A rising tide of lawsuits sweeping the nation centers upon ERISA fiduciary obligations of employers in their role as group health plan sponsors, particularly the “duty of prudence” in selecting and monitoring health plan vendors. These fiduciary failures harm plan participants and beneficiaries by paying more than they should.
SOURCE: Chubb
Did you know 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?
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.
Fiduciary Liability Insurance Policies are arguably one of the least understood insurance products on the market. However, it may be the only coverage that adequately protects people against liability for managing or administering an employee benefit plan
Fiduciary insurance protects 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. In addition to being an effective risk transfer tool for companies, fiduciary liability insurance is a vital means of protecting fiduciaries’ personal assets.
Who is Considered a Fiduciary?
Any individual included in the plan document by name or title, along with anyone who has discretionary decision-making authority over the administration or management of a plan or its assets may be considered a fiduciary under ERISA. Fiduciaries commonly include the plan sponsor (which is typically the employer), the plan trustee and the plan administrator, directors and officers (including when they appoint other fiduciaries or retain third party service providers) and internal investment committees.
Do you know the difference between ERISA Bonds and EBL Insurance vs Fiduciary Liability Insurance?
“Breach of fiduciary duties is rampant. Yet most plan sponsors do nothing to mitigate their risk. Eliminating risk is the best course of action yet few plan sponsors make the effort to do that” – Bill Rusteberg
