Yes, the failure of retirement plan fiduciaries to act can result in an Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit. For example, a class action lawsuit could accuse fiduciaries of failing to remove poorly performing investments from the plan. In fact, this is exactly what’s happening in a new lawsuit.
Appropriate Investment Options?
As class action lawsuits on behalf of plan participants continue to leverage the high standards of ERISA law, the intense scrutiny of how the investment options offered participants are selected, benchmarked, and, if warranted, removed from the plan, continues.Plan Sponsor reports on a newly filed 401k lawsuit which names the company, its board of directors and its 401k investment and administrative committees. The fiduciary breach lawsuit claims that the defendants failed to prudently monitor the investments and failed to act to remove poorly performing investment options over the course of nine years, resulting in substantial loss to participant accounts.
As ERISA litigation continues to flood courtrooms around the country, its best for plan sponsors to secure protection. The tough reality for retirement plan sponsors is that despite diligence, allegations of fiduciary breaches continue to impact plans of all sizes, exposing the personal assets of fiduciaries. Defense is costly: defense lawyers with ERISA expertise cost upwards of $600—per hour. That’s why plan sponsors across the country are proactively obtaining Colonial Surety’s affordable Fiduciary Liability Insurance. With this, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be covered for defense costs and penalty limits up to $1,000,000. Uniquely, Colonial even includes Cyber Liability Insurance, locks in multi-year rates and offers installation payments. Get protected efficiently and affordable here now:
Prudence In Action?
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 to the appropriateness and performance of available investment options, as well as to the selection and periodic review of service providers—and the fees charged. While you may be content with the investments and service providers, regularly benchmarking both is an example of demonstrating prudence as a fiduciary. It’s also essential to document your prudent process actions. For example, if a fund is determined to be underperforming, what actions were taken? One newly filed lawsuit, for example, alleges that the fund in question ranked in the bottom 90th percentile among the funds in its “peer universe” and that despite a plethora of better performing investment options, it was not removed from the plan.
Plan sponsors from small businesses, take note: lawyers from JD Supra report that allegations are being made against fiduciaries of smaller retirement plans. In earlier waves of ERISA litigation, lawsuits mainly concerned very large, multi-billion dollar plans. The precedents set are resulting in copy cat cases impacting smaller businesses and their retirement plans. 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.
Since cyber attacks also impact small businesses, be aware that 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. Choose your package today. Then, 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 is included too.
Colonial’s multi-year packages 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.