Stewardship education sets foundation for 401(k) committees
Plan sponsors are responsible for managing retirement plans according to The Employee Retirement Income Security Act (ERISA). Under this regulation the plan sponsor's investment committee members are legally accountable as investment stewards. To help members be effective, education is a useful tool.
For many, a position on the 401(k) committee will be their first and only time to serve as a fiduciary. Committees usually include members from finance and human resources who are familiar with ERISA. However, others may not be well informed.
Stewardship education should include materials from the Department of Labor that spells out ERISA's minimum required standards. The Prudent Practices for Investment Stewards handbook is another terrific resource and is available from the AICPA and FI360.
Better Input = Better Output
The purpose of education is to allow committees to find their way without interference from parties of interest (vendors). Education meetings should discuss the critical issues of process and strategy as well as address general questions. Bringing strong opinions and biases to the surface is important for member participation and helping the committee bond.
Committees sometimes want to know how they can measure their own success. One option is to request a limited scope review from independent advisers who specialize in ERISA stewardship. Independent fiduciary firms, CPAs and attorneys are all good choices.
An option to avoid regarding stewardship help is the "brand name" vendors. These companies are basically in the product (mutual fund) distribution business and their advice is mostly conflicted. The quest for fiduciary excellence is difficult and keeping conflicts in check will always be one of the committee's most important tasks.
