As I indicated in my last blog post, in retirement plan governance, good processes matter. But if that process isn’t documented, it may be much more difficult to prove a prudent process even exists. This is why documentation is such an important part of fiduciary oversight.
Plan sponsors and committees spend time reviewing investments, discussing service providers, considering fee information, and addressing operational issues. Each of these conversations are meaningful and should be documented. If there is no record of what was reviewed, what questions were asked, and why certain decisions were made, it can look like there is no process in place. When it comes to fiduciary matters, “we definitely talked about it” is not nearly as reliable as actual meeting minutes.
Good documentation does not need to be riveting or overly complicated. It just needs to show that the fiduciaries involved were engaged, informed, and thoughtful. Types of useful documentation can include:
- committee meeting minutes,
- investment review materials,
- fee benchmarking reports,
- service provider evaluation notes,
- records of decisions made and the reasons behind them,
- follow-up items and action steps, and
- documentation of delegated responsibilities.
The goal of documentation is not to create a pile of paper big enough to reach the moon. The goal is to create a clear record of prudent oversight. This is especially important in case decisions are questioned later. Whether the issue involves investments, fees, service providers, or plan operations, documentation helps demonstrate that fiduciaries followed a prudent process instead of simply making knee-jerk decisions and ignoring problems.
Keeping good records also helps with continuity, considering committee members change, internal teams shift, and memories fade. Documentation gives the plan a history that does not depend on “I think we talked about that two years ago.”
A strong fiduciary process includes both analysis and a written record of that analysis. When it comes to retirement plan oversight, good documentation should never be thought of as pesky grunt work. It is evidence of meeting your fiduciary duties.
If you are having productive conversations but not consistently documenting them, doing so may be one of the easiest and most powerful governance improvements you can make.
