Fidelity Bonds

Retirement Plans: Power of Attorney?



Among the many questions that retirement plan sponsors and their service providers confront is what to do when given a power of attorney (POA) for a plan participant. Indeed, designating a POA is an important aspect of retirement planning, and ERISA experts advice plan sponsors to put a solid review process in place.


Power of Attorney Basics

As the last several years of demonstrated, any of us can lose capacity at any time. Having a designated power of attorney means that we have made someone we trust legally ready to step in and make financial and other decisions on our behalf should we experience a decline in capacity. Simply put, Investopedia shares: “Power of attorney (POA) is a legal authorization that gives a designated person, termed the agent or attorney-in-fact, the power to act for another person, known as the principal. The agent may be given broad or limited authority to make decisions about the principal’s property, finances, investments, or medical care.”


Reviewing a Power of Attorney

Experts from Groom Law Group and CAPTRUST  note that is quite common for plan sponsors to receive requests to review POAs from retirement plan participants but stress that is important to have a clear process for the review:


Since a POA is a legal instrument under state law, someone needs to determine that the POA is valid under state law…; presuming your recordkeeper does not offer that service, then it would… make sense for your outside retirement plan counsel to review…Other potential issues should be mentioned…Someone should verify that the participant is not deceased, since durable powers of attorney expire upon a participant’s death. Even if the POA does not appear to be suspicious on its face, plan sponsors can’t be too careful and must ensure that the document’s pages are in order and that identity verification procedures are followed. Also, if the agent…is not the sole named beneficiary for this participant’s account, you should inquire of counsel if you need to inform the named beneficiary or beneficiaries of the POA, since the POA could affect their rights as beneficiaries to the participant’s death benefit.


Risk Management

As Plan sponsors are digging deep to understand and attend to their ERISA fiduciary duties, it is increasingly important for them to manage their own risks too. Any person involved in the management of a retirement plan can be held personally liable for a breach of fiduciary duties and legal defense costs in the face of even an allegation can be devastating. Colonial Surety is here to help. Armed with Colonial’s Fiduciary-Cyber Pack, 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. Our multi-year packages enable plan sponsors to secure Fiduciary Liability Insurance at locked in rates with annual premiums that cost less then one hour of ERISA legal advice. We even include Basic Cyber Liability Insurance. We make it so efficient and reasonable that every plan sponsor can secure insurance in minutes, now:

Fiduciary with Cyber Liability Insurance.


Reviewing Service Contracts

Industry experts remind plan sponsors to have high expectations when contracting with—and monitoring service providers. Make sure you understand the fee structures and services offered. Don’t forget to ascertain that best practices are followed related to cybersecurity too. With employees increasingly striving toward financial well-being, now is also the time to make sure plan service providers are giving participants high quality, data-rich information, and education. There’s also been a rise in requests for plan materials in languages other than English, so be sure that the ERISA requirement for providing assistance to non-English speakers is addressed.


Because it can be challenging to keep current on all ERISA regulations, plan sponsors across the country find it reassuring to secure Colonial’s  Three Point Coverage Package. This gives plan sponsors the greatest value and protection, providing: the required ERISA bond to protect the assets of the retirement plan from theft; Fiduciary Liability coverage to protect you and your assets from personal liability; and, Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.


Three Point Coverage Package: Right Here Now.


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.