Experts observe that during the pandemic, participants started asking more questions about investment plans and fees, ultimately pointing to flaws that hinder retirement savings to thrive. Now, a swell of new ERISA lawsuits are advancing the imperative for improved expense ratios, investment options and participant information.
Why So Many Lawsuits?
Who wants to find out that their efforts to save for retirement are not resulting in as much success as possible because of fees or investment structures? No one. As Forbes reports:
The number of Employee Retirement Income Security Act (ERISA) lawsuits in 2020 doubled the number of ERISA lawsuits in 2018 and had an 80% increase from 2019. Last month, CDI Corp. in Philadelphia was ordered to pay $1.8 million to settle a class-action lawsuit that claimed there was no system to evaluate its 401(k) plan’s investment options, leading to plans only offering actively managed, expensive funds.
The ideal retirement plan carries a diverse range of investment options, including low-cost stock funds, low-cost target-date funds, and several bond index funds. Some plans may include “actively managed” funds where a portfolio manager actively manages or trades the positions but frequently cannot match the performance of their correlated index. Be wary of a 401(k) plan with no low-cost funds because they might prove expensive in the long term.
The rate of companies settling 401(k) lawsuits indicates that companies have been enrolling their workers on flawed retirement plans. With these facts in mind, you should evaluate your employer-provided 401(k) on four merits: expense ratio, restrictions, investment options, and investor education.
Across the country, plan sponsors are in fact exploring new plan design options, reviewing the services of contracted providers and brushing up on their fiduciary responsibilities. According to 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. That’s why plan sponsors in businesses of all sizes are also taking added precautions to ensure that the plan—and their personal assets— are protected.
Colonial Surety helps plan sponsors efficiently and affordably secure needed coverage. Opt for cost-saving multi-year packages, ensuring the ERISA bond required by the Department of Labor remains in compliance. When you choose a package, you will have: the required ERISA bond that protects 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.
With Colonial, you can easily and quickly secure your affordable coverage package right now: Complete ERISA Bond Package.
Personal Exposure?
Many plan sponsors do not understand that their personal assets can be exposed in the event of a fiduciary breach. Protection is available: 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. If you are sued, even if you have done nothing wrong, the defense costs could be ruinous. Colonial’s annual premiums total less then just an hour or two with an ERISA lawyer if disaster strikes. Why take changes? Get protected now: Choose Your Plan Sponsor Protection Package Here.
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.