In the difficult climate that businesses face today with threats of tax increases and the rising cost of healthcare, what owner would dream that their greatest source of potential business liability is their company 401(k)? The current economic setting and recent litigation concerning defined contribution plans including 401(k)s and profit sharing arrangements may well be exposing retirement plan sponsors to increased fiduciary liability.
According to the recent white paper, “Who May Sue You and Why: How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance,” by The Chubb Group of Insurance Companies and the ERISA Litigation Practice of Morgan, Lewis & Bockius LLP., “ERISA class action lawsuits are no longer confined to the largest of companies. Employers of all sizes are vulnerable.”
“Business owners and managers need to understand the fiduciary liability exposures they face, especially in an environment where they are likely to reduce staff or employee benefits," said Christine Dart, vice president and manager for worldwide fiduciary liability at Chubb. “Employees who still have jobs may not be inclined to ‘rock the boat,’ but those who find themselves overboard are more likely to take legal action against employers, especially if their 401(k) plans sustained losses before they were terminated. Fortunately, employers can take steps to possibly reduce the threat of fiduciary liability lawsuits.”