Fiduciary Liability insurance helps protect individuals and companies from claims of mismanagement and the legal liability related to serving benefit plans. Most organizations sponsor retirement and health plans to attract employees, and anyone involved with managing those plans is likely considered a fiduciary. Per the Employee Retirement Income Security Act (ERISA) of 1974, fiduciaries can be held personally liable for a breach of fiduciary duties.
ERISA regulates not just retirement plans, such as 401(k)s and 403(b)s, but nearly all employer plans that provide benefits, including welfare plans like medical, dental, life, and disability plans. Litigation costs can be staggering if your company is sued for errors or omissions in the plan’s administration.
Who Is a Fiduciary?
Anyone cited in a benefit plan document and anyone considered to have decision-making power over the management of the plan and its assets may be viewed as a fiduciary under ERISA. Typical fiduciaries are employers, the company’s directors and officers, and plan administrators and trustees.
What Fiduciary Liability Insurance Covers
Fiduciary liability insurance protects an organization from the mismanagement of benefit plans. However, it will not protect an organization from fraudulent cases of theft. Coverage typically addresses the following activities:
- Informing employees of the availability and participation requirements of a pension plan
- Shortages in the benefit plan’s assets due to a breach /of fiduciary duty, such as improper investment of funds
- Interpretation of the plan’s benefits
- Enrollment and record handling
- Cancellation or termination of employee participation in the plan
Other Policies Exclude Fiduciary Coverage
Coverage for fiduciary liability is most likely not included, even if an organization holds other management liability policies. For instance, most Directors and Officers (D&O) policies specifically exclude fiduciary liability claims. Errors and Omissions (E&O) insurance for professional services covers your relations with customers, not employees—and Employment Practices Liability insurance shields against exposure from employment-related claims, such as discrimination.
Chivaroli & Associates will help tailor Fiduciary Liability policies to fit your healthcare organization’s needs. Connect with us today to discuss your company’s employee benefits programs and your unique fiduciary liability exposure.