As a 401k Plan Sponsor, there’s a lot to know and do as it relates to managing your company’s retirement plan.

As your plan grows in size, complexity, number of participants, etc., at some point you should consider setting up an investment committee.

Here’s why this is important:

1     Fiduciaries have a lot of responsibility and creating and formalizing a process for managing the plan’s investments (setting up an investment committee) can help decrease fiduciary liability.

A committee can pull together several individuals from the executive team, providing perspective, experience, and ideas that can work to create a more solid plan for the benefit of all participants.

2     A committee provides structure and a prudent process for managing your plan’s investments.

The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA and since prudence focuses on the process for making fiduciary decisions, forming a committee is the start of defining and documenting that process.

3     Having a committee provides checks and balances and can keep the plan in compliance through regular meetings.

By documenting the process for managing the plan, you’re putting to paper a framework that sets clear guidelines and expectations – something that can be followed by existing members and new members alike. This provides consistency, and clarity by giving the committee the roadmap for managing the plan.

This article is just one in a series on Best Practices for Investment Fiduciaries. Click here to access the entire series.