Confronting the disruptions of 2020, plan sponsors must be ever more vigilant in their fiduciary duties. Legal experts recommend five actions.
Uncertainties Are Not Excuses
As the sponsor of your company’s retirement plan, ERISA law requires you to “prudently” administer the plan, despite challenging circumstances. Your responsibilities include choosing and balancing investments to minimize large losses. Though you may contract with external administrators (co-fiduciaries) to assist, you remain responsible as a plan fiduciary.
Plan sponsors are likely feeling the weight of executing their responsibilities in these challenging times. As JD Supra sums up:
COVID-19 has presented many challenges, including market volatility and business disruptions, which have placed added pressures on plan fiduciaries to comply with their ongoing obligations to prudently administer plans and plan investments. COVID-19 does not suspend or reduce fiduciary obligations; rather, given the uncertainties and concerns faced by employers and employees regarding the effects of the economic downturn and the security of their retirement plan savings, plan fiduciary responsibilities arguably are increased. Since ERISA fiduciaries face potential personal liability for breaches of their responsibility, it is essential that they be able to demonstrate their compliance with fiduciary standards and best practices to successfully withstand any fiduciary duty challenges by participants, the Department of Labor or the IRS.
To help plan sponsors, Colonial Surety Company, an ERISA fidelity bond expert, offers a unique, affordable, full-service approach to protecting your plan—and yourself, as a plan fiduciary. When you choose an ERISA bond package from Colonial, you receive a discount on ERISA bond coverage for your plan; Fiduciary Liability coverage for yourself as the plan sponsor; and, the option to add on Cyber Liability coverage. Save time, money and stress: Get a Colonial Surety ERISA Bond Package.
Five Action Steps for Plan Sponsors
Toward demonstrating prudence in managing retirement plans, sponsors can take these steps, as recommended by JD Supra:
Review plan investment menu and policy.
Make sure the investment strategy is prudent in the current market.
Vigorously monitor plan performance.
Increase the frequency of investment reviews given market volatility.
Document fiduciary action and decisions.
Keep detailed records of meetings and the rationale for decisions.
Communicate regularly with plan participants.
Step up the frequency of communications, reminding participants to review their investment choices and providing information on the options.
Address cybersecurity and data breach protections.
Confirm that best practices are being applied to retirement account security.
Ensure Proper Coverage
Plan sponsors can relieve some of the stress of their duties by ensuring proper coverage for the plan—and themselves as fiduciaries. Remember, only companies named on the Department of Treasury’s listing of approved sureties are able to provide ERISA fidelity bonds.
Colonial is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed in all 50 states, the District of Columbia and most U.S. Territories. Colonial has pioneered a simple digital and direct process that allows customers to instantly purchase bonds and insurance online: I-Bonds® are available for an instant quote, purchase, print or e-file on your desktop or mobile device.
Colonial’s comprehensive ERISA bond packages offer up to $1,000,000 of fiduciary liability insurance coverage and provide the greatest protection and overall cost savings. Our 2 or 3-year packages also include cyber liability insurance to safeguard your company and plan against a loss due to cyber attack — plus extended coverage to ensure your bond remains U.S. Department of Labor compliant.