Retirement Plan Fundamentals


Small businesses are confronting tight hiring markets as they strive to recover from the pandemic’s economic impact. Offering a retirement plan can be a competitive advantage. Here is guidance and cautionary advice for business owners new to retirement plan sponsorship—and those who need a brush on their duties too.

Insights for New Plan Sponsors

BizJournals observes: As a small business owner, helping employees save for retirement with a 401(k) plan may also help your business. According to one industry survey, a 401(k) plan is among the top benefits that correlates with employee satisfaction….With nearly 50% of U.S. private sector workers lacking access to a workplace retirement plan, …it’s also a powerful tool for attracting top talent.

Although there are costs involved in starting a plan, you may be eligible for tax credits which offset the startup costs. You can also contract with plan advisors and other service providers, such as record keepers, for support designing and administering the plan. Do keep in mind however, that sponsorship of a 401k plan makes you a fiduciary. Never underestimate the significance of this role. As experts explain:

A 401(k) plan sponsor is also obligated to serve as a fiduciary, meaning they are required to act in the best interest of the employees participating in the plan. This includes selecting and monitoring the investments offered to plan participants. The Employee Retirement Income Security Act of 1974 (ERISA) contains a complex set of rules and requirements for retirement plan fiduciaries. Employers who fail to fulfill their fiduciary responsibilities could face financial and legal consequences.

 Personal Accountability?

That’s right—under ERISA law, all fiduciaries associated with a retirement plan can be held personally accountable to the plans’ participants and beneficiaries for a breach of fiduciary duties. Essentially, this puts your personal assets at risk, every day.

It’s important to understand that each year, thousands of ERISA lawsuits do expose fiduciaries to claims by plan participants and beneficiaries. Claims include: failing to make timely contributions, failing to prudently invest based on employee expectations, paying excessive fees, or failing to appropriately select and monitor service providers. Even if you are not at fault or liable, you can still be sued—and defending yourself can be ruinous. For example, just one hour with an expert ERISA attorney is likely to cost you upwards of $600.


You don’t have to go it alone, though! Plan sponsors across the country trust Colonial Surety, for affordable and comprehensive protection packages. Uniquely, at Colonial, plan sponsors can obtain affordable fiduciary liability insurance and cyber liability coverage along with the required ERISA bond. Colonial’s fiduciary liability insurance covers your business—and you as the fiduciary—against claims of alleged or actual breaches of duty in connection with the employee retirement plan. Annual premiums total less then just an hour or two with an expert ERISA attorney. Colonial’s comprehensive ERISA bond packages offer plan sponsors up to $1,000,000 of fiduciary liability insurance. Choose Your Plan Sponsor Protection Package Here.

What’s an ERISA Fidelity Bond?

If you are new to plan sponsorship (or just rusty on the regulations), here’s what you need to know: an ERISA fidelity bond is required by the Department of Labor to protect the assets of your retirement plan from theft. It must be kept current with your plan and can only be obtained from a surety listed by the U.S. Department of Treasury. Let leading national ERISA bond provider, Colonial Surety Company  help you ensure compliance. Opt for cost-saving multi-year coverage, ensuring the ERISA bond remains Department of Labor compliant for the life of its term.

Summing up: 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 quickly secure your affordable coverage package today. Take a few minutes and do it now: Complete ERISA Bond 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, U.S. Treasury listed and in business all across the country.