Retirement Plan Governance Practices Reviewed in Towers Perrin Report

Governance practices for qualified retirement plans continue to vary widely from one company to the next in many instances, but a growing number of common practices suggest organizations are agreeing on measures they believe will be useful in the effort to protect themselves from potential litigation.

These and other findings are described in Towers Perrin's 2008 Survey on Qualified Retirement Plan Governance. A total of 126 companies, mostly headquartered in the U.S., participated in the survey.  

Legal Risks From Qualified Plan Governance Practices Are Real

Your organization could be at risk. The Employee Retirement Income Security Act of 1974 (ERISA) allows plan participants, beneficiaries and the federal government to seek redress in court to address ERISA violations. Civil suits alleging breach of fiduciary duty, disparate treatment in benefit decisions and other types of complaints are common.

Plan sponsors need sound benefit plan governance practices to protect themselves from potential litigation and minimize the costs that can arise from a failure to administer their plans and oversee plan assets in ways that comply with ERISA. Board members or named executives, among others, can be named as defendants in an ERISA lawsuit if they have responsibility for appointing plan fiduciaries.

Key Survey Findings in Retirement Plan Governance Practices

The Towers Perrin survey found that executives, boards of directors and board-level committees are most often responsible for appointing fiduciaries and overseeing their performance.

Here are some of the other common practices in retirement plan governance identified in the Towers Perrin survey:

• Oversight of retirement plan administration and investments is the responsibility of a single committee in roughly half of the companies surveyed, and by separate administration and investment committees in the other half.
• The positions of CFO, VP of HR and treasurer appear as voting members of most committees.
• Reviews of governance procedures, operational compliance and 401(k) plan fees are more often conducted annually, although almost as many respondents report conducting reviews "as needed."
• Most individuals holding fiduciary responsibilities have had some level of training.  
• Most companies address potential liability for their in-house fiduciaries through a separate fiduciary policy or rider to their D&O or E&O policy.

See Towers Perrin's Point of View on this topic

If you would like to discuss ways to improve qualified retirement plan governance at your organization, call or e-mail Lisa Alkon at 617-638-3922, lisa.alkon@towersperrin.com  or Bill Belanger at 215-246-6084, bill.belanger@towersperrin.com