Are you thinking of starting a 401 (k) plan or have a plan and are worried about your current responsibilities? If you answer “yes” to any one of these questions, it may be time to create a 401 (k) committee, which can help improve planning management and ease your administrative burden. Want to learn more? Read the answers to frequently asked questions about the 401 (k) Committee.
1. What is a 401 (k) committee?
The 401 (k) Committee, consisting of several staff members, provides important oversight of your 401 (k) plan. The 401 (k) Committee is not required by the Department of Labor (DOL) or the IRS, but it is a good trust practice for 401 (k) plan sponsors. Not only does it help to share responsibilities so one person is not burdened unnecessarily, it also provides much needed checks and balances to help the plan comply. In particular, a 401 (k) committee conducts tasks such as:
- 401 (k) Plan Vendors Assessment
- Participation statistics and employee participation evaluation
- Investment, fees, and planning design review
2. Who should be on my 401 (k) committee?
Most importantly, anyone who acts as a plan trustee should have a role on the committee because they are legally responsible for the plan decision. In addition, it has a good idea:
- Chief Operating Officer and / or Chief Financial Officer
- Director of Human Resources
- One or more members of senior management
- Participants in one or more schemes
Senior leaders can provide valuable financial insight and oversight; However, it is also important to have representation and input from plan participants. Wondering how many people to choose? This is usually based on the size of your company – a large company can have a larger committee. To avoid a tie vote, consider choosing an odd number of members.
Once you have selected the members of your committee, it is time to appoint a chairperson to conduct the meetings and a secretary to make the decisions.
3. How do I create a 401 (k) committee?
The first step in creating a 401 (k) committee is to create a charter. Once registered, the committee’s charter should be carefully followed. It doesn’t have to be long, but it should include:
- Objectives of the Committee- The purpose and scope of the authority, who is responsible for delegating that authority
- Committee Structure- Number and title of voter and non-voter members, role of committee (e.g., chair, secretary), and method of replacing members
- Committee Meeting Procedure- Meeting frequency, recurring agenda item, quorum definition and voting procedure
- Responsibilities of the Committee – Review and supervision of vendors; Evaluation of plan statistics, design and employee participation; And plan compliance and operational evaluation
- Documentation and Reporting – The process of recording and distributing minutes of the meeting and the obligation to report
Once you have selected your committee members and created a charter, it is important to train the members about their fiduciary responsibilities and influence the importance of acting in the best interests of the plan participants and beneficiaries towards them. With a 401 (k) committee, your plan should run more smoothly and efficiently.