Insurance and bonding
10. Most importantly: Make sure the necessary insurance and bonding are in place.
The outsourced plan administrator is probably handling plan assets, so it will need an Employee Retirement Income Security Act bond. In fact, a service provider taking on those duties may want to have its own bond, rather than being part of the plan sponsor’s ERISA bond, Ms. Elliott writes.
Errors and omissions coverage is a must, and service providers often need to tack on coverage for fiduciary services in a separate rider. “No one should work in this business without coverage,” she writes. “Both parties should seek the advice of a broker who specializes in fiduciary services.”