Guarding Fiduciaries and Optimizing Committees

Traditionally, benefit plan committees oversaw administration, investments—everything to do with sponsoring and administering an employer-sponsored plan.

However, as financial responsibilities have changed, so have committee dynamics, according to Nancy Gerrie, partner at McDermott Will & Emery LLP, and speaker during a session at the Plan Sponsor Council of America (PSCA) 66th Annual Conference in Scottsdale, Arizona. Gerrie said now it is best to have one committee for administration oversight and a separate committee for investment selection and oversight. If a plan sponsor does have a blended committee, each member should understand his or her role and whether they are acting in a fiduciary capacity or not.

Heath Miller, principal at Shepherd Kaplan, LLC, added that if a plan sponsor has separate committees, they must communicate and each must understand what the other is doing. Gerrie said the plan document can provide guidance for who does what.

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Gerrie said she is seeing more plan sponsors setting up separate committees for claims appeals also, especially for welfare plans. She noted that the Employee Retirement Income Security Act (ERISA) emphasizes making sure reviewers are not low-level employees who can be influenced by higher-ups or who could be reviewing supervisors’ appeals. “It is good to have a separate committee, for litigation purposes,” she told conference attendees.

Sally Doubet King, partner at McGuireWoods LLP, pointed out that committee members will be carrying out both settlor functions and fiduciary functions, and it is important for them to know the difference. She explained that settlor functions include such things as plan design decisions and amending or terminating a plan. Fiduciary functions include selecting investments, making claims determinations and choosing and monitoring service providers. She suggested marking on meeting agendas whether the item being discussed or decided upon represents a fiduciary or settlor function.

According to Miller, it is also important to know the difference between functions when keeping committee minutes. It is important to document all fiduciary decisions, and the person may leave out details if they do not know what is being discussed is a fiduciary function, he contended.

Gerrie said it is important to train committee members about their fiduciary liabilities, if not every year, then every couple of years and when a new committee member is added.

Doubet King noted that the Department of Labor (DOL) asks during a plan audit about the committee structure and roles, and whether the committee meets regularly. Miller added that plan documents must include a named fiduciary, and if that is the company, regulators and the courts interpret that as the benefits committee. Committees should have a charter that specifies such things as whether the committee can delegate authority and what to do if a committee member leaves. Committees will be held to an expert standard, so they must hire help if members are not experts at certain functions.

According to Gerrie, when choosing committee members, a plan sponsor wants people with authority and knowledgeable enough to make decisions, that can recognize when it is necessary to hire someone to help, and committed enough to show up to meetings.

She also suggested committees keep separate minutes for each plan, so they don’t share too much information if one plan is audited. Miller said that also helps committee members think of plans separately, so they don’t make similar decisions for multiple plans that may not be relevant for one.

In meetings, committees should not leave any issue hanging, even if that means deferring to another time or another person or committee, Gerrie warned.

Higher Ed. Institutions See Benefits of Sole 403(b) Provider

Another higher education institution has moved to a sole recordkeeper model for its 403(b) plan.

TIAA-CREF announced that Providence College, a Catholic and Dominican liberal arts institution, has selected the company as sole recordkeeper for its 403(b) plan, transitioning from three retirement plan providers. While many 403(b) plan sponsors have moved to a single provider since the 403(b) regulations were passed in 2007, David Ray, vice president and head of Strategic Sales at TIAA-CREF, told PLANSPONSOR the higher education segment of the market is in the early stages of the trend.

According to Ray, a single recordkeeper model is beneficial for both plan sponsors and participants by providing retirement savings information that can lead to better decision-making and savings habits. In addition to streamlining administrative tasks, sole recordkeeping centralizes the management of plan administration to one institution. Providers can more easily monitor fiduciary obligations and ensure compliance needs are met, and keeping track of investment performance is simpler. Additionally, enrolling participants and tracking eligibility is easier for higher education institutions, and a more personalized approach can be taken to administer effective advice and outcome-based communications to participants.

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The institutions bottom line is also benefited, Ray added. Working with a sole recordkeeper allows institutional plan sponsors to redirect staff and resources into more strategic business areas.

Most plan sponsors are moving to sole recordkeepers to have to access open architecture investment lineups, Ray said. Providence College plan members will have access to an array of customizable investment options, including annuities and mutual funds. Plan members will also be able to purchase mutual funds of their choice through TIAA-CREF’s self-directed brokerage platform.

Plan sponsors also choose a sole recordkeeper model for compliance oversight for both the plan and the participant, robust participant education strategies and participant  level investment advice, economies of scale resulting in lower fees for the plan sponsor and participant, and one relationship with accountability for all critical plan administration needs. Providence College plan members will have access to TIAA-CREF financial advisers, who provide personalized retirement advice tailored to individual goals at various life stages, plus online financial advice and resources.

“Providers want to empower their participants by helping them navigate their choices and decide which options will be most effective in helping them reach their retirement savings goals, and consolidating to one recordkeeper plays a key role in instilling this confidence and trust within an institution,” Ray said.

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