For many construction businesses, benefits decisions are made the same way projects are managed: quickly, practically, and by the people who are closest to the work and the budget. That approach can work, until a different question comes up:
How did you decide that was the right decision?
Retirement plans and health and welfare plans involve significant employer dollars and carry important fiduciary responsibilities. However, many employers do not have a formal process for reviewing vendors, evaluating plan costs, monitoring performance, or documenting key decisions.
A formal fiduciary committee is not always required, but a defensible decision-making process is necessary.
Where employers often run into trouble is timing. Structure around benefits decisions is sometimes created only after a problem arises such as a fee challenge, a vendor dispute, an employee claim or complaint, or a significant plan change. At that point, the hardest question to answer is often the simplest one:
Who was responsible for making the decision, and what information did they consider?
A thoughtful fiduciary process does not have to create unnecessary bureaucracy. It is a stronger and more protective process if it is designed to fit in with how the company operates.
Key parts of this process include the following action items:
- Define responsibility. Identify who is making plan decisions and what authority they have. Ensure that any delegations are documented.
- Review vendors and costs. Retirement recordkeepers, investment providers, brokers, consultants, and health plan vendors should be periodically evaluated.
- Document decisions. A short record of what was reviewed and why a decision was made can be invaluable later.
- Bring the right people to the table. Benefits decisions often affect finance, HR, and operations. Not a single department.
For construction businesses, the goal is not to add another layer of administration. It is to build a process that supports sound fiduciary decisions and protects the plan fiduciaries when those decisions are reviewed.
You don’t need a fiduciary committee because someone told you to have one. You need a fiduciary process so that, when questions arise, you can clearly show how you did your job.
This article is not intended to serve as legal advice. If you are a construction employer evaluating your benefit plans or would like to discuss these issues, please contact Anne Greene at Saul Ewing LLP.
