News and Updates
Time Well Spent: 6 Hours a Year to Serve on Your Company’s 401(k) Plan Committee
Last Updated: March 24, 2021
Eight thousand seven hundred sixty. That’s how many hours there are in a year. Knowing that, is it okay with you if we kindly ask for a solid, uninterrupted, focused six hours for the good of your employees?
This is how much time it should take to serve on your company’s 401(k) plan committee every year. You’ve no doubt heard about your fiduciary duty – your legal responsibility. But, I’m not asking for that reason. I’m asking because I know you are an accomplished executive, have spent your career hitting your numbers and would gladly do what was necessary if you simply knew what was needed.
So, I am telling you: For the sake of the financial security of your employees, their families and your communities, you should devote six hours every year while you serve on the 401(k) committee. That is how many hours a typical plan committee will spend together learning, reviewing information, and making decisions on behalf of the plan’s participants. Four meetings per year, one hour per meeting and an additional two hours each year of continuing education. If you are the chair of the committee, you need to spend an additional hour in preparation of each meeting, bringing the total commitment to 10 hours per year.
It’s vitally important work because savings are the path to financial security. And, in my experience, most people aren’t financially secure. Being financially insecure – that is, feeling financially vulnerable – increases stress and anxiety, which in turn impacts our mood, our relationships, work productivity and even our physical health.
The 401(k) plan is vitally important to combatting this problem because it forces the habit of saving. Money is saved before the employee sees it. What is received is spent over the next week or two, just in time for the next paycheck. Without the “pay yourself first” feature of the 401(k), most of us would fail to ever build financial security for ourselves.
Your company’s 401(k) helps employees accumulate money for their future and, in the process, builds financial security for them and their family. If your company is a large employer in your community, this has a significant impact on your community.
So what’s the problem? We offer our employees a 401(k) and it is working just fine. Well, maybe … and maybe not. You see, that’s where you come in. For a 401(k) to live up to its potential and make the positive impact on your employees and their families, it requires skilled, experienced executives to oversee its management. And too often, that isn’t happening.
Serving on a company’s retirement plan committee is a bit unusual. It isn’t like the other work you do. That work is for the company. That’s what you were likely trained to do and have excelled at your entire career, which is why you are now an executive at your company. During these six hours, however, you are asked to set the company’s interests aside. For these six hours, you will need to be locked in on the interests of the plan’s participants (employees and former employees) and their beneficiaries. This is the fiduciary duty.
In practicality, though, executives who serve on the retirement plan committee too often aren’t engaged. The scrutiny they give the plan management isn’t at the same level as the scrutiny they give their other responsibilities. Performance reviews probably aren’t tied to it. Incentive plans aren’t based upon it. It begins to feel like extracurricular work.
But please, don’t treat it like an extra thing to do. Don’t be cavalier about it. Your skills and experience as an executive have equipped you to be an excellent advocate for your employees. Treat the retirement plan committee hours like you would other vitally important aspects of your job. What is the goal? What measurements will be used to determine success? What resources are needed? What performance is expected and when should we fire a vendor?
Time is valuable. Use it wisely. The financial security of your employees depends on it.