ERISA

Failed Pension Investments Can Lead to Fiduciary Liability

07/12/2019

Pension plan fiduciaries such as plan sponsors have to worry about a lot of different scenarios that could result in a fiduciary duty breach and liability. One of the most dangerous scenarios that fiduciaries have to worry about is risky pension plan investments failing and leading to fiduciary breaches.

Employees of a typical defined pension benefit plan may sue a fiduciary if the fiduciary invests a large percentage of the pension plan’s investments in risky investments and they fail. These can include penny stocks, initial public offerings, and junk bonds.

The problem is that these can also result in great gains if they succeed. There will not be any liability if there are gains because there would be no damages. But if they fail, plan participants will be able to sue for a breach of fiduciary liability due to the damages caused by this risky behavior.

So how can you make sure you’re personally protected from a fiduciary breach for a failed investment? Fiduciary liability insurance!

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 in case your pension plan investment fails.

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 Department 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 a piece of mind that you are protected. Learn how to bundle your ERISA bond and fiduciary liability insurance for a discounted rate.