The federal government’s Employee Retirement Income Security Act (ERISA) of 1974 requires every employer to abide by the set standards in the administration of employee welfare and retirement benefit plans. Failure to comply with ERISA standards can amount to a breach of fiduciary duty and consequently, costly litigation and judgment. This means fiduciaries should take the necessary measures to protect their organizations as well as their personal assets. One way to do this is to carry fiduciary liability insurance coverage.
What Does Fiduciary Liability Insurance Cover?
As a fiduciary, the government expects you to act in the best interests when it comes to managing your organization’s employee retirement and welfare plan. Any slight administrative error or omission can result in an expensive lawsuit as well as reputational damage. That’s where the right fiduciary liability insurance comes in handy. This policy covers the resulting legal costs, penalties, and settlements in case an employee sues you for fiduciary negligence. Fiduciary liability insurance covers a wide range of allegations and claims, including:
- Administrative errors and omissions
- Embezzlement of retirement funds
- Poor management of employee benefit plans
- A breach of your fiduciary duty
- Denying employee benefits inappropriately
- Violation of ERISA policies
- Overcharging employees
Who Needs Fiduciary Liability Insurance?
American businesses have about an 11.7% chance of being sued by their employees for employment-related issues, with breach of fiduciary duties being among the top reasons. Therefore, if your business offers employee benefit programs, you should carry the right fiduciary liability insurance. This policy is also necessary if you serve in a fiduciary capacity on behalf of third parties such as investors. It safeguards the company against fiduciary liability claims and shields every individual working in fiduciary positions. For instance, if the clerk in charge of documenting employee welfare plans omits an employee’s name by mistake, denying them their rightful benefits, fiduciary liability insurance will also protect them from litigation.
Cost of Fiduciary Liability Insurance
The cost of this policy depends on various factors. These include, among others, the insurance provider, desired policy limits, plan assets, number of plan participants, and nature of business. Recently, stringent regulations have led to a surge in the number of 401(k) related lawsuits in the U.S. In response to this, insurers have raised the cost of fiduciary liability insurance coverage. Despite this, the cost is still significantly small compared to the costs associated with a breach of the fiduciary lawsuit, which can run into tens of millions of dollars.
How CF&P Insurance Brokers Can Help
When you are in the market for fiduciary liability insurance, call the reputable agents at CF&P Insurance Brokers. Our experts understand the importance of protecting your business and its assets. We also understand the complexities that are involved in insuring you against potential mistakes and errors related to your fiduciary duties. Schedule a consultation with one of our experienced agents, and you will get the answers you need. Contact us today!