Fiduciary Liability Insurance

When a company sponsors an employee benefits plan, it accepts fiduciary responsibility to its employees. This coverage protects from legal liability should a benefit plan administrator practice improper plan care.

Who is Fiduciary Liability Insurance for?

Many companies sponsor employee benefits plans, helping to attract new talent to their workforce. Consider the benefits of 401(k) plans, employee stock ownership plans (ESOPs), welfare plans, and pension plans, to name a few. Benefits plan administrators are undoubtedly fiduciaries; however, companies sponsoring the employee benefits plan also must accept fiduciary responsibility. Fiduciary liability insurance is a type of management liability insurance for fiduciaries.

Sponsors

Businesses who sponsor an employee benefits plan, such as a 401(k).

Fiduciaries

Individuals handling funds or property related to an employee benefits plan.

Companies

Aside from holding direct fiduciary responsibility, companies must maintain integrity and momentum.

Why you need Fiduciary Liability Insurance


Summary

If the plan administrator miscalculates, mishandles, or practices improper plan care, employees will blame all parties involved, including their employer. Fiduciary liability insurance is optional, unlike an ERISA Fiduciary Bond, which is required by law. This policy protects companies from legal liability as it relates to employee benefits plan sponsorship. It covers defense costs, judgments, or settlements against the company.


Reasons for getting Fiduciary Liability Insurance
Protects from legal liability when sponsoring employee benefits plans
Protects employees’ retirement plans
Easily bundled with other must-have risk management policies
Calculation error

Perhaps an employee accuses a plan official of miscalculating their benefits.

Improper counsel

Suppose an employee feels that they were improperly counseling regarding investment decisions.

Dispute about fees

When an employee is upset about investing fees relating to their retirement plan, they might file a lawsuit.

What Does Fiduciary Liability Insurance Cover

You will have to consult your policy documents to confirm exactly what coverage your insurance provides but here are  some examples of what is covered by Fiduciary Liability Insurance:

If the plan administrator miscalculates, mishandles, or practices improper plan care, employees will blame all parties involved, including their employer. Fiduciary liability insurance is optional, unlike an ERISA Fiduciary Bond, which is required by law. This policy protects companies from legal liability as it relates to employee benefits plan sponsorship. It covers defense costs, judgments, or settlements against the company.

 


Risky investments

If a plan official makes risky investments in an employee’s retirement plan.


Bad counsel

If a plan official gives poor or ill-advised advice on investing in an employee’s retirement plan.


Errors

If a plan official makes errors in administering healthcare or welfare plans, resulting in lost or incorrect benefits.


Improper change

If a plan official wrongfully denies or makes improper changes to an employee’s benefits.


Service providers

If a plan official makes an ill-considered selection of third-party service providers.

Fiduciary Liability Insurance Claim Examples

Here are some claim examples that illustrate what Fiduciary Liability Insurance covers

If you’re a fiduciary, you have very specific responsibilities and defined penalties for not meeting those responsibilities. A 401(k) plan administrator (e.g. Vanguard) would be considered a fiduciary since they have the actual hands-on control of the investment. What some businesses don’t realize is that they, as sponsors, are fiduciaries too. They can also be held accountable for the plan’s losses if it’s determined that they didn’t exercise proper care.

Fiduciary Liability Insurance FAQs

No. These two products are similar as they both address fiduciary responsibility, but they vary in distinct ways.

Typically, fiduciary liability insurance is highly affordable. The reason is that these policies tend to have a favorable loss history and are often bundled together with directors & officers or general liability insurance. The retentions are usually low for the same reason. It’s common for smaller businesses to have fiduciary liability insurance with a $0 retention.

How it works

Finding insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined & intuitive as possible.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

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