Employee Benefit Plans: The 411

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Forming a 401(k) Plan Committee

As a Plan Sponsor, you have important fiduciary responsibilities which, according to the Employee Benefits Security Administration (“EBSA”) within the Department of Labor (“DOL”), include:

  • Acting solely in the interest of plan participants and their beneficiaries
  • Carrying out duties prudently
  • Following the plan documents (unless inconsistent with ERISA)
  • Diversifying plan investments
  • Paying only reasonable plan expenses

Carrying out these responsibilities will require expertise in a variety of areas, and establishing a plan committee is a great first step in covering these areas.

401(k) Plan Committee Members – Your 401(k) plan committee should include a variety of individuals, and depending on your plan’s needs, will fall into two categories:

  • Permanent Members:
  • Plan Fiduciary (should be indicated on your plan documents)
  • At least one member of senior management (e.g. CFO, COO)
  • The company’s legal counsel
  • External Vendors (can include representatives from the plan’s record keeper, trustee, and/or investment adviser)
  • Temporary Members (alternating new members into the committee on an annual or other basis):
  • Committee Secretary (a person to be responsible for documenting all committee meetings and decisions)
  • Plan Participant(s) (voluntary representation for current participants)

Establishing a Charter – Once the structure of the committee members has been established, the next item on your agenda should be establishing your plan committee’s charter. This charter should define the plan committee’s purpose, responsibilities, and its processes for conducting reviews and resolving issues. You may also define how often you will meet, required attendees versus optional attendees, and/or file retention policies for plan committee meeting minutes.

401(k) Plan Committee Meeting Topics – Most of your meetings will probably focus in on the plan’s investments. Work with your investment adviser and have them present an investment review at least annually. If your plan does not have an investment policy statement, you can also ask your adviser for a template that can be adopted for use by the plan. Additional items to discuss may include:
• Plan administration topics
• Enrollment updates
• Client service issues
• Regulatory updates
• Reasonableness of plan fees
• Review of service auditor’s report provided by your custodian or trustee

Having an effective 401(k) plan committee will bring additional knowledge and expertise to your plan and will provide the crucial oversight that can not only help you carry out ERISA’s five responsibilities noted above, but also reduce legal and fiduciary risk related to your 401(k) plan.

By Audrey D. Richards