Serving on a retirement plan committee is a position of trust, but it's also a position of liability. Under ERISA, fiduciaries are held to one of the highest standards of conduct known to law and "I didn't know" or "we meant to get to that" are not defenses that hold up in court or in a Department of Labor audit.
Most fiduciary breaches aren't the result of bad intentions. They're the result of good people running busy committees without a disciplined process. Below are the mistakes that show up most often when plans get reviewed, audited, or sued and what your committee can do this quarter to close the gaps.
Mistake 1: Treating Oversight as an Annual Event
Many committees meet once a year, review a presentation from their advisor or recordkeeper, nod along, and move on. The problem is that ERISA doesn't require sponsors to make good decisions once a year, it requires an ongoing, prudent process.
A single annual check-in makes it difficult to demonstrate that the committee was monitoring the plan continuously, which is exactly what a prudent expert would do. Market conditions change, share classes change, recordkeeper service levels change, and participant needs change far more often than once a year.
The fix: Move to quarterly committee meetings at minimum, with a standing agenda that covers investment performance, plan fees, participant outcomes (deferral rates, loan activity, distribution patterns), and any service provider issues. Even a 45-minute quarterly call is far more defensible than a single annual deep dive, because it shows a pattern of consistent attention.
Why it matters: ongoing monitoring is itself a distinct fiduciary duty under ERISA. Courts and the DOL evaluate whether the committee was paying attention throughout the year, not just whether it eventually landed on the right answer.
Mistake 2: Confusing "We Discussed It" with "We Documented It"
This is the single most common gap auditors and plaintiffs' attorneys find. A committee can have an excellent, thoughtful conversation about whether to replace an underperforming fund or renegotiate recordkeeping fees. And if it isn't written down, it is functionally invisible. In litigation and DOL investigations, the standard isn't what you actually did; it's what you can prove you did.
Common documentation failures include meeting minutes that simply say "investment performance was reviewed" with no detail on what was discussed or decided, missing records of why a fund was retained despite a watch-list flag, no record of the rationale behind selecting or retaining a recordkeeper, and committee charters that are outdated or were never formally adopted.
The fix: Minutes should capture not just attendance and topics, but the substance of the discussion and the reasoning behind decisions, including decisions to take no action. If your committee debates whether to fire an underperforming fund and decides to keep it for one more quarter, write down why. That single sentence can be the difference between a defensible prudent process and an indefensible rubber stamp.
Why it matters: ERISA evaluates fiduciaries largely on process, not outcomes. If it isn't documented, regulators and courts have no way to credit the work the committee actually did.
Mistake 3: Reviewing Fees Without Benchmarking Them
Nearly every committee believes it reviews fees. Far fewer can show that they benchmarked those fees against the market within a reasonable timeframe. Typically every two to three years, depending on plan size and complexity. Reviewing a fee disclosure document is not the same as determining whether that fee is reasonable for the services received.
This is also where revenue sharing arrangements, asset-based recordkeeping fees, and indirect compensation tend to hide. A plan can pay a "reasonable" headline rate while still overpaying once embedded costs are accounted for, particularly in older share classes that haven't been converted to lower-cost alternatives.
The fix: Conduct a formal RFP or fee benchmarking study on a defined cycle, and document the results even when the conclusion is "fees remain reasonable, no action needed." Make sure the committee understands the full fee picture: recordkeeping, investment management, advisory, and any indirect compensation. If you haven't benchmarked fees in the last three years, that alone is worth flagging at your next meeting.
Why it matters: excessive-fee litigation remains one of the fastest-growing categories of ERISA lawsuits, and "reasonable" fees can only be established through comparison, not assumption.
Mistake 4: No Formal Investment Policy Statement — Or One Nobody Follows
An Investment Policy Statement (IPS) is meant to be the committee's rulebook: how funds are selected, monitored, placed on a watch list, and removed. Two failure modes show up repeatedly. Either the plan has no IPS at all, leaving every decision looking ad hoc and unprincipled, or the plan has an IPS that the committee doesn't actually follow, which can be worse than having none, since it creates a written standard the committee can be shown to have violated.
The fix: If you don't have an IPS, get one in place. If you have one, pull it out at your next meeting and confirm the committee's actual practices match what's written. Update it if your process has evolved. Just make sure the document and the behavior stay aligned.
Why it matters: an IPS the committee doesn't follow can be worse than having none at all, since it creates a written standard the committee can be shown to have violated.
Mistake 5: Letting the Advisor Run the Committee
Plan sponsors often lean heavily on their advisor or recordkeeper, which is appropriate but there's a difference between leveraging expert support and outsourcing fiduciary judgment entirely. Fiduciary responsibility cannot be delegated away simply by hiring a good advisor. The committee still has to ask questions, push back, and make its own informed decisions.
The fix: Make sure your advisor is educating the committee, not just presenting to it. Committee members should understand why recommendations are being made, not just approve them. New member onboarding and periodic fiduciary training help ensure the whole committee, not just the most experienced member, can engage critically with what's being presented.
Why it matters: fiduciary responsibility cannot be outsourced by hiring a good advisor. The committee remains accountable for the decisions, even when an expert is in the room.
Building a Defensible Process
None of these fixes require dramatic overhauls. They require consistency: meeting regularly, writing down the reasoning behind decisions, benchmarking fees on a defined schedule, keeping governing documents current, and staying engaged rather than deferring entirely to outside experts.
Regulators and courts generally aren't looking for perfect investment outcomes. For example, index funds underperform sometimes, and that's not a breach. What they're looking for is a prudent, well-documented process. Committees that can show their work tend to fare far better than committees that simply got the right answer without being able to explain how they got there.
Five Questions to Benchmark Your Fiduciary Process
Before your next committee meeting, consider asking:
- 1. Have we formally documented our fiduciary decisions over the past year, including decisions to take no action?
- 2. When was our last independent fee benchmarking or recordkeeper review?
- 3. Are our investment reviews actually following our Investment Policy Statement?
- 4. Are we engaging critically with our advisor's recommendations, or simply approving them?
- 5. If the Department of Labor requested our fiduciary file tomorrow, would it clearly demonstrate a prudent decision-making process?
If any of these gives you pause, that's a reasonable place to start.
This article is for general informational purposes and does not constitute legal, tax, or investment advice. Plan sponsors should consult with ERISA counsel regarding their specific fiduciary obligations.
At Rose Street Advisors, we work alongside retirement plan committees to build disciplined fiduciary processes not simply to satisfy compliance requirements, but to create retirement plans that deliver meaningful value for both employers and participants. If your committee would like an objective review of its governance practices, we'd welcome the opportunity to provide a complimentary fiduciary process assessment.
Scott Higgins | AIF ®, CFP®, CPFA®, NSSA®
Financial Advisor
Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. Rose Street Advisors is independently owned and operated. #5887179Interested in more?
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