Apathy and Fiduciary Liability?


No retirement plan sponsor sets out to fail in their fiduciary duties. Running a small business can be exhausting, though, with good intentions ending up on the bottom of the to-do list. Pension experts offer important reminders and tips for ensuring you are getting the help you need.

Don’t Fail This Test

 ERISA obligations are among the highest known to law and the current swell of lawsuits points to the importance of actively monitoring and controlling investment costs and other plan fees. According to experts, small businesses remain particularly vulnerable to excessive and hidden fees—putting plan sponsors at risk. As Eric Doblyen of Employee Fiduciary, a 401k provider explains:

Plan sponsors know they have a fiduciary duty to ensure that their plan puts the interest of participants before their own or that of the plan provider. Yet many smaller plans fail this test by working with providers that obscure fees or are opaque about conflicts of interest, Doblyen says.

“The biggest source of fiduciary liability is apathy,” says Eric Doblyen

 Not surprisingly, plan sponsors who work with financial advisors often opt to work with an advisor who is a 3(38) fiduciary, an investment manager who reviews investment options and takes day-to-day responsibility for a plan’s investments. However, Doblyen points out, plan sponsors can never entirely transfer their fiduciary responsibility. They still have a duty to choose a solid 3(38) fiduciary.

While 3(38) financial advisors can be tremendously helpful, plan sponsors need to remember that they themselves still have a fiduciary responsibility to the plan—and can be held personally responsible for a breach, such as failure to appropriately select, monitor and review the advisor. Since even allegations of a fiduciary lapse are costly and disruptive, with ERISA lawyers costing over $600 per hour, plan sponsors across the country are obtaining protection via Colonial Surety’s fiduciary liability insurance. It covers the business—and the plan sponsor—against claims of alleged or actual breaches of duty in connection with the employee retirement plan. Colonial’s annual premiums total less than just an hour or two with an ERISA lawyer. Get protected now: Choose Your Plan Sponsor Protection Package Here.

Good To Know

When contracting for help, plan sponsors need to remember: not all financial advisors are fiduciaries. Those who are not, are not duty bound to put the interests of participants first. As Brighton Jones explains: Knowing the type of retirement plan advisor you have hired is a crucial part of assessing your risks, meeting your fiduciary standards, and providing the best (and most equitable) experience for your plan participants. Without this knowledge, the stakes are high—including costs of lawsuits and losses, audits and investigations, and significant fines.

To help plan sponsors better understand the choices they make in contracting for advisement services, experts offer this differentiation:

3(21) Investment Advisor

An investment advisor (sometimes a broker or consultant) offers advice, recommends fund lineups, and manages plan assets…. Their fiduciary obligations are usually limited, which can potentially transfer risk and administration to the plan sponsor. The investment advisor is not a decision-maker and does not have discretion over plan assets. Discretion isn’t part of a 3(21) investment advisor’s obligation to their clients, which leaves the plan sponsor responsible for investment decisions….

3(38) Investment Manager

The 3(38) investment manager is appointed by the plan sponsor to manage investments and has discretionary responsibilities. They are responsible for the selection, monitoring, and replacement of investment options as needed. They will often act as a plan consultant by helping to manage other providers, as well as provide financial education.They assume a complete investment fiduciary stance as recognized by ERISA. They must acknowledge this status in writing, as well as have a written agreement with the plan sponsor…. Although the 3(38) investment manager is responsible for making financial decisions, the plan sponsor is still responsible for ensuring the advisor fulfills their obligations.

Selecting, Monitoring, and Protecting

These are critical duties for plan sponsors—ensuring that investments and services are focused on benefitting participants. It’s never a bad idea to refresh your understanding of fiduciary responsibilities–or even take training. As diligently as you go about your duties, however, know that while you can mitigate fiduciary liability risks, you can never fully eliminate them. Under ERISA law, any individual involved in the management of a retirement plan can be held personally liable. Let Colonial Surety help you manage the inherent risks with our affordable and comprehensive package options. Remember, an ERISA bond protects the assets of the retirement plan from theft; Fiduciary Liability Insurance protects you and your assets from personal liability; and, Cyber Liability Insurance safeguards your company and plan from covered losses and expenses in the event of a cyber breach.

With Colonial, you can easily and quickly secure your affordable coverage package right now: Protection for Plan Sponsors.


Serving customers since 1930, Colonial Surety is 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.


Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country.