Amidst the deluge of ERISA litigation hitting the news, plan sponsors are encouraged to remember: the essentials of sound retirement plan practices can reduce the risk of common exposures—and result in satisfied plan participants too.
Practical Action Steps for Retirement Plan Sponsors
Let’s face it, lawsuits are distracting, time-consuming, expensive—and all-around scary. Legal experts advise that there are practical steps for plan sponsors to take which can be helpful in the event of a lawsuit—and, importantly, are fundamentally good for plan participants in the first place. As Vestwell General Counsel Allison Brecher points out:
These steps can help ensure plan sponsors are well prepared, while also doing right by plan participants in the first place. Because after all, offering a 401(k) is an important company benefit, so having happy participants is the best protection there is!
Two key action areas for plan sponsors, as reported by 401k Specialist are:
Hire and delegate to investment and other providers.
Engaging a qualified provider is, by itself, evidence of a plan sponsor’s care in supporting its plan. Plan sponsors are always responsible for reviewing these providers, but a provider with expertise in investments and other plan activities is more qualified to defend litigation.
Maintain internal training and documentation.
Courts will continue to examine the process more so than the outcome. Plan sponsors do not have to select the lowest cost investment options and simply claiming investments are expensive or performed poorly is not enough to pursue a breach of fiduciary duty claim. Plan sponsors who complete regular training about fiduciary obligations document their policies and well-reasoned decisions about plan investments, and benchmark their plan’s fees periodically can set up a favorable defense in the event of litigation.
Protect Your Assets
As a plan sponsor, have you protected your personal assets in the event of a lawsuit? Understand: the ERISA bond required for the retirement plan does not cover you—the plan sponsor— as a fiduciary. That’s why Colonial Surety Company offers unique coverage to plan sponsors across the country.
Select an affordable coverage package and receive a comprehensive solution that includes:
- The ERISA bond required to protect the assets of the retirement plan from theft;
- Fiduciary Liability coverage to protect you and your assets from personal liability;
- Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
Colonial Surety Company’s ERISA bond package provides plan sponsors up to $1,000,000 of fiduciary liability insurance. Secure the greatest overall savings and protection with our 2-3 year packages. Colonial even includes extended coverage to ensure your ERISA bond remains US Department of Labor compliant.
Even after contracting an excellent plan services provider, remember, a critical aspect of your fiduciary duties is diligent oversight on behalf of your plan participants and beneficiaries. Guidance about monitoring is provided by the US Department of Labor. Pointers include establishing a timeline and process for reviewing the performance, fees, policies and practices of the service provider. Be sure to adhere to your review process-and document it too. Remember to follow up on complaints from plan participants in a timely manner.
Unfortunately, there’s no guarantee that you won’t face personal exposure for breach of fiduciary duty. Even allegations of a fiduciary breach can result in costly ERISA litigation, diverting attention and resources from your business—and life.
Protect yourself. Visit Colonial Surety Company now for an affordable, full-service solution that includes your Fiduciary Liability coverage:
Colonial Surety Company is in business all across the USA. We are rated “A Excellent” by A.M. Best Company and U.S. Treasury listed.