7 decision-making and documentation best practices for 401(k) and 403(b) plans

Are you making retirement plan decisions using a prudent process? Do you always put the interests of plan participants ahead of the company's when considering plan issues? Following are some best practices related to decision-making and documentation:

• Form an investment committee to make decisions about plan issues. It is best if your investment committee has an odd number of members to avoid tie votes.

• With help from your investment Adviser, develop an investment policy statement to guide the selection and monitoring of your plan's investments. Review and update the IPS each year.

• Use consultants and existing providers to help you develop prudent policies and procedures for running your plan.

• Working with an attorney or your recordkeeper, make sure your plan documents are up-to-date. You must always comply with all plan documents. Many times plan document language and provisions will channel your decision-making process.

• Hard as it may be sometimes, you are required to put the interests of plan participants first when making decisions, ahead of your personal interests and those of the company.

• For every decision made, document your process and place the notes in the plan file. Every time you meet to discuss the plan, take minutes and make sure to file them. Finally, always file a copy of every employee plan communication.

• Each year review all participant plan forms to make sure they are up-to-date.

And you should also consider:
There are no gray areas. You are either in compliance or not. Following your plan documents or ignoring them. You cannot pick and choose which plan provisions to follow and which to ignore. Not following your plan documents can result in fiduciary breaches and personal liability.

Documentation is key. Think you are following prudent processes when making decisions? There is no way to know when looking back at prior decisions unless you documented it.

Not following prudent decision-making processes and procedures can result in plan disqualification, fiduciary breaches, lawsuits and personal liability. Make sure you let prudent policies and procedures guide your decision-making on retirement plan issues.

Robert C. Lawton is President of Lawton Retirement Plan Consultants, LLC (lawtonrpc.com) an RIA firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities. He may be contacted at bob@lawtonrpc.com or 414.828.4015.