Most employers offer benefit plans as a way to attract and retain employees. However, fiduciaries are at risk to be held personally liable for what happens to that plan under the Employee Retirement Income Security Act (ERISA). If you are involved in the management of a retirement or health plan for a company, then you are likely considered a fiduciary.
As a fiduciary, you have a legal obligation to act prudently and in the best interest of plan participants. It’s your responsibility to select advisors and investments, minimize expenses, and follow plan documents.
You need coverage that will protect your personal assets against a claim. Most directors and officers and employment practices liability policies specifically exclude claims for ERISA violations. Fiduciary liability insurance provides financial protection against administrative errors and omissions and personal liability for breach of duty.
Here are the top five reasons why your organization needs coverage:
- Fiduciaries can be at risk if they breach their duties and be personally required to restore any losses to the plan or restore any profits made through improper use of the plan’s assets resulting from their actions.
- Defending and resolving lawsuits costs time and money. The average settlement is $994,0001, average defense costs are $365,0001 and 69 percent of substantive ERISA litigation is resolved in favor of the plaintiff2.
- You can’t avoid liability solely by blaming plan participants for their investment decisions. Fiduciaries are responsible for providing a broad range of investment alternatives and minimizing the expenses associated with those investment. Since 2006, the plaintiff’s bar has recovered more than $170 million for excess expenses3.
- A fiduciary can be sued for not following the plan documents and plan participants regularly sue claiming denial of benefits in violation of plan documents. More than 9,000 ERISA lawsuits are filed each year on average4.
- A fiduciary cannot escape responsibility by blaming a service provider. According to the Department of Labor, it is the responsibility of the fiduciary to vet and monitor any outside vendor.
For more information on fiduciary liability insurance and to discuss the specific needs of your business, contact McGrath Insurance Group at 508-347-6850 or visit our website at www.mcgrathinsurance.com.
*This article is written for informational purposes only and should not be construed as providing legal advice.