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Should a DC Plan Have Two Committees?

Should your clients have separate committees — one focused on fiduciary matters like investment and provider selection and monitoring, and the other focused on so-called settlor functions like plan design? This question was discussed recently by a panel of experts at the PSCA’s 66th annual conference.

The two functions might be very different and require different skill sets, with the traditional investment committee carrying fiduciary liability. Courts have said that if the company is the named fiduciary, then all members of the committee are considered to be one as well.

If there are two committees — an investment and an administrative committee — they need to communicate with each other effectively. Having a separate administrative committee may free members to focus on the important issues of plan design, while the investment committee can focus on ensuring that the plan is complying with their fiduciary obligations.

The bottom line: Advisors should have a well-documented program and training program to inform their clients and prospects about the duties of plan fiduciaries — and should at least consider the option a two-committee structure to optimize outcomes.

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