Today, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued much anticipated cybersecurity guidance for employee retirement plans. This comes more than four and a half years after the ERISA Advisory Council, a 15-member body appointed by the Secretary of Labor to provide guidance on employee benefit plans, shared with the federal Department of Labor some considerations concerning cybersecurity. The essence of today’s guidance:

Responsible plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks.

What that obligation means at this point is at least what EBSA set out in the following materials on its website, although the “Online Security Tips” are directed more to plan participants than plan fiduciaries:

Acknowledging ERISA-covered plans hold “millions of dollars or more in assets and maintain personal data on participants,” EBSA’s guidance lists a range of best practices for use by plan recordkeepers and service providers responsible for plan-related IT systems and data, as well as plan fiduciaries having the duty to make prudent decisions when evaluating and selecting plan service providers. Some of the EBSA’s best practices include:

  • Maintain a formal, well documented cybersecurity program.
  • Conduct prudent annual risk assessments.
  • Implement a reliable annual third-party audit of security controls.
  • Follow strong access control procedures.
  • Ensure that any assets or data stored in a cloud or managed by a third-party service provider are subject to appropriate security reviews and independent security assessments.
  • Conduct periodic cybersecurity awareness training.
  • Have an effective business resiliency program addressing business continuity, disaster recovery, and incident response.
  • Encrypt sensitive data, stored and in transit.

The EBSA fleshes out each of these best practices to give recordkeepers, service providers, and plan fiduciaries more guidance when developing their own policies and procedures. It is worth noting these best practices are not dissimilar to other, well-known frameworks designed to protect personal data. So, organizations that have engaged in efforts to comply with, for example, the HIPAA privacy and security rules for group health plans, the Massachusetts data security regulations, or the NY SHIELD Act will have a head start taking similar steps concerning their retirement plans and/or their services to plans.

Selecting ERISA plan service providers has long been an important fiduciary function for plan fiduciaries. In its guidance, EBSA offers key cybersecurity issues to account for when selecting service providers, including the following:

  • Ask about the service provider’s information security standards, practices and policies, and audit results, and compare them to the industry standards adopted by other financial institutions. Plan sponsors may assume that a service provider referred from a trusted source with compelling marketing materials would have put in place appropriate cybersecurity safeguards. As the saying goes, “Trust, but verify.” This also applies to all third-party plan providers, even large, well-known organizations.
  • Ask the service provider how it validates its practices, and what levels of security standards it has met and implemented. Look for contract provisions that give you the right to review audit results demonstrating compliance with the standard.
  • Ask whether the service provider has experienced past security breaches, what happened, and how the service provider responded. As these incidents are often reported, consider reviewing news accounts of the service provider’s response to the incident.
  • Investigate whether the service provider might have cyber insurance that would cover losses caused by cybersecurity and identity theft breaches, including misconduct by the service provider’s own employees or contractors, or a third party hijacking a plan participant’s account.
  • Consider the willingness of the service provider to include contract terms requiring ongoing compliance with cybersecurity, clear rules concerning use and disclosure of personal information, responsibility for security breaches, and other key terms addressing exposure to the plan, plan sponsor, and participants.

It is important to note that no set of safeguards will prevent all data breaches and no amount of due diligence will result in the selection of a flawless service provider. In many cases, a data breach experienced by a plan service provider may not warrant moving away from that provider. Here are some reasons why.

Third-party plan service providers and plan fiduciaries should begin taking reasonable and prudent steps to implement safeguards that will adequately protect plan data. EBSA’s guidance should help the responsible parties get there, along with the plan fiduciaries and plan sponsors’ trusted counsel and other advisors.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.