How Strong Retirement Plan Governance Can Help Reduce Fiduciary Risk

As a fiduciary, you are responsible for ensuring your company’s retirement plan is well-managed, compliant, and in the best interest of participants. Fiduciaries of ERISA plans are legally required to regularly monitor their retirement plan by conducting well-documented plan reviews.

That responsibility is not only about selecting good investments or keeping fees reasonable – it’s about having a strong process in place to prove your decisions were made prudently.

One of the most critical areas of focus is fiduciary governance.

Why Fiduciary Governance Matters in Retirement Plans

ERISA, or the Employee Retirement Income Security Act, establishes minimum standards for most voluntarily offered retirement plans. It is designed to protect plan participants by requiring information disclosure, setting standards for plan operations, and establishing rules for plan fiduciaries to act in participants’ best interests. 

Under ERISA, fiduciary conduct is based on the process followed – not necessarily the outcome. Courts and regulators want to see that decisions were made prudently, and with the plan participants’ best interests at heart. That means governance is , and more about:

• Establishing a decision-making framework
• Documenting every step along the way
• Reviewing plan operations regularly

When governance is strong, fiduciaries have a clearer line of defense against legal or regulatory challenges. Just as importantly, it helps ensure participants benefit from a retirement plan that is managed responsibly, transparently, and efficiently.

Risks of Weak Governance

Failing to prioritize governance may expose both plan sponsors and participants to serious consequences, including:

• Legal risks: Without documentation of a prudent process, fiduciaries may be vulnerable to lawsuits – even if investments perform well.
• Regulatory issues
• Poor outcomes for participants: High costs, inefficiencies, and poor service provider oversight can reduce plan participant retirement readiness and satisfaction.

The CBIZ Prescription for Success

Strong governance requires structure, consistency, and informed guidance. Plan sponsors may wish to consider:

• Establish a retirement plan committee: Create a dedicated group and hold regular meetings to review governance, investments, and administration.
• Follow an investment policy statement (IPS): Use it as a roadmap for fund selection, monitoring, and replacements.
• Document all decisions: Meeting minutes, compliance records, and benchmarking data can help demonstrate a prudent process.
• Review service providers regularly: Confirm they are meeting performance standards and fee agreements.
• Train your committee annually: Ensure all members understand their fiduciary responsibilities under ERISA.

Seeking Solutions to Strengthen Your Fiduciary Governance?

Strong fiduciary governance is the backbone of a healthy retirement plan. It can help protect fiduciaries from legal risk, ensure regulatory compliance, and – most importantly – potentially secure better outcomes for participants.

With the right structure and oversight in place, your organization can strive to confidently meet its fiduciary responsibilities while giving employees the retirement plan they deserve. Contact CBIZ to get your personalized, complementary benchmark assessment.

Investment advisory services provided through CBIZ Investment Advisory Services, LLC, a registered investment adviser and a wholly owned subsidiary of CBIZ, Inc.