Meeting Minutes: Crucial Fiduciary Documentation

This comment is among the most common findings cited in ERISA audits each year. While meeting minutes are often viewed simply as a record of plan changes or updates, their importance goes far beyond documentation. Properly maintained meeting minutes provide clear evidence that a plan sponsor is fulfilling its fiduciary responsibilities by reviewing key plan analytics and governance matters.

In recent years, lawsuits alleging fiduciary breaches by plan sponsors have become increasingly common, often resulting in significant settlements. Many of these cases focus not on a single decision, but on the absence of a documented fiduciary process. Meeting minutes play a critical role in demonstrating that process. Recent litigation has focused on three key areas: excessive fees, poor-performing investments and failure to properly use forfeitures.

Excessive Fees

Most retirement plans offer participants access to marketable securities through recordkeepers, trustees or investment custodians. The associated fees, such as recordkeeping, investment management and transaction fees, can vary widely.

A growing number of lawsuits have alleged that plan fiduciaries failed to monitor the reasonableness of these fees. Importantly, these cases do not require fiduciaries to select the lowest possible fees. Rather, they focus on whether fiduciaries periodically reviewed and compared plan fees to those of similarly situated plans.

For example, in Babinski v. Siemens Energy Inc., plaintiffs alleged that plan participants paid $200 per participant in fees, while comparable plans paid less than one quarter of that amount. A well documented fiduciary process, including regular meetings that review fee benchmarking, can help plan sponsors identify potentially overpriced services and make informed decisions about whether to retain or replace service providers.

Fiduciaries are not required to select the best performing funds at all times. However, they are expected to conduct periodic analyses to identify underperforming or overpriced investments and take action when appropriate. When a plan works with an investment advisor, plan meetings often provide an opportunity to discuss watch list funds, document replacement decisions, and demonstrate ongoing oversight.

Failure to Properly Use Forfeitures

Plan fiduciaries must also ensure that forfeitures are used in accordance with the plan document. Common permitted uses include reducing employer contributions, paying plan expenses, or reallocating forfeitures to participants.

In addition, forfeitures generally should be used at least annually, if not more frequently. Allowing forfeitures to accumulate without purpose can unnecessarily increase costs to participants.

The Buescher v. North American Lighting, Inc. case highlights this issue. In that lawsuit, plaintiffs alleged that forfeitures were allowed to accumulate rather than being used to offset plan expenses, thereby increasing participant fees. Regular review of forfeiture balances during plan meetings helps ensure these funds are used in a manner that benefits participants and complies with plan terms.

Why Meeting Minutes Matter

Annual or more frequent meetings, supported by thorough minutes, provide a valuable opportunity to monitor the plan’s overall health and document fiduciary oversight. Well prepared minutes create a clear audit trail demonstrating that fiduciaries considered relevant information, evaluated alternatives, and made reasoned decisions.

With increased regulatory scrutiny and litigation risk, even quarterly or annual meetings can go a long way in evidencing a prudent fiduciary process. In many cases, meeting minutes are not just a best practice; they are a critical line of defense. If you have any questions or would like support evaluating your fiduciary documentation practices, Withum’s team is available to assist.