A retirement plan committee without a charter is like a ship without a navigator — the crew would not know where they are going or how to get there.
Unfortunately, many retirement committees do not have a charter. And even those that do often find it’s not specific enough to provide adequate guidance. In order to follow retirement plan committee best practices, you need a custom charter that provides a framework for meeting its responsibilities.
A well-written retirement committee charter advises the committee of your overall retirement planning philosophy. It directs where your retirement plan should head and what path it should take. It also provides milestones and directions for handling problems.
A charter can maximize your organizational outcomes by supporting your workforce-planning objectives. It can also help your participants prepare for retirement. Finally, a properly constructed charter can help your committee defend its actions, if necessary.
Having a charter will provide an enormous benefit to your committee, helping you:
The employees and former employees of a large manufacturing company sued the two committees that administered its 401(k) plans. The court found for the participants, noting that the fiduciaries did not follow their investment policy statement. As a result, they had paid excessive recordkeeping fees. They had also failed to monitor the costs of the plan’s investment offerings.
A retirement committee with a charter would have defined roles and responsibilities for the plan’s fiduciaries. This would include the performance of the tasks in the plan’s investment policy statement.
Every retirement committee needs a charter to keep its plan on course. Putting a charter in place for the retirement committee’s use is a best practice and an essential component to good plan governance.
A well-written custom charter will help the committee ensure that the organization’s retirement plan meets all its goals for its participants as well as the organization. Construct an effective charter by ensuring all of the fiduciary requirements and due diligence have been taken into account.
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