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Best Practices for Retirement Committees
CALLAN Institute took a look at the practices
of retirement plan committees to
determine what they are doing right and
what they could be doing better. It was
discovered that plans with over 10,000
participants are more likely to have
both an investment and an administrative
committee, while plans with under
10,000 tend to have a single committee.
Among investment, administrative
and single committees, members consider
strained internal resources as their top
challenge, Callan says in its study report,
" It Takes a Committee: The Best Ways
to Govern DC Plans. " Administrative
committees struggled equally with timeliness
of making decisions. In contrast,
clarity about roles and responsibilities
challenged single committees the most.
For all committee types, poor participation
and role clarity corresponded with having
a larger than average size committee.
According to key findings from the
survey, committees should not become
too large-i.e., more than seven people.
When they do, lines of responsibility
become blurred. Because committees
vote, it is better to have an odd number
than an even number of members. Not all
committees give their members fiduciary
training, which, Callan says, is imperative.
The study also recommends that the
head of the committee, who understands
the strategic objectives of the plan, set the
committee agenda, rather than leaving
this to the committee members.
On average, investment committees
tend to have six to seven members.
Administrative committees tend to have
five or less, and single committees have
anywhere from four to seven members,
Callan found. The institute also advises
that committees choose people based on
their job function not job title. " [This]
streamlines the nomination process in
the event of turnover or organizational
restructuring, where a specific job title
may be unfilled for a period of time or
even cease to exist. "
Additionally, the most common
number of committee meetings a year
was four, which Callan recommends.
It also says, " Fiduciary training is vital
for committees to operate efficiently
and safely. Comprehensive fiduciary
training is warranted at the formation of
a committee, for new members and as a
refresh for all committees at least every
few years. " -Lee Barney
Top Challenges, by Committee Type
Investment
Committee
Clarity about roles and
responsibilities
Ensuring proper documentation
is in place and followed
Keeping appropriate records
Lack of appropriate expertise
Meeting too often
Poor participation by
committee members
Short tenure for
committee members
Strained internal resources
Timeliness of making decisions
Too much turnover of
committee members
None
8%
4%
0%
4%
0%
12%
12%
31%
23%
4%
4%
Administrative
Committee
0%
7%
0%
7%
0%
14%
7%
29%
29%
7%
0%
Frequency of Fiduciary Training for Committee Members
Investment
Committee
Annually
Every two years or more
Periodically
No fiduciary training
Upon appointment
35%
14%
43%
8%
35%
Administrative
Committee
27%
14%
32%
8%
30%
Source: Callan " It Takes a Committee: The Best Ways to Govern DC Plans "
Single
Committee
44%
15%
4%
15%
30%
Single
Committee
15%
8%
5%
5%
3%
3%
5%
28%
18%
0%
13%
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