Why You Need a Plan Governance Program
A good governance plan simplifies life for all involved by reinforcing the established plan objectives, accurately representing the fiduciary structure, and details the processes and the required documentation. Without good plan governance, these details are often overlooked and can increase the risk for both litigation and liability.
A detailed governance plan can also improve your retirement plan’s success because the fiduciaries involved in governance are all on the same page working within the game plan. As Yogi Berra famously said, “make a gameplan & stick to it.”
Elements of an Effective Governance Plan
While plan governance is a broad concept, a good plan is not—the devil is in the details. A good governance plan should be a detailed framework that outlines the policies and processes for managing the retirement plan and the roles and responsibilities of the individuals involved. This provides an effective structure for all aspects of the plan and decision-making, from documentation and financial reporting to operations and investments. Documenting every aspect of the management of the plan is also the gift that keeps on giving. It can improve outcomes and assist when it comes time for plan audits and compliance reviews.
The plan should have:
- Detailed governance and fiduciary structure
- Defined individuals, roles, and responsibilities
- Established and carefully documented operational policies, procedures, and documentation
- Prudent investment processes and options, including reasonable fees
- Effective participant education and communications about plan options, in addition to the required notices
- Mitigation of risk strategies such as strictly following governance and investment policy statement
Evaluating Investment Options & Providers
As we discussed in Part 2, your plan governance program provides an effective structure for all aspects of the plan and decision-making. In this vein, it’s a good idea to review the plan’s investment options and providers frequently to exclude those that don’t meet plan requirements. A thorough re-examination of the retirement plan’s investment offerings helps identify where enhancements and changes can be made to better assist participants in meeting their goals. Since the passage of the SECURE Act, it’s also prudent to consider what lifetime income options are available for participants. The Supreme Court held (9-0) in the precedent-setting landmark case for fiduciary breach, Tibble v. Edison, that “a trustee has a continuing duty — separate and apart from the duty to exercise prudence in selecting investments at the outset — to monitor, and remove imprudent trust investments.” In short, monitoring, managing, and maintaining the investments and operations of your retirement plans is the mandatory job of a fiduciary, and building an annual plan and operational review into your plan management helps everyone in the long run.Start Today
Managing a retirement plan is no easy feat, and in the current regulatory and legal environment, it is also complex. Ideally, plan governance is put in place at the onset. However, it is never too late to establish or update a plan.
In the last part of our series, Modernizing Non-ERISA Plans in 2023 and Beyond, we look at how plans are evolving now and in the future.
This series was created for plan sponsors, TPAs, plan consultants and advisors and others involved in managing non-ERISA retirement plans. IPX Retirement provides recordkeeping, IRA, trust & custody, and lifetime income solutions to the retirement plan industry. For more information on the IPX Retirement Plan Governance Program, contact your plan advisor or IPX Retirement representative or visit ipxretirement.com/pgp.