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Introduction to management committees

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What is a management committee?

A management committee (MANCO) is constituted by an employer to manage the retirement solution on its behalf for the benefit of its employees. This committee usually consists of members, employer representatives and sometimes financial advisers. Member-elected representatives are there to ensure that the members’ voices are heard.

Legally, the ultimate responsibility for the umbrella fund lies with the board of trustees of the umbrella fund and not with the MANCO. The MANCO, however, makes a number of decisions on behalf of the participating employer and its members.

Why the need for a MANCO?

When an employer joins an umbrella fund, a key concern is whether or not the employer will have any input into the fund on behalf of its members going forward. The MANCO therefore acts as the link between the umbrella fund and the employer’s members. Ultimately, the objective of such a MANCO is to ensure that its members’ interests are represented and communicated to the umbrella fund and that the fund is well managed and governed. MANCOs therefore play a significant role in ensuring that the employer stays close to all matters affecting members, with the input from members.

How should a MANCO be constituted?

MANCOs should have representation from both the employer and employees. The size of the MANCO depends on the number of members from the participating employer in the umbrella fund. It might not be practical to set up a MANCO for a small participating employer, given the need to have employee representation on the MANCO. For very small employers, the employer representative, usually the HR manager, may be sufficient to manage the affairs of the employer’s participation. The MANCO usually consults with a financial adviser who is paid from the members’ retirement contributions. The employer representative is responsible for day-to-day administration of the retirement solution, it is therefore essential for them to be standing members of the MANCO.

It would also be good guidance for the responsible person, i.e. the director responsible for the retirement solution, to form part of the MANCO, because the MANCO guides the employer in making risk and investment decisions.

From the outset, a chairperson of the MANCO should be elected from MANCO members and setting up a code of conduct is considered best practice for such committees. A set term of office should also be agreed upon for those sitting on the MANCO. It is also important that meetings are scheduled regularly and that a pre-set agenda, which determines the structure of the meeting, is followed to ensure that the MANCO operates optimally. In addition, the sponsor needs to ensure that the financial adviser, the employer and the various representatives have a framework within which to operate and manage the MANCO. Sponsors should also provide the necessary templates, such as a meeting agenda and minutes.

MANCO: An employer level management committee to manage the interests of the participating employer and its employees who are members of an umbrella fund.

What is the mandate of a MANCO?

The mandate of the MANCO needs to be agreed on with the employer upfront. This will ensure there is alignment when decisions are made, and that the retirement solution is run efficiently for the benefit of the participating employer’s members.

The MANCO is the voice of the employer and the fund’s members to the board of trustees of the umbrella fund. It is a platform where negotiations with the financial adviser take place in terms of appropriate solutions for the particular participating employer. Some of the main decisions the MANCO will make are the selection of appropriate risk benefits, investment portfolio, structuring of the member groupings within the participating employer’s business, as well as the extent of member choice.

The umbrella fund board determines the full range of portfolios available for selection, but it is the MANCO that will choose the appropriate solution for the participating employer in the umbrella fund. The MANCO also provides oversight for the responsibilities of the employer representative and responsible person. This will ensure that the duties of these parties are discharged as expected. The MANCO also has a role to play in member education, particularly where member choice of investment portfolios is involved.

The functions of the MANCO should therefore include:

  • Reviewing benefit decisions and analysis to ensure members have a good understanding of the benefits available to them;
  • Investment portfolio analysis, which allows members to understand who their funds are being invested with, how their portfolios are positioned, and how those managers have performed over time from a risk/return perspective;
  • Member communication to ensure that members are kept up to date with how their funds are being invested;
  • Member education to ensure that members understand all relevant aspects relating to their retirement investments and risk benefits;
  • Assisting with the processing of death benefits is also an important role of the MANCO.

REFERENCES
1. www.oldmutual.co.za
2. www.sanlam.co.za
3. www.allangray.co.za