Importance of Minutes as Evidence of Corporate Governance

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

Corporate governance is how a company polices itself and employees. It is intended to increase the accountability of the company, serve as a preventative measure, and help build transparency and trust. Corporate governance as it relates to plan administrators involves meeting your fiduciary responsibilities. Under the Employee Retirement Income Savings Act (ERISA), meeting your fiduciary responsibilities is a central responsibility. This involves acting in the interest of plan participants, carrying out your duties and responsibilities, carrying out the plan document and keeping it consistent with ERISA, diversifying plan investments, and paying plan expenses within reason.

To ensure fiduciary responsibilities are being carried out in a timely and accurate manner, the plan should be conducting regular plan administrative committee meetings with minutes documenting these actions by the Plan. The minutes should include reviews of plan agreements with third party administrators and investment managers, including any reasons for changes, and compliance with 408(b)(2) service provider notices and investment policies. Minutes should also record the review by the administrator of the list of parties in interest and prohibited transactions; approval of benefit payments; employer contributions; and investment results. As a part of the process, the committee should be following up on participant complaints, checking actual fees, inquiring about trading, and investment performance. Additionally, if the Plan has hired an investment provider to help participants make informed investment decisions, it should be carried out in the same manner as hiring any plan service provider and should be included and monitored through committee minutes.

Minutes are significant documentation, establishing that the plan administrative committee is actively involved in managing the Plan for the benefit of the Plan’s participants and their beneficiaries. Not only is this a best practice for plan administrators but neglecting committee minutes as a part of corporate governance leaves the company without a record of how they are achieving their fiduciary responsibilities.

By Sherry L. Staggs