The Employee Retirement Income Security Act of 1974, ERISA, sets out the responsibilities of the fiduciaries that control retirement plans like 401(k)s. If your private business offers a 401(k), it is imperative to have a fiduciary liability insurance policy, or FLIP.
Sudden Rise in Excessive Fees Litigation
Over the last 20 years, the number of cases brought under ERISA, accusing fiduciaries of paying excessive fees, has skyrocketed, with settlements exceeding $1 billion. While there have been over 200 of these cases over the last several years, at least 90 of those were filed in 2020 alone, with the cases expected to grow exponentially.
Litigation Is Aimed at Traditional Offerings
You may feel that your business is safe from claims of excessive fees, but these lawsuits have been aimed at traditional offerings, claiming that any investment that underperforms should have been pulled immediately and that administrative fees are too high.
Protect Yourself With Planning
These lawsuits and settlements have also affected insurance underwriters. To maintain your FLIP, make sure you are taking active steps to mitigate the potential for lawsuits. Review your offerings and document all decisions along with the reasoning for them. Insurance providers and judges are looking for specific information on how decisions were made.
A FLIP protects your business, your advisors and your employees, providing a dike against the rising sea of excessive fee litigation.