Denied! That’s what’s happening in federal courts across the country as retirement plan sponsors struggle with defense against fiduciary breach allegations based on claims of excessive fees. An analysis by Bloomberg Law reveals that for the most part, millions in “winnings” come from settlements after plan sponsors have lost the motion to dismiss.
Allegations Prove Costly
Precedents established by victorious settlements are pulling more cases involving smaller retirement plans into federal courts across the country. Mounting a defense against allegations of fiduciary failings related to retirement plan fees is creating an enormous strain on these businesses, as 401k Specialist reports: “Various proposed class actions in ERISA cases are currently pending in more than half of U.S. federal district courts. And it’s not just the jumbo plans that are getting sued anymore. Historically, the vast majority of plans being sued had over $1 billion in plan assets. Recently, sponsors with much smaller plans are being targeted.”
An analysis by Bloomberg Law has found that settlements lawsuits have resulted in an “impressive win rate” for plaintiffs. In the few cases that have proceeded to trial, defense for plan sponsors has mostly been successful; nonetheless, the wear and tear—and sheer cost of defense—to businesses—has made settling commonplace. In fact, the U.S. Chamber of Commerce has begun referring to the tide of allegations against plan sponsors by a handful of law firms as a “cottage industry,” observing: “The lawsuits typically follow a familiar playbook, often with cookie-cutter complaints…Lawyers frequently find a plan sponsor to sue, advertise for current or former employees willing to serve as plaintiffs, and pursue the litigation.” With the availability of affordable, new protection packages for businesses of every size, Colonial Surety is making sure no plan sponsor has to go it alone in these challenging times. A whole year of our Fiduciary Liability Insurance costs less then just one hour with an ERISA legal expert if disaster strikes—and we even include Basic Cyber Liability Insurance with the policy for added protection.
Fighting For Businesses
Representing over three million businesses of all sizes, the U.S. Chamber of Commerce is looking to stem the tide on the cookie cutter lawsuits it believes are negatively impacting the ability of employers to offer retirement plans. As 401k Specialist reports, the Chamber is waging an “unusual campaign”: “filing amicus briefs in the early stages of many excessive fee ERISA lawsuits with a goal of getting the cases dismissed before they get to summary judgments or settlements.”
With excessive fee lawsuits hitting businesses of all sizes across the country, the U.S. Chamber of Commerce also points out the increasing cost of fiduciary liability insurance, which make it harder for plan sponsors and other fiduciaries to secure protection. Plan sponsors: remember, Colonial Surety is here to help, with affordable, multi-year insurance. Armed with our Fiduciary-Cyber Liability Pack, plan sponsors facing claims of alleged or actual breaches of duty in connection with the employee retirement plan, are covered for defense costs and penalty limits up to $1,000,000. Plus, in the event of a cyber breach, the business—and plan—will receive support at every stage of incident investigation and breach response, including implementation of obligatory investigation and notification procedures.
ERISA defense experts stress that doing without insurance is “a bad idea since your plan would potentially be exposed to uncapped liability in the event of litigation.” Even the allegation of a fiduciary breach can be a disaster, putting personal assets at risk, while defense costs of about $600 per hour wrack up. With litigation now also aiming at the intersection of ERISA law and cybersecurity, retirement plan sponsors and other fiduciaries have ever more need for protection. Cyber breaches can rapidly result in additional fiduciary breach allegations. According to the U.S. Department of Labor, “Responsible plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks.” Among the DOL’s recommended best practices for doing so is putting in place a cyber breach response plan that prevents incidents from spiraling into disasters.
For the greatest value, protection and efficiency, plan sponsors across the country come to Colonial Surety for multi-year packages with locked in rates and installation payment options. Packages include:
- The required ERISA bond which protects the assets of the retirement plan from theft.
- Fiduciary Liability Insurance to protect you and your assets from personal liability.
- Cyber Liability Insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
Colonial makes it so easy and speedy to secure this coverage that you can do it now, right here: Complete Plan Sponsor Package.
Serving customers since 1930, Colonial Surety is 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.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, US Treasury listed and in business all across the country.