As a fiduciary, one violation of the Employee Retirement Income Security Act (ERISA) could cost you. Not your business. Not your boss. You. Under ERISA, employers and administrators have fiduciary responsibility, which means they are responsible for managing the company benefit plan properly and are personally liable for any mismanagement.
Are you liable?
First, determine if you are a fiduciary. Fiduciaries, on a fundamental level, are those listed on the benefit plan document. However, unlisted individuals can be considered fiduciaries if they manage, or could manage, plan administration or plan assets. Additionally, anyone who can or actively does provide plan asset investment advice could be considered a fiduciary.
Know your options
Fiduciary liability insurance will protect fiduciaries from facing personal out-of-pocket legal fees during a mismanagement claim. This coverage can cover a variety of claims including
- denial or change of coverage benefits,
- reduction or elimination of benefits,
- administrative error,
- improper advice or counsel,
- wrongful termination of a plan,
- failure to adequately fund a plan,
- conflict of interest,
- imprudent investment of assets or lack of investment diversity,
- imprudent choice of insurance company, mutual fund, or third-party service provider,
- errors in computing that result in lost benefits,
- improper enrollment or terminations,
- inadequate communication or instructions resulting in lost benefits, and
- charging excessive fees.
While this insurance does not satisfy ERISA bonding requirements, it saves individuals from paying sizable settlement and defense costs. In the event of an unintentional ERISA violation, this coverage will be incredibly valuable; however, it does not cover fraudulent acts.
Think you’re covered?
Most employee benefit plans are subject to ERISA regulations, including group health, life, retirement, profit sharing, disability and employee leave. The only exemptions to ERISA are church and governmental organization benefit plans.
Your company may have Employee Benefits Liability (EBL) insurance, but even when paired with Directors and Officers (D&O) insurance, it may not be as comprehensive as it seems. EBL insurance only covers basic claim errors, it falls short of covering extensive and pricy ERISA violation claims. Also, most D&O insurance does not cover claims for EBL or breaches of fiduciary duty.
Stay protected
Waiting until a claim has been made is too late to get coverage. For a fiduciary liability insurance quote, call our Property and Casualty division at 913.951.2400. For more information on fiduciary liability insurance, visit bukatyinsurance.com/fiduciary_liability.
