“Our committee meets regularly, and it is always a problem taking minutes – we are not sure what exactly to include, who should be note taking, etc. What are the basic rules we should follow when taking minutes? Is there a basic template that we should follow?”
This is an excellent question. One of the first the things the Department of Labor (“DOL”) will ask a plan fiduciary to produce upon audit is a record (minutes) of all committee meetings over the past year or two. In recent years the DOL has been particularly focused on the fiduciary process, perhaps driven by the increased attention paid to investment returns and fees by the plaintiff’s bar. Take heart, in this regard, you are ahead of the curve; you have regular committee meetings and you take some form of minutes.
There are no “rules” when it comes to recording the minutes of a committee meeting, only best practices. And as with any question we ponder, reasonable people will differ. However, it cannot be refuted that taking committee meeting minutes is important, if for no other reason than to demonstrate the fiduciary process to the DOL upon audit or in the event a committee action is otherwise challenged.
The ERISA fiduciary rules are “process-driven”. By this I mean that the decision a fiduciary makes, and the consequences of that decision, are not necessarily what is important; more important is the process followed by the fiduciary in reaching that decision - and if the process is prudent within the context of ERISA. The result alone (e.g., an underperforming investment fund) is not enough information to reach any conclusion as to the appropriateness of the fiduciary decision to include that fund in the line-up offered to participants. To demonstrate a prudent fiduciary process, it is recommended that the committee meet regularly and maintain minutes of those meetings.
With that background in mind, let’s turn to the specific question posed. When it comes to recording minutes, a general rule of thumb that I follow is “less is more”, but within reason. The trick is to provide sufficient information to demonstrate a prudent fiduciary process, while at the same time not being so specific as to provide a road map for a plaintiff’s counsel to exploit gaps.
The minutes should record the date, time and place of each meeting, who attends and how (in-person or by phone), starting and ending time of the meeting, and include a copy of the meeting agenda, as well as any reports presented at the meeting by record keepers, investment advisors or other advisors retained by the committee to provide expertise. In addition, the minutes should memorialize any committee deliberations and any actions taken by the committee. A best practice that I follow is to keep the minutes to a general description of the discussion that takes place, and not identify what each committee member may have asked or said; it will often suffice to simply provide that the committee discussed a particular subject (e.g., reviewed the investment returns of each investment option available under the plan) and if necessary, voted on a particular path (the voting results should be included, but not necessarily each particular member’s vote).
Investment performance is often the primary focus of the committee meeting, but the committee also should focus on other fiduciary issues of concern. Investment fees should be reviewed periodically, distribution/cash flow needs of the plan, and recordkeeping performance and fees also are important fiduciary concerns. In addition, committee meetings should devote some time to periodic fiduciary education sessions. ERISA’s fiduciary standards are among the highest under the law, and upon audit, the DOL has been known to inquire about the fiduciary education provided to committee members. Committee members often wear two hats - one as a corporate officer/employee, and the other as a plan fiduciary. When wearing the fiduciary hat, committee members need to act solely in the interests of the plan participants. An understanding of these fiduciary concepts can be demonstrated by periodic fiduciary training which is documented in the minutes.
A committee member may be designated as secretary to take the minutes, or the appointed secretary may delegate the actual recording of minutes to an assistant or other non-committee member. Whether the appointed secretary or a delegate actually records the minutes, the secretary is responsible for making sure that minutes are drafted and provided to the other committee members, and for keeping records of the minutes of all committee meetings.
No one can prevent an otherwise prudent fiduciary action from back-firing from time-to-time (e.g., an investment fund underperforming). Such results can raise questions as to the committee’s adherence to ERISA’s fiduciary standards. The best defense, should such a challenge arise, are regular and well-documented committee meetings and maintenance of meeting minutes.