March Retirement Plan Newsletter 2023

Retirement plan committees can help plans function more efficiently and effectively. They aren’t a requirement under ERISA, though many organizations choose to establish committees for the many advantages they offer.

A Host of Benefits 

Committees can assist retirement plans in any number of ways, including:

• Delegation of plan responsibilities.
• Providing greater clarity about fiduciary roles and responsibilities.
• Promoting accountability.
• Allowing more diverse voices to weigh in on plan management.
• Establishing transparent procedures to maintain appropriate oversight and strengthen plan governance.
• Monitoring for ERISA compliance and providing documentation in the event of an audit.
• Helping ensure the plan benefits all participants.
• Serving as a vehicle for members to gather employee feedback to aid in decision-making.

None, One — or Some?

According to Voya, 94% of plans with more than 5,000 participants have a retirement plan committee — but that number drops to only 53% for plans with less than 200 participants. Most committees have 5 to 10 members, which often includes representation from the finance, legal, HR, benefits and/or payroll departments.

Committee functions are occasionally divided up, with various areas of responsibility assigned to different groups. For example, an investment committee will provide ongoing management of the plan’s lineup. Sometimes you may also find an oversight committee charged with monitoring the plan’s service providers and advisors. And somewhat less common are settlor committees, which handle business-related decisions that don’t fall under the usual rules of fiduciary duty.

But how many committees should your organization have? When it comes to ensuring the right amount of oversight and guidance, should it be one and done — or is more better?

More Does Not Mean Better 

While committees can help you run your plan more efficiently, too many can overcomplicate processes and produce the opposite effect. If you have employees or board members serving on several committees, it could become more challenging for them to meet all of their responsibilities.

Small companies with fewer resources likely won’t have the time or personnel necessary to staff and run multiple committees. And while it might seem that having several committees might especially benefit larger plans, too many cooks in the kitchen can hinder committee productivity and coordination. Communication may begin to break down, and it can take extra time and resources to ensure decisions coming out of multiple committees are consistent and mesh with organizational objectives. For the majority of organizations, one committee is often enough.

Your Advisor as a Resource 

Your advisor, often in consultation with an experienced ERISA attorney, can be invaluable in assisting plan sponsors with the setup and operation of your retirement plan committee. They can make recommendations regarding the size of the committee, and the staff and members of your workforce who should serve on it. They can also help draft the retirement plan charter and provide the necessary fiduciary training to committee members.

In the end, when it comes to how many retirement plan committees is best — one done right is usually all you need.

Sources:
https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/reviewing-retirement-plan-committee-designs-and-practices.aspx
https://401kbestpractices.com/best-practices-for-401k-committees
https://www.plansponsor.com/psnc-2019-best-practices-retirement-plan-committee/
https://www.voya.com/voya-insights/heres-what-many-retirement-plan-committees-have-common
https://www.plansponsor.com/advisers-can-spearhead-retirement-plan-committee-setup-training/

What's in a Benchmark? 

The designated benchmarks used within the Scorecard System were selected because they are the most appropriate and/or most commonly used indices in the marketplace (Russell 1000, MSCI EAFE, BC US Aggregate Bond, etc.). While both the Russell and S&P indices are commonly utilized, Russell employs a more quantitative approach to index construction. Below are some benefits of using the Russell benchmarks:

• Russell ranks each company in the investable universe according to its total market capitalization. The market cap is the primary tool to determine where a company belongs in the Russell Index. S&P uses a committee to make these decisions.
• Russell indices adjust each company’s capitalization ranking to eliminate closely held shares that aren’t likely to be traded. Using this float adjustment methodology, Russell creates benchmarks that most accurately reflect the market.
• Russell updates their indices’ holdings on a regular basis. Russell reconstitutes its indices annually, which assist in a truer representation of the market.
• Russell indices objectively allow the market to determine the index composition according to clear and published rules. The market determines which companies are included, not the subjective vote of a selection committee.

As a reminder, the score is a starting point. For a complete picture of a score’s performance, run an Asset Class Review report. Those several pages often vivify the fiduciary decision to keep, watchlist or consider replacement of a fund in question.

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Participant Corner: Planning Financial Futures 

Do you spend more time planning your annual vacation than you do thinking about your personal finances? If so, you’re not alone. A lot of people put off financial planning or avoid it altogether.

Personal financial planning is an ongoing, lifelong process. If we break it down into small, achievable tasks, it’s a lot less daunting and can pay huge dividends to you and your family.

Resolve to make yourself financially fit in 2023:

The following personal finance calendar may help you get started.

January

• Manage your debt. Start by paying off all high-cost and consider establishing an emergency fund.
• Create a cash flow statement of prior year income minus expenses. Calculate personal net worth.
• Consider if your portfolio’s original target asset allocation needs rebalancing.
• Evaluate your contribution amount and save enough for your goals and take advantage of any available employer match.

February 

• Review your insurance policies to be sure they are reflecting current needs.

March

• Consider using any bonus or similar windfall to pay down debt and/or build an emergency fund.
• Check your credit report as improvements may allow lower loan costs.

April 

• File your income tax return by April 15 (unless extensions are available).
• April 15 is the last day to make an IRA or Education Savings Account for the prior year.
• Evaluate whether Roth after-tax or traditional pre-tax contributions make sense for your contributions.

May

• Create an inventory of your home and personal property for insurance or estate planning. Record a phone video of your valuable possessions and store the video in a secure, remote location.
• Review your estate plan.

June

• Consider a mid-year review of your finances to confirm you are on track year-to-date income and expenses.

July

• Consider reading one book on personal finance or investing.
• Designate or update your own beneficiary on your retirement plan.

August 

• Compute if your vacation spending is as you projected.

September 

• Consider establishing a Christmas/Holiday spending budget.

October 

• Consider beginning year-end tax planning.
• Consider upcoming open enrollment season and any changes with your health insurance coverage and other employer benefits.

November 

• Keep your holiday budget in mind. Plan for any charitable giving and tax-deductible gifts.

December

• Consider rebalancing your portfolio allocations and contributions for the New Year.
• Evaluate your past contributions into the Plan and decide if you can increase your contributions for the coming year.

IMPORTANT DISCLOSURE INFORMATION