Although the judicial outcomes are yet to be decided, the recent flurry of lawsuits filed against private colleges and universities over lack of fiduciary oversight of their 403(b) retirement plans is already having an effect on the insurance market.
“Fiduciary Liability insurance carriers are seeing more claims and there is more scrutiny regarding the due diligence around the choice of vendors, the fees paid and the investment options offered to participants. We expect to see increased premiums, higher deductibles/retentions and potentially lower liability limits being offered by these carriers for Insureds with below average controls/due diligence procedures in the coming renewal cycle.” says John Milano, SVP and head of RCM&D’s Management Liability Practice. When carriers start to pull in the reins like this it is more important than ever to review current policy language and compare with the market to ensure clients have the broadest coverage available for their level of risk tolerance. “Our management liability team works closely with our Education Practice to perform these policy evaluations yearly for our 80+ higher ed clients, but in times like these extra diligence is warranted to keep them appropriately protected.”
While insurance is an important part of the puzzle, having proactive risk management policies and procedures on the front end are paramount to minimize the risk of catching an ERISA violation lawsuit in the first place. RCM&D has offered free retirement plan document reviews, investment fund reviews and fee benchmarking reports for years to clients and prospects alike. Rob Kotler, the head of RCM&D’s Retirement Services Practice, recommends having these reviews performed at least every 3 years to ensure the plan document, plan sponsors and plan participants are aligned in their goals and pursuing them in the most prudent ways possible. “One of the best ways to mitigate fiduciary liability is not just to have a process in place for decision making but to document each step of the way to show that you are following that process.”
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