. As a result, ongoing education and training for plan committee members is vital, as they must understand the requirements of ERISA, litigation trends, the importance of documentation and much more.

Gregg Levinson, market leader at Willis Towers Watson, explains that ERISA requires very specific, informed decisionmaking for the benefit of the plan and the participations. Levinson emphasizes that oversight of the retirement plan is “distinguished from the business.”

“Plan design—that’s a business decision,” Levinson says. “Operating [and] administering the program is a fiduciary decision.”

For example, Levinson says, the business will make a decision to have a 401(k) plan that matches 6% of pay, but it is the fiduciary’s responsibility to implement the retirement plan and make sure it is operating properly.

“The role of the fiduciary … is the linchpin in effectively and legally running the program,” Levinson says. “It breaks down into very key areas: It’s compliance, it’s plan administration, it’s the investments.”

Who Sits on the Committee?

When establishing a retirement plan committee, plan sponsors should aim to include people from different parts of the organization in order to represent the diversity of the company’s employee population.

Levinson says expertise is not necessarily required to be a fiduciary or to sit on a committee. For more specific expertise, a committee should hire an investment adviser, consultant, lawyers or actuaries.

“The committee doesn’t require expertise, but I think it does require a diverse experience,” Levinson says. “You want representation from the different parts of the organization so that you have various voices representing the company.”

Levinson says a balanced committee includes members from human resources or benefits—typically the head of benefits is the chair of the committee—as well as members from finance and various other business leaders.

Mark Olsen, the managing director of PlanPILOT—a Chicago-based retirement plan consulting company —specifically recommends that the company’s chief financial officer or vice president of finance sit on the committee, as people in those roles tend to be very knowledgeable about investing.

Olsen adds that plan sponsors might want to include natural leaders in the organization or people who have expressed interest in the retirement plan, as the committee may benefit from their knowledge. He says it is also important to keep in mind the demographics of the committee members.

“Oftentimes, committees are made up of people over the age of 50,” Olsen says. “If everyone sitting around the boardroom is over 50, we don’t really have a healthy perspective of what somebody who’s 25 is thinking about the retirement plan. So if there is someone on the younger side, who is sub-40, that can [add] a perspective and that’s attentive to the decisions that need to be made within the committee, those are great additions.”

What About a Governmental Retirement Plan Committee?

Kristine Sciangula, the plan administrator for Suffolk County, New York, says her retirement plan committee is made up of 16 voting board members. Each of the eight labor unions representing county employees has a representative on the board, and there are eight management representatives.

Suffolk County’s primary retirement plan is a defined benefit pension plan, which is mandatory for most employees. A small population has the option to participate in a defined contribution plan instead. Those primary plans are run by the state of New York. Additionally, the county offers a 457(b) plan as a supplementary and voluntary DC plan.

Union appointments to the committee are made by each union’s president, while the management appointments are made by the county executive, an elected position. Sciangula explains that the county’s by-laws require that one of the management representatives be from the county comptroller’s office and one from the county’s information technology department.

“Those two departments are essential in the functioning of the plan, including handling payroll, so having two people [from] those departments who are knowledgeable of both the operations of those departments, as well as the plan’s needs, is extremely important,” Sciangula says.

Suffolk County’s board members on both the union and management sides come from various county departments and careers. Sciangula says each employee has someone they work with, via their building, department or union, representing them on the board.  

“[Employees] know that they can go to that person with questions about the plan or to bring any suggestions to the full board, rather than just having a 1-800 number to call,” she says. “That arrangement gives me as an administrator, as well as the rest of the board, the ability to hear what the employees are thinking. … If something isn’t working or is confusing to employees, we hear about it very quickly and can work to remedy it.”

Sciangula says she encourages those making the board appointments to choose people who have an interest in the retirement plan, as well as ones who have the time to commit to going to monthly meetings and training sessions.

In addition to the board’s monthly meetings, subcommittees meet throughout the month. For example, Sciangula says there is an investments subcommittee, a subcommittee that works on the plan documents and one that works on participant education efforts. The subcommittees then report what they have been working on at the full board meetings and update everyone on what has happened over the last month.

Sciangula says the meetings consist of a lot of education. When the SECURE 2.0 Act of 2022 was passed, for example, she says an hour of each meeting was dedicated to going through the provisions, one by one. Sciangula even gave out quizzes to the board members to test their knowledge.

In addition, Sciangula helps come up with a list of basic questions that board members may have to answer about the plan in case they find themselves in court.

Knowing a Member’s Fiduciary Responsibility

Olsen emphasizes that it is important that committee members are aware of their fiduciary responsibility, especially if they are called to court as a witness. For example, if a plan committee member claims in court they were unaware of their fiduciary status, this defense will likely not protect them. PlanPILOT provides a form to new committee members when they are appointed and another signed on an annual basis so members understand they are making decisions as a fiduciary.

Sciangula says educating board members on a regular basis is important, and members are also encouraged to attend at least three training conferences per year. Suffolk County is a member of the National Association of Government Defined Contribution Administrators, so board members are encouraged to participate in webinars and training conferences held by NAGDCA.

The board also participates in an annual fiduciary training session presented by the legal and compliance team from its recordkeeper, T. Rowe Price.

Key Areas of Education

In terms of the knowledge required for board members to properly fulfil their obligations and fiduciary responsibilities, Sciangula says it boils down to two categories.

The first is basic retirement plan administration and fiduciary knowledge. For example, she says it is important for members to understand which laws the plan is subject to, the differences between the various types of retirement plans, the investment vehicles offered in retirement plans, revenue-sharing agreements and the responsibilities of the board versus the county versus the recordkeeper.

As a public plan, Suffolk County’s plan is not subject to ERISA, but it must comply with the by-laws of the county government.

Sciangula says it is important for newer board members to understand how different types of investments being offered work, even though they may not have been part of the decisionmaking process.

The second category of education, according to Sciangula, has to do with the information that allows the committee to make better decisions and prevent or remediate plan issues.

“The more that board members know about how we operate, how our recordkeeper operates, why we’re doing what we’re doing in comparison to other plans and what courts are saying about plans that end up in litigation, the more equipped we are to make the right decisions,” she says.  “The aspects of this second category change constantly, and rapidly, in comparison to the first category.”

Educating board members on litigation trends is also important, and Sciangula notes that a legal adviser from the county attorney’s office serves as a non-voting member of the board and attends all board meetings. The adviser is trained in the same manner as the voting board members so as to be knowledgeable on retirement plan administration and up to date on industry and litigation trends.

Levinson says when he conducts plan committee training at WTW, he begins with the fundamentals of what ERISA requires and what it means to be a fiduciary. He also emphasizes the importance of documentation in his training sessions.

“Being able to demonstrate … that you’ve made good decisions and that you’re consistent, you have agendas, you have regular meetings, is really important so that if you ever find yourself in a litigation situation, you have the material you need to successfully defend yourself and make sure, ideally, that this litigation goes away quicky,” Levinson says.

He adds that he provides board members with legal updates and market trends within the context of how they make decisions.

“It’s not just dumping information on them, but it is showing them and sharing this information relative to their decisionmaking process or what’s going on with them at the moment,” Levinson says.