Great resignation hits DC plan committees

Paul Visconti, senior director of total health and retirement programs at energy services company AVANGRID Inc., found himself in a situation last year that's increasingly common among plan sponsors: The retirement plan committee overseeing the company's $2 billion 401(k) plan lost four of its five members — all within six months' time.

"They trickled out over the course of 2022," Mr. Visconti said, referring to four committee members and "long-timers" who either left the company for better opportunities or retired. His concern, he said, was less about finding replacements and more about finding people who would be thoroughly prepared to serve on the committee.

AVANGRID is not alone. More plan sponsors are reporting high turnover in retirement plan committees, losses that industry observers say have sent some plan sponsors scrambling to find new members and get them up to speed on their fiduciary responsibilities. In some cases, the losses have even led to stalled projects and initiatives.

The turnover stems mostly from the "great resignation" and other post-pandemic labor shifts but also from a weakened economy, according to industry experts.

Emily Wrightson, a principal at CAPTRUST Financial Advisors LLC in New York, has seen a high level of turnover among committee members across her entire client base, often not just of one member but multiple members, a reflection of the tight labor market, she said.

Greg Ungerman, a senior vice president and defined contribution practice leader at Callan LLC in San Francisco, also reports an uptick in committee turnover, attributing it to layoffs and business restructurings in the post-COVID environment.

"Committees are not immune to all the layoffs going on," he said, adding that workforce reductions in technology and other industries "flows through to both staff and committee members."

Gregg Levinson, senior director of retirement at Willis Towers Watson PLC in Philadelphia, says colleagues, too, have seen higher-than-expected turnover, and attributes the turnover to business disruptions triggered by the pandemic. Last year, a large retail company client had to "suddenly reconstitute the committee" because all of its members were "let go" as the company struggled in the wake of the pandemic, he said.

In some instances, committee turnover has also been due to people being removed from the committee for not taking the job seriously and "putting the committee's decision-making power at risk," Mr. Levinson said. "They're not coming to meetings. They're not doing their homework," he said.

Retirement plan committees play a crucial role in providing oversight for an employer's workplace retirement savings plan. Though such committees are not required by the Department of Labor, most employers have one because it's considered good fiduciary practice.

The majority of employers (63.9%) have just one committee, but some (19%) have two and others have as many as five or more, according to a survey by the Plan Sponsor Council of America in June 2021.

The typical retirement plan committee is made up of senior leaders throughout the organization who perform a range of duties, such as assessing plan vendors, evaluating participation statistics and reviewing investments, fees and plan design.

"It's just a matter of providing that oversight to ensure that the plans operate the way they need to," said Christopher Moss, the Hartsville, S.C.-based director of employee benefits at global packaging company Sonoco Products Co., which lost one member on the company's retirement plan committee last year. The committee oversees $1.4 billion in 401(k) assets.

High turnover on plan committees can create challenges for plan sponsors, especially if multiple members leave, according to industry experts.

"Depending on who has left and how many have left, decisions can get delayed and projects can be slowed down," CAPTRUST's Ms. Wrightson said.

Ms. Wrightson recalled projects that were about to be implemented that were "put on indefinite pause because the committee members that were spearheading those changes left."

"There wasn't the bandwidth to get the work done," she said. Ms. Wrightson declined to provide additional details of the projects due to client confidentiality.

Willis Towers Watson's Mr. Levinson also cited an example of a health-care system client whose attempt to harmonize newly purchased regional systems stalled because the retirement leadership team "kept turning over."

"We're up to the line for the third time," he said. "We're trying to start it again."

Finding replacements can also be challenging in certain situations.

"The more turnover there is in a short amount of time, the greater the impact, especially since the hiring process these days takes such a long time," Ms. Wrightson said.

Ms. Wrightson noted that she's seen some committee positions open for eight to 10 months. In situations where multiple committee members have left, the plan sponsors have even had to change the plan committee charter to facilitate filling the open spots, she said.

Another issue for plan sponsors with high committee turnover is that it can potentially increase employer litigation risk if members are not in the practice of documenting the reasons why they've made the decisions they've made, said Carol Buckmann, a partner at law firm Cohen & Buckmann PC in New York.

Committee members who were not around when decisions were made "may well have problems when litigation arises," she said. "It's not always possible to just contact prior members and get a clear picture of why things were done. People die. People retire."

Turnover also means doubling down on members' fiduciary training, which is one way to keep litigation risk at bay.

"When you have turnover, you've got a learning curve," Sonoco's Mr. Moss said.

With the elevated turnover, Ms. Wrightson of CAPTRUST anticipates an uptick in refresher, "back to basics" fiduciary training for plan committee members on what their fiduciary responsibility is and "why they're there."

AVANGRID's Mr. Visconti, for example, is gearing up for fiduciary training for the company's reconstituted six-member plan committee on which he serves. "We had long-standing committee members who were very aware of their fiduciary responsibilities. Now we have to retrain all the new members to make sure that we're up to speed," he said.

Joe Conzelman, a vice president and retirement plan adviser in the retirement and wealth management division of insurance broker Hub International Ltd. in Houston, agrees that fiduciary training is important, saying that committee members often don't realize that being on the committee is much more than just investment selection.

"Many who join don't truly understand their responsibilities as a committee member and even more so don't realize that being a part of the committee moves them into fiduciary capacity," he said.

To Ms. Wrightson's way of thinking, turnover in plan committee is not all bad and comes with a silver lining. New people bring new ideas and different perspectives that can make the committee — and the plan — stronger, she said.

New committee members might want to revisit fiduciary decisions such as fee structures and investment options.

"A new person might come it and want to explore and reaffirm that those decisions still make sense," she said.