An aggressive plaintiffs’ bar, the use of AI to rapidly mine retirement plan data for potential mistakes, complex regulations, and legal precedent from successful ERISA lawsuits, are all stacking up against retirement plan sponsors. In fact, ERISA defense experts are pointing out that getting named in a lawsuit is becoming a “bet the company concern” for owners. Read on for insights and guidance on protecting your company.
ERISA Retirement Plan Lawsuits
Courtroom wins and settlements brought against plan sponsors on behalf of retirement plan participants have created a highly litigious environment–and a lucrative path for plaintiff attorneys. With AI making it easier and faster to identify possible shortcomings vis a vis the exceptionally high standards of ERISA law, retirement plan sponsors have little room for even minute oversights, as risk management expert, Dick Clarke underscores: “Entrepreneurial-minded attorneys are flocking to uncover breaches of fiduciaries’ ERISA duty, statutory prohibited transactions, or other statutory violations, hoping to access the trillions of dollars held in private retirement plans. Opportunistic attorneys even go fishing for ERISA violations by casting their litigation netting far and wide.” In fact, defense attorneys at Jackson Lewis are now describing ERISA litigation as a “bet the company” concern for businesses nationwide:
Despite an employer’s…best efforts to comply with the law and mitigate risk, costly and time-consuming benefits litigation often ensues. Class Action ERISA litigation has become a “bet-the-company” event. We are asked frequently why ERISA class action litigation is so prevalent today. The answer is simple: the amount of plan assets. Long ago people asked why famed bank-robber Willie Sutton robbed banks. The response: that’s where the money is. Private pension plans hold more than $10 trillion of assets, making plans an attractive target for the plaintiff’s bar. Additionally, the statutory environment for retirement and welfare plans incorporates complex regulatory provisions from the tax code and labor laws. Multiple government entities regulate plans, including the Department of Labor, the IRS, the Department of Treasury and the Pension Benefit Guaranty Corporation. Combine complex regulation, with claims impacting an entire workforce, plus the potential for draconian damages and the result is often “bet-the-company” class actions.
Though allegations and investigations against plan sponsors are not automatic indications of errors or wrongdoing, mounting an ERISA defense is disruptive and costly: “For SMBs, a $200K compliance penalty or settlement can be devastating. For individual fiduciaries, it can be catastrophic, with legal defense costs averaging about $600 per hour.” Dangerously, many business owners continue to forgo protection, not realizing that as ERISA fiduciaries, they can be held personally liable. Traditional business insurance coverages do not provide defense against ERISA allegations, prompting experts to stress: “Fiduciary liability insurance is an indispensable measure to ensure sponsors and their businesses are protected with defense costs and penalty limits. Without such protection, plan sponsors are on the hook for costs….”
Protect The Company, The Plan and Yourself
The serious obligations and risks associated with being a retirement plan sponsor necessitate serious attention. Remember, the ERISA Bond required by the Department of Labor does not cover your personal exposure as a fiduciary. Additionally, cybersecurity breaches are not “just a tech thing”: they can quickly escalate into fiduciary breach allegations, especially if you do not have an expert response plan in place.
Don’t shoulder unnecessary risks alone. Colonial Surety Company makes it efficient and affordable to add Fiduciary and Cyber Liability Insurance to your ERISA Bond, ensuring protection for the plan, the company and yourself, as the plan sponsor. When armed with our cost-efficient Fiduciary+ Cyber Liability Insurance, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be protected with defense costs and penalty limits up to $1,000,000. Plus, the Cyber Liability Insurance provides breach response services, ensuring implementation of obligatory investigation and notification procedures, and offering coverage against lawsuits and regulatory actions.
It only takes a moment to quote and obtain affordable protection. Click here and cover your business, your plan–and yourself, before another day goes by:
Fiduciary and Cyber Liability Insurance Here
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, US Treasury listed and in business all across the country.