Five Key Strategies for Implementing a Healthy Retirement Plan: Strategy One — Develop Strong Plan Fiduciary Governance

In my previous article, I plainly explained why Church retirement plan sponsors can no longer afford to view ERISA and its related laws as irrelevant for their Church-run plans.

This lesson was painfully brought to light in 2025 through the unfortunate combination of the Christian Brothers Employee Retirement Plan (CBERP)'s massive underfunding crisis and the precedent-setting personal liability judgment against Bishop Scharfenberger. While it remains to be seen who will ultimately be held responsible for the staggering $800M Christian Brothers pension underfunding crisis — a similar lesson appears evident in both cases: the decision to waive off even abiding by the spirit of ERISA only may have deepened the blows felt by plan sponsors and participants, alike.

In both cases, there are no winners. Pensioners are reeling and organizational leaders are struggling to discern a clear path forward for making whole those who have dedicated their time in service to the church. The path to resolution of this painful and seemingly impossible situation remains murky.

As to Christian Brothers, lawsuits may appear likely, and when the dust has cleared (likely years from now), we can only hope that preventative actions — born out of the suffering many are now experiencing — will go a long way in ensuring this never happens again. As the Dalai Lama sagely admonished: "When you lose, don't lose the lesson."

What is the lesson here? Several, actually — and we will dig into them. What is widely understood is that both ERISA principles and state trust law offer commonly cited best practices for retirement plan management, including Catholic church plans.

I know the term ERISA may strike anathema in the minds of church-plan sponsors, but I propose that abiding in accordance with such law with clarity and purpose is mission critical — even if only in the spirit of the law. Now that we are painfully aware of the why, let's shift to the how. And we begin at the very foundation…

Strategy One: Develop Strong Plan Fiduciary Governance

Without a strong governance framework, other plan strategies may be significantly weakened. Governance is not merely an administrative formality. It is the structural backbone of a well-run retirement plan — and increasingly, it can be an important factor in how a plan sponsor responds to a legal challenge.

First Things First: Understanding the Legal Landscape of Church Retirement

Before we can govern well, we must understand the relevant standards and governance landscape. There are several laws and government entities that govern private retirement plans.

These include:

• Employee Retirement Income Security Act (ERISA) — or at minimum — for Church plans, the spirit of ERISA. As previously described, trust law essentially mirrors ERISA in the most critical areas. ERISA sets the standard for participant protection, and its principles remain relevant even if a Church plan is technically exempt from its mandates.
• The U.S. Department of Labor (DOL) — and particularly the Employee Benefits Security Administration (EBSA), the DOL agency is charged with protecting the retirement, health, and other workplace-related benefits of American workers and their families.
• The Internal Revenue Service (IRS) — oversees the tax-qualified status of retirement plans and the compliance obligations that attach to them.
• The Uniform Prudent Investor Act (UPIA) — adopted by most states into their state law, the UPIA establishes the standard of care for trustees overseeing or managing investment portfolios and investment lineups. The UPIA is rooted in Modern Portfolio Theory — which emphasizes asset class diversification and the Prudent Investor Rule. This rule focuses on the importance of fee reasonableness and the suitability or appropriateness of risky assets in the portfolio when considering the overall needs of the beneficiaries of the trust.

Taken together, these four practice pillars of retirement plan oversight frame the legal environment in which retirement plans operate, while also establishing the manner by which plans and sponsors will be evaluated. (And, we can no longer dismiss the possibility that an actual judge might be involved.) As you consider your role as a church plan sponsor, I emphatically encourage plan sponsors to consider these standards as underpinnings that may help support the retirement security of your employees — while also assisting your organization in your pursuit of fulfilling its mission.

Understanding Fiduciary Responsibilities: Who Is a Fiduciary Under the Law?

One of the most common — and most costly — misconceptions among Church plan sponsors is that fiduciary status is limited to a narrow class of formal decision-makers. In reality, the law casts a much wider net. The following roles may be considered fiduciaries under American law, depending on facts and circumstances:

• Plan Sponsor (typically the employer): Generally the named fiduciary, carrying overall responsibility for the plan. This is often the diocese, religious institution, or Church-affiliated organization itself — and by extension, its leadership.
• Plan Trustees: Responsible for managing the plan's assets and making investment decisions. Trustees bear a heavy burden — one that cannot be discharged through inattention or deference alone.
• Plan Administrators: Manage the day-to-day operations of the plan, including benefit payments and recordkeeping. The administrative function may seem routine, but errors here can carry serious legal consequences.
• Investment Committee: Advises on investment options and monitors the performance of plan investments. Committee members who treat their role as purely ceremonial may increase their exposure to potential liability.
• Investment Advisors: Provide advice on investment strategies and can be fiduciaries if they receive compensation for their advice. Not all advisors are fiduciaries — and plan sponsors frequently do not know the difference between a fiduciary advisor and a non-fiduciary advisor. Understanding the fiduciary role of your provider is critical — and make sure you properly monitor all.
• Those with Discretion Over Plan Management or Assets: This category is broader than most plan sponsors realize. Any individual who makes decisions about plan administration or who controls the use of plan assets may be deemed a fiduciary under the law — regardless of their formal title.

The implications of this are significant. A bishop who serves on a pension board, a CFO who approves plan expenditures, a committee member who votes on investment options — each may carry fiduciary responsibility and, with it, potential personal liability. The Bishop Scharfenberger case should be considered carefully. It may serve as a cautionary example for plan sponsors to review day-to-day plan management practices through the lens of what best practices look like and what's really going on with the plan. Are they reflective of each other, or does your plan need some shoring up to increase fiduciary protection?

What Are Fiduciary Duties?

Understanding who is a fiduciary solves about half the equation. The other half is understanding what the law requires of them. The collective laws previously listed tell us that fiduciaries are obligated to:

• Act solely in the interest of plan participants and beneficiaries. This is the cornerstone of fiduciary duty — the unwavering obligation to put the interests of participants first, above institutional convenience, above budget pressures, and above the preferences of any individual stakeholder.
• Carry out duties prudently. Prudence is not merely good intentions. It is a standard of care — a commitment to process, to documentation, to informed decision-making. A fiduciary who acts in good faith but without a defensible process may still be found liable.
• Follow the plan documents. The governing documents of a retirement plan are not suggestions. Deviating from them — even with good intentions — can constitute a breach of fiduciary duty.
• Diversify plan investments. Concentration risk is not just a financial concern; it is a legal one. Fiduciaries are required to diversify plan assets to minimize the risk of large losses.
• Pay only reasonable plan expenses. Every dollar paid to a service provider must be justifiable. Fees that are excessive relative to the services rendered expose fiduciaries to liability — and they are increasingly scrutinized in litigation.
• Delegate to prudent experts when internal resources or expertise are lacking. This is, perhaps, the most underutilized protection available to Church plan sponsors. The law does not require fiduciaries to be experts in everything. It does require them to recognize the limits of their expertise and to delegate accordingly — to qualified, vetted professionals.

Each of these duties may become actionable depending on the circumstances. Each can be documented, monitored, and demonstrated in a court of law. And each, when neglected, may be referenced in a liability claim.

Developing Sound Governance Standards

With the legal framework in view, let us turn to the practical steps that constitute sound governance. At Investing for Catholics, we have been implementing the following governance standards with our clients since our founding in 2009. They are not novel. They are not complicated. But we find they are consistently underutilized across Catholic church plans — and that gap between what plans should be doing and what they are doing is precisely where liability is born.

• Charters and By-Laws: Every plan should have well-drafted governing documents — charters, by-laws, and committee charters — that are formally acknowledged and consistently followed. Documents that sit in a drawer, unsigned and unreviewed, or woefully outdated, offer no protection. Documents that are actively used, regularly updated, and referenced in meeting minutes are the building blocks of a defensible governance record.
• A Knowledgeable and Responsible Board and Committee: The individuals who serve in fiduciary roles must clearly understand the fiduciary mantle they have accepted and the potential for personal liability that comes with it. Ignorance, a lack of resources, or good intentions absent action, offer no defense. Education about fiduciary obligations is not optional — it is a fiduciary obligation in its own right. Boards and committees should receive regular training on their duties, the plan's governing documents, and the evolving legal landscape.
• Process Is Critical: This cannot be overstated. Understanding, adopting, and documenting a prudent process for organizing, formalizing, implementing, and monitoring your plan and its providers is on of the most important steps a plan sponsor can do to protect itself. A well-documented process demonstrates that decisions were made thoughtfully and deliberately — not carelessly, capriciously or arbitrarily. If litigation arises, a well‑documented process can be an important element of a plan's defense. Importantly, courts often place significant emphasis on documented process.
• Understand the Roles and Fiduciary Status of Service Providers: Not all service providers are created equal, and not all of them are fiduciaries. Plan sponsors must understand exactly what role each provider plays, what fiduciary responsibility — if any — they have accepted, and what insurance protections are in place. Assuming that a service provider is a fiduciary when they are not is a mistake that plan sponsors cannot afford to make.
• Delegate Investment Selection to a 3(38) Investment Manager: This is not an abdication of responsibility; it is the fulfillment of the fiduciary duty to delegate to prudent experts when internal resources or expertise are lacking. To enhance fiduciary risk management, plan sponsors should consider delegating investment selection, monitoring, and replacement to a qualified 3(38) investment manager, e.g., a Registered Investment Adviser (RIA). By doing so, the plan sponsor may transfer certain fiduciary responsibilities for investment decisions to the 3(38) manager, subject to applicable law.
• Perform a Legal Review of All Service Provider Contracts: Every service provider contract should be reviewed by qualified legal counsel to ensure that all services are properly and completely reflected in the agreement. This includes Investment Policy Statements, Record Keeper and Administration Agreements, and Investment Management Agreements. Contracts should be reviewed periodically — not just at inception — to ensure ongoing compliance with plan terms and applicable law.
• Conduct Fee-Benchmarking Reviews at Least Every Three Years: Fiduciaries are obligated to ensure that plan expenses are reasonable. The only way to know whether fees are reasonable is to benchmark them — against the services provided and against comparable peer plans. A fee-benchmarking review conducted at least every three years is widely viewed as a best practice and may be a documentable element of fiduciary prudence.
• Hold Meaningful Meetings — and Ask Questions: Service providers should attend plan meetings and present their findings. And plan fiduciaries should do more than listen — they should ask questions. Engaged, probing questions that demonstrate genuine oversight are both a sign of good governance and a record of it. Meeting minutes that reflect substantive dialogue between fiduciaries and service providers are a powerful component of any defensible governance record.

Governance: Not a Burden — but a Shield

I know this brief document contains A LOT of information for you to absorb, so I want to close with a thought that I hope stays with you. Strong fiduciary governance is not a compliance burden imposed upon Church plan sponsors from the outside. It can serve as a meaningful risk-management tool for plan participants and sponsors, and honors the sacred trust that underlies every retirement promise a Catholic institution makes to its employees.

The events of 2025 have highlighted the seriousness of these issues. The question before every Church plan sponsor today is not whether to take governance seriously. That question has been answered. The question now is how quickly they will act — and whether they will do so before, or after, the next crisis lands at their door.

In the coming weeks, I will continue rolling out the remaining four strategies in this series. Each builds upon the foundation we have laid here today. Together, they form a practical framework for implementing a healthy, defensible, and participant-centered retirement plan.

If you would like to discuss general governance considerations— or if you are among the plan sponsors navigating the CBERP crisis — I would be glad to discuss general considerations. Call me at 949-428-0432 or email mary@ifa.com.

Next in the Series: Strategy Two — Properly and Contractually Delegate to Prudent Service Providers Where Necessary

About the Author 

Mary Brunson – Co-Founder, Senior Vice President, Investing for Catholics

Mary Brunson is the Co-founder of Investing for Catholics (IFC), a division of Index Fund Advisors, Inc. (IFA). Since 2009, she has focused her advisory efforts on Catholic faith-consistent investing, applying financial science to support fiduciary advice and institutional wealth services aligned with Catholic values. She works closely with religious orders and Catholic organizations—including diocesan plans, endowments, and foundations—as well as public trusts, pension plans, and individuals.

Disclosure:

This article is provided for informational and educational purposes only and is not intended to constitute legal, tax, ERISA, or investment advice. The discussion of laws, regulations, court decisions, fiduciary standards, and governance practices is general in nature and may not apply to all plans or circumstances. Outcomes and interpretations may vary based on specific facts, plan design, governance practices, and applicable law. No assurance can be given that any approach, strategy, or practice will achieve a specific result or reduce risk.  Plan sponsors should consult with qualified legal and tax professionals regarding their specific circumstances. 

Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Advisory services are offered through Index Fund Advisors, Inc., a registered investment adviser. Readers should consult their own legal, tax, or financial professionals regarding their specific situation before taking any action.  Any services described are offered only pursuant to a written advisory agreement. 

References to fiduciary governance practices and liability considerations are discussed in general terms and do not imply that any specific action or strategy will prevent litigation, reduce liability, or produce a particular legal outcome. Nothing herein should be interpreted as a recommendation or determination of fiduciary status.