COLLECTED WISDOM™ for Plan, Retirement, and Investment Committees
Most would agree the plan fiduciaries must establish investment and plan committees that will clearly define a process of plan administration. However, the only thing worse than not having a committee is having one that doesn't know what it's doing or never follows its own rules. Learn more from these resources.
This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.
If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.
This 6-page paper reviews notable differences between growth and value investing and evaluates the recent performance trends while providing historical context. It also explores how the recent outperformance of growth investing compared to value investing impacts defined contribution plans and plan participant behavior. Finally, it provides conceptual arguments that support the cases for growth and value investing on a forward-looking basis.
Source: Sageviewadvisory.com, July 2021
As the plan sponsor, it's your fiduciary responsibility to make sure your plan funds reflect the best interests of your participants. This usually requires regular monitoring of your investment fund menu and making updates as you see fit. With that in mind, here are three signs it may be time to add or replace investment options in your company's retirement plan.
Source: Planpilot.com, July 2021
Retirement plan sponsors and committees that are fiduciaries often ask for guidance when hiring investment professionals. The best practice is to do a formal request for proposals that target likely candidates for the job. The RFP will identify the most qualified candidates, but other, less objective factors will differentiate them.
Source: Rpaconvergence.com, July 2021
Would you like your investment committee to utilize best practices and produce better outcomes? This is a rundown from a recent episode of a podcast from Fiducient Partners that should prove insightful. Ten Habits of Effective Investment Committees is based on what the author has gleaned over the years from observing many well-run investment committees.
Source: Fiducientadvisors.com, June 2021
Retirement plan sponsors need to be knowledgeable about their investment lineups and deliver documentation to the DOL and IRS on time. Most retirement plan committee members already know this. However, there are some things that advisers and consultants wish their sponsor clients were better at, or that they prioritized more.
Source: Plansponsor.com, June 2021
Before evaluating investments for inclusion on a DC plan fund lineup, plan sponsors need to decide what types of investments they want to use. The purpose of a retirement plan and the demographics of its participants will help plan sponsors decide what types of investments they need to use to take participants from accumulation to decumulation.
Source: Planadviser.com, June 2021
If there was ever a meeting that couldn't be replaced with an email, it's that of a retirement plan committee, and while those structures are as varied as the companies that sponsor them, a new survey by the Plan Sponsor Council of America uncovers some key consistencies in structure and approach. Indeed, retirement plan committees have always been an essential element in assuring prudent retirement plan operation and administration. While there is perhaps no perfect number of committees -- or committee members -- their construction, monitoring, and maintenance through rotations and training are as critical to their effective operation as it is to the design of the plan functions they oversee.
Source: Psca.org, June 2021
A participant has requested copies of plan committee meeting minutes and notes for the last four quarters. Does the committee have to comply with this request?
Source: Retirementlc.com, May 2021
If you are like many 401k plan sponsors, you worry about whether your retirement plan committee is using its time wisely talking about what is important? The author believes that your retirement plan committee should focus on six main areas which are reviewed here.
Source: Lawtonrpc.com, May 2021
Does the Recently Amended Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions
The final rule on investment decision-making that emerged from the filter of constituent comments does not prohibit fiduciaries of ERISA employee benefit plans from selecting investments that have ESG or other collateral objectives or benefits and does not create different standards for consideration of such investment options. Rather, the amended regulation requires that fiduciaries make investment choices based on consideration of pecuniary factors, which is consistent with the DOL's existing guidance. The final rule does, however, shift focus from considering investment options under the totality of the facts and circumstances to considering only defined pecuniary factors to the exclusion of non-pecuniary factors. This could be a distinction without a difference, however, given the expanded interpretation in the preamble and the flexibility incorporated into the final regulatory language.
Source: Wagnerlawgroup.com, April 2021
On March 10, 2021, the DOL announced in an official statement that it will not enforce its recently issued regulations on the investment of 401k plan investments based on nonpecuniary factors, such as environmental, social, and governance factors. The announcement represents an unusual, though not unexpected, change of course concerning the DOL's prior stated position on this issue. Generally stated, the DOL's March 10, 2021 announcement specifies that pending the publication of further guidance the DOL will not pursue enforcement actions against any plan fiduciary based on a failure to comply with the final regulations.
Source: Compliancedashboard.net, March 2021
A March 10 announcement by the Department of Labor's Employee Benefits Security Administration provides a precursor to the direction it plans to take on the recently finalized rules. Released as an enforcement policy statement under Title I of ERISA, the DOL advised that it will not enforce the final rules on Financial Factors in Selecting Plan Investments and Fiduciary Duties Regarding Proxy Voting and Shareholder Rights.
Source: Asppa.org, March 2021
Given that there are so many considerations to weigh when overseeing a retirement plan, it is important for plan sponsors to have a checklist for their committees -- whether the sponsor has a single retirement plan committee or dual investment and administrative committees -- to cover in quarterly meetings. Experts discuss what main facets of a retirement plan that a committee should cover in its quarterly meetings.
Source: Plansponsor.com, March 2021
Many fiduciaries responsible for selecting their 401k plan's target-date funds don't understand how these funds work. The risk of staying ignorant is increasing. Lawsuits challenging target-date fund selection are on the rise, and plan fiduciaries need to be able to defend their choices in response to these suits. New products, such as target-date funds that provide lifetime income options or make private equity investments are becoming available. For all of these reasons, if target-date funds are included in a plan's investment menu, fiduciaries need to develop a prudent process for evaluating the funds in partnership with their investment professionals.
Source: Cohenbuckmann.com, March 2021
The status of alternative investments as viable options on 401k plan menus received a significant boost on Jan. 21, as a California federal judge granted defendants' motion to dismiss in the latest development in the closely watched Anderson v. Intel Corp. Investment Policy Committee case. For plan sponsors who have watched the recent 401k litigation wave progress with no sign of relenting in recent months, this decision comes as a welcome development as it should help raise the bar for plaintiffs looking to challenge these types of plan investment options. In addition, the court's opinion may provide a road map for changes to fiduciary decision-making processes that could limit the ability of plaintiffs to bring these types of cases.
Source: Ropesgray.com, February 2021
Does the Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions
The more things change the more they stay the same. Or do they? This question should be on every employee benefit plan fiduciary's mind after January 12, 2021, when an amended DOL regulation went into effect changing the standards under which fiduciaries are expected to make investment decisions for ERISA employee benefit plans.
Source: Wagnerlawgroup.com, January 2021
Plan sponsors need to establish who will be responsible for plan administration and plan and investment decisions. Committees aren't legally required, but if plan sponsors appoint a committee as a "named fiduciary," they will not only see it pay more careful attention to plan issues, but a company's owner or board of directors will be relieved of most responsibilities for the plan. Having a committee or committees can also greatly help with defense if a plan or plan sponsor is sued.
Source: Plansponsor.com, December 2020
The DOL issued a final rule that amends the long-standing regulations that govern the selection of retirement plan investments by fiduciaries. One of the provisions is a prohibition on the use of an ESG fund as a QDIA. Plan fiduciaries that choose a fund that involves ESG screening strategies are taking a risk that the fund is not a permissible QDIA.
Source: Boutwellfay.com, December 2020
At the 2020 InvestmentNews RPA Convergence CIO Roundtable and Think Tank, Jamie Battmer, chief investment officer for Resources Investment Advisors, said collective investment trusts were gaining so much momentum that "40 Act funds [in 401k plans] are going the way of checkbooks." There are many compelling reasons for this rather swift transformation in the retail 401k market. There are also still many questions about collective investment trusts, or CITs, but none of them seem to be show killers.
Source: Investmentnews.com (registration may be required), December 2020
The DOL issued final regulations that, beginning on Jan. 12, 2021, require plan fiduciaries to only consider financial factors when selecting plan investments. While not specifically targeting Environmental, Social, and Governance investments, the regulations significantly alter the fiduciary process needed to support a plan's decision to offer them. Plan fiduciaries wishing to consider ESG factors when evaluating an investment can still proceed but should be cautious and careful to document their process.
Source: Lockton.com, November 2020
Plan sponsor fiduciaries who take a do-it-yourself approach to plan investments face huge potential exposure for underperforming investments and excessive plan fees. If you are a plan sponsor fiduciary who is losing sleep over all of this, it may be time to consider outsourcing your investment responsibilities to an investment manager or outsourced chief investment officer.
Source: Cohenbuckmann.com, November 2020
The Final Rule requires that fiduciaries evaluate investment opportunities based upon pecuniary factors. However, if fiduciaries are unable to distinguish investments based on pecuniary factors, the Final Rule permits fiduciaries to consider non-pecuniary factors as a tie-breaker provided that they comply with the Final Rule's documentation requirement. Like the Proposed Rule, the Final Rule includes restrictive conditions for investments used as a plan's qualified default investment alternative. This article describes the Final Rule's key features, including notable differences from the Proposed Rule.
Source: Groom.com, November 2020
Retirement plan governance is the system through which key decisions are made about strategy and operations, including plan design, administration, and investment choices. Typically, at the core of plan governance is an official plan governance committee. Although the DOL and IRS do not require a plan to have a plan governance committee, it is considered a best practice to have one.
Source: Orba.com, November 2020
The Pecuniary Rule: A Roadmap for Navigating the DOL's Final Rule on Financial Factors in Selecting Plan Investments
The DOL has issued a final rule to revise its existing rule regarding financial factors in selecting plan investments. This article provides a roadmap for fiduciaries on the final rule along with a general discussion of the core concepts under the final rule and some of the key departures from the proposed rule.
Source: Bradley.com, November 2020
The final rule on ESG investing by ERISA plans steps away from the proposed rule's focus on ESG. The DOL notes that "unlike the proposal, the final rule's operative text contains no specific references to ESG or ESG-themed funds." Rather, the DOL's position is that the lack of a precise or generally accepted definition of 'ESG' made ESG terminology inappropriate as a regulatory standard. Therefore, the final rule refers to "pecuniary factors and non-pecuniary factors" in defining the relevant fiduciary investment duties.
Source: Asppa.org, November 2020
The Department of Labor is adopting amendments to the "investment duties" regulation under Title I of ERISA. The amendments require plan fiduciaries to select investments and investment courses of action based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action.
Source: Americanbenefitscouncil.org, November 2020
The Department of Labor announced a final rule that updates and clarifies the Department's investment duties regulation in 29 CFR 2550.404a-1. The final rule intends to provide clear regulatory guideposts for fiduciaries of private-sector retirement and other employee benefit plans in light of recent trends involving environmental, social, and governance investing.
Source: Dol.gov, October 2020
PGIM found that more defined contribution plan sponsors are hiring outsourced chief investment officers. Plan sponsors say they are looking to create an institutional-quality investment lineup because they lack the internal expertise to do so and to reduce their fiduciary risk.
Source: Planadviser.com, October 2020
You got past another October 15 filing date for the Form 5500 for your 401k plan. Now you can focus on your 2020 plan year and start making sure you have your 401k plan house set for the end of this year. Keeping detailed minutes from the meetings of your 401k plan oversight committee is an important part of this process. Here are a few simple tips for keeping detailed and effective 401k committee meeting minutes.
Source: Linkedin.com, October 2020
When it comes to fiduciary training for retirement plan committees, experts generally say a plan adviser can take the lead and use the occasional help of an ERISA attorney. Plan sponsors can trust advisers to help with committee decisions and training.
Source: Plansponsor.com, October 2020
Release of the DOL's final rule addressing environmental, social, and governance factors in selecting plan investments appears to be imminent. Following a 30-day comment window that ended July 30 and more than 8,000 comment letters, the DOL on Oct. 14 submitted a final rule to the Office of Management and Budget for review.
Source: Ntsa-net.org, October 2020
This year, in particular, with the protests that sprung up across the country following the death of George Floyd, has shown many companies the importance of having a truly diverse workforce. And that principle should extend to the retirement plan committee as well as the workforce, experts say. With representation being top of mind in 2020, companies are reconsidering the makeup of their workforces and their retirement plan committees.
Source: Planadviser.com, October 2020
New research from PGIM sheds light on the use of outsourced chief investment officers by defined contribution plan sponsors. In a divergence of opinion, OCIOs seem to underweight their expertise in implementing institutional-quality structures, indicating that the top reasons for being hired by their clients were the perceived mitigation of fiduciary risk and the plan sponsors' lack of resources.
Source: Pgim.com, October 2020
While outsourced chief investment officers have historically been tapped by defined benefit plan sponsors and endowments, there is a growing trend of DC plan sponsors turning to OCIO managers. New research from PGIM research found the top reasons that plan sponsors are using an OCIO manager.
Source: 401kspecialistmag.com, October 2020
Most 401k providers have little incentive to help business owners to pick prudent investments for their 401k. The opposite may be true. They can grow their profits by steering business owners towards "imprudent" investments with excessive fees and/or inferior returns. If you're a business owner and want to avoid this trap, the article has two recommendations: 1) model your investment menu after the Federal Thrift Savings Plan, or 2) hire a fiduciary-grade financial advisor for professional investment advice.
Source: Employeefiduciary.com, October 2020
In this paper, the authors challenge five common misconceptions that have led to the increased prevalence of passive investments in defined contribution plans. To help fiduciaries weigh the pros and cons of active management, they perform a reality check on each misconception, referencing fiduciary principles, and market and participant survey data.
Source: Mfs.com, September 2020
Discusses the new set of proposed regulations from the DOL guiding retirement plan fiduciaries about investing plan assets in ESG Investment Vehicles. The group discusses what ESG investments are, what's different about considering them for retirement plans, what the DOL's proposed regulations will do, and what they wouldn't. Also talks about the reaction to the rules, how they impact retirement plans, and the next steps for plan fiduciaries.
Source: Ballardspahr.com, September 2020
The DOL issued a proposed regulation outlining the duties of an ERISA fiduciary when considering an investment that incorporates environmental, social, and corporate governance factors. Some believe that the DOL will likely move quickly to finalize the regulation before the end of the current administration's first term. The proposed regulation would make five basic changes to the current regulation.
Source: Verrill-law.com, August 2020
Among the many claims brought by plaintiffs challenging investment offerings in defined contribution plans is the claim that plans should offer stable value funds instead of more conservative capital preservation funds, such as money market funds and deposit accounts that are insured by the U.S. government. Plaintiffs have argued that stable value funds are inherently better than more conservative options because they typically provide a higher rate of return. A federal district court in Texas recently dismissed this type of claim in a case brought against American Airlines.
Source: Erisapracticecenter.com, August 2020
A new whitepaper finds that the use of fixed income options in 401k plans has not kept pace with workplace trends. The whitepaper points out that in the past, investment recommendations may have been more focused on achieving minimum compliance and "checking the fixed income box" rather than anticipating participant investment needs at various life stages. A multi-generational participant population has more complex needs.
Source: Napa-net.org, August 2020
As the DOL increases its investigations and inquiries into ESG investments held by retirement plans, plan fiduciaries should review their plan investments and policies to (i) determine if their retirement plans hold any ESG-type investments, and (ii) if they do hold such investments, (a) review their investment policy statements and evaluate whether such policies comply with the current rules for ESG investments, and (b) confirm whether such investments remain appropriate for the plan.
Source: Haynesboone.com, August 2020
The DOL's proposed rule addressing environmental, social, and governance factors in selecting plan investments received more than 1,500 comment letters during the 30-day comment window, with many taking issue with the proposal.
Source: Napa-net.org, August 2020
Employers that are fiduciaries of participant-directed individual account plans subject to ERISA should be pleased with the position taken by the DOL in an information letter dated June 3, 2020, addressing the use of private equity investments in designated investment alternatives offered in Plans. The DOL states that subject to the standards and considerations outlined in the letter, a plan fiduciary would not violate its duties under sections 403 and 404 of ERISA solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative in a plan.
Source: Workforcebulletin.com, July 2020
Changes made to the investment lineups of corporate 401k plans in 2019 reflect U.S. sponsors' ongoing focus on cost savings, a Pensions & Investments analysis of recently released 11-K filings shows. Changes to index fund lineups among plans were prevalent, with many adding to their passive tiers or changing index fund providers, with Fidelity Investments seeing several wins and Vanguard Group seeing some losses.
Source: Pionline.com, July 2020
Retirement plan investment fiduciaries would be well-advised to note the increasing level of scrutiny the DOL is applying to ESG funds in retirement plans. Selecting or retaining ESG funds can be fraught with increased audit risk, including, potentially, imposing penalties for breach of fiduciary duty under ERISA. 401k and other defined contribution plans are at enhanced risk.
Source: Benefitslawadvisor.com, July 2020
The proposed rule makes it clear that fiduciaries must select those investments based solely on financial considerations that impact the economic value of the investments. In other words, plan fiduciaries must not sacrifice performance or expose the plan participants and beneficiaries to additional risk by including investment options that primarily serve the non-financial interests of the plan fiduciaries.
Source: Icemiller.com, July 2020
Alternative investments such as private equity can commonly be found in the investment portfolios of defined benefit plans. However, despite their potential strengths, there has not been wide adoption of private equity strategies in DC plans to date. To support the consideration of private equity by fiduciaries of DC plans subject to ERISA, the DOL issued an information letter to Groom Law Group. The information letter provides a framework for a prudent process for fiduciaries who believe a private equity allocation to a diversified plan investment option, including a target-date fund, may be appropriate.
Source: Groom.com, July 2020
The DOL released a proposed rule that will amend existing guidance governing a fiduciary's investment duties under ERISA. The proposed rule clarifies that plan fiduciaries must base their investment decisions solely on pecuniary factors: those that have a material effect on an investment's risk and return based on appropriate time horizons consistent with the plan's investment objectives and funding policy. In other words, plan fiduciaries must not sacrifice performance or expose plan participants and beneficiaries to increased financial risk to serve a non-pecuniary interest.
Source: Thompsonhine.com, July 2020
While the guidance does not establish any new fiduciary rules or exemptions, it is nonetheless quite helpful in providing factors to be considered by fiduciaries in determining whether investment vehicles with private equity components belong in their plan investment menu. The Information Letter considers facts relevant to private equity investments, but the guidance can be applied more broadly to consideration of any alternative investment vehicle with similar characteristics.
Source: Wagnerlawgroup.com, June 2020
DOL Information Letter Outlines Fiduciary Considerations for Including Private Equity in DC Plan Investments
The Letter emphasizes that selection and monitoring of an investment option with private equity are subject to the same fiduciary considerations as other investments (including the duties to be prudent and loyal, and the duty to avoid prohibited transactions). At a high level, this includes evaluating whether the potential upside from the investment justifies the added risk, fees, complexity, and valuation and liquidity issues. The Letter lists specific considerations.
Source: Erisapracticecenter.com, June 2020
Department's views on the use of private equity investments within 401k and other DC plans. The Information Letter was issued to Groom Law Group on behalf of two of its clients and makes clear that 401k fiduciaries can prudently include private equity as a component of an ERISA plan's diversified investment option, such as a target-date fund. The letter provides a framework of important factors for plan fiduciaries to consider to demonstrate the prudence of such investments.
Source: Groom.com, June 2020
The DOL issued important new guidance for 401k plan investment committees on June 3 that want to include private equity as a component of a target-date fund or other diversified investment fund offered within a 401k plan. The Information Letter marks the first time DOL has addressed the use of private equity in defined contribution retirement plans.
Source: 401kspecialistmag.com, June 2020
There is so much great information online to help you set up and manage a 401k committee. In the last several months alone there have been over 50 articles on committee best practices. To save you time, in this piece you'll find seven of the best articles for building a strong 401k committee filled with common (and not-so-common) strategies to consider.
Source: 401kbestpractices.com, March 2020
The fiduciary landscape is changing, and processes once seen as "good enough" no longer check all of the right boxes. Use this straightforward checklist to ensure the investment committee is covering its bases.
Source: Conradsiegel.com, March 2020
The standards plan fiduciaries are held to seem to be rising. A critical step in meeting your fiduciary responsibility is to start an investment committee or strengthen your current one. The high-level investment committee basics here break down what a successful committee looks like.
Source: Conradsiegel.com, February 2020
Training new retirement plan committee members, as well as providing ongoing training throughout the year for all members, is critical, industry experts say. "Because their responsibilities are so enormous, we need to do a better job of training these fiduciaries to make better decisions," says Joshua Itzoe, a partner and managing director with Greenspring Advisors. This article reviews some best practices.
Source: Plansponsor.com, January 2020
One question that a plan sponsor always asks respondents to an RFP for investment management services is to describe their investment philosophy. Plan sponsor going to the trouble and expense of issuing an RFP deserves an answer to this question from a respondent that is forthright, commonsensical, and well thought-out. A fiduciary should be the leader of the pack in its relationship with a plan sponsor, especially in cases where an RFP calls for the services of a discretionary fiduciary, such as an ERISA section 3(38) investment manager.
Source: Morningstar.com, December 2019
The U.S. District Court for the Western District of Pennsylvania in Scalia v. WPN Corporation wrote regarding the duty to monitor investment fiduciaries. Given the potential risk related to a breach this fiduciary duty, the WPN opinion is likely to be an important one for Appointing Fiduciaries. In its opinion, the WPN court provided the guidance for assessing the extent to which an Appointing Fiduciary has a duty to monitor and, if so, for determining whether the Appointing Fiduciary has fulfilled that duty.
Source: Financialservicesemploymentlaw.com, December 2019
Offering a competitive retirement plan is one of the most important benefits an organization can provide to its employees. However, given the complexity, required resources, and potential for liability related to operating a retirement plan, establishing a committee to share in the fiduciary responsibility and oversee the plan's governance is considered best practice. While the reasons for having a retirement plan committee may be clear, who should serve on the committee is not. With no guidance from ERISA, the DOL, organizations are often left questioning the best composition for their committee.
Source: Cammackretirement.com, November 2019
A recently released case highlights the protection afforded by a retirement plan committee that takes its role seriously. In Scalia v. WPN Corp., a Pennsylvania federal court ruled that the U.S. Department of Labor was wrong in its insistence that retirement committee members were liable under ERISA for failing to monitor the committee's investment manager.
Source: Carltonfields.com, November 2019
Many organizations choose to form a committee to manage their retirement plan, as having a diverse range of perspectives often leads to better results versus one individual managing all the duties and decision-making. There is no one-size-fits-all approach to building a retirement plan committee. Creating your committee depends on the size and demographics of the plan and employee population. However, to achieve the most cohesive and efficient committee possible, plan sponsors should look to a couple of key components.
Source: Planpilot.com, November 2019
Research has shown that employers' ability to automatically enroll workers into investment defaults within DC plans led to a significant increase in participation rates and a reduction in self-directing participants. However, many studies that plan sponsors, consultants, and investment advisors use to identify best practices for participants were conducted prior to the introduction of the PPA. The potential impact of smaller core investment menus may not have the same effect when most participants are ending up in the default-investment option today. The paper explores the relation between core investment menu size and two key participant investment decisions: the acceptance of the plan's default-investment option, and the efficiency of portfolios among participants who were self-directing their accounts.
Source: Morningstar.com, November 2019
If you are like most employers, you worry about whether you are discussing the right things at your 401k investment committee meetings. Fiduciary compliance is probably the most important topic that investment committees struggle to understand and address correctly. Here are three fiduciary responsibilities every 401k investment committee should address.
Source: Lawtonrpc.com, October 2019
With more than $5 trillion held in 401k plans, watching over retirement savings is no small task for plan sponsors and advisors. Maintaining these plans involves several duties: choosing and changing investments, communicating these changes to employees, and more. Additionally, this fiduciary responsibility includes acting in the best interest of plan participants. Because the tasks of monitoring and making changes to a plan's investment menu can be complicated, it's important for 401k plan sponsors and advisors to do their best to avoid a few common pitfalls.
Source: Morningstar.com, September 2019
Periodic training updates for retirement plan committee members acting in a fiduciary capacity is a prudent approach ensuring that they maintain the current knowledge essential to carry out their duties. More fundamental is ensuring that new committee members get a strong grounding in plan operations and their responsibilities promptly on being appointed to a plan committee, if not before.
Source: Orba.com, August 2019
A recent federal court decision should remind us all of the importance of plan committee education. The case involved a suit by participants in the SunTrust 401k plan that challenged the initial selection of, and subsequent acquiescence with, an ostensibly imprudent plan investment menu. The court's decision focused on one aspect of the case: the liability of "new" plan committee members for actions that predated their involvement on the committee but continued after their involvement.
Source: Napa-net.org, July 2019
Plan sponsors know that offering a retirement plan is important not only to attract and retain loyal employees, but to ensure they are retirement ready. There are many moving parts to the retirement plan, including enrollment, plan education efforts, building the investment fund lineup, staying compliant with the DOL and ERISA, and making distributions. Particularly, building an ideal investment fund lineup is a multi-stage process, and for many sponsors, the prospect of selecting the investments to be offered in a plan can seem overwhelming.
Source: Planpilot.com, July 2019
A rash of 401k class-action lawsuits and low participation rates have revealed rifts between plan sponsor intentions, on the one hand, and participant perceptions of actual practices, on the other hand. Details about plan investment lineups often reside at the center of the controversy and confusion. This paper examines six items a plan sponsor might consider when building, maintaining, and altering the fund menu for its participants.
Source: Jhinvestments.com, June 2019
Plan fiduciaries and retirement plan committees would do well to consider the trends in the ways that retirement plan funds are invested and the behaviors and attitudes of plan participants, recommends a recent analysis.
Source: Ntsa-net.org, June 2019
As a retirement plan sponsor, one of the biggest steps toward ensuring regulatory compliance includes establishing a committee to manage the plan. Setting forth clear objectives and direction for the composition and function of your retirement plan committee can be the key to its success. In this article, learn about some standard objectives and responsibilities for your committee, with a specific view towards its investment responsibilities.
Source: Planpilot.com, May 2019
Failure to understand how they must operate exposes fiduciaries and plan sponsors to lawsuits. It also hurts participants who may have a plan that isn't run properly and has poorly performing and expensive investments. While there isn't any legal requirement that committee members have fiduciary training, Department of Labor auditors will ask about it. They also view training as an indication that the members take their responsibilities seriously.
Source: Penchecks.com, May 2019
There is a growing interest in including funds that emphasize environmental, social, and governance factors in 401k plan investment menus, in response (in part at least) to participant interest in these funds and the increased participant engagement they generate. What issues does inclusion of an ESG fund in the plan's fund menu raise for plan fiduciaries?
Source: Octoberthree.com, May 2019
Mutual fund companies usually make their funds available to 401k plans in multiple share classes. While all classes hold the same underlying securities, they can charge very different fees. In general, employers have a fiduciary responsibility to choose the lowest-priced share class available to their 401k plan so participant investment returns aren't reduced unnecessarily by avoidable fees. To meet this fiduciary responsibility, employers must be capable of evaluating share class fee differences.
Source: Employeefiduciary.com, May 2019
Morningstar researchers found what they termed "significant evidence" that replacement funds outperformed the replaced fund over both future one-year and three-year periods. The researchers noted as the "most surprising" finding, more specifically "unexpected in the context of past research, which has generally noted that replacement funds do no better (or worse) than the funds being replaced."
Source: Napa-net.org, April 2019
Why do some committees generate better investment outcomes than others? Is it because they are just better investors, or are there group dynamics at work that can systematically rob a committee of its ability to make strong decisions? This 25-page paper outlines some fundamentals of building a strong team and maintaining a structure that supports thoughtful decision-making. It also addresses the pitfalls that groups can fall prey to, with a discussion of group dynamics and behavioral economics heuristics that can become issues for investment committees if members are not aware of them.
Source: Arnerichmassena.com, April 2019
401k investment committees have a fiduciary responsibility to regularly monitor and periodically evaluate the quality of a plan's investment funds. However, the research is varied on whether or not a 401k investment committee's practice of swapping out the funds in a plan's investment menu actually results in better performance and improved outcomes.
Source: 401ktv.com, April 2019
It's been said that the DOL and Courts take the position that "if it wasn't documented, it didn't happen." In the case of ERISA, the best defense for retirement committees is always a strong offense which means taking a proactive approach to implementing a comprehensive fiduciary governance process. One of the cornerstone practices to demonstrate that the retirement committee has made prudent decisions as required by ERISA is to take official minutes at each meeting.
Source: Greenspringadvisors.com, February 2019
An organized and effective retirement plan committee forms the essential foundation for a sound fiduciary process, meaning a process that plan fiduciaries can be proud of and that will stand up to scrutiny. The most effective committees commit to an approach that emphasizes both committee engagement and adherence to a disciplined process. This 4-page article reviews some best practices that consistently lead to high functioning retirement plan committees.
Source: Fiallc.com, February 2019
In recent years, there has been an increase in considering environmental, social, and governance criteria when it comes to investing. However, not all investors agree that ESG factors should be considered when identifying prudent investments. The Department of Labor recently put out a bulletin that clarified how ESG criteria can be used by plan fiduciaries in making investments.
Source: Bsllp.com, February 2019
One of the most important things a company can do to properly equip its retirement plan committee members is to provide comprehensive fiduciary training. It's an important step to minimize fiduciary risk through education and governance. Furthermore, the DOL views fiduciary training as a critical element of prudent oversight and is increasingly looking for evidence that fiduciary training has been provided during plan audits. Unfortunately, formal fiduciary training is still not very common within the industry.
Source: Greenspringadvisors.com, January 2019
Retirement plan committees (which are sometimes broken down into separate committees such as an investment committee and/or an administrative committee) serve an important function to ensure that the plan fiduciaries fulfill their responsibilities. While most plan sponsors utilize these committees, not all have adopted a formal committee charter. So, what does a good committee charter include? Here are some of the key elements.
Source: Cammackretirement.com, January 2019
A well-organized and effective retirement plan committee is the cornerstone of successful fiduciary decision-making and organizational risk management for plans of any size. However, great committees do not happen by accident, they are the product of a "best practices" approach to design and implementation. Listed here are eight simple steps any company can implement to make its committee more effective.
Source: Greenspringadvisors.com, January 2019
This short article shares a number of do's and don'ts when it comes to your 401k plan fund menu.
Source: Conradsiegel.com, January 2019
Many 401k fiduciary lawsuits have focused on fees including, their reasonableness, their necessity, and whether the fees are being assessed for funds and services add value and help participants achieve their retirement goals. How often do you check up on your retirement plan fees? Investment committees need to be aware of their fiduciary duties and remain vigilant in carrying them out.
Source: 401ktv.com, December 2018
Ongoing due diligence and research are a necessity, even for funds that are performing well. In the end, retirement plans should aim to utilize investment strategies that are disciplined and focused on delivering results in the long run. These are the strategies most compatible with the investment goals of retirement savers.
Source: Cammackretirement.com, November 2018
There is not a legal requirement that committee members receive fiduciary training. Instead, it's a best practice and good risk management. But, what should the fiduciary education cover? Based on an analysis of court decisions on fiduciary responsibility, Fred Reish worries that fiduciaries may not be adequately educated about their basic responsibilities and particularly their administrative oversight duties.
Source: 401kspecialistmag.com, November 2018
Plans compare their returns by asset class to selected benchmarks that reflect their investment goals for the asset class. Plans pay fees to external asset managers with the expectation that the managers will exceed these benchmarks. As such, this paper focuses on the benchmarks to assess the role of fees. The question is whether higher fees help or hinder the ability for a plan to outperform its chosen benchmarks.
Source: Bc.edu, October 2018
Socially responsible investing includes funds that take environmental, social and governance factors into account when selecting the fund's underlying investments. They are often referred to as ESG Funds. Studies show that millennials want socially responsible investments. This article discusses what you should consider.
Source: 401ktv.com, September 2018
In Meiners v. Wells Fargo & Company, the U.S. Court of Appeals for the Eighth Circuit clarified the burden plaintiffs must meet to state a claim for breach of fiduciary duty under ERISA based on the inclusion of allegedly underperforming and expensive investment funds. Because plaintiffs often lack detailed information about the process plan fiduciaries followed to make investment choices, pleading a plausible claim that those fiduciaries have acted imprudently can pose a significant challenge.
Source: Kslaw.com, August 2018
Plansponsor's National Conference featured a session on investment committee education, the basics surrounding it, and the best resources available to plan sponsors. Two retirement industry professionals reviewed best practices for investment committee members.
Source: Plansponsor.com, June 2018
As DC plans represent a growing share of workers' retirement nest eggs, plan sponsors and consultants may be considering customized investment options for their DC plan investment menus. This 12-page paper discusses the potential benefits and drawbacks of including nonstandard investment options, particularly white-label funds, in a 401k plan.
Source: Vanguard.com, June 2018
Fund expenses cover portfolio management, fund administration and compliance, shareholder services, recordkeeping, certain kinds of distribution charges, and other operating costs. This ICI study found that, on average, fund expenses for long-term mutual funds have declined substantially for more than 20 years.
Source: Ici.org, April 2018
The Trump administration unveiled guidance aimed at the burgeoning socially responsible investment industry that left some investors scratching their heads. The Department of Labor, which oversees retirement-plan funds, published guidelines that said investments based on environmental, social and governance issues aren't always a "prudent choice" and that such factors shouldn't "too readily" be considered as economically relevant by fiduciaries.
Source: Investmentnews.com (registration may be required), April 2018
Like good design, people know a good fiduciary process when they see it. When replacing a poorly performing investment in a fiduciary account, follow these best practices to ensure fiduciary compliance.
Source: Fi360.com, March 2018
When a person is appointed or is being sought to be member of a retirement plan committee, the natural question is to understand exactly what the person is committing to. Simply stated, a committee member is a fiduciary, who is expected to always act on behalf of plan participants, using the care of a person familiar with retirement plans and investments. This article covers the specifics on the role and responsibilities of being a fiduciary.
Source: Planpilot.com, March 2018
Traditionally, the governing committee for 401k and 403b plans have been called "investment committees" which can cause confusion and might even be harmful. They should be called "retirement committees" or even "benefits committees." Here's why.
Source: 401ktv.com, February 2018
The author reviews a few key problems he has seen over the years in the operation of retirement plan committees.
Source: Fiduciaryplangovernance.com, February 2018
This is an aspect of committees where there is generally a woeful lack of understanding of the commitment that is being made. This article discusses making a committee position offer (what plan sponsors should be thinking about), formalizing appointments, removals, and resignations.
Source: Fiduciaryplangovernance.com, January 2018
When considering committee meetings, it's a mistake to think only about the time spent in the meeting itself. In fact, this time is by far the least important part of a committee meeting. In fact, meetings start well before the meeting itself and end well after it.
Source: Fiduciaryplangovernance.com, January 2018
Committees serve at the pleasure of an appointing entity, usually a board of directors that gives them discretionary authority over key aspects of plan operations, investments, and administration. Committees are accountable to that appointing entity for their actions.
Source: Fiduciaryplangovernance.com, January 2018
Plan sponsors are not legally compelled to set up committees. Most standardized plan documents give plan sponsors the flexibility to set one up or not. But just because you are not required to do something doesn't mean it's not a good idea.
Source: Fiduciaryplangovernance.com, January 2018
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