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Professor Norman Stein Testifies Before U.S. Department of Labor Advisory Council

Norman Stein

July 18, 2018

Professor Norman Stein testified June 20 before the ERISA Advisory Council, which provides the U.S. Secretary of Labor with input and advice on employee welfare and pension benefit plans.

Stein discussed a provision of the 1974 Employee Retirement Income Security Act that requires employee benefit plans to purchase fidelity bonds. The regulation dates back to an earlier law enacted in 1962, Stein said.

The employment benefit picture has changed dramatically since the 56-year old regulation was created, Stein said, noting that fiduciaries who have fiscal responsibilities now oversee pension funds and provide safeguards that did not exist decades ago. Given exponential growth in the scale of pension funds, he said, it’s not clear that fidelity bonds that max out at $500,000 for most plans are adequate to cover losses.

Issues such as cybersecurity threats and conflicts of interest by investment advisers have largely eclipsed concerns about fraud that fidelity bonds were designed to address, Stein added.

Stein urged the advisory council to explore the degree to which issuers of fidelity bonds have been successful at recovering payment from wrongdoers and other questions in order to gauge the ongoing need to enforce the regulation.

A senior policy adviser to the Pension Rights Center, Stein is a nationally recognized authority on pension and benefits law.