By now, plan fiduciaries and their service providers likely have heard about the DOL’s cybersecurity guidance. The Department of Labor’s stepping into cybersecurity in this way – a posting of best practices on the agency’s website – has left plan fiduciaries with some questions. Here are a few:
- “When is this effective?”
- “Does this apply to me?”
- “Could I be liable if a service provider has a data breach?”
- “We are halfway through the term of our services agreement with our recordkeeper, do we need to do something now?”
- “This is IT’s problem, right?”
- “What exactly do we have to do to be ‘prudent’?”
- “Do we have to communicate anything to plan participants?”
- “If our service provider had a data breach, do we have to terminate the relationship?” “What factors should we considering in making that decision?”
So, what are plan fiduciaries actually thinking? Fortunately, we’ve been able to obtain snippets of conversations between plan fiduciaries that may provide some insight into that question. Here is our first installment, and, of course, we redacted the text to protect the privacy of the individuals.
Retirement Plan Committee Chair: So, what did you think of your first retirement plan committee meeting?
New Committee Member: Well it sounds like it will be really interesting…though, I’m a little bit nervous about the personal responsibility part and I’m not much of a technology person. I keep hearing about these breaches in the news, ransomware, you know, and I was one of the people on the gas line due to the Colonial Pipeline incident.
Retirement Plan Committee Chair: I know what you mean. During the time we were out of the office for COVID, if it weren’t for my 13-year-old, I don’t think I would have been able to get onto any conference calls! But I think we have a good team and good procedures. There is a fiduciary training coming up and I believe they will cover this.
New Committee Member: Yea, that will be good. I am not sure I know all the service providers we have for the plans. We spoke a lot about the 401(k) plan’s recordkeeper tonight, are there others?
Retirement Plan Committee Chair: That is a good question. We definitely will need to identify all of our service providers, particularly those handling plan data. I know we have an auditor, and then there is our investment advisory firm…
New Committee Member (interrupting): …and what about the financial wellness vendor?
Retirement Plan Committee Chair: Yes, them too. Well, we should probably regroup after the training and come up with a plan. I have to run, see you next week.
New Committee Member: OK, bye.
It looks like this organization takes its retirement plan administration seriously and has some thoughtful people on the team. Retirement committees generally are not required under ERISA but they can be a valuable tool for organizing the administrative responsibilities of an employee benefit plan.
Getting more educated on “cybersecurity” is a good initial step for a committee or plan fiduciaries generally. Done right, training will help fiduciaries better understand the threats and vulnerabilities to data generally (not just from criminal hackers) and gain more insight into the DOL’s best practices. Such training also can help plan fiduciaries (and personnel on virtually all levels of plan administration) appreciate more of the ways data may be accessed or transmitted in the course of operating a plan. Looking at plan operations from that perspective, where data lives and how it moves, can help plan fiduciaries identify the service providers they need to be thinking about.
Perhaps the most important nugget from the exchange above for addressing the DOL’s guidance is from the Retirement Plan Committee Chair – come up with a plan!