ERISA

Most ERISA Lawsuits Don’t Make Headlines

03.10.2021

 

Participants in the American Red Cross Savings Plan are suing the organization—and many of its fiduciaries—over excessive fees. Retirement plan fiduciaries from businesses of all sizes are taking note!

Breach of Duties Alleged Regarding Fee Oversight

As the latest big lawsuit related to retirement plan fees hits the news, it might be convenient to think that ERISA litigation only happens to large plans and companies. Although it tends to be the large cases that make the headlines, the reality is that smaller cases are occurring all the time. In just one recent year for example, over 12,000 ERISA lawsuits were filed in U.S. District Courts.

Lawsuits involving retirement plans, whether large or small, commonly question the oversight duties of fiduciaries. Here, for example is the summary of the Red Cross case, as reported by Plan Advisor:

An Employee Retirement Income Security Act (ERISA) lawsuit has been filed on behalf of participants in the American Red Cross Savings Plan against the American National Red Cross, its Board of Governors, members of the board, its Benefit Plan Administration Committee and members of the committee for breaches of their fiduciary duties.

The plaintiffs accuse the defendants, however, of not trying to reduce the plan’s expenses or exercising appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent.

The lawsuit says the defendants breached the duties they owed to the plan and its participants by (1) failing to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; (2) maintaining certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories; and (3) failing to control the plan’s recordkeeping costs.

Fees—and oversight—that’s the guts of this lawsuit, right? The same questions can be asked of smaller plans—and their fiduciaries. Are you ready?

Questioning Fees—Suing the Fiduciaries

Whether in a big or small company, no plan sponsor ever wants to be accused of allowing excessive investment and recordkeeping fees in its 401(k) plan. Diligence choosing and monitoring service providers and communicating about choices with participants are all  essential responsibilities of plan sponsors. But, it’s also important for plan sponsors to be prepared—and protected—in the event of a lawsuit over breach of fiduciary duties.

Why go it alone? As you know, any individual involved in the management of a retirement plan can face personal exposure for breach of a fiduciary duty. Even allegations of a fiduciary breach can divert attention and resources from your work—and life.  For example, if you suddenly needed an attorney with ERISA expertise, you would likely pay upwards of $500—per hour! Ouch! Avoid this possibility—and a lot of other stress—with Colonial Surety Company’s affordable Fiduciary Liability insurance.

Available with a complete ERISA Bond Package, a whole year of Fiduciary Liability coverage is less than what you’d pay for one hour with that lawyer if a crisis hits. Plus, Colonial’s 2 and 3 year packages also includes Cyber Liability coverage to protect your business and retirement plan in the event of a cyber breach.

Remember: the required ERISA bond protects the assets of the retirement plan from theft; Fiduciary Liability coverage protects you and your assets from personal liability; and, Cyber Liability coverage  can safeguard your company and plan from covered losses and expenses in the event of a cyber breach.

With Colonial, you can easily and affordably secure this complete coverage package. Step into spring with a stepped up risk management plan for yourself, and your business.

ERISA Bond Package With Fiduciary Liability Coverage

Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country.