Fiduciary Liability Insurance
Fiduciary Liability Insurance protects individuals charged with the responsibility of creating, managing, and administering employee benefit plans and plan assets within business organizations.
Do you need Fiduciary Liability Insurance?
Fiduciary liability arises from the obligations set forth in the Employee Retirement Income Security Act (ERISA) of 1974. ERISA was passed to assure that employees participating in (1) employee pension benefit plans and (2) employee welfare benefit plans receive the benefits promised by such plans. As a result, the law created a variety of fiduciary liability exposures for employers that offered these plans, and, in response, Fiduciary Liability Insurance coverage became available on a widespread basis during the mid-1970’s.
Fiduciary Liability Insurance is the only coverage that adequately protects employees against liability for managing or administering an employee benefit plan. If you your business has either a retirement plan or welfare plan then this coverage needs to be considered.
Retirement plans include a broad definition, which would include but not be limited to defined benefit pension plans, profit sharing or savings plans such as 401(k)s, 403(b) plans, stock purchase plans, and employee stock ownership plans (ESOPs).
Welfare Plans would include medical, dental, life and disability plans.
Fiduciary Liability Insurance will protect plan fiduciaries against claims alleging that they mismanaged an employee benefit plan or plan assets. This includes, but is not limited to, making bad investment decisions, negligently handling plan records, and negligently selecting plan service providers.
ERISA Section 409 expressly imposes personal liability on plan fiduciaries who breach their fiduciary duties. This means that fiduciaries might have to personally pay for any losses they cause out of their own private assets.
ERISA prohibits plans from indemnifying plan fiduciaries, which means plans cannot pay defense costs, settlements or awards on behalf of fiduciaries that have breached their fiduciary duties. Even if your company wishes to indemnify its fiduciaries, it may not be financially capable of doing so, or it may be barred by law from doing so.
Fiduciary Liability Insurance Costs
Fiduciary Liability Insurance costs are based on a number of factors which include:
- Number of plan participants
- Amount of assets
- Type of plan for which coverage is desired including:
- Defined Benefit
- Defined Contributions
- Self Funded Welfare Plan Benefit Plan
- Limit of coverage
- Deductible options
- Loss history
Reach out to me if you’re considering Fiduciary Liability Insurance. I will discuss with you how it works and assess if it fits into your risk management needs. If you determine this coverage is needed I will then provide you with comparative Fiduciary Liability Insurance quotes from multiple insurance carriers so you can get the best possible rate.
As an insurance broker I help businesses throughout Oregon and the Pacific Northwest manage risk.