In the case of In re WestarEnergy, Inc., the court held:

“[A]s fiduciaries, each member [of the Committee] had some duty albeit limited, to monitor the other members of the Committee, for they were to work together as a body of fiduciaries.”

While that case involved company stock, one of the findings was that fiduciaries, like committee members, cannot turn a “blind eye” to what they know. That is significant in a number of regards.

For example, if a committee member finds out that the company is not forwarding deferrals to the trust in a timely manner, the committee member has a duty to take steps to protect the participants. There is no alternative; resignation does not work. (Note that this is also covered by the co-fiduciary liability rules.) At the least, the committee member needs to discuss the matter with senior officers of the company. And, if it is not corrected, the committee member may have an obligation to report his own company to the Department of Labor.

However, the principle can apply in a more subtle way. For example, if an officer is a committee member, but the committee never meets, then the officer is obviously aware that he or she is not fulfilling the fiduciary responsibilities and that the committee is not functioning to protect the participants. An even more subtle version may occur when the committee is aware that one member is consistently missing the meetings and, therefore, not participating in the decisions. For, as the Westar case says, the committee is to work as a group.

While, in most cases, there would be little, if any, damages to the participants because of the failure of a single member to participate, it is clear that the member is breaching his fiduciary duties. Even though there may not be damages, if the DOL discovers that pattern of behavior, it does have the authority to enjoin the member from participating as a fiduciary for the plan.

The moral of this story is that, if someone is appointed as a committee member, they should participate actively and properly. If they do not want to do that, then the member should either resign or be removed.

Source: The Report to Plan Sponsor