Thursday, January 7, 2016

Establishing a High Performing Investment Committee for Corporate Retirement Plans

Survey participants’ responses in our Retirement Survey Report varied widely as to how often their investment committee met to discuss different kinds of retirement plans. However, most participants generally met on a quarterly basis, particularly so with regard to 401(a) profit sharing plans (78%), 401(a) money purchase plans (75%), and Employee Retirement Income Security Act (ERISA) 403(b) plans (59%). By contrast, 29% met semiannually to discuss 401(k) plans—versus 57% who met quarterly—with an additional 26% meeting semi-annually to address issues related to ERISA 403(b) plans.



Only 11% of survey participants said their investment committee reviews 401(a) profit sharing plans annually. Similarly, 20% of investment committees for 457 deferred compensation plans also review their plans annually. This is in keeping with general best practices, which encourage investment committees to meet at least annually and, ideally, on a quarterly basis so critical issues and questions can be addressed in a timely manner. A number of respondents said they meet routinely to review non-ERISA 403(b) plans.

Except in limited circumstances (church plans and governmental plans), plan sponsor involvement with non-ERISA 403(b) plans should be limited so as not to violate the safe harbor provisions applicable to these plans and trigger ERISA coverage. Generally, non-ERISA 403(b) plans should not be an agenda item for retirement plan investment committees. Responses regarding type and frequency of activities performed by investment committees varied significantly. The most common responses were as follows:
  • develop or review investment policy statement annually, 43%;
  • maintain committee meeting minutes quarterly, 55%;
  • develop or review committee bylaws annually, 49%;
  • benchmark fees annually, 49%; and
  • evaluate plan investments quarterly, 46%.
HBS recommends investment committees conduct routine, regularly scheduled meetings and address the following topics:
  • develop or review the investment policy statement annually;
  • maintain committee meeting minutes every meeting;
  • develop or review committee bylaws annually;
  • benchmark fees every meeting; and
  • evaluate plan investments every meeting.
If you have any questions about establishing an investment committee, or would like to speak with an advisor, please get in touch by calling (800) 388-1963 or via e-mail at hbs@hanys.org.