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HOW AN INVESTMENT COMMITTEE CAN HELP YOU RUN A MORE COMPLIANT PLAN
If you haven’t set up a committee to oversee the investments in your company retirement
plan - or if you have but you haven’t gone through a formal process or review to know if
the committee is operating properly, here are some things you should know…
Those responsible for the management and decision-making of their company retirement
plan plan (aka “fiduciaries”) have personal liability according to ERISA (the Employee
Retirement Income Securities Act of 1974), because they make decisions on behalf of plan
participants and their beneficiaries.
Plan fiduciaries must act solely in the interest of plan participants and beneficiaries, period. After all, we’re talking about someone who has some level of control over the MONEY (contributions) of plan participants so they have to do certain things to safeguard this money (that’s not theirs, but that they’re responsible for)…Such as:
- Demonstrate Prudence*: Act with care, prudence, and diligence;
- Diversify Investments: Diversify the investment options of the plan so as to
,reduce the risk of large losses; and - Adhere to the Plan: Act in accordance with the documents and instruments governing
the plan.
[**Prudence focuses on the process for making fiduciary decisions and one way to demonstrate "procedural prudence” is to have a paper trail, minutes, a documented
process that can demonstrate the reasons behind the decisions made on the plan].
Setting up a committee to clearly define and document a process of plan oversight is an effective way to limit the liability associated with managing a 401(k) plan – and run a more effective and compliant plan.
Our fiduciary advisors are ready to walk you through the steps to set up and/or manage an effective Investment Committee for your plan that includes a complete documentation strategy for demonstrating prudence and compliance.
Contact us for more information.
Phone: (480) 364-7401 | Email: hello@cognisgrp.com | Request Free Consultation