Slightly higher 401(k) Fees Make Plan Sponsors Liable


Paying 1% higher fees than the average rate for someone to administer a 401(k) plan does not sound like it would cause too many problems. But paying fees even 1% higher than average in 401(k) fees can cause you to be personally liable as a fiduciary.

The 1% may not sound like much now, but over an employee’s time with a company, it will keep adding up every year and can cost one employee up to even $100,000 over their entire time with the company. That is more than enough to sue a fiduciary over for a breach of their fiduciary duty.

You may think that paying more for an administrator may bring better results, but if it does not, that 1% difference in the cost of that administrator can make you personally liable as a plan sponsor for all that was paid to that administrator.

So how can you make sure you’re personally protected from a fiduciary breach? Fiduciary liability insurance!

Where the ERISA fidelity bond is set in place to protect the participants of the plan it, however, does not protect YOU as the fiduciary.

Colonial Surety Company is a Treasury Listed surety company providing ERISA fidelity bonds packaged with fiduciary liability insurance that includes a cyber liability insurance endorsement at no extra cost. Colonial is one of the leading providers of ERISA related products, offering bonds approved by the Department of Labor. We make it easy to obtain your bond instantly as well as allowing you to purchase retroactive insurance for the years the plan was not previously covered.

Under ERISA, fiduciaries may be held personally liable for a breach of their responsibilities in the administration or handling of employee benefit plans. Under ERISA 410, the plan cannot relieve you of this responsibility with indemnification language, however, it specifically permits persons with personal liability to purchase fiduciary liability insurance. Covering yourself with fiduciary liability insurance gives you a piece of mind that you are protected. Learn how to bundle your ERISA bond and fiduciary liability insurance for a discounted rate.