No Plan Governance Means Not ERISA-Compliant

Introduction to Plan Governance

Plan Sponsors who offer retirement plans to their employees are held to standards under the Employee Retirement Income Security Act of 1974 (ERISA) when it comes to managing and effectively running their employee benefit plans.

What is Governance?

Plan governance has become a hot topic in ERISA and with the Department of Labor (DOL) over the years.  You may find yourself asking – what exactly is governance?  The word has a broad meaning and this article will help provide some background to ensure that you as a Plan Sponsor are doing all that you can to fulfill your role as a fiduciary to the plan.

Defining Plan Governance

Governance is important for many reasons.  It is the backbone that gives structure to the Plan.  It is the procedures set forth by governance that determines items like proper plan design, operations of the plan, investment choices and compliance.  Governance is usually defined by a committee of people at the plan sponsor who are charged with overseeing the Plan to ensure it is operating in compliance with the rules of ERISA.   As a fiduciary of the plan, it is your duty to run the plan solely in the interest of the participants and beneficiaries.  Without having a strong governance program in place, the plan is subject to risk of noncompliance with ERISA.

An effective plan governance program helps to incorporate all of these processes and assigns duties and responsibilities to those involved with the retirement plan.  All parties involved in governance should have a clear understanding of their roles and responsibilities within the group.  These tasks and responsibilities should be clearly documented so that there is no confusion amongst the group.  It is critical that these tasks be handled correctly and that everyone in the group is meeting their responsibilities.

Developing a Proper Governance Plan

If you find yourself asking if you have the proper governance plan in place, here are a few questions to ask yourself.  If you find the answers to these to be no, then it is time to take action for your plan.

  1. Does your plan have a governance or administrative committee?
  2. Does your committee meet on a regular basis, or at least once a year?
  3. Does the committee document the discussions in the meeting in the form of minutes?
  4. Does your plan have an investment policy statement?
  5. Are you monitoring the investments within the Plan and making appropriate changes when needed?
  6. Have you looked at your plan design and determined it is in the best interest of the participants?
  7. Do you have measures in place to protect the plan in case of a cyber-attack?
  8. Do you have a cybersecurity governance plan?
Takeaway

All of these questions will be further expanded on in this series of future articles we will be writing on Plan governance.  The importance of this responsibility should not be taken lightly and making sure you fully understand your role within the plan will help to further strengthen the operations and controls of your plan.  Normally, the governance program is set up at the time the plan is initially formed; however, it is never too late to develop this platform and procedures.

Contact Us

To discuss your employee benefit plan’s governance and ERISA-compliance, contact Windham Brannon’s dedicated Employee Benefit Plan Practice Leader Anne Morris to schedule a consultation.