As the ranks of retirement plan fiduciaries continue to swell, so have the numbers of lawsuits filed and tried against
plan sponsors and other fiduciaries for alleged breach of duty.
In recognition of their risk, plan sponsors are increasingly
seeking ways to ensure protection. One form of shield may be
fiduciary liability insurance (FLI). Jonathan Blaze with Mainstay
Investments spoke with PLANSPONSOR about this type of
insurance, and what plan sponsors should know.
Eliminating a Fiduciary Blind Spot
Fiduciary liability insurance can provide protection for plan sponsors
PLANSPONSOR: When you look at the current environment
for plan sponsors, what are they most challenged by in this
uncertain fiduciary landscape? What are both advisers and
plan sponsors looking to do, or what are the biggest obstacles to navigating?
Jonathan Blaze: I think the industry, in general, has attempted
over the last 10 to 12 years to help evolve the knowledge base
of plan sponsors as well as advisers. There’s a big element of
education involved here. You’ve got to have an investment policy,
perhaps a fee policy. You need to set up a committee, you need to
have a charter of that committee to follow what’s required under
ERISA [Employee Retirement Income Security Act] so that you are
protected as a fiduciary of the plan and can’t be sued, or, if you
are, that you’re not potentially risking your own personal assets.
PS: How are you at Mainstay helping advisers and plan spon-
sors navigate the renewed, or increased, focus on fiduciary
Blaze: When we were re-evaluating and restructuring our DCIO
[defined-contribution-investment-only] effort within New York
Life Mainstay Investments, we wanted to be an industry leader.
We felt it was important to focus on governance—best practices
for plan sponsors. Over the last year, we’ve created the Retirement Institute, geared toward financial advisers and consultants
who primarily serve retirement plans, giving them access to topics
such as fiduciary liability insurance. It’s an ongoing process of
educating, adding value to the adviser and enhancing our relationship with the individual so that, hopefully, when opportunities arise, he will look to New York Life Mainstay Investments as a
PS: Where does Mainstay find the fiduciary expertise and
content that you’re disseminating through the Retirement
Blaze: We were fortunate enough that our outside ERISA counsel at New York Life is Groom Law Group out of Washington,
D.C., and that Groom is one of the oldest ERISA law practice
firms. We work closely with Steve Saxon and other members of
the firm, who help us create content. We present to Steve topics
we feel are relevant, obviously, arriving at those topics by asking
our clients, the advisers, what’s on their minds, what they need
clarification on, what would help them communicate their value-add proposition to clients and prospects, and what they feel are
timely, relevant topics.
PS: There are many plan sponsors concerned about their liabil-
ity and making sure they’d like to do whatever they can to
mitigate the likelihood of being sued. How are they currently
mitigating their fiduciary liabilities?
Blaze: Everything within ERISA, it all comes back to the process,
right? Using an adviser to guide them through those processes.
Relying on an adviser is itself an indication of a procedurally
prudent process. Once you get to the basis of your retirement
program, established or re-established, then it’s making sure all
the i’s are dotted and t’s are crossed and you have an investment
policy statement [IPS] that provides that process for how you
select and monitor investments. You may choose to establish an
investment committee, and you have a charter that explains who
should be on the committee, what their responsibilities are, how
you bring people on, how you take people off the committee,
things of that nature.