If you are in charge of your company’s employee retirement plan, you are entrusted with safeguarding the future of your employees. Exercise every precaution to protect them, the company—and yourself.
ERISA Lawsuits Are Common
There are thousands of lawsuits for violations of the Employee Retirement Income Security Act (ERISA) each year. They are painful, costly, and time-consuming for everyone involved. Note, for example, the 2018 case recently settled by Mutual of Omaha Insurance Co. representing 7,000 participants in company retirement plans. As reported by Pensions & Investments:
Mutual of Omaha Insurance Co. has agreed to pay $6.7 million to settle ERISA complaints by participants in two company 401(k) plans that fiduciaries favored some proprietary products over other investment options and charged extra fees for non-proprietary funds in the investment lineups.
The participants had accused the company, plan fiduciaries, and an affiliate, United of Omaha Life Insurance Co., of “self-dealing” by offering certain proprietary products. United of Omaha, also a defendant, provided administrative and investment services for the plans.
Take note! This case illustrates how plan sponsors (aka plan fiduciaries) can be directly accused of mismanagement. Imagine the cost of mounting a personal defense—and the exposure to your personal assets?
Protect Yourself As a Plan Sponsor
While you are busy managing and protecting your company’s retirement plan, don’t forget to protect yourself personally too!
If you make mistakes with plan management, even the most innocent error may jeopardize your personal assets. You can protect yourself with Colonial Surety Company’s fiduciary liability insurance for plan sponsors. This coverage safeguards you from covered breaches in duties and obligations.
Because Colonial Surety Company is also a leading provider of required ERISA fidelity bonds for your plan, we offer complete packages for plan sponsors. Our digital, direct to consumer approach makes it easy and fast to obtain the coverage you need.
Review Your Fiduciary Responsibilities Annually
Whether you are a new or experienced plan sponsor, it is a good idea to review your key responsibilities at least once a year. RBC Wealth Management provides a Plan Sponsor Fiduciary Guide with tips and tools to help you. It includes guidance on establishing a policy, a scorecard to track your duties, and this summary of your key fiduciary responsibilities:
- Demonstrate prudence — Act with care, prudence, skill and diligence of a prudent person acting in a similar capacity.
- Diversify investments — Diversify to minimize the risk of large losses.
- Comply with the Exclusive Benefits Rule — Act solely in the interest of plan participants and their beneficiaries with the exclusive purpose of providing benefits to them and defraying the reasonable expenses of the plan.
- Adhere to the plan — Act in accordance with the documents and instruments governing the plan (unless inconsistent with ERISA)
Good To Know
According to a study conducted by the Pew Research Center last year, only about one-third (35%) of Americans personally invested in stocks, bonds, or mutual funds. However, over half (55%) had IRA, 401(k), or similar retirement investments. This underscores the critical importance of the fiduciary responsibilities undertaken by plan sponsors: 55% of Americans are counting on you to safeguard their retirement income!
Colonial Surety Company is the easy choice for your fiduciary liability coverage package. We’re licensed in all 50 states and US territories and make it easy to obtain your I-Bond® (instant, online surety bond). Get your fiduciary liability package here now!