Build a Plan Committee in Six Steps

Plan committee members are also the primary named fiduciary for a typical retirement plan, according to a recent white paper from Chicago-based retirement plan consulting firm PlanPILOT, so there’s even more at stake in committee assembly decisions. The wrong processes and decision-making can lead to costly litigation.

The white paper, titled “How to Build and Run a Retirement Plan Committee,” describes the process in six steps.

First, those involved in developing the committee must determine the right committee size. Small organizations with a relatively simple plan may only need a couple of group members, while larger organizations with multiple plan service providers and more complicated plans may require larger groups.

Often the principal aspect affecting this decision will be the “ability” factor—how many committee members are feasible based on an organization’s time and resources. Research conducted for the white paper indicates the ideal number of committee members is five. At that level both productivity and diversity of opinion and expertise can be optimized.

Once they’ve got a number in mind, organizers should strive to select a diverse group of employees for committee membership. The PlanPILOT white paper advises committee organizers to consider multiple types of diversity. Some examples are social diversity, bringing in members of different race, age, and sex; skillset diversity, bringing members from different professional backgrounds; and value diversity, bringing in members with different opinions about the goal and purpose of the plan.

The next step is selecting a committee leader and setting the ground rules for efficient and effective meetings. The former step can be accomplished best by choosing someone who is process-oriented, flexible and can maintain the committee’s focus during challenging debates and decisions. The latter, establishing effective meeting rules, can be accomplished by setting meeting time limits and ensuring meetings have a specific, well understood topic.

Once assembled, all committees should designate one person to take meeting minutes at every committee meeting. When collecting meeting minutes, committees should make sure to document who attended the meeting and any decisions that were reached. They should also show the rationale for those decisions and demonstrate that a prudent process was followed.

Careful consideration should also be given by the committee to documenting investment policy statements, quarterly investment reports, manager search reports, committee charters, committee acceptance/resignation forms and conflict of interest disclosure statements.

Finally, effective plan committees know when to seek outside help in dealing with the above issues.

A complete copy of the white paper is available here.