MANAGING RISK: RETIREMENT & BENEFIT PLANS
Insurance Needed to
Cover Assets in The Plan and the Plan Fiduciary
If your company offers Retirement Plans such as a 401(k)s or 403(b), or offers Health and Welfare benefits such as medical, dental and vision insurance, paid-time-off, disability, life insurance as well as educational assistance programs you will take on risk in the administration of those plans, specifically in the areas of Fiduciary Responsibilities.
Click here for information from the Department of Labor on Fiduciary Responsibilities and Group Health Plans and click here for information on Fiduciary Responsibilities and Retirement Plans from the IRS.
Employers and individuals monitoring employee benefits face a high duty of care to carry out fiduciary responsibilities and comply with ERISA regulations.
Failing to do so creates considerable liabilities and exposures. By obtaining adequate fiduciary liability coverage, effectively maintaining plans, and regularly evaluating key elements of the plans, organizations and individuals can proactively reduce their risk and exposure to potential liabilities.
ERISA FIDELITY BOND
Who Needs an ERISA Bond?
Under ERISA, an an employer with fiduciary responsibilities for sponsored benefit plans including Retirement, Health, Life and Disability, must obtain an ERISA Fidelity Bond.
Whar Type of Loss Does it Cover?
An ERISA Fidelity Bond is a type of insurance that protects the plan against losses caused by acts of fraud or dishonesty. Fraud or dishonesty includes, but is not limited to, larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication, and other acts.
When an administrator or trustee – or anyone serving in a fiduciary capacity for an employee benefit plan – steals or embezzles from the plan, the ERISA fidelity bond will cover those losses up to the coverage limit.
Click here for more information from the Department of Labor on what a ERISA Fidelity Bond is and who needs one.
Click here for a link to a Fact Sheet on ERISA Bonds from our preferred carrier Colonial Surety.
FIDUCIARY LIABILITY INSURANCE (FLI)
FLI Protects Benefit Plan Sponsors / Fiduciaries
Although an ERISA fidelity bond covers the participants of your plan, it does not cover YOU as the fiduciary from personal liability. Fiduciary liability insurance gives you peace of mind that your personal assets are protected from a breach of responsibility in the administration or handling of an employee benefit plan.
Lawsuits can expose fiduciaries to numerous claims by plan participants and beneficiaries. These exposures include claims for failing to make timely contributions, not following plan documents, failing to prudently invest to meet employee expectations, paying excessive fees, and failing to respond to requests for rollovers, distributions, and investment changes.
A Benefits Plan Fiduciary Can Be Held Personally Liable
Under ERISA law, fiduciaries can be held personally liable to the plans’ participants/beneficiaries for breach of fiduciary duties and responsibilities. As such, an individual fiduciary’s personal assets are at risk if he/she does not carry out the required fiduciary obligations.
What Does This Type of Insurance Policy Cover?
Fiduciary Liability Insurance covers the legal defense costs and your personal liability for actual or alleged breaches of fiduciary duties in connection with employee benefit plans. Fiduciary liability insurance is necessary because while the ERISA bond covers the plan for any loss by theft, it does not cover fiduciaries for lawsuits brought by third parties.
Need an ERISA Bond or Fiduciary Liability Insurance?