ERISA Plan Investment Committee Governance Webinar

Back by popular demand, a panel of esteemed speakers will present on January 27, 2016 about the fiduciary risks and litigation trends faced by ERISA investment committee members. Sponsored by Strafford Publications, Inc. and eligible for Continuing Legal Education ("CLE") credits, the program is entitled "ERISA Plan Investment Committee Governance: Avoiding Breach of Fiduciary Duty Claims."

Faculty speakers include:

  • Dr. Susan Mangiero - Managing Director with Fiduciary Leadership, LLC;
  • Ms. Rhonda Prussack - Vice President and Fiduciary Liability Product Manager with Berkshire Hathaway Specialty Insurance; and
  • Richard Siegel, Esquire - ERISA attorney with Alston & Bird.

The panel will review key issues such as those listed below:

  • What are the ERISA regulations with which investment committees must comply?
  • How should plan sponsors vet fiduciary risks when selecting an investment committee?
  • What litigation techniques can be implemented to minimize the likelihood of a finding of breach of fiduciary duty by an investment committee?
  • What is the role of the economic expert in assessing investment committee performance and investment monitoring, post-Tibble?
  • What is the role of ERISA fiduciary liability insurance?

Inasmuch as many ERISA lawsuits cite the entire investment committee as defendants, there is a need for each member to understand her personal and professional liability as well as the risks that arise if other members are ill-prepared, are conflicted and/or lack sufficient knowledge and experience. In other words, a best practice is for the entire committee to recognize the seriousness of fiduciary obligations and behave accordingly.

ERISA Plan Investment Committee Governance

In case you missed "ERISA Plan Investment Committee Governance: Avoiding Breach of Fiduciary Duty Claims" with Dr. Susan Mangiero (Fiduciary Leadership, LLC), Ms. Rhonda Prussack (Berkshire Hathaway Specialty Insurance) and Attorney Richard Siegel (Alston & Bird), click to download the November 17, 2014 presentation or visit the Strafford CLE website to obtain the audio recording.

Given the importance of the investment committee governance topic and emerging market trends in the area of outsourcing, my comments focused on committee structure, guiding documents, training and implications when third parties sign on as fiduciaries. Points I made during the webinar include, but are not limited to, the following:

  • The ERISA Advisory Counsel, in its 2014 Issue Statement about outsourcing employee benefit plan services, cites a desire to understand how vendor contracts address provisions such as termination rights, indemnification, liability caps and service level agreements.
  • An evaluation of the outsourcing business model is not surprising given a service provider push to serve as an Outsourced Chief Investment Officer or Fiduciary Risk Manager. (An Asset International publication refers to the OCIO movement as a fast-growing segment of investment consulting.)
  • Once an investment committee has been authorized by the sponsor's board of directors, a core set of qualifications and experience needs can be assembled. Plan counsel can play a vital role in explaining fiduciary obligations.
  • Beyond that core base, facts and circumstances such as plan design, company size, industry structure and investment strategy should be taken into account as part of determining requisite training and experience.
  • Regular meetings are encouraged with frequency being determined in part by what has to be done by the investment committee and related time sensitivity of completing a task(s).
  • Notwithstanding the voluntary nature of having an Investment Policy Statement ("IPS") in place, an ERISA plan investment committee should establish one nevertheless that makes sense for a particular plan. Some organizations have been questioned after creating an IPS but not following it.
  • Creating (and following) an appropriate Risk Management Policy can likewise be useful, especially for ERISA plans that utilize derivative instruments and/or allocate money to more complex products or strategies.
  • Training is another mission-critical area. (According to "DOL Investigators Quiz Plan Sponsors On Training of Fiduciary, Attorneys Say" by Bloomberg BNA contributor Joe Lustig, fiduciaries are being asked by regulators whether training programs exist.)
  • Continuing education is beneficial since regulations, market conditions and plan-related objectives and strategies can change over time.

Someone from the audience asked whether it made sense for an investment committee to consist of a senior corporate executive such as a Chief Financial Officer and her direct reports. The point is that each fiduciary is equal at the investment committee "table" but otherwise unequal. This can present a big problem if any or all of the investment committee members disagree with the Chief Financial Officer. Worse yet, a subordinate (in corporate organization terms) may be reluctant to whistle blow about an imprudent decision made by the CFO while wearing her hat as ERISA fiduciary. I will leave the question as to legal protection to attorneys. However, in doing some research, it turns out that U.S. federal pension law does address whistle blower protections. Interested persons can click to read "ERISA Has a Whistleblower Provision? Yep." by Seyfarth Shaw attorneys Ada Dolph and Robert Szyba (June 19, 2014).

There is a lot more to say on the topic of investment committee governance, notably because ERISA lawsuits that are adverse to a plan sponsor tend to include all investment committee members as defendants. An effective infrastructure and good governance policies and procedures can help to mitigate fiduciary personal and professional liability and position the investment committee to better serve participants.