Individuals who serve as a fiduciaries to their company’s retirement plan often feel they may not be sufficiently informed or qualified to make prudent decisions for the plan. They might ask themselves: “How do I know which are prudent investments?” or “What amount of plan fees are ‘reasonable’”? Now, the DOL is requiring plan fiduciaries to prudently assess cybersecurity, possibly taking many plan fiduciaries further outside their comfort zones.

We started to see this developing in Episode 1 of our Musings series, when a new member of the Retirement Plan Committee expressed concerns about being qualified to help make decisions about the new DOL cybersecurity guidance. Knowing the Retirement Plan Committee maintains a robust training program, the Committee Chair reassured the New Committee Member that some upcoming training might help…

Retirement Plan Committee Chair: So, what did you think of the training?

New Committee Member: It was long! And, I have to admit, when I saw the agenda showing that our ERISA attorney was going to be presenting for 90 minutes, I immediately went for a second cup of coffee! But I was wrong. The presenter was quite good at putting complex and unfamiliar concepts into easy to understand, bite-sized pieces. She certainly calmed some of the concerns I expressed to you last week, while helping me to see how the problem of cybersecurity has become interwoven with our fiduciary duties

Committee Member A: I agree 100%. Until today I did not fully understand the scope of our duty as fiduciaries. I thought protecting assets in the plan meant simply make good investments and controlling fees.

Committee Member B: Yes, but did you hear what the attorney said? It is not a matter of “if” but “when” we have a breach. So, why spend all this time if we are just going to have a breach anyway?

Retirement Plan Committee Chair: Maybe, but the message was not that we have to be perfect, but prudent. We have to do our due diligence when making decisions, but we can’t guarantee a result.

Committee Member B: The attorney explained we have to make sure that nobody steals money from participant accounts.  This is like playing  cops and robbers but now the robbers can be thousands of miles away, stealing by a stroke of their computer. How are we to cope with this?

New Committee Member: That is not exactly what I heard. I heard that we need to be proactive, not reactive. We need to think more critically about the risk to the plan’s data and its assets. We have to consider the kinds of safeguards that are in place at the company and with any vendor that provides services to the plan. We need to learn more about what those safeguards should be, and maybe even bring in some expertise to help us figure that out. We can’t just wing it! And our own IT team may not have this expertise and be on top of the latest types of attacks.

But, she cautioned, even that may not be enough, because no set of safeguards is perfect. It’s like building a moat around the plan’s assets, but also realizing the attackers are sophisticated and can find their way around the drawbridge and the moat.  So, we need to be prepared to respond to the inevitable data breach.

I feel better knowing that meeting our fiduciary duty does not require us to be perfect, but we also have some work to do, including to document our process.

Committee Member A: Exactly. You are right. Before the meeting  I was totally confused and had visions of cyberattacks from Mars. Counsel explained the situation and provided concrete examples. It was helpful knowing we could develop a road map to follow.  I feel better that the situation can be addressed if we take the time and effort to understand it. She laid it out step by step, identifying some common shortfalls and strategies for mitigation.

Retirement Plan Committee Chair: There certainly is a learning curve here, but sounds like we are on our way. Tonight was first step of prudently addressing this new issue and we will build on it. There is a lot to unpack here. For example, it is not just about passwords, firewalls, and encryption, based on the presentation, we also have to consider identity verification.

We all have approved distributions and withdrawals requested by participants. Is our process good enough to tell a real request from a fraudulent one? How much time do each of us actually take to review requests, question the frequency of requests, or consider where they are coming from?

New Committee Member: The attorney said she was going to be at our next meeting, is that right?

Retirement Plan Committee Chair: Yes, that’s right. She may bring in an IT firm in to help us further and to begin shaping a plan to address this issue.

Committee Member B: That is good because I spoke with one of my friends who serves on his retirement plan committee, and the DOL has already started auditing plans on these issues. I volunteered to serve on this committee but am concerned about liability. I want to do more to protect myself and the plan.

The Committee appears to be moving in the right direction. They realize now they cannot be experts in all aspects of plan administration, and that some basic training can go a long way to help them make better, more prudent decisions.  But they also realize that need a plan to tackle the process of assessing cybersecurity risks for plan assets and plan data.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, 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, Mr. Lazzarotti 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 – Mr. Lazzarotti 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 – Mr. Lazzarotti’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.

Mr. Lazzarotti 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.

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