The Power of Effective Plan Governance

In a previous post, we discussed the importance of plan governance and how it works to make your retirement plan more efficient. Plan governance involves a myriad of details that must not be overlooked. How do you organize the responsibilities, policies, procedures to create an effective strategy?

Developing a Plan Governance Strategy

An appropriate strategy will vary depending on a company’s plan size and goals. When developing a process and strategy, it’s important to document it, both for organizational and compliance reasons. Having a written process helps ensure everyone follows the process appropriately.

Generally speaking, a governance process will include:

• Identifying a fiduciary, as well as how to select and monitor the fiduciary and his or her actions.
• Delegating duties to the fiduciary, ensuring these are in accordance with ERISA, Department of Labor regulations, and the plan document.
• Establishing the governance structure of how the plan should be managed.
• Creating a process for choosing and overseeing service providers and overseeing the employees involved in operating the plan.
• Developing an investment policy and plan committee.
• Design a framework for executing the plan administrator’s duties, from qualification compliance to audits.
• Creating a plan participant communication program that strives to maximize participant success rates.

The Power of Effective Plan Governance

With proactive and thorough plan governance, an organization can make the most of their plan, keep costs fair, and improve retirement success rates.

At PlanPilot, we provide comprehensive retirement plan consulting services. We’ve worked with companies to develop a strong plan governance foundation for their defined contribution plans.

A few years ago, one client engaged our services in hopes of improving their overall retirement plan governance. At the time, they didn’t have a formal retirement committee or established policies or procedures, they had minimal investment offerings and hadn’t reviewed their plan fees and services for several years, and they weren’t following ERISA guidelines.

Following our guidance, the client formed a retirement committee that, within one year, created an investment policy statement, established a formal committee member onboarding process, performed an in-depth review of their investment options, completed a formal plan review, and more. As a result, this client experienced a number of positive outcomes.

1. For one, they improved confidence in their decision-making. With a committee and clear responsibilities, they understand their key objectives so they can take action with confidence.
2. They have reduced risk to the sponsor and plan fiduciaries through a formal review process that identified and corrected plan shortcomings. They added new investment options to fill identified investment menu gaps and to replace investment funds that weren’t meeting investment policy guidelines. Their new investment offerings provide a 40% reduction in the plan’s target dates series’ investment costs through the introduction of a lower cost share class.
3. They lowered recordkeeping costs by more than 15% by negotiating agreements to improve plan automation and administration.
4. They improved plan efficiency through a process that resulted in 20% of separated participants with small balances taking full distributions.
5. They reduced sponsor administration time by identifying available recordkeeping support services they weren’t currently utilizing and through support PlanPilot provided to perform necessary reviews and document actions.

How We Can Help

Is your plan in need of a comprehensive strategy to lower costs, reduce risk, and improve returns? PlanPilot specializes in providing guidance and expertise to benefit both your company and your employees. Call us today at (312) 973-4911 or email info@planpilot.com and together we can create a strong governance foundation for your retirement plan.

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