Does your retirement plan have an Investment Committee (IC)? If so, how is your IC structured? Is it on an ad hoc basis, where you may meet every couple of years, or do you have a written plan that guides your IC functions? Does it really matter?

Why should practices that have been in place for years be changed? Many plan sponsors often contemplate this question along with who is going to care if things just continue as they have been.

Under the Employee Retirement Income Security Act of 1974 (ERISA), ERISA as well as the courts have confirmed on numerous occasions to hold fiduciaries to the highest standard care under US law.

Investment Committees have the ultimate responsibility for overseeing investments in their company’s retirement plan. One of the challenges for an Investment Committee is ERISA offers limited specific guidance on procedures and practices to follow in carrying out fiduciary obligations.

Organizations often incorrectly assume that if a plan’s investment performance is adequate, the plan would pass any Department of Labor (DOL) examination.

However, the DOL has made it clear that plan operations will be the driving factor and retirement plans will be evaluated by the processes employed in achieving results, and not by investment performance. It’s the process, and not the results that are required to meet ERISA standards.

So, what is your best course of action to ensure ERISA standards are met?

There are many components to creating an outstanding Investment Committee for an organization:

  • What are the duties of an Investment Committee?
  • What will be the composition of the IC, such as:
    • Number of Committee members
    • Determining the demographics of members
    • How often should members be rotated
    • How often should meetings be held
    • How should meetings be documented
  • How should the process of monitoring investment managers and investments be documented?
    • Frequency of investment manager and investment evaluations
    • Period of time an investment manager or investment is provided before various actions are taken (Watch List, Manager/Investment change, etc.)

The structure and operations of the Investment Committee is part of the Fortune Financial Difference! Fortune Financial excels at partnering with your organization to navigate through the design and operations of the IC. Additionally, we help implement best practices to ensure relevant processes are implemented.

With new DOL regulations scheduled to be implemented, and with further ones sure to be in the hopper, it’s imperative that a plan sponsor be aligned with the expertise to help structure and navigate retirement plans to remain compliant with ERISA and DOL laws.

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