Plan Advisory Committees and Investment Policies Needed for 403(b) Pro

[Guest kerryb]

Do 403(B) plans need a formal plan advisory committee and investment policy statement. What is the risk for not having a special plan committee or investment policy statement when we have chosen a bundled custodial fund service provider?

Who should be a member of a committee - is it acceptable for all 403(B) plan decisions to be made soley by a sub-committee from the Board of Directors - in the absence of a formal investment policy?

[Guest Brent Rowell]

An informal comment ...

I do not believe I've ever seen a 403(B) plan with an investment policy statement.

Other than the Federal requirement for multiple investment choices (which I believe means fixed, equities, and money market as a minimum) there are no formal requirements.

I seriously doubt that a fund provider would formally agree to follow an employer committee's decesions. It also seems contrary to the idea that the contract is employee owned.

Brent Rowell

[QDROphile]

If the plan is subject to ERISA, don't immediately jump into the confusion of jargon about investments. Get someone to advise you about basic fiduciary responsibilities, including the fiduciary responsibility for investment management. Then, with advice, decide how the fiduciary duty will be carried out. Part of the decision will be to determine who is the fiduciary.

If your plan is subject to ERISA, you have already make quite a few of the decisions about fiduciary duties, whether you know it or not. You may wish to have someone explain to you exactly what you have done, and who the fiduciaries are that have responsibility for the decisions that have been made. Under ERISA, consciousness is usually a good thing.

If your plan is not subject to ERISA, many of the same principles could apply under applicable state law, probably without some of the formalities of ERISA. For example, ERISA has some very specific rules about managing a plan if the participants direct investment of their accounts. State law probably is much more general to the extent it applies.

[Guest PeterGulia]

For answers (with citations) to these questions, see Q&A 5:29 and following in Panel Publishers 403(B) Answer Book (5th edition and 2001 Supplement).