ERISA Plan Governance Best Practices

Plan governance is important to ensure you’re managing an effective and compliant plan. Effective plan governance can help reduce risk for the plan and its fiduciaries, as well as increase the likelihood that plan and participant objectives are met.

Identify Fiduciaries
Individuals, committees, and plan service providers may have a fiduciary duty to your plan and its participants. Fiduciaries should be trained to understand their obligations under ERISA and sign an acknowledgement of their fiduciary responsibility. Consider the need for fiduciary liability insurance.

Understand Plan Processes
The plan administrator should maintain detailed documentation of the processes and procedures relevant to significant plan functions, such as enrollments, contributions, transfers, distributions, and financial reporting.

Investment Management and Monitoring
Consider developing an Investment Policy Statement to clearly explain how you will evaluate current and prospective plan investments.

Fees and Expenses
Ensure that costs are appropriately allocated between the employer and the plan, and that all costs paid out of plan assets are reasonable. This includes an assessment of the quality of the services provided, the cost, and the allocation method. Consider requesting proposals from multiple service providers to evaluate fee reasonableness.

Monitor Outsourced Functions
Many plans will outsource certain administrative functions, like recordkeeping or processing certain participant transactions. The plans themselves are ultimately responsible for these functions, and therefore should monitor these service providers regularly. Recordkeeping and custodial agreements should be kept on file. SOC Reports detailing the service providers’ systems of internal control should be reviewed at least annually.

Maintain Plan Committee Meeting Minutes
Keep minutes of each plan committee meeting detailing the topics of discussion and all actions taken.

Benchmark Your Plan
Evaluate your plan compared to others to make sure your plan is operating effectively. Consider your investment menu, service providers, plan design features, and plan costs.

Schreiber Accounting and Advisory can help you understand how to apply these best practices to your 401(k) plan or 403(b) plan. The firm also offers 401(k) plan audit and 403(b) plan audit services. Contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.