The storm of lawsuits alleging violation of Employee Retirement Income Security Act (ERISA) fiduciary duties continues to push plan sponsors into settlement negotiations. Though costly, settling before trial frequently ends up becoming more appealing then the disruption and defense costs associated with trials.
Unprotected During a Stormy Period?
As the rapid rise of excessive fee lawsuits hits businesses across the country, the U.S. Chamber of Commerce points out that there’s been an increase in the cost of fiduciary liability insurance—making it harder for plan sponsors and other fiduciaries to secure protection. The Chamber of Commerce also warns that as they confront the dual challenge of more lawsuits and more expensive insurance, retirement plan sponsors may end up reducing or even eliminating employer contributions to retirement savings. Plan Sponsor provides this summation of current dynamics from lawyer Emily Costin of Altston & Bird:
The bulk of lawsuits involve…run-of-the-mill claims that fees are too high or investments are underperforming in single-employer plans. According to Costin, more than 50% of lawsuits are making it past motions to dismiss. Then it becomes a choice for the plan sponsor to either continue to litigation, which becomes expensive…or settle the lawsuit because it’s not worth the expense…So far, the only takeaway from excessive fee lawsuits for plan sponsors is that having a good process is key, Costin says. She adds that there’s no guarantee of preventing a lawsuit from being filed, noting that one lawsuit might challenge a certain type of issue while another might claim just the opposite.“A plan sponsor can do everything right and still be a target. Anyone can get sued,” she says.
Lawyers at JD Supra urge plan sponsors to sweat the details, especially when it comes to understanding fees, choosing providers and recording all prudent process actions. Colonial Surety is here to help too, with affordable protection for plan sponsors. Our annual premium for fiduciary liability insurance costs less than just one hour with an ERISA lawyer if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan. When you obtain fiduciary liability insurance from Colonial Surety, you’ll have defense costs and penalty limits up to $1,000,000 in the event of a covered lawsuit. We even include Cyber Liability Insurance, lock in multi-year rates and offer installation payments. Get protected here in minutes: Fiduciary Liability Insurance.
Small Businesses Are Impacted Too
While it tends to be the big dollar ERISA cases making headlines, small and mid-size businesses are getting caught up in the litigation too. Leveraging the precedents established by the large cases, cookie-cutter cases are increasingly impacting smaller businesses. The Employment Benefit’s Security Administration (EBSA) is holding small businesses accountable too. The defense costs, fines and restitution requirements are even causing some to shut down. As fiduciaries, plan sponsors in businesses of every size are responsible for the appropriateness of investment options, and the selection—and periodic review—of service providers, including fees charged.
When you review your service providers and contracts, include cybersecurity considerations, using the Tips from the Department of Labor (DOL). Remember to beef up your own cybersecurity protocols too. In addition to the damage cyber breaches can cause to your business and retirement plan, they can result in allegations of fiduciary breaches. That’s why Colonial Surety’s multi-year protection packages for plan sponsors conveniently come with Cyber Liability Insurance. Get covered today and in the event of a cyber breach at your business, experts will identify what’s been comprised and coordinate the response. Liability protection in the event of covered lawsuits or regulatory actions due to a data breach? That’s included too.
Colonial’s multi-year packages for plan sponsors provide the greatest convenience and value, ensuring continuous compliance and protection. Packages include:
- The required ERISA bond which protects the assets of the retirement plan from theft;
- Fiduciary Liability coverage to protect you and your assets from personal liability; and,
- Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
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.