By Kent Maze with Jackson Lewis P.C.
It’s hard to believe that 2024 is well underway! That means it’s a perfect time to think about an issue that might get lost in the summertime and (dare I already say) year-end shuffles: fiduciary committees.
ERISA imposes fiduciary duties on those considered fiduciary under an ERISA-covered plan. Generally, absent a delegation, the board of directors is considered the plan fiduciary—meaning the board is subject to the complex duties and obligations imposed on plan fiduciaries. It’s now common, if not the norm, for the board to delegate its fiduciary duties to a fiduciary committee. But having a committee isn’t a set-it-and-forget-it situation—it requires regular action to ensure the committee is properly undertaking its role as a plan fiduciary.
Below are some best practice items committees should consider annually:
Review the committee charter. The committee charter often sets out details about what authority has been delegated to the committee and about the processes that the committee must or may follow in carrying out its duties and responsibilities. Regularly reviewing the charter not only helps to make sure the committee is adhering to those duties and responsibilities, but it can also help identify areas that may need adjustment.
Schedule fiduciary training. ERISA sets out fiduciary duties that apply to plan fiduciaries, including the duty of loyalty, the duty to act prudently, the duty to follow plan documents, and the duty to diversify investments. There is a lot packed into these concepts—plan fiduciaries must understand these duties and what they mean for handling issues related to their plan. Fiduciary training is not only crucial for new committee members but also a valuable refresher for existing committee members. A recent court cited a committee’s regular fiduciary training as evidence of its prudent process and compliance with its fiduciary duties.
Consider establishing a committee for your health and welfare programs. While the focus of fiduciary duties is often aimed at qualified retirement plans, ERISA applies fiduciary duties to ERISA-covered health and welfare programs. This fact has been in the spotlight recently with the rise of fee litigation targeting fiduciaries concerning oversight and operation of prescription drug benefits, including pharmacy benefit manager arrangements.
Schedule regular committee meetings and document the process. Having regular committee meetings helps make sure the committee is adhering to its duties and engaging in proper oversight of the plan(s). Committees can bring in their hired experts to help them evaluate plan issues and make decisions. Don’t forget to keep minutes so the committee has a well-documented record of its process.
Review the fiduciary liability insurance policy. ERISA imposes personal liability on plan fiduciaries. Fiduciary liability policies generally provide coverage for claims related to the administration and operation of retirement and health and welfare plans. Having an up-to-date, robust policy is a vital part of making sure the fiduciaries (and the plan) are prepared to face the seemingly never-ending litigation targeting plan fiduciaries.
If you’d like to speak to an Asure HR expert about your business, connect with us.
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