As senior leaders start to retire, learn best practices for smooth committee transitions.

Change is upon us. The Silver Tsunami is lifting the baby boom generation into retirement. For many companies, this means shifts in 401(k) committee leadership. As with all committee processes, having a clear plan is essential. A well-documented transition process can help new and existing members understand their roles, and smooth and consistent transitions will keep plans operating seamlessly.

Develop a consistent onboarding process

A thorough and repeatable process for onboarding new committee members is essential. In many cases, the process begins with an orientation program that includes:

• ERISA regulations and compliance best practices.
• Fiduciary education and oversight responsibilities.
• Previous and current plan design.
• Plan operations, administration, costs, and other key issues.
• Key plan documents, including the plan document, investment policy, criteria for hiring outside consultants, and other pertinent information.
• The committee’s history, governance structure, composition, meeting minutes, and operations.

Depending on the size of the committee, it may be beneficial to assign a mentor to each new appointee. These mentors can help less-experienced individuals understand their roles and responsibilities and provide ongoing guidance.

Passing down essential knowledge

Stepping into a new role on the 401(k) Committee can feel like drinking from a fire hose. Here are a few ways to make sure that important knowledge is passed down smoothly:

• Share exit insights: Gather insights from departing members through exit surveys. Ask them to share challenges, solutions, and best practices. This helps new members learn from previous problems and avoid the same mistakes.
• Create advisory roles for retiring members: It may be a sound idea to have retiring members serve in advisory roles for a period of time.
• Ease into new roles: When committee members step into leadership roles, consider offering transition support. The outgoing leader can serve as a mentor by sharing knowledge and easing the shift. By co-leading a couple of meetings, it allows for a smooth transition and helps the incoming committee leader establish relationships.
• Highlight the importance of documentation: To remain in compliance with ERISA, retirement plan committees must maintain meticulous records. This is a great time to review your documentation practices and identify any gaps. Best practices suggest that all plan processes, decisions, and non-decisions be thoroughly documented.

Tips for new 401(k) Committee members

Communication is one of the keys to smooth transitions. It is important for new members to review plan documents and meeting minutes. This is a first step in understanding the current structure of the plan and the benefits it offers to participants. Keep a list of any questions that arise and add them to the next meeting agenda.

Consider scheduling a few brief meetings to help new members understand fiduciary and plan basics. These discussions may cover features the committee has chosen to adopt or exclude. Informal discussions like these often reveal insights not found in formal plan documents. Here are a few other topics to discuss:

• The history of the plan
• The roles of various committee members
• Committee best practices
• Significant challenges the committee has encountered
• Current and future challenges

Your plan advisor is a valuable resource for both rookie and veteran committee members. It’s a good idea to include an experienced advisor in the transition process to provide guidance on compliance, fiduciary duties, and overall plan health.

When your committee is experiencing personnel changes, get in touch. We can help support a smooth transition.