New Book Targets Issues Facing Faith-Based Retirement Plans

Murray Coleman
Tuesday, August 21, 2018

The drumbeat keeps rolling. A slew of lawsuits in recent years against corporate retirement plans is expanding from the public sector to private universities and large nonprofit organizations ranging from Yale and MIT to USC.

To at least one veteran market observer and plan fiduciary, the next wave of pension-related litigation is headed straight for religious groups -- particularly 403(b) plans run by Catholic dioceses across the country.

In her new book, "Your Church Retirement Plan Needs Fixing," faith-based financial advisor Mary Brunson argues that overseeing employees' investments can be "one of the most fertile grounds for lawsuits from disenfranchised participants with an insecure retirement looming on the horizon."

She adds: "Get this part right and you can relax. Get it wrong and you face potentially sleepless nights with very long days ahead -- possibly sitting across the table from a couple of lawyers as you collectively ponder the best way for you to finish your sentence that begins with "Well, your honor…"

Brunson is co-creator of Investing for Catholics, a division of Index Fund Advisors Inc. The parent independent registered investment advisor, which is based in Irvine, Calif., manages nearly $4 billion in assets.

"In a nutshell, the plan sponsor bears fiduciary responsibility for investment selection and monitoring, and replacing when necessary, the investments offered to plan participants," Brunson notes in her latest book.

While she goes to great lengths to describe how to fix and properly maintain a 403(b) retirement plan in today's complex legal and regulatory environment, much of her writing this time around seeks to build on broad insights developed by her previous work. That book, "Tending the Flock: Shepherding Catholic Retirement," was co-authored by Judy Baba, another member of the IFA and IFC team.

Rather than duplicating broad strokes covered in the first book, Brunson takes aim this time at taking an in-depth dive into some of the most complex and sophisticated fundamental administrative and investment planning issues facing religious leaders and 403(b) plan sponsors these days.

In her latest work, Brunson provides additional details about how to fix and properly maintain a faith-based retirement plan in a fast-evolving legal and regulatory marketplace. "The heart of your new plan must include automatic enrollment, automatic escalation, restrictions on loans and prudent employer matches," she observes.

In a compact and easy to digest 99 pages, Brunson spends considerable time setting up a framework for plan sponsors to implement a variety of key features and set achievable long-term fiduciary goals.

For example, she points out that if an individual is to replace 60% to 80% of their income in retirement -- as should normally be the case, according to Brunson -- then employees must save at least 10% to 14% of their current annual income "and invest it wisely."

Her advice: "Start small." As she puts it in the new book, "biting off even a small percentage of their paychecks can set off a visceral response, causing some to jump out too quickly."

Too aggressive of an auto-enrollment goal, Brunson cautions, might not work to shape proper investment behavior over the longer-term.  "While a sense of urgency is a great way to motivate your employees to plan and prepare for retirement, it's important to keep your eyes on the long term," she suggests. "Starting small and getting your employees accustomed to the benefit of saving—and making the bite sustainable—will help keep them on board."

Brunson even gives tips on specifics regarding what salary deferral rate to target automatic enrollments at initially, how much to increase those amounts each year and ways to get employees to increase their savings.

But she also presents cutting edge industry practices and the latest research on topics ranging from how best to develop faith-based investment policies and efficiently pick  funds to setting up procedures to avoid letting long-term investment goals "go awry."

All of these topics are flushed out in terms of how today's modern retirement plan system has evolved, from its post-World War II maturations to introduction in 1974 of the Employee Retirement Income Security Act. The book also reviews ERISA's heightened fiduciary requirements for plan sponsors, both in terms of costs as well as legal ramifications.

At the same time, "Your Church Retirement Plan Needs Fixing" doesn't shrink from tackling head-on implications for plan sponsors of changing demographics within America's diversified workforce.

In a forward by Thomas Burnham, chief human resources officer for the Roman Catholic Diocese of Orange (Calif.), he writes: "Significant shifts in mortality tables with revised prolonged life expectancy numbers paved the way for increased retirement debt obligations."

The book chronicles the 403(b) marketplace's move into an era of defined contribution plans, coming with it a perceived promise of greater simplicity over traditional defined benefit retirement plans. (Burnham notes that less than 10% of private employers today offer a defined benefit plan.)

Too often, he sees plan sponsors struggling with a harsher reality. "It appears simple, but it really is far more complex," writes Burnham in reference to using 403(b) platforms as opposed to older pension plans.

In fact, he makes a case that leaders of religious organizations big and small can't afford -- either from a cost basis or legal viewpoint -- to take a set-and-forget mindset.

"Simplification offered through a defined contribution plan, however, does not mean that employers can simply set up a 401(k) or 403(b) and ignore it," Burnham writes. "JUST THE OPPOSITE!" 

To read "Your Church Retirement Plan Needs Fixing," check or call IFA for a free copy at 888-815-5025.



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