Hidden Fees Can Make Plan Investments Imprudent


As a fiduciary, you may do everything by the book in choosing what to invest plan assets in. The investment may be safe, provide proper amounts of returns and not be overly risky. But there’s one thing that can derail that prudent investment and send it straight to imprudence and a breach of fiduciary duty: excessive hidden fees.

Hidden fees on their own have the ability to hurt the yield of an investment to the degree that the investment can no longer be considered prudent. One to try to prevent this from affecting your plan is to use index funds as benchmarks. Performance of any more expensive fund has to outweigh the additional expense with the large availability of passively managed index funds. Another way is to choose the lowest expense share class to make certain to avoid hidden fees.

But if you want to get a higher yield than index funds for your clients, you may have to risk having higher fees. And if they’re hidden, they may not be known about until it’s too late. The only way to completely protect yourself from imprudent investments as a plan sponsor is with fiduciary liability insurance.

Where can I obtain instant fiduciary liability insurance?

Where the ERISA fidelity bond is set in place to protect the participants of the plan it, however, does not protect YOU as the fiduciary.

Colonial Surety Company is a Treasury Listed surety company providing ERISA fidelity bonds packaged with fiduciary liability insurance that includes a cyber liability insurance endorsement at no extra cost. Colonial is one of the leading providers of ERISA related products, offering bonds approved by the Department of Labor. We make it easy to obtain your bond instantly as well as allowing you to purchase retroactive insurance for the years the plan was not previously covered.

Under ERISA, fiduciaries may be held personally liable for a breach of their responsibilities in the administration or handling of employee benefit plans. Under ERISA 410, the plan cannot relieve you of this responsibility with indemnification language, however, it specifically permits persons with personal liability to purchase fiduciary liability insurance. Covering yourself with fiduciary liability insurance gives you a piece of mind that you are protected. Learn how to bundle your ERISA bond and fiduciary liability insurance for a discounted rate.