Establishing a fiduciary committee

Fiduciary best practices

Many plan sponsors use a fiduciary committee to assist them in meeting their fiduciary duties. The purpose of this article is to provide information relevant to establishing and operating a fiduciary committee.

Please note that many plan sponsors form separate investment and administrative committees with specific responsibilities assigned to each. For simplicity, we will refer to all such committees as “fiduciary committees.” We hope you find this helpful as you establish or further develop your fiduciary processes and procedures.

Establish the purpose of the committee The objective of a fiduciary committee is to make, or assist the plan sponsor in making, fiduciary decisions. For example, a committee might provide prudent oversight on plan expenses, plan investing strategies and investment options, and compliance with the plan document and the Employee Retirement Income Security Act of 1974 (ERISA).
Determine who should serve on the committee Select individuals who can make decisions and implement a course of action on behalf of the plan sponsor. The members of the fiduciary committee are themselves fiduciaries; therefore, committee members should be clear on their responsibilities and qualified to fulfill those responsibilities.
Identify roles on the committee Roles should be clearly identified so that the fiduciary committee can function as a working team. Important roles to consider:
• Chairperson/Facilitator
• Secretary/Recorder: responsible for taking the notes and distributing action items
The fiduciary committee should receive a variety of information, including information on the following:
• Investments
• Plan expenses
• Plan operations
Members of the committee do not always provide these reports. In some cases, for example, this role is filled by an administrator who is not actually a committee member.
Determine how often the committee should meet A fiduciary committee should meet on a regular basis.
Determine the agenda for the meetings Discussion topics may include the following:
• Ensuring that plan expenses are reasonable
• Reviewing investment performance
• Reviewing the plan’s portfolio and objectives
• Reviewing service provider performance and associated plan expenses
• Establishing an investing strategy that includes a clear definition of the risk tolerance, diversification, and expected returns
• Reviewing legislative changes and impacts on the plan
• Reviewing the plan’s investment policy statement (IPS)—if one exists—and making changes, if applicable
• Reviewing the plan’s Form 5500
• Directing changes to plan investments
• Reviewing and authorizing plan amendments or changes to the plan document
• Reviewing participant claims and appeals for benefits
Document fiduciary committee outcomes While the decisions of the fiduciary committee are expected to reflect prudence and the best interest of participants and beneficiaries, it is also very important for the fiduciary committee to follow defined processes and to document outcomes. Fiduciary committee meeting minutes should be formally approved by the committee and retained. In addition, you should retain fiduciary committee meeting minutes for a period of at least six years. If your plan is audited, these minutes might provide a helpful history.

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Fidelity does not provide legal advice, and the information provided herein is general in nature and should not be considered legal advice. Consult an attorney regarding your plan’s specific legal situation.