Many Board of Directors establish a Retirement Plan Committee to whom they formally delegate oversight of their organization’s retirement plans. The creation of this committee is frequently done by establishing a Fiduciary Committee Charter (Charter). The Charter is not required by the Internal Revenue Service (IRS) or Department of Labor (DOL) but is being used more frequently and is increasingly adopted as a fiduciary best practice.
The Charter should not be confused with the Investment Policy Statement (IPS). While both could technically be part of the same document, they are typically separate. The Charter creates and defines the committee, while the IPS describes the process the committee members are to use in executing their duties. The Charter is created and adopted by the Board and oftentimes authorizes the Fiduciary Committee to create and adopt the IPS. The Charter, as an establishing document, is often shorter than the IPS.
Because the Charter is adopted by the Board it shows that the committee is operating with Board authorization. In creating the committee often defines the following:
- The purpose of the Committee
- Committee Membership
- Frequency of Investment Committee Meetings
- Investment Oversight Responsibilities
- Administrative Responsibilities
The Charter can also provide authority for the committee to do things like form subcommittees, have access to resources within the organization, and to hire outside advisors to support them in the execution of their responsibilities.
Organizations that have already established a Fiduciary Committee may consider adopting a Charter. It provides clear authority and direction for the committee members. In addition, as membership of the Fiduciary Committee changes it helps new members understand their role and responsibilities.
Once established, like all fiduciary documents, the Charter should be periodically reviewed by both the committee and the Board to ensure its directions remain in line with the organization’s expectations.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.