Juggling Act?



Plan sponsors have always had a lot to juggle but lately the juggling has gotten harder. If you are feeling the stress, you are not imagining it: the scurry around SECURE 2.0, pending new IRS regulations, civil investigations, and confusion over ESG are taking a toll on plan sponsors. So are lawsuits, not to mention cybersecurity protocols. Experts empathize–-and offer advice.


Tough Times

Though validation does not solve problems, it sure is reassuring to know that we are not imagining them. Offering perspective on the current dynamics plan sponsors are confronting, national risk management expert (and Colonial Surety Company’s Chief Insurance Officer), Richard Clarke observes:


Retirement and benefits plan professionals routinely balance the needs of their organizations with the needs of their employees, many of whom are feeling insecure about saving for retirement. Once we throw in competition for talent, compliance with changing regulations, personal liability, and a perilous economy, anyone can see that dedicated benefits representatives bear enormous moral, professional, and fiduciary responsibilities every day.


Retirement plan sponsors and administrators bear personal exposure for third-party claims of not meeting fiduciary obligations, and Clarke reminds us that this is indeed a liability to take very seriously, given the swirl of litigation and investigation hovering over retirement plans now:


Entrepreneurial-minded attorneys are flocking to uncover breaches of fiduciaries’ ERISA duty, statutory prohibited transactions, or other statutory violations, hoping to access the trillions of dollars held in private retirement plans. Opportunistic attorneys even go fishing for ERISA violations by casting their litigation netting far and wide. Retirement industry executive Rhonda Berg noted that in the first quarter alone 43 lawsuits had been filed against retirement plans, with 14 settled at a cost of $55.3 million, setting a record pace for $220 million in 2023. Last year was the second most active year on record for ERISA litigation against plan sponsors, with 24 settlements totaling more than $160 million to date. Meanwhile, the Department of Labor’s EBSA recovered enforcements totaling $931 million from 907 civil investigations in 2022.


Neither the diligent efforts of plan sponsors and administrators, nor the ERISA fidelity bonds required by the Department of Labor (DOL) for employee dishonesty, provide protection in the face of lawsuits or investigations. As Clarke explains: “Fiduciary liability insurance is an indispensable measure to ensure sponsors and their businesses are protected with defense costs and penalty limits.  Without such protection, plan sponsors are on the hook for costs related to legal and computer forensic services, call center services, credit and identity monitoring, and cybersecurity response services following a data breach.”


Though allegations and investigations are not automatic indications of errors or wrongdoing, mounting a defense is disruptive and costly: “For SMBs, a $200K compliance penalty or settlement can be devastating. For individual fiduciaries, it can be catastrophic, with legal defense costs averaging about $600 per hour.” Experts agree that proactive protection is essential and Colonial Surety is here to help with affordable Fiduciary Liability Insurance. With this, for a few dollars a day, you’ll have coverage for defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber Liability coverage is included at no extra cost, providing additional protection against regulatory actions related to data and privacy, as well as expert response services.


Fiduciary+Cyber Insurance Here


Recommended: Extraordinary Vigilance

As threats to cybersecurity mount, it’s critical to remember that the DOL’s EBSA division has said “Responsible plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks.” A cyber breach can even find fiduciaries having “to prove that there is no link between a cybersecurity breach and losses caused to the plan.” Summing up the current situation for employee plan professionals, Clarke  concludes: “Employee plan professionals need to exercise extraordinary vigilance in today’s economic and regulatory environment to deliver well-run, value-added benefits plans….Robust defense plans should include coordination with cybersecurity colleagues, solid cyber and fiduciary liability insurance, monitoring evolving regulatory frameworks, and updating/automating compliance practices.”


Protect yourself: Colonial Surety ensures that for a few dollars a day, plan sponsors have coverage in the event of claims of alleged or actual breaches of duty in connection with the employee retirement plan. Colonial’s fiduciary liability insurance includes 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.


Fiduciary With Cyber Liability Insurance Right Here

Pension plan professional?

Colonial can help you ensure your plan sponsor clients have the coverage they need—and we’ve got you too. From Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liability Insurance–and more, we’re HERE with the coverages pension professionals need to keep their businesses going—and growing.


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.