Why Plan Sponsors Need a Retirement Plan Committee

Should all retirement plans have a retirement plan committee?

The answer: Probably.

All plan sponsors are fiduciaries, and as such, they have a legal responsibility to act solely in the interest of plan participants. A committee helps ensure plan sponsors fulfill their fiduciary responsibilities.

Plan committees help meet participant interests and are a prudent way for the plan sponsor to mitigate risk, especially fiduciary risk.

However, a retirement plan committee has many more benefits — not the least of which is making all parties accountable, including the plan advisor and recordkeeper.

Meeting fiduciary duties

The committee evaluates how well the plan is meeting the needs of the participants. Benchmarking measurable or quantitative items, such as the plan fees and expenses and investment, is a standard function of a retirement plan committee.

For example, the committee should know the percentage of the funds on the investment menu are outperforming their benchmarks or peers, as well as the plan’s overall expenses relative to other plans. And members of the retirement plan committee should know if the plan is receiving good value for those fees.

Other ways to benchmark success include monitoring participation rates and participant deferral rates.

According to the Department of Labor, qualitative concerns include “carrying out duties with the care, skill, prudence and diligence of a prudent person familiar with the matters.”1 It can be helpful to reserve time at every meeting for any concerns to be voiced and directed to the plan advisor.

One way to demonstrate fiduciary responsibility is a written investment policy. In addition, it’s important for a retirement plan committee to document all decisions. Meeting minutes detail the decisions made and also the processes that drove how those decisions were made.

How often should the committee meet? It depends

Generally, annual meetings are scheduled with additional meetings as deemed necessary.

The appropriate number of meetings should be based on the plan’s complexity, the size of the company and whether the plan management is outsourced completely — in other words, if the plan is outsourced to an investment manager with full fiduciary responsibility (a 3(38) advisor) or whether day-to-day fiduciary responsibility is shared by the plan sponsor with a 3(21) investment advisor.

With less involvement from the plan sponsor, fewer meetings each year may be sufficient. But if the plan sponsor is more involved and retains greater fiduciary responsibility, more frequent meetings — perhaps quarterly — may be necessary.

Determining the committee makeup

The committee should consider having an odd number of members to avoid ties on votes and include people with key managerial responsibility within the employer organization. In the case of a smaller company with a hands-on owner or CEO, it may make sense for the owner to be involved with the plan committee.

Also, it can be highly advantageous for one committee member to be a non-managerial employee, who should be chosen with special care. Ideally, this person should be financially savvy with knowledge of fellow employees and their needs and concerns.

In all that the committee does, keep in mind that the overarching concern is the best interests of plan participants.

And note that a retirement plan lacking a committee doesn’t mean that a plan sponsor is automatically failing their fiduciary duties. However, a plan committee can help ensure that a plan sponsor can meet their responsibilities, fiduciary and otherwise.


This content is for general information only and is not intended to provide investment, tax or legal advice or recommendations for any particular situation or type of retirement plan. Please consult with a financial, tax or legal advisor on your own particular circumstances.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through Global Retirement Partners, LLC (GRP), a registered investment advisor. Insurance services offered through HUB International. GRP, Washington Financial Group and HUB International are separate and unaffiliated with LPL Financial. Washington Financial Group is the approved name under which LPL Financial business is conducted.

1 Internal Revenue Service, “Retirement Plan Fiduciary Responsibilities,” July 2, 2021.

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