Sponsors of defined contribution retirement plans have somewhere new to turn if they’re seeking guidance on best practices—and something high on the list is the plan’s oversight committee.

The DC Plan Governance Survey from Callan LLC not only offers insights into what other DC plan sponsors are doing with regard to governance committees, but also provides a guide to best practices for the structure and composition of such committees, how often they should meet, what sort of agendas ought to guide those meetings and what kind of fiduciary training needs to be in place for members.

The study outlines steps sponsors can take to improve committee effectiveness, as well as highlighting the importance of a properly structured and resourced committee as a “critical foundation on which a DC plan thrives.”

Among key findings of the study is the fact that smaller committees work better than larger ones; says the report, “Across committee types, poor participation and clarity around roles corresponded with a higher-than-average number of committee members.”

Not only does size matter, but when it comes to large corporations with high participant counts, they often prefer to divide their committee into two: one for administrative functions and another for investment functions. But one thing to beware of: investment and administrative committees with an even number of members were more likely to report challenges with strained internal resources.

Investment committees with an even number of members, the study finds, were also more likely to report poor participation, while administrative committees with an even number had problems with making decisions in a timely manner. Single committees with an even number of members were more likely to experience challenges with clarity around roles and responsibilities.

And just because there are committees, it doesn’t follow that members have been trained in fiduciary functions. Even though most committees said there was annual, or at least periodic, fiduciary training, nearly one in seven respondents from single committees said that no fiduciary training had been done.

One other important aspect of the issue to remember: the study found that the party responsible for setting the agenda influenced the committee’s priorities (i.e., staff vs. committee head). According to the study, “the committee head [set the agenda]… roughly a quarter of the time. This may indicate the committee is acting in a reactive rather than proactive fashion.”

Respondents to the study do indicate that they believe their committees to be highly effective; if they do not, however, the report reminds that “ERISA affords plan sponsors considerable latitude for designing and maintaining their governance structure.”

As long as ERISA requirements are satisfied, a plan sponsor can “use any governance model that suits its nature, culture, size, demographics, and benefit plan array,” and should review it periodically to make sure it works. If it doesn’t, the report adds, it should be modified.

Instant Insights /

New study outlines best practices for DC plan sponsors

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