The Fiduciary Duty to Only Pay Reasonable Fees from ERISA Plan Assets


Plan sponsors may not realize this, but one of their numerous fiduciary duties is that they have a fiduciary duty to only pay reasonable and necessary fees from plan assets. The reason for this is that while slightly larger than necessary fees may not have a large impact today if they continue over time, they can greatly reduce the amount of a plan participant’s retirement plan balance. Those larger than necessary fees add up over time.

The problem is that it is not quite clear what a “reasonable” fee entails. There is no definition in ERISA and the U.S. Department of Labor only suggests using an objective process for your decision making and says that fee charges should be reviewed in terms of how they relate to services charged. Generally, objectives processes are understood to involve benchmarking your fees versus competitors and the industry average, but it is still a question of what exactly “reasonable” means.

You have to protect yourself against what you deem a “reasonable” fee not being deemed reasonable by plan participants and the court. You can do that with fiduciary liability insurance.

Fiduciary liability insurance protects you against charges of paying unreasonable plan fees from plan assets!

Where the ERISA fidelity bond is set in place to protect the participants of the plan it, however, does not protect YOU as the fiduciary.

Colonial Surety Company is a Treasury Listed surety company providing ERISA fidelity bonds packaged with fiduciary liability insurance which includes cyber liability insurance at no extra cost. Colonial is one of the leading providers of ERISA related products, offering bonds approved by the Dept. of Labor. We make it easy to obtain your bond instantly as well as allowing you to purchase retroactive insurance for the years the plan was not previously covered.

Under ERISA, fiduciaries may be held personally liable for a breach of their responsibilities in the administration or handling of employee benefit plans. Under ERISA 410, the plan cannot relieve you of this responsibility with indemnification language, however, it specifically permits persons with personal liability to purchase fiduciary liability insurance. Covering yourself with fiduciary liability insurance gives you peace of mind that you are protected. Learn how to bundle your ERISA bond and fiduciary liability insurance for a discounted rate.

If you would like to learn more about purchasing an ERISA fidelity bond, or an ERISA fidelity bond package including fiduciary liability insurance, call 888-383-3313 or email Learn more about becoming a Pension Professional Partner here.