PLANSPONSOR - January - February 2024 - 37

functions, and document the reasoning
behind all fiduciary decisions.
" It's really all about process, " he says,
" What I mean is documenting decisions
that are made by fiduciaries, so you have
that as a record and documenting it well
enough to show a well-thought-out reason
for the decisions you made at the time. "
Kaleda has seen vulnerabilities appear
when fiduciaries made a decision that likely
was even well reasoned but was recorded
poorly. " You obviously won't remember
what you did six years ago, " he says.
Committee Member Selection
Jodi Epstein, a partner in Ivins, Phillips &
Barker, Chartered, in Washington, urges
her clients to select engaged and available
employees to be committee members
from the outset. While this is not a legal
requirement, she has seen how thoughtful
planning from the start can prevent problems
later.
And,
for new members, followed by annual
reviews, is also key, she says.
Fiduciary Training
Percy Lee, of counsel also with Ivins, Phillips
& Barker, Chartered, in Washington,
agrees, urging robust fiduciary training
that covers all committee duties. One
necessary piece of preparation, he says,
is to separate members' business- and
fiduciary-decisions.
Fiduciary training, besides covering
the basics, should clarify " how fiduciary
concerns differ from concerns
[the members] might have in their noncommittee
roles
at
the company, " Lee
says. For instance, deciding whether to
adopt optional features of the SECURE 2.0
[Setting Every Community Up for Retirement
Enhancement] Act would
be
given that fiduciary
duties involve meeting regularly, finding
committee members who are focused and
free to attend can help, she says.
" You want people who can make it
to the meetings and who are reliable, "
she says. " Sometimes, people are unreliable
because they get double and triple
booked. Then you lose a quorum, and
your meeting falls apart. "
Based on her experience, she says,
smaller committees tend to function efficiently,
and having an odd number of
people prevents tie votes by design. Ideally,
she likes to see committees of three to five
members, representing the benefits, operations
and finance divisions of a company.
Rules of the Road
Establishing how the committee runs is
the next step, which could involve establishing
a charter or, for an individually
designed plan, relying on provisions
in the plan document itself. Epstein
depends on these organizing documents
to help outline how the committee functions-e.g.,
they spell out whether decisions
require a majority vote or a unanimous
vote. Having fiduciary training
a
company function, but once the decision is
made, to implement it properly according
to the terms of the plan and requirements
of the law would be a fiduciary function.
Outsource Committee Duties
Not everyone is an expert, and the flexibility
to hire experts permitted by ERISA
may be beneficial for some sponsors.
" If I'm the plan sponsor, [I] want to
designate people who are [or] want to be
fiduciaries. But those fiduciaries can [still]
hire experts and service providers to help
them, " Kaleda says, giving the example of
an officer at a trucking company, who may
lack the investment expertise needed to
oversee plan investment decisions.
Split Duties When Necessary
Some large-plan sponsors that Kaleda
works with find success in dividing up
committee duties. A subcommittee of
three to five individuals, helmed at some
companies by the chief investment officer,
will oversee investment decisions. In that
case, the senior vice president of human
resources and benefits might be tasked
with the day-to-day running of the plan.
" In a smaller-plan environment, it
may just be the business owner, and that's
OK, " Kaleda says, " but you want to have
clear lines of who does what. You want
to try and avoid 'accidental fiduciaries,'
meaning people who are actually acting as
fiduciaries and don't know it. "
Mind the Minutes
According to Epstein, the intent of minutes
is to document one's process. She says they
should describe the topics discussed at any
meetings with experts, such as investment
advisers or the recordkeeper, along with
recording any key decisions. But there is a
fine line between being overly detailed and
informative, she says.
" It shouldn't be a transcript, but it also
shouldn't be the agenda, " Epstein says. " If
the committee is behaving as it should, it
should get credit for grappling with issues. "
Lee recommends that the minutes
accurately reflect attentive and careful
thought being put into overseeing the plan
and ultimately showing that committee
members are people willing to ask the
right questions to get to a reasonable decision
based on the available information.
" The law doesn't require fiduciaries to
be the experts on plan administration and
require fiduciaries to be perfect, " he says.
" They are expected to be diligent and make
reasonable inquiries, so they ask questions
or seek expert advice. "
Adopt a Compliance Calendar
Stalter recognizes that, while every organization
operates differently, some tasks can
fall through the cracks, so he supplies a
compliance calendar to clients to help keep
the required steps front and center.
" That helps manage the day-to-day
throughout the year, making sure everyone's
doing what he's supposed to be doing
from a compliance perspective, " he says.
Rely on Your IPS
Stalter has watched as much of the litigation,
on a national basis, has come back not
necessarily to any one decision that was
made but to the process and procedures.
" The investment policy statement is
the user's manual for that portion of the
operation, " Stalter says. -Elizabeth Harris
PLANSPONSOR.COM January - February 2024 37
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