401(k) Plan Committees

The plan’s Named Fiduciary will delegate the administration of the company’s employee benefits plans to a Benefit and Investment Committee. The committee usually serves under the appointed Plan Administrator and Trustee, where, like the named fiduciaries, each committee member must acknowledge his/her fiduciary duties, responsibilities, and accountability to the plan, its participants, and beneficiaries.

Committee Members

Who should be on the committee? It is recommended that a Benefit or Investment Committee include:

• anyone who serves as a plan fiduciary;
• at least one member of senior management, the plan sponsor’s legal counsel;
• one or more participants from the “rank and file;” and
• one committee secretary, who is responsible for taking notes and documenting discussions and decisions during committee meetings.

Committee Decisions

Committee(s) members, while serving as fiduciaries, are expected to make both “informed and reasoned” decisions on behalf of those whom they serve. A prudent process by which a plan fiduciary can make reasoned and informed decisions would include the following:

• Ask and answer all the relevant questions when determining a course of action. The failure to make a necessary decision is a fiduciary breach.
• Investigate all the possible alternatives. Complete a thorough due-diligence examination of the situation, problem or opportunity before settling on a course of action.
• Document how a course of action was chosen. Fiduciaries are allowed to be wrong when determining a course of action. However, they must document how they arrived at the chosen course of action, which they believed was in the best interest of the plan participants and their beneficiaries.
• Follow the terms of the governing documents. Fiduciaries must read and understand those materials.
• If the fiduciary requires outside assistance at any step in the decision process, procure it.

Finally, before settling on a course of action, answer these four questions in the affirmative:

1. Is the course of action appropriate, given the stated objective?
2. Is the course of action reasonable, given the known facts and circumstances?
3. Is the course of action permitted by the governing documents and regulations?
4. Is the course of action solely in the best interests of the participants and beneficiaries?

Committee Administration

The benefit committee should function as expected when it was conceived. As such, it should establish its officers and By-Laws, which denote their responsibilities to the plan, their respective duties to the committee, the frequency of meetings, required attendees, routine agenda items, reporting and record keeping expectations, etc. Many of the duties of the committee will likely be outlined in the plan(s) governing documents.