It’s no secret that ERISA Class Actions have been on the rise, putting fiduciaries in the hot seat, especially related to decisions about plan fees. Though large plans were initially the prime targets, claims are increasingly aimed at smaller plans.
Keep in mind, most ERISA lawsuits don’t make headlines. The truth is, any individual involved in the management of a retirement plan of any size can face personal exposure for breach of fiduciary duty. Plan sponsors: how are you mitigating your risks as lawsuits brought against 401(k) fiduciaries rise? For example:
Groom Law Group found just over 200 new ERISA class actions were filed in 2020, an all-time record that represents an 80% increase over the number filed in 2019 and more than double the number filed in 2018.
“As 2021 begins, this trend shows no sign of slowing down, with important developing issues related to fee and performance litigation for smaller retirement plans,” states a …Groom Law Group article on the topic.
According to experts, cases have been on the rise largely due to the maturing body of Employee Retirement Income Security Act (ERISA) law. The path to lawsuits has been established, arming plaintiff’s attorneys with a blueprint for use in new cases. As Carol Buckmann, an attorney specializing in ERISA law and a partner at Cohen & Buckmann in New York explains:
“Plaintiff ’s counsel started with the largest plans, but their targets have moved down to smaller plans over time,” Buckmann said. “Claims will typically go back six years (the usual statute of limitations for fiduciary breach), and claim damages for excessive fees and lost investment return, and these can be substantial amounts even for medium-sized and smaller plans.”
“I advise clients to purchase as much coverage as they can reasonably afford because litigation is expensive even if you win, and the required plan bonding coverage doesn’t protect them,” said Carol Buckmann, employee benefits and ERISA attorney with Cohen & Buckmann.
Securing Affordable Protection
As a leading, national provider of ERISA bonds, Colonial Surety Company is now helping plan sponsors across the country obtain comprehensive and affordable fiduciary liability protection too. Colonial’s user-friendly online platform makes it possible for plan sponsors to easily obtain the required ERISA Bond—and, affordable fiduciary liability protection. Obtain up to $1,000,000 of fiduciary liability insurance coverage with Colonial’s complete protection package.
Why go it alone as a small business owner and retirement plan sponsor? Imagine how even allegations of a fiduciary breach would divert attention and resources from your work—and life? For example, if you suddenly needed an attorney with ERISA expertise, you would likely pay upwards of $600—per hour. Avoid this possibility—and a lot of other stress—with Colonial Surety Company’s affordable Fiduciary Liability insurance. At Colonial, a whole year of Fiduciary Liability coverage costs less than what you’d pay for one hour with an expert ERISA lawyer if a crisis hits. Why wait?
The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently…..Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of plan assets. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA including their removal.
Diligence choosing and monitoring fees, service providers and investment options are all important responsibilities of plan fiduciaries. It’s also critical to be personally prepared—and protected—in the event of a lawsuit over breach of fiduciary duties. Remember: 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.
Offering the best overall savings and coverage for plan sponsors, Colonial’s 2 or 3-year packages include cyber liability insurance— plus extended coverage to ensure your ERISA bond remains U.S. Department of Labor compliant. With Colonial, you can easily and affordably secure this complete coverage package. You—and your plan—will be better protected in a jiffy! See for yourself now:
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country.