Every business must guard against the damage and disruption of cybercrime. Those that sponsor retirement plans, like a 401k, are legally obligated to work even harder, both to prevent incidents and to curtail damages after cyber breaches.
Fiduciary Obligations Exemplified
Anyone with any responsibilities related to a company sponsored retirement plan is a fiduciary, subject to the high legal standards of ERISA, and, therefore, obligated to mitigate cybersecurity threats to the assets and data in the plan: “Cybersecurity is no longer a choice—it’s a fundamental aspect of plan governance. As a fiduciary, you have a duty to act with prudence, care, and diligence. That responsibility now includes actively safeguarding participants’ retirement assets against cyber threats.” Although many retirement plan sponsors mistakenly believe that outsourcing plan services eliminates their fiduciary risks, this is not true. Fiduciary risks, including being held personally liable for losses to the plan, can be reduced, but never fully eliminated. Accordingly, experts at Savant Wealth remind businesses that 401k plans are prime targets for cybercrime, and urge sponsors to take action on the guidance issued by the Department of Labor, by taking these steps:
- Conduct a comprehensive cybersecurity audit: Review your internal systems, vendors, and data-handling practices.
- Ask the right questions: Inquire about encryption methods, audit procedures, and breach response plans.
- Implement cyber liability insurance: Ensure your policy includes fraud recovery and incident response coverage.
- Update service agreements: Clearly define cybersecurity responsibilities and liability.
- Educate your participants: Encourage strong password habits, multi-factor authentication (MFA), and phishing awareness.
Why 401ks?
Of course, the assets and data associated with retirement plans make them a huge temptation for cybercrime. But there are additional factors that make 401ks vulnerable to cyber threats, including: infrequent participant logins, outdated systems and the potential for human error. With artificial intelligence evolving and available to cybercriminals, it’s definitely time for retirement plan sponsors to take their obligations for cybersecurity much more seriously:
Cybersecurity has evolved far beyond an IT concern—it’s now a critical fiduciary obligation for 401(k) plan sponsors. With increasingly sophisticated cyber threats and the high value of retirement accounts, employers must take proactive steps to safeguard participant assets and sensitive information..Recent data breaches have led to financial losses and, even more damaging, legal liabilities and reputational harm for plan sponsors….Robust cybersecurity isn’t just about reducing liability—it’s a trust-building tool. Today’s workforce is paying attention to how their retirement savings are protected. Employers who demonstrate strong cyber practices send a clear message: “Your future is secure with us.”
Since cybercrime is expected to continue to rise, retirement plan sponsors can anticipate both more scrutiny on the implementation of prevention protocols, and the introduction of new tactics for keeping 401k plans secure, including:
- Increased DOL enforcement of cyber guidance
- Use of AI-driven threat detection tools
- Wider adoption of biometric logins
- Early exploration of blockchain validation for transactions
Meanwhile, remember, outsourcing plan services does not erase the fiduciary responsibilities inherent to plan sponsorship: in fact, per the Department of Labor, you are required to monitor the cybersecurity protocols of all service providers. Failure can result not only in the serious problems that can flow from even a relatively minor cyber breach, but also in YOU being held personally liable for not complying with fiduciary obligations.
Even if you have done nothing wrong, defending yourself against allegations of cyber and fiduciary breaches will be costly and disruptive to your business and life. Why go it alone? Colonial Surety Company offers retirement plan sponsors an efficient, affordable and clear solution.
For a few dollars a day, you’ll have protection for the company, the plan, and yourself, with a Cyber Liability+Fiduciary Liability Insurance package.
In addition to providing, you with defense costs and penalty limits up to $1,000,000, if faced with claims of alleged or actual breaches of duty in connection with the employee retirement plan, our Cyber Liability+ Fiduciary Liability Insurance addresses numerous Department of Labor recommendations, by explicitly covering the plan and the business, and including:
- Expert-led response services following a data breach.
- Protection from lawsuits and regulatory actions related to the breach
- Legal services.
- Computer forensic services.
- Public relations and crisis management expenses.
- Notification services.
- Call Center services.
- Credit and Identity monitoring
Plan sponsors can obtain this comprehensive coverage online in minutes today or speak to one of our knowledgeable ERISA experts for further support. Mitigate threats to the retirement plan–and reduce your personal liabilities before another day goes by!
Cyber Liability Insurance+ Fiduciary Liability Insurance
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.