- What's at stake: Small business owners facing personal liability and out-of-pocket defense costs for administrative errors.
- Expert quote: "Unrest and disruption are the norm, not the exception." — Michael Bonfante, Colonial Surety
- Forward look: On the horizon: Evolving Department of Labor priorities targeting cybersecurity and benefit distribution practices.
Source: Bullets generated by AI with editorial review
Retirement plan sponsors are under increasing pressure to regularly review how benefits are calculated and administered. A recent court ruling found that the use of outdated actuarial assumptions and mortality data can result in Employee Retirement Income Security Act violations.
Michael Bonfante, a pensions specialist at Colonial Surety Company, explained below why fiduciary responsibility extends beyond investment oversight and how proper safeguards serve as a critical layer of protection. This interview has been edited for length and clarity.
Why did the recent Sixth Circuit Court of Appeals ruling in Reichert v. Kellogg Co. reinforce that fiduciary responsibility extends beyond investment oversight to include ongoing review of actuarial assumptions, participant benefit calculations, and plan administration?
For years, retirement plan sponsors have focused a great deal of their fiduciary energy on fund selection, investment performance monitoring and fee benchmarking. Reichert v. Kellogg Co. delivered a stark reminder that ERISA's core duties of prudence and loyalty can be applied even to the administrative and calculation mechanics of a plan. Courts are making it clear that fiduciary duty isn't limited to choosing investment menus; it can extend to oversight of day-to-day operational execution, software logic, and calculation inputs.
Cases of "actuarial equivalence" like Reichert v. Kellogg Co. have been presenting legal challenges to defined benefit plans for about eight years, and as ERISA defense experts at
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What steps should plan sponsors take with the help of their adviser to ensure governance processes, documentation and oversight practices keep pace with evolving regulatory and litigation risks?
No matter where subsequent court decisions land, plan sponsors are wise to understand that the evolution of ERISA litigation makes passive oversight increasingly risky. In other words, simply setting it and forgetting it is not an option related to any aspect of retirement plan sponsorship. Here's the critical reality for plan sponsors: They can outsource the administrative work, but never outsource the fiduciary liability.
In our day-to-day work as national experts on ERISA fidelity bonds, we find that many retirement plan sponsors are confused about what it actually means to be a fiduciary. One pragmatic step we recommend to all plan sponsors is brushing up on what the
Why does having proper safeguards, including fiduciary liability insurance, serve as a critical layer of protection against alleged breaches of fiduciary duty as legal scrutiny continues to increase?
Right now, there are more questions than answers. ERISA litigation theories are multiplying – reaching into fees, forfeitures, plan administration and even what counts as "reasonable." Courts have left much unanswered, and across a landscape that's actively shifting, the one certainty is uncertainty. Uncertainty is risk.
That risk catches a lot of plan sponsors off guard, because of a common misconception: many small and midsize business owners assume their mandatory ERISA fidelity bond already protects them if a participant sues. It doesn't. A fidelity bond protects the plan's assets from internal fraud or theft. It does not cover costs for a lawsuit alleging administrative errors or a breach of fiduciary duty. Those are two entirely different risks and only one of them is covered by the bond most ERISA plans are required to carry.
In the face of a lawsuit alleging an operational miscalculation or vendor oversight, defense costs start accumulating before a court ever rules on the merits. Without fiduciary liability insurance, those costs come straight out of the plan sponsor's pocket.
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What does the recent court decision signal about the future of ERISA enforcement and the areas where plan sponsors should proactively assess risk with the help of their adviser?
Reichert v. Kellogg Co. is a good example of how far an ERISA argument can travel through the courts, with a case that seemed closed getting sent back for another round. That's not unique. It's simply how ERISA litigation moves.
Litigation is only part of the picture. Department of Labor priorities shift, too. Cybersecurity and benefit distribution practices are current enforcement areas and those priorities will keep evolving. Unrest and disruption are the norm, not the exception. The retirement plans and sponsors that hold up are the ones that treat fiduciary excellence as an ongoing practice, not a one-time achievement.
That means staying current on regulatory priorities and taking the lessons from litigation seriously: strong governance, real documentation and ongoing monitoring, applied continuously rather than revisited once and forgotten. It also means making sure coverage keeps pace for the plan, business and sponsors personally as fiduciaries.
Weaving together governance, documentation, monitoring and the right coverage is what holds up when something is tested. And with ERISA, rest assured that there will always be something new under scrutiny.
