When you sponsor a retirement plan at your business, you are a fiduciary. Whether or not you know that, understand it, or enjoy the responsibilities it entails, under the high standards of the Employee Retirement Income Security Act of 1974 (aka ERISA), you can be held personally liable for oversights that impact the savings of everyone trusting you—participants and their beneficiaries. Here’s the good news: experienced ERISA attorney, Ary Rosenbaum, explains that it is entirely possible to master your fiduciary obligations–no superhero costume or powers required.
Retirement Plan Sponsors Don’t Mean To Err…
Most of us did not of course set out to sponsor a 401k plan just to screw it up, and face heavy consequences. But, as Rosenbaum reminds us, if we don’t take the fiduciary role seriously, we are in fact quite likely to mess up sooner or later:
Most plan sponsors don’t mess things up because they’re evil or incompetent. They mess things up because they don’t know what they don’t know. You don’t need to be a tuxedo-wearing superspy to fulfill your fiduciary duties. You just need to: take your role seriously;ask the right questions; work with people who know more than you do document everything; And, most importantly, care. ERISA doesn’t require perfection.It requires prudence, loyalty, and process. If you can commit to those three principles, you’ve already won half the battle. This mission is not impossible. It’s entirely possible. ….Fiduciary liability isn’t some boogeyman invented by ERISA attorneys to scare clients into signing retainers. It’s real, it’s manageable, and most importantly—it’s something you can get under control if you’re willing to take it seriously.
If it has been a while (or never) since you dedicated some time to the Department of Labor’s resources aimed at helping retirement plan sponsors succeed, it’s wise to do so, and you can start with this one: Meeting Your Fiduciary Responsibilities. Rosenbaum reminds plan sponsors that even when outsourcing services for the plan, the sponsor retains a fiduciary role (after all, you chose the providers…); and, encourages us to take these seven actions very seriously:
- Form a Fiduciary Committee
- Benchmark your fees. Then do it again.
- Hire the right advisors—then hold them accountable.
- Avoid the “set it and forget it” trap.
- Communicate with participants like it actually matters.
- File your Form 5500–and everything else–accurately and on time.
- Most importantly, care.
You’ll find Rosenbaum’s specific pointers related to managing fiduciary liability like a pro here: Mission Possible, and as you dig in, take heart in his reminder: “You don’t need to be a superhero. You just need to be deliberate, informed, and committed to doing the right thing, even when it’s not convenient.”
Good To Know
Specific examples of what you can be held personally accountable (aka liable) for as a fiduciary include:
- Decisions: Do you have the right advisor, and investment options?
- Cost control: Are the plan fees reasonable and services solid?
- Compliance: Do operations adhere to the plan document, and government regulations?
Indeed, allegations of high plan fees and poor investment options have been at the heart of a storm of lawsuits proving costly and disruptive for retirement plan sponsors across the country. As a fiduciary, you can also be held accountable for failing to adequately mitigate cybersecurity threats to the plan, or to curtail the damage from a breach. You can even be held responsible for failure to monitor your chosen service providers for their adherence to cybersecurity protocols.
If you face claims that you have failed in your responsibilities as a retirement plan sponsor, the only type of protection that shields you personally is Fiduciary Liability Insurance—-with it, you’ll be armed with coverage for defense and penalties. Without Fiduciary Liability Insurance, your personal assets are exposed.
To help retirement plan sponsors mitigate their risks, Colonial Surety Company offers an efficient and affordable Fiduciary+ Cyber Liability Insurance bundle. You can even add the coverage on to your ERISA Bond. For a few dollars a day, you’ll be armed with:
- $1,000,000 for Defense and Penalties if you are faced with alleged or actual breaches of fiduciary duty.
- Cybersecurity Coverage for the business and plan, which addresses Department of Labor recommendations, and includes expert response services to curtail damage after an incident.
Get protected now: Fiduciary+ Cyber Liability Insurance
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