PLANSPONSOR - September - October 2023 - 18

COVER STORY
performance; the investments' performance relative to the
benchmarks; and investment fees, Stapel says.
Following best practices includes documenting the meetings
adequately, says Amy Ciepluch, a partner in law firm Foley
& Lardner LLP, in Milwaukee. " The key is to make sure that when
any decision is made-such as to put a fund on the watch list or to
do a recordkeeper RFP [request for proposals]-that decision gets
documented, in addition to the reasons for making that decision.
" Documenting the decision process is really important, " she
continues. " When we look at 401(k) investment and fee litigation,
it's the process that carries the day, most of the time. It's not that
the committee needs to always pick the highest-performing funds:
It's that the committee needs to always follow a prudent process. "
2
Review and update plan documents when
needed. Ciepluch recommends doing an in-depth
review of the investment policy statement every two
or three years. " And, at least annually, there should be a readthrough
of the IPS by the committee or its adviser or legal counsel,
just to make sure the IPS doesn't say the committee is going
to do something that it doesn't actually do in practice. "
As for updating the plan document, Ciepluch says, it
depends on whether a plan utilizes a prototype plan document
or is an individually designed plan. If a plan uses a preapproved,
prototype plan document, its provider-typically the recordkeeper-is
responsible to ensure that it gets updated for any statutory
or regulatory change in a timely way, she says. " What you
as a plan fiduciary are responsible for is, if you're making a plan
design change [such as adjusting the match formula], that decision
needs to be promptly communicated to your provider, so it
can update your document.
" With an individually designed plan, in my experience, it's
pretty reasonable to rely on your legal department-whether that
is internal or external-to be responsible for the upkeep of your
plan document, " she says.
3
Work with legal counsel to ensure ongoing compliance.
" Sometimes, committees ask legal counsel,
'Can you come in and look at our charter, our practices
and our meeting minutes, to see what we could be doing better?'
That's quite a common practice, " says Emily Seymour Costin, a
partner in law firm Alston & Bird LLP, in Washington. " It's also a
good practice to bring in legal counsel to see that the committee
members are educated on their fiduciary duties and on the best
practices among their fiduciary peers. "
Many attorneys also attend their clients' committee meetings,
and a portion of the meeting is devoted to the legal counsel
giving an update about legal and regulatory developments, Costin
says. " Some counsel also will update committees, by email,
about legal developments that happen between meetings, " she
says. For instance, she recently informed clients of developments
18 PLANSPONSOR.COM September - October 2023
with lawsuits related to the use of employer stock in a plan.
An ERISA attorney can help a committee put in place
an overall fiduciary governance structure, Stapel says. One
method is to start with a fiduciary-governance audit- " taking
all the plan documents, trust documents and board minutes
and charting it out to see what each of these documents says, "
she says. " Most importantly, we then help coordinate it all to
[verify] the plan is operating in ways that are consistent with
what the plan documents say. "
4
Take steps to prevent prohibited transactions.
With respect to prohibited transactions, it is crucial for
sponsors to know who the plan's service providers and
their affiliates are, Costin says. " You want to be certain that, as
a committee, you understand where the fees are going, including
to any affiliate companies. " If an investment consultant recommends
a particular investment, for example, does that party
have an affiliation with the investment management company?
she says.
The best way to avoid prohibited transactions is simply to
require that every contract with every service provider includes
the obligation for that company to structure its services to avoid
prohibited transactions, Stapel says. " The contracts with your
service providers are a fiduciary's greatest friend: They are the
key to effective delegation of your fiduciary duties, " she says. " The
other thing I'd recommend is a conflict-of-interest policy, with a
[vote] recusal policy, for the committee members themselves, so
you can avoid conflicts among the committee members. "
5
Monitor the recordkeeper consistently, and stay
informed about new services. " Most of our committees
put a recordkeeper discussion on the agenda for every
meeting, " says Kristi Baker, managing partner in CSi Advisory
Services, a division of Hub Retirement and Private Wealth, in
Indianapolis. She and her team utilize this time to update the
client's committee about systems and procedural changes at the
plan's recordkeeper or any operational issues that have surfaced
there, plus explain any pertinent changes the provider has made
in the investments available on its platform.
" Once a year, we also do a fee review and analysis: We
discuss what the recordkeeper's fees are, who is getting paid
and how, and we benchmark the recordkeeper's fees versus
other recordkeepers', " Baker says. Plus, she says,
her firm usually advises clients to do a full
recordkeeper RFP every three to five years.
Besides regularly reporting to
client committees about compliancerelated
recordkeeper activity, AFS
401(k) updates them about the
significant recent development
of recordkeepers offering
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