The Fiduciary Role of the Retirement Plan Committee

Establishing a formal retirement plan committee is widely recognized as a best practice for organizations sponsoring a retirement plan. According to Mercer's 2025 Guide on Fiduciary Committee Governance, documenting a committee's formation, authority, and responsibilities is essential for properly satisfying fiduciary duties under ERISA. [1]

A well-structured retirement plan committee provides organizations with a formalized process to oversee the retirement plan. Each member of a retirement plan committee is considered a fiduciary and must adhere to the rules and responsibilities outlined in the committee's charter.

Yet, according to JPMorgan Asset Management's 2025 Defined Contribution Plan Sponsor Survey, more than half of retirement plan sponsors do not even realize they are plan fiduciaries.[2] Under ERISA, any person with discretionary authority or responsibility for plan administration is considered a fiduciary and is held to the same legal standards and obligations that come with that role.

A retirement committee member is appointed to manage the plan under the terms of the plan document and is considered a named fiduciary. Therefore, they are held to the same fiduciary standards as a plan administrator.

Standards of Conduct

As a fiduciary, they have the responsibility to operate the plan solely in the best interest of their participants. Fiduciaries must engage in a prudent process by gathering and analyzing information before making any decisions. During the decision-making process, it is important to retain any information being received and document all processes to protect against any potential breach of duty claims. ERISA outlines four core standards every fidcuiary should follow.

Exclusive Benefit Rule: A fiduciary must act for the exclusive purpose of providing benefits and paying only reasonable plan fees.

Prudent Person Rule: A fiduciary must perform your duties with care, skill, prudence, and diligence that would be exercised by a prudent person familiar with the matter and acting under similar circumstances.

When it comes to investment selection, this is sometimes called a prudent expert rule because fiduciaries are measured by the standard of a knowledgeable investor. In other words, a good faith effort without investment knowledge is not enough.

Diversification rule: A fiduciary must diversify the plan investments to minimize the risk of investment loss. When choosing investment options, a fiduciary should select investments with different objectives and risk/return characteristics. For participant-directed plans, a broad range of investment options should be offered to help participants meet their goals and risk tolerances.

Duty to follow plan terms: A fiduciary must act in accordance to plan documents and ERISA rules. If a plan's documents are in violation of ERISA rules, fiduciaries are required to override the plan document and get their plan in compliance with regulations.

Guiding Fiduciary Principles

In addition to the many responsibilities, a fiduciary must also demonstrate that they are fulfilling their obligation. It can feel a bit overwhelming, but a committee doesn’t have to do it alone. Working with an educated financial advisor can help support the committee in its fiduciary responsibilities, which can help offset some of the stress from the fiduciary and legal standpoint. Listed below are four guiding principles to help a retirement plan committee fulfill its responsibilities as a fiduciary.

1. Understand Your Responsibilities

Under ERISA, one or more fiduciaries control the administration of a plan on behalf of the participants and beneficiaries. In practice, this means knowing which decisions fall under which authority, from selecting and monitoring investment options to striving to ensure plan fees are reasonable and plan documents are kept current. A good starting point is reviewing your committee charter annually to confirm that roles, responsibilities, and decision-making authority are clearly defined and still reflect how the committee operates.

2. Select and Monitor Investments

Offering a broad range of diversified and well-selected investment options helps fiduciaries meet their duty to provide investments that are suitable for participants. Once selected, all investments must then be monitored.

3. Communicate and Educate Participants

Participant communication and education are critical to the success of any retirement program. While it's not required, plan fiduciaries may use employee education to document program goals and accountability. A well-designed education policy can help ensure effective and consistent communications and encourage better participant understanding and decisions. It may also lead to greater levels of participation, higher contribution amounts and better-invested accounts.

4. Manage the Plan Prudently

A plan committee member must make decisions in the best interest of the plan participants. The right plan documentation and procedures will help the committee reach this goal while managing the plan effectively and prudently.

A retirement plan committee member may wear many hats and must be prepared for all scenarios. But the main thing to keep in mind is that the goal is always to do what is in the best interest of the plan’s participants, the people who have their savings invested in your business's retirement plan. If a retirement plan committee can move forward with that in mind, it positions them to meet and honor their fiduciary obligations.

Keeping your plan participants' best interests at the center of every decision is the foundation of strong fiduciary leadership. Want to strengthen that foundation? Join our Fiduciary Basics webinar and learn the essentials that every retirement plan committee member should know.

These materials are provided for informational and educational purposes only and do not constitute a recommendation to buy, sell, or hold any security, nor do they constitute legal, accounting, investment or tax advice. Investment advice offered through OneDigital Investment Advisors LLC. ID 00585191.

 

 

Sources:

[1] MERCER: A Guide to Defined Contribution Fiduciary Committee Governance

[2] JPMorgan Asset Management: 2025 Defined Contribution Plan Sponsor Suvey Findings