Meta what? As most of us scramble to leverage current technology to improve our businesses and lives, some experts are thinking forward about the implications of technology on the work of sponsoring and administering retirement plans. Here are some predictions to ponder.
More Powerful Tools—and Scrutiny Too
Technology is likely to continue making tools for analysis, performance review and financial education increasingly available, at reasonable costs, to more and more people. At least according to some experts, “wealthtech” disruptions will extend financial planning possibilities beyond the super rich.
With the continued disruptions we can expect technology to create across the retirement planning industry, comes the potential for increased regulatory scrutiny too. For example, the American Society of Pension Professionals and Actuaries recently published some predictions from retirement savings policy analyst and author Mike Barry, including these:
Software is going to eat our world. The short version: In financial transactions generally and in retirement plan recordkeeping specifically, blockchain is going to replace current practice. In this regard, let’s remember Amara’s Law: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
Technology-driven changes are going to dislocate a lot of things. The reduction of friction in securities/plan transactions and simplification of the recordkeeping process will reduce the costs of most transactions. However, many of our current tools—e.g. automatic enrollment and default investments—depend on friction for their effectiveness. As friction is reduced, we will have to find new ways to nudge participants toward the choices that (in most cases) are best for them.
The increase in transparency will make many tools more powerful—e.g., targeted communications, fund analysis, performance review—and at low or no cost. Managed accounts, perhaps combined with AI, may replace target date funds as the preferred default. But depending on how the system is implemented, this enhanced transparency may permit greater scrutiny by regulators and even more problematic fishing expeditions by data-driven plaintiffs’ lawyers.
Current Realities: Litigation
Indeed, plaintiffs’ lawyers are a busy bunch. Legal experts predict that 2022 will be another hot year for ERISA litigation, particularly related to retirement plans. With more firms now working for plaintiffs and drawing on established precedent, cases continue to wind their way through the court system. The tough reality for retirement plan sponsors is that despite diligence, allegations of fiduciary breaches are now considered a “new normal.” Defense is costly: litigation eats up time and ERISA legal experts cost upwards of $600—per hour. That’s why plan sponsors across the country are being proactive and obtaining Colonial Surety’s affordable Fiduciary Liability Insurance. With annual premiums of less than the cost of just one hour with an ERISA lawyer if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be covered for defense costs and penalty limits up to $1,000,000 in the event of a lawsuit. Uniquely, Colonial even includes Cyber Liability Insurance, locks in multi-year rates and accepts installation payments. Get protected efficiently and affordable here now: Fiduciary Liability Insurance–with Cyber Included!
Outside Providers Are Leveraging Technology Too
Chances are that as a plan sponsor, you will have more and more opportunities to consider new tech tools being offered by service providers. Which calculators, predictors, financial intel and other tools will be most helpful to your participants? Which new plan design features will be beneficial? How do you know? What if you make an imprudent choice about an outside service provider?
Unfortunately, these are the dilemmas and risks inherent to the role of plan sponsor. With Colonial Surety on your side, however, you don’t have to take on all the risks on your own. For example, if you have our Fiduciary Liability Insurance and were to face allegations that you had made an imprudent outside service provider choice, you would have coverage. Keep in mind that according to ERISA law experts, if an outside provider fails to put appropriate cybersecurity protocols in place, you could be faced with claims of a fiduciary breach.
Don’t go it alone. At Colonial Surety, you can affordably obtain fiduciary liability insurance and cyber liability coverage along with your required ERISA bond. We even lock in multi-year rates and offer installation payments. For the best value and protection Choose Your Package Now.
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. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.