Alleging a variety of ERISA violations, the former participants of a KPMG 401(k) plan are suing the company—and the plan fiduciaries. The complaint has been filed in U.S. District Court in Newark, New Jersey, citing “failure to administer the plan in a prudent manner.” Would you pass a prudence test? What if you don’t?
As a plan sponsor, you are a fiduciary: ERISA law obligates you to be more careful with the retirement assets of your employees than you are with your own money. This applies not just to the appropriateness of available investment options, but also to the selection—and periodic review—of service providers—and the fees charged. While you may be content with your service providers, regularly benchmarking is an example of demonstrating prudence as a fiduciary. Reporting on the allegations against KPMG fiduciaries, Pensions & Investments reports:
The complaint criticized “the selection (and maintenance) of several funds … and payment of excessive record-keeping and administration fees that wasted the assets of the plan and the assets of participants because of unnecessary costs.”
In arguing that record-keeping fees were too high, the plaintiffs alleged “there is little to suggest that defendants conducted an RFP at reasonable intervals — or certainly at any time prior to 2015 through the present — to determine whether the plan could obtain better record-keeping and administrative fee pricing from other service providers.” They added that “the market for record-keeping is highly competitive, with many vendors equally capable of providing a high-level service,” according to court documents.
Best Practice: Diligence and Protection
As a retirement plan sponsor, you are a fiduciary and can face allegations of a fiduciary breach—no matter how diligent your efforts. Even defending yourself against an allegation is expensive and disruptive, with ERISA lawyers costing over $600 per hour. Don’t go it alone: obtain fiduciary liability insurance from Colonial Surety. Our annual premium is less than just one hour with an expert lawyer if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan. Our fiduciary liability insurance provides defense costs and penalty limits up to $1,000,000. Get protected now: Choose Your Package Here in Minutes.
But We’re Just a Small Company?
That’s excuse won’t protect you. While it’s true that it tends to be the big dollar ERISA cases making headlines, don’t fool yourself. The large cases have set precedent and a swell of cookie cutter cases impacting smaller businesses and their retirement plans are also winding their way through courts. Meanwhile, the Employment Benefit’s Security Administration (EBSA) is holding small businesses accountable too. The defense costs, fines and restitution can even cause the shut-down of small businesses.
JD Supra urges plan sponsors to sweat the details, especially when it comes to understanding fees, choosing providers and keeping good records of all your prudent process actions. Be sure to include cybersecurity in all reviews, discussions and contracts with service providers, following the Tips from the Department of Labor underscore the importance of plan sponsor vigilance when contracting with service providers.
Don’t neglect your own cybersecurity either! Cyber breaches can lead to 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.