by Herbert R. Ricklin (reprinted w/permission)
Is it fair and responsible to place a pension or health fund controlling tens or even hundreds of millions of dollars under anything other than the full attention and direction of qualified trustees?
The Taft-Hartley Act and the Employee Retirement Income Security Act (ERISA) both require that the decisions made and actions taken by trustees be solely in the interest of the fund's participants and beneficiaries. The law's intent is clear, and yet, in many cases, the follow-through is impractical.
The employer trustee cannot automatically shed his responsibilities to his company upon walking into a trustee meeting. His relationship with the union and its leaders carries over to this arena. It is unreasonable to expect that trustee to disregard completely other influences, such as upcoming labor contract negotiations. He may also be sitting at the same table with representatives from competitive companies who have different agendas from his.
Against that backdrop, does the Trustee stand and fight against increasing benefits, which could result in future costs to his employer? Will he allow the union leaders to increase benefits shortly before an election for campaign purposes?
The labor trustee, too, must deal with a variety of outside influences. Upcoming elections, charges by dissidents within the union's ranks, and concern that the employers might not be allowing full utilization of the funds to buy needed benefits are some examples.
Though their concerns may differ, traditional trustees from both management and labor clearly carry some excess baggage to the periodic plan meetings where decisions are made affecting thousands of lives. For this and other reasons, it makes practical sense to employ a professional trustee whose primary mission is to insure the well being of the fund and to find the best way to meet the needs of its participants.
The independent trustee should be someone who is educated in the benefits field, can devote the time needed to attend all meetings, and is capable of asserting the best judgements solely for the plan and its participants as stated in the law.
Professional trustees should be knowledgeable in the area of investments. of course. For a fund controlling, say, $100 million, a half point reduction in expenses can result in a substantial financial gain.
However, the independent trustee should also be committed to pushing for the highest level of performance from the plan's professionals and administration. In many cases, that will also result in greater productivity at lower cost.
The fiduciary responsibilities involved in trusteeing a plan are huge, yet many trustees can give only limited attention to those duties because of their other day-to-day responsibilities.
Because of liability concerns, many companies are no longer willing to send their representative to act as trustees. Some companies do not fully grasp the importance of having an educated and informed board of trustees. I have known a number of employer trustees who have used vacation time to attend educational seminars held at desirable locations in order to avoid any appearance of impropriety.
The trustees on any plan should be chosen on the basis of their qualifications and understanding of benefits law and administration. Too often, however, they are there simply to "fill a seat," or as a reward for some type of loyalty.
A professional trustee is chosen through a thorough selection process, based on the candidate's training, experience, and understanding of the benefits field and related management and labor issues.
The professional trustee can inject new ideas into a plan and facilitate consensus decision-making among the trustees. Over time, his input can result in a significant improvement to the fund's performance.
It is not important that an independent trustee have prior business experience in the field covered by the plan. What is important is that he understand his obligation to "do the right thing." As an unaligned member of the board of trustees, he may take positions opposed to one side or the other at different times. He should do so tactfully, but also decisively.
Most organizations bring a specific set of criteria to their search for a professional in any field, be it medicine or law, investment or architecture, business or trade. They seek out a person who will devote his time and energies to the project as a primary focus rather than an incidental sideline. Should the direction of a multi-million dollar fund on which thousands of people may depend for benefits receive any less consideration?
Through experience, I have come to believe that a professional trustee is necessary in Taft-Hartley funds and should probably be considered for major corporate and public funds as well. The day will probably come -- in the not too distant future -- when this will be considered standard operating procedure.
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The author is President of Herbert R. Ricklin Associates Inc., a human resources consulting firm headquartered in Millburn, N.J. With more than 25 years of experience in human resources and labor relations, he has served as a trustee on more than a dozen funds. Currently he serves as a professional trustee and secretary on the Masters, Mates and Pilots pension, welfare, vacation and training funds. He has twice been a member of the Board of directors of the International Foundation of Employees.
