Benefits lawyers are currently experiencing a flood of lawsuits related to 401(k) plans. Plan sponsors need to closely follow ERISA regulations and ensure protection for retirement plans—and themselves.
Challenging 401(k) Plan Fees
An analysis by Bloomberg Law has found that there have been five times more class-action suits related to 401(k) plan fees in 2020 than in all of 2019. Specifically, as of the end of August, more than 60 class suits had been filed in 2020—compared to a total of about 20 cases in 2019.
As reported by Bloomberg Law:
Several employers have even been sued multiple times by participants who say the plans are too expensive. Cerner Corp., Omnicom Group Inc., and Quest Diagnostics Inc. are among the companies that have been sued twice this year.
The spike in cases can be explained by the maturing body of law under the Employee Retirement Income Security Act, an emerging blueprint for filing and litigating cases, new tools available to plaintiffs’ attorneys, and—yes—even the global pandemic, attorneys told Bloomberg Law.
Plaintiffs’ attorneys are not only more experienced—and better armed than in the past, they also have more access to retirement plan participants—because so many are “stuck at home” due to the pandemic. Bloomberg Law offers this example about the emerging trends:
James E. Miller, a plaintiff-side litigator and a partner with Shepherd, Finkelman, Miller, & Shah LLP in Chester, Conn., said his firm has had five to 10 times as many inquiries from retirement plan participants and plan sponsors concerned about fees.
“With the pandemic, participants and retirees are at home and frankly are having more time to focus upon their retirement savings and be concerned about their retirement savings,” Miller, whose firm has active cases against ADP Inc., MedStar Health Inc., and others, said. “They’re making inquiries about whether their investments and the expenses in their plans are appropriate.”
Plan Sponsors Have Fiduciary Responsibility
Remember, plan sponsors are fiduciaries—employees have trusted you with properly managing the funds they commit to retirement plans. In addition to the cost and reputation damages companies face when class action suits occur, plan sponsors can personally face damage to their reputations, careers—and personal assets— in the event they have to mount a defense.
For their own protection, plan sponsors are strongly encouraged to obtain fiduciary liability insurance coverage. While mandatory ERISA bonds provide coverage for retirement plans, fiduciary liability coverage protects plan sponsors in the event of claims against them personally.
To provide plan sponsors with a unique and easy to obtain coverage solution, Colonial Surety Company offers ERISA bond packages. When you choose your package, you receive a discount on ERISA coverage for your plan; fiduciary liability coverage for yourself; and, the option to add on Cyber Liability coverage. Save time, money, and stress: Choose a Colonial Surety Coverage Package Now!
Refresh Your ERISA Knowledge
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) provides seminars, workshops and webcasts to help employers understand and comply with benefit plan laws. Through the archive, you can even brush up on previously covered topics. You can subscribe for email updates—and view the archive sessions here: EBSA Seminars and Webcasts.
Secure Fiduciary Liability Coverage
Remember, Colonial is the easy choice for plan sponsors to protect retirement plans—and themselves. We’re licensed in all 50 states and US territories and make it efficient to obtain your I-Bond® (instant, online surety bond).
Let Colonial Surety Company help you, via our unique packages. These include up to $1,000,000 of fiduciary liability coverage, providing you—and your plan— with the greatest protection and overall cost savings.
Our 2 or 3-year packages also include cyber liability insurance to safeguard your company and plan against a loss due to cyber attack — plus extended coverage to ensure your Erisa bond remains a US Department of Labor compliant.