Establishing Sound Retirement Plan Governance

This article is adapted from “401(k) Best Practices: A Guidebook for Plan Sponsors,” by Matthew Gnabasik with contributing author Ty Parrish.

As a retirement plan sponsor, you are responsible for administering the plan and making all material plan decisions. Because of your role, you are almost certainly a fiduciary and therefore personally liable for the decisions regarding your plan.

Class-action litigation against plan fiduciaries is soaring, and the Employee Benefits Security Administration has successfully enforced monetary judgments in 71% of its cases in 2024, resulting in a total recovery of nearly $742 million.¹ Given the high financial and reputational stakes for organizations that allow gaps in oversight, documentation, or decision-making, sound retirement plan governance is critically important.

The good news is that there are basic steps you can take to help minimize the risk of sponsoring a retirement plan, both for you personally and for the organization you work for. Below is a basic framework for conducting overall plan decision-making in an efficient and procedurally due-diligent manner that will not only help reduce risk but also help support better retirement outcomes.

Fiduciary responsibility: Purpose and guiding principles

A strong governance process helps provide a consistent, defensible framework for making fiduciary decisions that support the plan’s objectives and protect participants’ interests. Essentially, there are five broad duties that fiduciaries need to follow to meet their obligations when offering a retirement plan:

1. Follow the plan document and comply with the Employee Retirement Income Security Act of 1974 (ERISA) and Internal Revenue Service regulations;
2. Select, monitor, and diversify investments;
3. Select and monitor service providers;
4. Avoid unnecessary expenses and make sure the plan fees are reasonable and necessary; and
5. Make informed decisions.

The key to fulfilling these responsibilities is to build a balanced approach to fiduciary oversight that addresses all major review components. While this might seem straightforward, we’ve often met with a potential new client who spends more than 90% of the committee’s meeting time focused solely on investments. (To be fair, most consultants emphasize investments at the expense of other key plan success drivers, so it’s no surprise that many committees follow their lead.)

The reality is that the majority of lawsuits filed over the past decade have not been focused on underperforming investments, but rather on fees and the lack of service-provider oversight. Therefore, it’s important to maintain a balanced approach to help ensure that all aspects of the plan are covered.

Step 1: Create a retirement committee plan charter

A written retirement plan committee charter is the cornerstone of governance. It should define fiduciary roles (the plan administrator, named fiduciaries, and investment adviser); establish committee structure, membership, term lengths, and authority; outline meeting frequency, quorum requirements, and voting procedures; describe the scope of oversight (investments, administration, compliance, and service providers); and require an official board resolution delegating fiduciary authority to the committee.

One major decision that should be addressed during the charter’s development is the level of fiduciary responsibility the committee wants to assume regarding the oversight of investments. Committees have the option to handle the investment oversight process in-house, share it with a co-fiduciary called a 3(21) fiduciary, or outsource the investment oversight process to the 3(38) discretionary investment manager. While beyond the scope of this article, we recommend engaging ERISA counsel to assist with the development of the charter and weigh the pros and cons of engaging an outside fiduciary to provide oversight on investments.

A best practice is to engage ERISA counsel or use a vetted template from your consultant or recordkeeper, then formally adopt it through a board resolution.

Step 2: Form a committee

A balanced committee typically includes three to seven members representing human resources, finance, legal or compliance, and, optionally, an employee representative to provide participant perspective. Each member should acknowledge fiduciary status in writing and complete initial and periodic fiduciary training.

Step 3: Educate committee members

Providing annual fiduciary training—delivered by an independent adviser, ERISA attorney, or recordkeeper—ensures all members understand ERISA fiduciary duties (loyalty, prudence, diversification, and adherence to plan documents); prohibited transactions and fee disclosure rules (408(b)(2) and 404(a)); recordkeeping and documentation standards; and best practices for monitoring investments, providers, and fees.

Step 4: Establish an investment policy statement

Implement an investment policy statement (IPS) to provide guidance for both the committee and the retirement plan consultant. The committee will use this document when selecting a new manager or replacing existing ones. The written IPS should define selection, monitoring, and replacement criteria. You should also ensure the consultant’s monitoring process aligns precisely with the IPS, conduct performance and fee reviews at least quarterly or semiannually, and document all discussions and rationale for any investment changes.

Step 5: Meet regularly

Hold two to four meetings per year covering all fiduciary domains, and spotlight different aspects of the retirement plan throughout each quarter to create better balance. There is nothing in ERISA that states you must review investments quarterly. At Cerity Partners, we provide 24/7 monitoring of the investment menu and formally review performance twice a year, allowing more time to focus on other key elements of the retirement plan. If something comes up on the investment side, we make room for it on the agenda regardless of the quarter.

A suggested meeting cadence and topics are listed in the table below. Meeting minutes summarizing discussion topics, decisions, and supporting rationale should be recorded at each meeting. Review and approve minutes at the next meeting.

Meeting Focus	Key Topics
Q1 – Fee and plan benchmarking	Fee benchmarking against peers and service-level reviews
Q2 – Investments and compliance	Performance review, charter and IPS review, legislative updates, plan operations, audit, Form 5500
Q3 – Plan design and participant outcomes	Education initiatives, plan metrics, strategic enhancements
Q4 – Investments and education	Performance review, fiduciary training

Step 6: Document decisions and pertinent information

One of the most important pieces of a sound fiduciary framework is leaving behind a well-documented trail of decision-making. Taking meeting minutes regarding key decisions and supporting rationale is crucial. In addition, maintain a secure, centralized fiduciary file that includes:

• Plan documents, amendments, the summary plan description, and trust agreements;
• The committee charter and meeting minutes (minimum of 3 years);
• The IPS and investment monitoring reports;
• Fee disclosure notices (408(b)(2), 404(a)) for at least 6 years;
• Service provider contracts and benchmarking data;
• Fiduciary insurance and ERISA bond documentation; and
• Plan audits, Form 5500s, and participant communication materials.

Additional fiduciary best practices

In addition to the six steps above, here are further best practices that will help demonstrate you follow a prudent governance process:

• Fiduciary liability insurance: Secure coverage to protect committee members from personal exposure (distinct from the required ERISA fidelity bond).
• Covered service providers: Vendors paid from the plan should undergo periodic due diligence through an RFI or RFP process every five to seven years, or sooner if warranted.
• Annual self-assessment: Review committee effectiveness, participation, and adherence to the charter.
• Independent advice: Retain a fee-only fiduciary advisor (3(21) or 3(38)) to enhance decision quality and reduce conflicts of interest.
• Succession planning: Ensure continuity through staggered terms and onboarding processes for new members.

Establishing a retirement plan governance framework is critical

A robust retirement plan governance framework is not just a compliance exercise, it’s a strategic imperative that safeguards fiduciaries, strengthens participant confidence, and drives better long-term outcomes.

By establishing a balanced approach to governance, committees demonstrate procedural prudence that can significantly reduce litigation and reputational risk. In short, governance done right transforms fiduciary responsibility from a liability into a powerful tool for organizational integrity and participant success. Learn more about our Retirement Plan Consulting capabilities.

1. Compliance Bug, “71% of 2024 ERISA Plan DOL Audits Resulted in Monetary Penalties.” https://www.compliancebug.com/annual-erisa-dol-fines-penalties/ ↩︎

---

Cerity Partners Retirement Plan Advisors LLC, doing business as Retirement Plan Consultants (“RPA” or “RPC”), is an SEC-registered investment adviser with offices across the United States. Registration as an investment adviser does not imply any level of skill or training. RPA is a wholly-owned subsidiary of Cerity Partners LLC. RPA provides retirement plan consulting services only.

The information contained herein is not personalized investment, tax, or legal advice and is for informational purposes only. There is no guarantee that any views or opinions expressed will come to pass. This information is subject to change without notice and should not be considered an offer to sell or a solicitation to buy any security. Past performance is not indicative of future results. Before making any decision that may affect your retirement plan or finances, consult a qualified professional adviser.

For information about RPA’s registration status, refer to the Investment Adviser Public Disclosure website at ww.adviserinfo.sec.gov. For additional information about RPA’s services, fees, conflicts of interest, and related persons, please request our Form ADV Part 2A and Form CRS disclosure documents. Please read these documents carefully before engaging our services.

©2026 Cerity Partners Retirement Plan Advisors LLC. All rights reserved.