Successfully running your business isn’t just about making sure everything runs smoothly on a day-to-day basis. You also need to make sure you’re planning for the future—and that includes running your retirement plan investment committee.
In this role, it’s up to you to oversee a group retirement plan that meets the unique financial needs of your employee base and adheres to the complex laws, regulations and responsibilities required of you as a fiduciary. This is an important task—one that shouldn’t be done alone—so when it comes time to assemble and run your investment committee, here are some best practices to follow.
Overall Committee Structure
- At a minimum, committees should meet semiannually to evaluate plan investment and demographic information. As we touched on earlier, the size of your plan will dictate exactly how often you meet, so a smaller plan might not require as much attention, but with a larger one, it’s a good idea to meet more often. As your workforce changes due to turnover, it’s also a good idea to meet more often to reevaluate plan demographics.
- Create a committee charter to establish goals, structure and processes for members. Once you start meeting with your committee members, this charter will act like a blueprint for how your committee should be structured and how it should function. Don’t be afraid to get specific, either. The more detailed your committee charter is, the less ambiguity there should be around what everyone’s goals and responsibilities are.
- New committee members should review prior meeting minutes and committee materials to become familiar with committee activities. This is a great way to ensure everyone is on the same page at the start of each new meeting. You can get derailed easily if you spend too much time looking back at previous meetings and not enough time moving forward.
At Each Meeting
- Prior meeting minutes should be approved as a way to review recently discussed topics and to initiate a starting point at each meeting. To reiterate the previous point, having a structured way to recap previous meetings ensures you don’t spend too much time looking back and can instead focus on looking forward and discussing new ideas or topics.
- Review investment performance across each investment fund, including a deep review into the plan’s target date funds in accordance with the plan’s Investment Policy Statement (IPS). Reviewing investment performance helps ensure your plan is investing in the right funds to get the best possible returns for your employees. As more and more workers turn to their employer-sponsored retirement plan as their primary source of retirement income, pressure increases for you, as a plan sponsor, to deliver on what your employees need to help them work toward their financial goals. That’s why keeping tabs on how your investments are performing is so important. That way, when the time comes, you can make any necessary changes to your investment strategy.
- Review the plan’s fees and conduct appropriate benchmarking. In accordance with your goals, your plan should yield the highest possible return on investment for your employees. But that ROI is about more than just investment performance. It’s also important to keep track of the types of fees you’re paying into your plan and look for ways to reduce them.
- Discuss ongoing participant plan education areas of focus. Your employees will make the best plan elections when they have the most valuable, up-to-date information possible. Look for ways to educate your employees about the specifics of the plan. Give them updates on investment performance. Benchmark investment performance from year to year, and then relay that information to your employees when it comes time to make their annual elections. Your employees will thank you for being so transparent with them.
- Discuss relevant regulatory changes. Laws, rules and regulations change all the time. If anything has changed with regards to your retirement plan, you’ll want to make sure that you’re following any new rules or regulations to stay as compliant as possible.
While these are all good things to keep in mind, it’s also important to note that there’s no “one-size-fits-all” approach to how you run your retirement plan investment committee. These tips can get you started, but investment committee best practices can vary depending on the size of the plan, the portfolio’s complexities and the plan needs. But luckily, the experts at Wealth Enhancement Group can provide even further help and advice getting your investment committee off the ground.
This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
Brian Gregov is located in our Warren, NJ office and is not affiliated with LPL Financial.
CPFA, AIF®, QKA Brian leads a highly qualified team and oversees the retirement plan governance and fiduciary responsibilities for his clients, along with their administration, operations and design. He has more than 20 years of broad experience working in retirement solutions, including managing plans for large, multi-hundred-million-dollar corporations as well as small businesses. Brian supports his clients by designing customized retirement plans that are focused on specific goals and...Read More