Stay Alert:Recordkeepers


Understandably, retirement plan sponsors rely on their record-keeping service providers to stay on top of a lot—including hundreds of rules. However, even with great effort, recordkeepers make mistakes, so plan sponsors are advised to remain alert. After all, the selection and monitoring of plan service providers is a fiduciary responsibility.

 Mistakes Happen

Because switching the retirement plan’s recordkeeper is a daunting task, plan sponsors tend to ride out mistakes and even poor service from recordkeepers. As experts at Fiduciary News point out: “In a lot of ways, recordkeepers have successfully positioned themselves as the ‘gatekeeper’ of company 401k plans….This doesn’t mean recordkeepers can do no wrong. If anything, some might argue this power position means there’s no motive to keep everything clean and straight. Mistakes happen.”  Given the high consequences associated with ERISA law, including being held personally liable as fiduciaries, plan sponsors are advised to pay particular attention to these potential recordkeeper challenges:

“The biggest recordkeeper issue is poorly trained account reps who don’t recognize issues until it is too late,” says Carol Buckmann…at Cohen & Buckmann….“Missed partial plan terminations and controlled group issues are two examples. Sponsors learn to consult legal counsel on these issues and to confirm on an ongoing basis that vendor employee advice is correct.”

 “A big issue that plan sponsors face with record-keepers is…monitoring the nondiscriminatory rules for their plan…” says Jason Noble…at Prime Capital Advisor….“Plan sponsors have a fiduciary obligation to their participants. The plan recordkeepers are supposed to help with this big obligation. If the plan sponsor has a workforce where there are a lot of highly compensated employees (HCEs), and not enough non-highly compensated employees (NHCEs)…there could be an over-contribution from the HCEs…Working with a recordkeeper that can track this throughout the year and working on plan design is your best option….”

 Of course, even with great diligence in monitoring service providers, plan sponsors are inherently at risk of a fiduciary breach. Without protection, just the mere allegation of a fiduciary breach can be ruinous. Consider, for example, that in ERISA cases, defense costs alone are about $600 per hour. These days, even a relatively minor cybersecurity incident can rapidly spiral into a fiduciary disaster too. That’s why Colonial Surety offers an affordable Fiduciary-Cyber Liability Pack for plan sponsors. It’s now conveniently available with a one year commitment. Armed with this protection, you’ll have:

  • Legal defense and coverage for penalties against claims of alleged or actual breaches of fiduciary duties—up to $1,000,000.
  • Defense against lawsuits and regulatory actions related to a cyber breach.
  • Expert-led response, notification and crisis management services to prevent a cyber incident from spiraling into a disaster.

Colonial makes it so fast and reasonable for plan sponsors to secure all this protection, that you can obtain yours in minutes now: Fiduciary-Cyber Liability Pack

Important To Know

Experts at Fiduciary News remind plan sponsors to be vigilant about all of the information plan participants receive from recordkeepers. Terminology may conflict with the plan document or educational policies:

“With increasing frequency, recordkeepers are using participant information to trigger individualized communications that commonly conflict with the plan sponsor’s desires,” says Matthew Eickman…at Qualified Plan Advisors….“For example, a recordkeeper that manages target date funds will alert a participant that his or her investment mix is out of balance with his or her age. It is also common for a recordkeeper with a strong IRA business will push the virtues of its retail department. Plan sponsors, either through a strong consultant or on their own, should ask the recordkeeper relationship manager to shut off all communications from the retail side of the business. They also should ensure that other plan-related communications are first approved by the plan advisor and/or plan sponsor. The more a recordkeeper pushes back, the more a plan sponsor should question whether the provider is willing to put the plan first.”

With so many ways that mistakes and oversights can lead to big trouble for fiduciaries, it’s essential for plan sponsors to have protection. Afterall, under ERISA law, fiduciary liability risks can be reduced, but never fully eliminated. That’s why Colonial Surety offers an affordable and efficient three point protection plan for plan sponsors: the DOL required ERISA bond to protect the assets of the retirement plan from theft; Fiduciary Liability Insurance to protect you and your assets from personal liability; and, Cyber Liability Insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber breach. Conveniently, Colonial, now offers a comprehensive one year package! Choose yours in minutes, now: ERISA Protection Package Here.

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 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. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.