By Mark Olsen, Managing Director at PlanPILOT
You could spend your whole life studying ERISA laws and the regulations around retirement plan sponsorship and still never know everything there is to learn. With so much information out there and the ever-changing legal landscape, it can be hard to tell which lessons are most important to remember. As an industry leader in the retirement plan advisory space, I’ve heard my fair share of advice aimed at motivating plan sponsors. But if I could only pass on one lasting lesson, it would be the importance of plan governance and implementing proper fiduciary protocols.
The Importance of Plan Governance
As a retirement plan sponsor, you have an enormous responsibility to ensure your participants have access to a well-structured and efficiently managed retirement plan, and a robust plan governance framework is a critical aspect of success.
Plan governance refers to the set of policies and procedures that oversee the management and administration of a retirement plan. It is designed to ensure that the plan is being managed in the best interests of plan participants and beneficiaries. Having well-developed processes and procedures in place can provide plan sponsors with a number of benefits, including:
Compliance
A good plan governance framework can help keep the retirement plan compliant with all relevant laws and regulations. This is a major benefit for plan sponsors, since failure to comply with the Employee Retirement Income Security Act (ERISA) regulations, can cause penalties, fines, and even lawsuits from plan participants.
With organized processes and clearly defined protocols to guide fiduciary responsibilities, plan sponsors can greatly reduce the chances of a compliance misstep or lawsuit.
Risk Management
Further, well-defined plan governance helps to identify and mitigate risks. For instance, a plan sponsor may establish a committee responsible for monitoring the plan’s investment performance, reviewing service provider contracts, and ensuring that the plan fees are reasonable. By doing so, the plan sponsor can mitigate risks associated with poor investment performance, excessive fees, or conflicts of interest.
Improved Decision-Making
A solid governance framework also leads to improved decision-making by establishing an investment policy statement (IPS) that outlines the plan’s investment goals, objectives, and strategies. The IPS can serve as a guide for the plan sponsor when making investment decisions that are in the best interests of the plan participants.
Participant Confidence
Lastly, strong policies and procedures can increase participant confidence in the plan. By providing clear and transparent communication about the plan’s investment options, fees, and performance, participants are more likely to feel confident that their retirement savings are being managed well. This increased confidence can lead to improved participant engagement and, ultimately, better retirement outcomes.
How We Can Help
As a retirement plan sponsor, developing, implementing, and maintaining a strong plan governance framework is crucial to the success of your retirement plan. Developing these policies and procedures can also empower you to make better decisions regarding your plan structure and offerings. At PlanPILOT, we can help you do just that. As an independent retirement plan consulting firm, we have decades of experience helping plan sponsors navigate their options. To learn more, call us at (312) 973-4913 or email mark.olsen@PlanPILOT.com.
About Mark
Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, Stable Value Investment Association, and CUPA-HR.