Let’s face it: the term can be confusing—and the responsibilities are daunting when it comes to having a fiduciary role related to company sponsored retirement plans. Financial experts point out that repeated attempts by the Department of Labor (DOL) to clarify the definition have not broken through, though national financial and risk management leaders can point us to the bottom line.


Simply Put

Christopher Carosa of Fiduciary News reminds us that layers of governmental effort sometimes get in the way of clarity, and enlists the help of other national experts to shed light on what it means to have fiduciary responsibilities. Lowel Smith,Chief Compliance Officer at IRALOGIX offers this simple explanation of fiduciary: “a person or entity retained or appointed to look out for a client’s or individual’s best interests.” Building on this, Richard Clarke, a national leader in risk management, and the Chief Insurance Officer here at Colonial Surety helps us understand “fiduciary” as it relates to the high standards of ERISA law:


My base with the term ‘fiduciary’ is from the Employee Retirement Income Security Act of 1974 (‘ERISA’), with amendments, because this has always seemed to me to set the standard for defining who a ‘fiduciary’ is….In the original federal legislation, ‘fiduciary’ is defined as anyone with discretionary judgment responsibility for employee benefit plans. Within most organizations, these are the people who make decisions on the types of plans offered, how these plans will affect the beneficiaries—generally, the employees—and how these benefit plans will be funded. Certainly, some of these responsibilities can be ‘outsourced’ such as to a third-party administrator or other types of outside ‘fiduciaries,’ but it is generally conceded that the ultimate intended liability for employee benefit plan’s decisions rest with the employer organization and those persons who meet the original ERISA definition of ‘fiduciary.’


A Mistake To Avoid

Unfortunately, many retirement plan sponsors assume that outsourcing eliminates the risk of being held personally responsible for errors. Experts remind us  this is a big mistake: plan sponsors retain liability exposure for the decisions made in using third party  administrators—and can be held personally responsible for mistakes made in the operations of the retirement plan. Because it is impossible to fully eliminate the inherent risks associated with sponsoring a retirement plan, it is best to reduce them via

fiduciary liability insurance. Colonial’s affordable policy provides defense costs and penalty limits up to $1,000,000 if you face allegations over an error in plan administration.


For further value and protection, Colonial’s Fiduciary Liability policy comes with Cyber Liability coverage—at no extra cost. That’s important, because for plan sponsors, a cyber breach can quickly explode into a fiduciary breach. It only takes a few minutes—and a few dollars a day—to protect your business—and savings:


Fiduciary+Cyber Liability Insurance Here.


Another frequent area of confusion for retirement plan sponsors relates to the ERISA fidelity bonds required by the Department of Labor for everyone involved in handling the funds or property of the retirement plan (in any way). ERISA fidelity bonds are not the same as fiduciary liability insurance. Experts at Eisner Amper remind us that ERISA bonds protect the retirement plan against acts of fraud or dishonesty, in accordance with the law:


Section 412 of the Employee Retirement Income Security Act of 1974 (“ERISA”) requires every person who handles funds or other property of a plan to be bonded (excluding certain exempted individuals). Such persons include plan fiduciaries but may also include any director, officer or employee of the fiduciary. This is referred to as ERISA’s bonding requirement. The ERISA fidelity bond, also known as an employee dishonesty bond, is a legal requirement arising from ERISA to protect plans against losses resulting from an act of fraud or dishonesty by persons handling a plan’s assets.


Learn more via the Department of Labor’s handout, “Protect Your Employee Benefit Plan With and ERISA Fidelity Bond,” which is available here. Failure to have an ERISA bond that continuously and adequately covers the plan also poses significant risks for plan sponsors, including being “held personally liable for losses that could have been covered by a fidelity bond.” As a leading national ERISA bond provider, listed with the Department of the Treasury, Colonial Surety helps plan sponsors ensure compliance. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Plan sponsors can even opt for comprehensive, multi-year packages, which ensure the ERISA bond remains Department of Labor compliant for the life of its term. Obtain ERISA Fidelity Bond Here Now.


Pension plan professional? We’re here to help you with your plan sponsor clients—and we’ve got you too. From  Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liabiity Insurance–and more, we’re HERE with the coverages pension professionals need to keep the business going—and growing. Insurance for Pension Professionals Right Here.


Colonial Surety was founded in 1930 and continues giving customers the assurance that they, their businesses, and their clients are safeguarded with the right surety and insurance products at all times. We are a direct and digital insurer offering products through an online platform supported with exemplary customer service. We give customers a simple, direct, and instant service that takes the pain out of buying insurance and bonds. Colonial Surety is licensed in every state in the U.S., rated “A” Excellent by A.M. Best, and listed by the U.S. Treasury as an approved surety.