As a record number of new ERISA class actions were filed in the past year, smaller retirement plans are increasingly impacted. Since even the allegation of an ERISA breach can be very costly, small businesses are advised to secure protection.
Motion for Dismissal Denied
Legal experts at Seyfarth caution that ERISA complaints can force businesses into costly discovery processes in federal district courtrooms. Even allegations based largely on “information and belief” have withstood motions for dismissal—pushing the defendants into the expense of discovery, defense—and settlement.
As the body of ERISA law matures, experts anticipate that smaller plans will be increasingly targeted by complaints. Since any individual involved in the management of a retirement plan can face personal exposure for breach of fiduciary duty, it’s important for business owners to have defense protection for themselves—and their businesses. Money. Time. Reputation. These are what even the allegation of a fiduciary breach could take from your business—and you.
Why go it alone? Colonial Surety’s fiduciary liability insurance covers your business—and you as the fiduciary—against claims of alleged or actual breaches of duty in connection with the employee retirement plan. Annual premiums total less then just an hour or two with an expert ERISA attorney if a lawsuit lands in your in-box. Colonial’s comprehensive ERISA bond packages offer plan sponsors up to $1,000,000 of fiduciary liability insurance.
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“Information and Belief” Allegations
In response to a recent case in federal district court, involving allegations of delinquent contributions, Beneficially Yours reported:
The court noted that the allegations relied on secondhand information that plaintiff merely believed to be true…. The court denied the defendants’ motion to dismiss, finding that such allegations were sufficient to allow the plaintiff’s claim to proceed.
This decision is important because of the substantial consequence of losing a motion to dismiss. Losing a motion to dismiss is a ticket to the often distasteful world of discovery….. Discovery, at least in the class action context, is so expensive that it often leads to settlement regardless of the merits of the case. This is all the more true today given the enormous increase in electronic data a party maintains, especially after a pandemic that has created much more video and other electronic data that may be subject to discovery.
So, while the Supreme Court has made it more difficult under some circumstances for ERISA plaintiffs to withstand motions to dismiss, district courts may still favor discovery over dismissal. Individual district courts may decide to encourage settlement and preclude appellate review by allowing claims to continue, even when the allegations are based on information that a plaintiff merely believes to be true.
Most ERISA lawsuits don’t make headlines. Allegations occur in large—and small—retirement plans. In 2020, a record number of new ERISA class actions were filed. Let’s get you covered—comprehensively, today!
Colonial Surety’s affordable plan sponsor packages include:
- The ERISA bond required to protect the assets of the retirement plan from theft;
- Fiduciary Liabilitycoverage 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.
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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.
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.