What is Fiduciary Liability Insurance?
Fiduciary liability insurance protects businesses and employers from claims where there was a breach in fiduciary duty. Read on to learn more.
The Employee Retirement Income Security Act of 1974 (ERISA) says common fiduciaries include the following:
- Plan administrators
- Officers and Directors
- Plan trustees
- Investment committees of an internal nature
- The employer
Employee Benefit Plans
These are run by fiduciaries and usually include:
- Pension plans as well as employee stock purchase and options plans
- Welfare plans including but not limited to life, disability, dental and medical plans
What is ERISA law?
- ERISA was passed in 1974 to make sure employees get the benefits they have invested for.
- ERISA is there to make sure plans are run properly and meet specific standards
- ERISA created fiduciary liability exposures for employers that offer employee benefits plans resulting in fiduciary liability insurance coverage becoming very popular in the 1970’s
Fiduciary liability insurance only covers the insured company and its employees involved in fiduciary roles. It never covers outsiders who may be there to guide and advise.
What Breaches Are Covered?
- Plan administration errors
- Counseling errors
- Giving negligent or poor quality advice
- Making investments considered risky in a pension plan that is defined
- Unfair changes in benefits or benefits denied in an unfair manner
Any company that offers benefits plans can be exposed. Large organizations may have more expertise at hand but the impact on small businesses can be devastating as well.
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