PSNC 2021: A Checklist for Your Retirement Plan Committee

Attendees at this year’s virtual PLANSPONSOR National Conference (PSNC) were treated to an in-depth panel discussion on how to create an effective retirement plan committee, as well as how to avoid potential legal pitfalls, such as having a member of the legal or executive team sit on the retirement plan committee or a subcommittee.

As moderator of the panel, Jonathan St. Clair, chief fiduciary officer and managing director at SageView Advisory Group, asked Benjamin Grosz, a partner with Ivins, Phillips & Barker, to brief the audience on a retirement committee framework.

Grosz said the committee should have clearly defined responsibilities. “Have the company as the administrator, [and determine] who is actually going to do the things that need to be done, such as picking the investments or overseeing vendors and how can you be confident that they have the authority to do those things,” he recommended.

That said, Grosz added that as an ERISA [Employee Retirement Income Security Act] attorney, he has encountered some companies where an individual at the firm acts as the plan fiduciary. In still other cases, some companies don’t have a retirement plan committee since it is not an ERISA requirement, Grosz told the audience.

But even though it’s not mandated, having a retirement and/or investment committee is a good idea, Grosz said. A committee can “make sure that things are done and done properly and there is no slipping through the cracks.”

In fact, panelists on the whole concurred that having the guidance of a retirement plan committee is a best practice—and is one that sponsors need to consider thoughtfully in order to have the right people with the right tools sit on the committee, as their decisions bear great weight on the success of a plan and its participants.

Panelists also pointed out the benefits of having separate investment and retirement committees, as well as a formal investment policy statement (IPS) to guide the investment committee.

The panelists also discussed whether having a member of the legal team or the president of a company and/or a member of the executive team is a good, or a possibly troublesome idea. Owners of family-run companies tend to feel paternalistic about serving on their company’s retirement plan committee, and members of the legal team can lend insight, some of the speakers said, but every company will be different.

St. Clair asked Laura Birk, head of human resources (HR) at Barilla America—a finalist in this year’s PLANSPONSOR of the Year Corporate 401(k) >$50MM-$150MM category—for her overall insights on productive retirement plan committees.

Birk said she oversees the manufacturer’s North and South American operations, and, in this role, she also runs the compensation committee.

Once plan assets reached a certain size—as is many times the case with retirement plan committees—members of the compensation committee realized that they are not ERISA attorneys and didn’t have all the answers, Birk observed.

“So, we got outside help for the compensation committee,” she said.

And Barilla didn’t stop with seeking additional assistance for its compensation committee. The company also hired an outside fiduciary, who, in turn, had outside help of its own, she said.

“This is cash. This is their future, so you want to make sure you are doing the best for your employees.”

Birk also told the audience that as the world’s largest pasta manufacturer and a multigenerational family business, Barilla’s president sits on the committee, as does the head of the supply chain. Birk said it is also important for sponsors to have representation from their company workforce on their retirement and/or compensation committee.

“It’s a lot of different meetings of the minds,” added Linda Fraise, payroll manager at Barilla America. “We are not single minded. We look at a lot of things and a lot of options. It works well for the group.”

To her colleague Fraise’s point about collaboration on the committee, Birk recounted how, when she first joined Barilla 10 years ago, the committee’s focus was all about risk mitigation.

Over time, as the committee became more seasoned, its focus shifted to a more holistic point of view, Birk said—one in which it truly appreciates its “role as a compensation committee, offering the best compensation benefits for retention and attraction, so [that employees] feel they really have the best access as part of their total rewards. This is cash. This is their future, so you want to make sure you are doing the best for your employees.”

Finally, Grosz said an odd number of committee members works best to break a potential tie vote. “Five is a sweet spot,” he added. He recounted a time when a retirement committee member felt very strongly about hiring a particular investment company for the investment lineup. The committee ultimately made its decision with a 4-3 vote. “If it had six committee members, that could have been a problem,” he noted.