Tag Archive for: plan governance

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RFP Every Three?

“I’ve heard contradictory arguments regarding request for proposals (RFPs). Should my plan sponsor clients solicit RFPs on a regular basis?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with a financial advisor is representative of a common inquiry related to mergers and acquisitions.

A recent call with a senior financial advisor from Texas is representative of a common inquiry involving plan sponsors and service providers.  The advisor asked: “I’ve heard contradictory arguments regarding request for proposals (RFPs). Should my plan sponsor clients solicit RFPs on a regular basis?”

Highlights of Discussion

While the DOL may not formally require plan sponsors to regularly request RFPs from plan service providers, the agency does presume “… plans normally conduct requests for proposal (RFPs) from service providers at least once every three to five years … ” in anticipation of changes to fee and service disclosures.[1] In fact, the DOL has stated, “… in hiring any plan service provider, a fiduciary may want to survey a number of potential providers, asking for the same information and providing the same requirements. By doing so, a fiduciary can document the process and make a meaningful comparison and selection.”[2]

Court cases have provided more support for including a regular RFP process in plan governance. For example, in Ramos v. Banner Health, 461 F. Supp. 3d 1067 (D. Colo. 2020), the court considered it was “…  significant that the plan fiduciaries did not issue an RFP on recordkeeping fees for over 20 years after engaging the recordkeeper.” The court assessed damages of $1.6 million. Similarly, the appellate court in George v Kraft Foods Global Inc., No. 10-1469, WL 1345463 (7th Cir. Apr. 11, 2011) held that plan fiduciaries who did not conduct RFPs every three years were at risk for fiduciary litigation. The case was eventually settled in 2012 for $9.5 million.

Business owners who sponsor ERISA-governed plans for their employees, such as 401(k) plans, have a fiduciary duty to administer and manage their plans prudently and in the best interest of the plans’ participants and beneficiaries, while ensuring fees are reasonable. By extension, plan sponsors must follow a prudent process to both select and monitor any service providers engaged to support their plans. Therefore, requesting RPFs at regularly scheduled intervals can be part of an effective fiduciary liability reduction strategy and established plan governance program.

An important supplement to the RFP process is annual benchmarking. The two go hand in hand to help protect plan sponsors.  A benchmark report will show how a plan’s fees compare to the average in the marketplace, while the RFP process engages the plan sponsor and provides a means to evaluate the quality of those services.


The DOL assumes plan sponsors solicit RFPs for service providers every three to five years as part of their fiduciary duty to monitor plan service providers. Annual fee benchmark reports supplement the RFPs.  Both are integral parts of a plan sponsor’s fiduciary liability reduction strategy.

[1] Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure

[2] DOL, Meeting Your Fiduciary Responsibilities


© Copyright 2024 Retirement Learning Center, all rights reserved
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When a Governance Review Reveals Something is Missing

“What should a plan committee include in its governance process?”

The Retirement Learning Center works with plan committees to help assess the effectiveness of their plan governance process. This process, known as a governance review, consists of reviewing various plan related documents to help assess how well the plan committee is satisfying its ERISA obligations. Recently, RLC completed a review for an organization in the Midwest and it was clear- something was missing.

We had requested and received the prior three years of agendas, meeting minutes and handouts, service agreements, the investment policy statement (IPS) and the plan document.

The documentation we reviewed was good. The meeting minutes were clear and well done; the investment review and assessment process was thorough and it appeared the IPS was followed appropriately. A solid array of investment options was maintained for the benefit of the participants.

Our concern was not what we saw but what was absent in meeting minutes and other materials.

The committee’s documentation only addressed investment-related issues and was devoid of any consideration or issues other than the investment process. Pursuant to the plan committee meeting minutes, no non-investment topics were ever discussed. RLC’s view is that  such an omission is problematic.

Good governance goes beyond oversight of the investment options. A good governance process should include ongoing

  • Fiduciary education,
  • Reviews of service agreements and standards,
  • Evaluations of plan documents and amendments,
  • Analyses of annual plan audits,
  • Checks on payroll remissions and
  • Participant notices and communication and
  • Government reporting.

Those are just a few of the key elements that a governance committee should evaluate, document and reflect in the agenda and meeting minutes.

A good governance process extends beyond oversight of the investment menu. We encourage plan officials to ensure their governance process is holistic and covers all aspects of plan operations, communications, and overall plan effectiveness.


© Copyright 2024 Retirement Learning Center, all rights reserved
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What is plan governance?

What is plan governance?

By W. Andrew Larson, CPC

It is our view that the goal of retirement plan governance is two-fold. First, plan governance should ensure that a business’s retirement plan is operated in compliance with Federal laws and regulations.  Second, plan governance should position participants to maximize their chances for successful retirement outcomes. That’s what plan governance should do.  But what is plan governance? Plan governance is a consistent, flexible, ongoing process that is well documented and transparent. This blog will explore, at a high level, what a plan governance process looks like; the make-up and role of the plan governance team; how to deal with service providers; and what it means to be a good consumer of fiduciary services.

No one aspect of plan governance is inordinately difficult; what is difficult is the ability to remain focused, and consistently execute and document the governance process. Typically, plan committee members have day jobs and their plan duties are usually far down on their to-do lists. Given this reality, committee members must diligently help each other create and follow accountability strategies, plus leverage service providers for assistance when needed.

What does a plan governance process look like?

A good governance process includes the following key elements.


The charter is the blueprint for what is done when and by whom with respect to the retirement plan. Many plans don’t have governance charters. Creating one is essential for establishing a good governance process. The charter addresses details such as who is on the plan committee, the frequency of committee meetings, roles, assignments and expectations, lines of authority and decision-making responsibilities.

The first step in creating the charter is a careful review of the governing plan document to ensure the charter is consistent with the plan in terms of provisions, terminology, lines of authority and reporting. Frequently, any governance provisions that may appear in plan documents are sparse; hence the need for a more robust document in the form of a charter. That said, the charter must be consistent with the plan document or the committee risks not following the terms of the plan, which would be a violation of legal requirements under the Employee Retirement Income Security Act of 1974 (ERISA).

Master Calendar

A master calendar is the plan committee’s essential “must-do” list. It is an important tool to make sure the committee is timely addressing its responsibilities. Standing annual calendar items can include the following items:

    • Review the plan document for needed amendments;
    • Review and assess service providers;
    • Benchmark and evaluate assets;
    • Schedule educational sessions for committee members;
    • Assess the adequacy of the plan’s fidelity bond; and
    • Evaluate committee members based on skill sets needed.

Documentation Protocol

Having detailed documentation of plan committee activity and decisions is a vital part of any liability containment strategy. Plan notes should be thorough and identify the rationale for key decisions made.

Payroll Log

This is a record of all payroll withholding and remission dates and amounts. One of the top concerns of the Department of Labor and IRS in plan operations relates to the timely deposit of employee salary deferrals.

Who’s on the plan governance team?

The make-up of the plan governance committee is one of the least discussed aspects in the realm of plan governance. And it often seems that committee membership comes with lifelong tenure. As we work with committees, we frequently inquire why “so and so” is on the committee. The typical response is something to the effect of “Well, they’ve always been on the committee.” We urge committees to conduct a periodic reset exercise where they identify the skill sets needed for a successful committee. Once the skills are identified, we then ask them to identify specific individuals—including those who may not be current committee members—who fit the skill set profile. This creates discussion of who could or should be on the committee.

It has been our experience that we often find the wrong people on plan governance committees. In many cases, there are people within the organization who want to be on the committee—and should be—but are not considered for membership. Let me share a personal experience illustrating this. I was on the plan governance committee of a former employer. Most decisions we made were second guessed and challenged by one particular noncommittee member employee. This guy read every bit of plan information that was provided. Not only did he read it, he studied it and complained about everything. He was a pain in our rear. However, it became clear this guy had a passion for plan stuff and a real willingness to study, learn, understand and question. He was “the guy” other employees sought out if they had plan questions. We began to discuss adding him to the committee. At first there was considerable pushback because he had been such a nuisance, but it was clear he did his homework and took the subject matter seriously. We added him to the committee on an interim basis, despite some trepidation. Now the end of the story—he became the hardest working and, arguably, the most educated and dedicated committee member. He wanted to do the legwork, was willing to be a team player and, ultimately, was the biggest fan of the plan and supporter of its governance team.

What does the team or committee need to know?

The short answer to this question is the plan governance team must know enough to successfully run the plan. ERISA requires plan committee members be held to an expert standard in terms of their decision making with respect to the plan. This does not mean the committee members have to be expert in all topics, but they need to understand what they don’t know and when they need to enlist additional, expert-level support to make prudent decisions. At a minimum, committee members need a general understanding of the following tenets:

  • ERISA governance requirements;
  • Key plan document provisions;
  • Service providers duties, costs and contractual expectations; and
  • Reporting and compliance requirements.

Understanding what plan service providers do and don’t do is commonly a mystery to many plan committees. More service provider training and understanding is a common recommendation we make to plan committees.

Why are we hiring a fiduciary?

In recent years, many organizations have begun to offer various fiduciary services to retirement plans. Plan committees have many fiduciary support options from which to choose. One of the most important governance decisions a plan committee will ever make is whether to retain an outside fiduciary. There are right and wrong reasons to retain an outside fiduciary, and plan committee records and/or minutes should articulate the rationale for any fiduciary-related decision made by the committee. For example, a committee retaining an outside fiduciary to reduce committee members’ liability may be selecting a fiduciary for the wrong reason. Retaining a fiduciary to reduce the committee’s workload may be a valid reason to retain a fiduciary. Effectively, hiring a fiduciary doesn’t limit the committee’s liability; retaining a fiduciary merely changes the nature of the committee’s responsibilities to overseeing the retained fiduciary.

And it is important to remember that all fiduciaries are NOT created equal. There are important differences among providers that should be discussed and documented in the decision-making process, and reflected in service agreements. This is what I mean by being a good consumer of fiduciary services.


Good governance comes down to having the right people, with the right support following a consistent process, and documenting decisions and actions. It means asking probing questions and realizing when outside, nonconflicted support is necessary. The rationale for key decisions and the recording of such is as important as the decision itself.  Maintaining a solid governance process is the best strategy to help minimize the liability of the plan sponsor and plan committee, and provide participants with the best opportunity for successful retirement outcomes.

© Copyright 2024 Retirement Learning Center, all rights reserved