That’s what ERISA legal experts advise plan sponsors to do. For example, when you buy a cup of coffee, you know how much you are paying, right? What about the retirement plan fees your participants—and you—are paying? How clear are you on that? As a plan sponsor—and fiduciary—make it your business to find out.
Careless? Confused? Too Busy?
If you face an allegation of a fiduciary breach, ERISA law won’t care why you didn’t know that your participants were being charged hidden fees, or failed to study up on the U.S. Department of Labor (DOL) guidelines for mitigating the risks of cyber threats to retirement accounts. Plan sponsors are fiduciaries who need to dig into the details of their 401k plans on behalf of participants—and cannot afford to make excuses.
As legal expert Ary Rosenbaum puts it:
If you want to be careless with your money, you can. However, as a plan fiduciary which is your role as a 401(k) plan sponsor, you can’t. As a plan fiduciary, you need to be more careful about the retirement assets of your employees than your own money because you have a higher duty of care as a plan fiduciary.
ERISA obligations are among the highest known to law and the current swell of lawsuits points to the importance of actively monitoring and controlling investment costs and other plan fees. Since even allegations of a fiduciary lapse are costly and disruptive, with ERISA lawyers costing over $600 per hour, plan sponsors across the country are obtaining protection via Colonial Surety’s fiduciary liability insurance. It covers the business—and the plan sponsor—against claims of alleged or actual breaches of duty in connection with the employee retirement plan. Colonial includes cyber liability insurance along with fiduciary liability insurance—and the annual premium for this comprehensive protection is less than just an hour or two with an ERISA lawyer. Get protected now: Choose Your Plan Sponsor Protection Package Here.
Sweat These Details
JD Supra urges plan sponsors to sweat the details, especially when it comes to understanding fees, choosing providers and keeping good records of all your prudent process actions. Here is specific advice from some legal experts to help you dig into the details:
Fees: TPAs may charge you in many ways. A TPA can charge your plan one or more of the following ways: a base fee, a participant fee, or, an asset-based fee. These fees can be charged proportionally, per person, or per capita. These fees may or may not be reduced by revenue sharing/sub-TA fees paid by particular mutual funds in your 401(k) plan. I used to joke that some TPAs would create a fee, just to replace a fee they had to eliminate (such as when revenue sharing payments have to be fully disclosed). Not every type of fee is the same and not every TPA charges the same type of fee. As a 401(k) plan sponsor, you need to identify all the fees being charged to the plan and understand them. Without identifying and understanding the fees, you will have no idea whether the fees being charged to your plan are reasonable for the service being provided.
Hiring Providers: When it comes to hiring providers for your 401(k) plan, you just can’t simply pick the first provider you meet. You need to meet a handful of providers for each plan provider position (such as third-party administrator (TPA) and financial advisor) and decided which one is the best fit. Don’t pick a plan provider just because they’re cheap or because they’re related to you, because they do your payroll, or because they will help you in ways outside of the plan. You need a process in place to review potential providers and criteria that is rational when it comes to selecting a plan provider that is the right fit and charges a reasonable fee for the services provided.
Keeping Good Notes: Whether it’s taking minutes of your fiduciary meetings, keeping attendance of participant enrollment/education meetings, and keeping copies of all plan documents, you need to keep good records. You also need to make sure that all participant notices are handed out including copies of the new Summary Plan Description and Summary Annual Report….While it seems like the small stuff, keeping good records and doing a good job is all about showing that you’re following a prudent process in managing your plan. Whether it’s an Internal Revenue Service or a Department of Labor audit or a lawsuit, following a prudent process and keeping good records is your 401(k) plan sponsor version of the “Get out of Jail Free” card.
More Details: Cyber Breach Response Plan?
Cybercrime is here to stay—so don’t neglect to put a cyber breach response plan in place. Remember, a cyber breach is not always a disaster but mishandling it is. In fact, cyber breaches can lead to allegations of fiduciary breaches too. That’s why Colonial Surety’s Fiduciary Liability Insurance includes Cyber Liability Insurance. Get covered today and 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? Of course, that’s 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.