Does Your 401k Plan Have an Investment Committee?
Posted on Mon, Aug 30, 2010
If you have a 401(k) plan in your employee benefits package, along with it comes fiduciary responsibilities, including providing a prudently managed selection of investment options for your employees.
It is a recommended fiduciary practice to establish an Investment Committee for the plan. The purpose of the committee is to follow a formal method for reviewing and monitoring the investment options offered to plan participants. This committee should meet at least annually, or quarterly if possible, and should range from four to six people. Some experts recommend the number of people should be an odd number for voting purposes. The members of the committee normally include company executives from HR, Finance, or Operations, along with any outside professional investment advisors that the plan has hired.
When an Investment Committee is established, the first order of business is to adopt an Investment Policy Statement (IPS). Your investment advisor should be able to provide you with a sample template. The committee can review and customize this policy based on your plan’s goals and objectives. I will cover more on the IPS in a future post.
Each time the committee meets, meeting minutes should be taken and kept for documentation purposes. These minutes can serve as protection if a legal issue arises in the future, as the minutes prove the fiduciary process used by the committee.
The meeting minutes should include the following:
- The date, time, and location of the meeting
- Identification of everyone present at the meeting
- Reference of any reports that were used to analyze funds during the meeting
- Any participation issues such as education, goals for increasing the number of participants, or deferral rates
- Any plan fee issues discussed
- Any fund performance issues discussed
- Any decisions made, such as the decision to place a specific fund on a formal or informal “watch list” that will need to be addressed at a future meeting
- Any decisions made which require immediate action, such as the decision to remove and/or replace a fund in the plan’s line-up
The meeting minutes serve as important documentation that a fiduciary process was followed, and the plan is being prudently managed by the Investment Committee members.