The Evolution of Quarterly Investment Committee Meetings

Much like the retirement planning industry itself, the wants and needs of investment committee members have evolved. Instead of solely discussing investment topics, meetings are now comprised of topics stretching from regulatory changes to cybersecurity and beyond.

The shift in members’ needs is a result of factors such as regulatory changes, technological advancements and more data evaluating retirement readiness, according to industry professionals.

In addition to guidelines provided by the Department of Labor, other legislation such as the Employee Retirement Income Security Act and the , continue to inform how meetings are run today. New topics investment committee members are eager to discuss include lost participants, fiduciary training and education, and cybersecurity.

Getting More Guidance

One topic increasingly broached during investment committee meetings today is the need for more fiduciary training and education due to changes in guidance from the Department of Labor related to ERISA.

“The Department of Labor has been clear that retirement planning committee members should pursue fiduciary education … that’s new in the last 10 years or so,” says Brian Montanez, a principal in the Multnomah Group.

Within the last 10 years, the DOL has focused on the ERISA duty of prudence and recommended practices that including documenting processes, training on identifying and avoiding conflicts of interest, and using DOL frameworks, such as the department’s Interpretive Bulletin 96-1, for education.

In addition to DOL guidance, ERISA Sections 3(21) and 3(38) have also led to an increased need for fiduciary education, according to Heather Bader, a partner in law firm Faegre Drinker Biddle & Reath LLP.

 A 3(21) fiduciary needs to provide advice and recommendations during committee meetings so that the plan sponsor can make final investment decisions. A 3(38) investment manager takes on the fiduciary responsibility for investments, and while Bader says 3(38) managers are not asking committees to review investments, they still have a lot to discuss.

“[A 3(38) investment manager is] unilaterally deciding whether or not the investments are appropriate … so they have a much bigger stake,” Bader says. “As a part of that, I saw a trend of education because they really want to make sure that the investment committee [members] were not just … getting these recommendations, but understanding the landscape behind it.”

Bader says the trainings and education have created an opportunity for committee members overseeing plans that utilize either 3(21) or 3(38) investment managers to discuss “what’s going on with the global markets, what’s going on from an economical perspective … so that these committee members are really understanding not just the investment, but—from an economic perspective—what the markets and trends are.”

Another topic that has become prominent within the last 10 years and is also influenced by DOL guidance is cybersecurity, which Julie Doran Stewart, head of fiduciary advisory services at the Sentinel Group, describes as “a big one.”

DOL guidance requires plan sponsors, fiduciaries, recordkeepers and plan participants to digitally protect sensitive information and assets.

“I like to tell my clients that’s not a one-and-done kind of thing,” Stewart says. “We need to be working [cybersecurity protocols] into conversation regularly.”

Locating lost participants has been another focus addressed in meetings in the past decade due to DOL guidelines. In 2014, the DOL issued Field Assistance Bulletin No. 2014-01, which states that fiduciaries of terminated defined contribution plans need to locate missing participants. Montanez says the bulletin has “best practices for a prudent plan administrator to or prudent plan fiduciary to do in terms of attempting to locate missing participants.”

However, the DOL released new enforcement priorities on Thursday that did not include finding missing participants as a priority. Montanez says the regulatory shift of priorities is “somewhat discouraging,” as he previously saw a “meaningful year-over-year decline” in the number of missing participants, and even saw non-ERISA clients adopt the DOL’s practices.  

“Because fiduciaries continue to bear responsibility for making reasonable efforts to locate missing participants, well‑governed committees should continue to emphasize the importance of maintaining robust internal processes for identifying, locating, and communicating with these individuals,” Montanez says. 

How Advisers Can Prepare

Now that meetings are not solely related to investments, advisers are recommended to establish and manage in-depth fiduciary governance programs. These will document procedural prudence and ensure the plans are managed for the exclusive benefit of plan participants and beneficiaries, according to Matthew Meyer, the practice leader of investment and fiduciary consulting at Newport, an Ascensus company.

Stewart says another pointer for advisers is to remain curious and continue learning about evolving areas within the industry by attending conferences and webinars and following daily news and current court cases.

“Advisors need to be flexible in what it is they’re willing to learn, because their job is ultimately to help their client, and that is a bit more multifaceted these days than it once was,” she says.

Changing Names, Changing Members

Along with the evolution of investment committee meeting topics, sometimes the make-up and even the naming of these meetings have evolved as well. For example, Stewart says she has rebranded her meetings as “retirement plan committee meetings.”

“We are talking about many factors well beyond just investments these days in committee meetings with plan sponsors,” Stewart says. “So we’ve tried to get away from that investment committee terminology.”

Stewart says while her committee’s name has changed, the members—and their focus on the retirement plan—have stayed the same.

Larger organizations will sometimes reconfigure their investment committees as “administrative committees.” These still focus on the retirement plan, but will also tackle topics not traditionally covered by investment committees, such as compliance, nondiscrimination testing and lost participants, according to Montanez.

However, Montanez says smaller and midsize companies tend to have one committee that covers all aspects of a retirement plan.