Fiduciary Liability

Fiduciary Liability coverage is written to protect the plan fiduciaries in the event that they breach their duties under the Employment Retirement Income Security Act (ERISA).

The duties of the Fiduciaries under ERISA are:

  • Duty of Loyalty
  • Duty of Diversification
  • Duty of Non-Deviation

Plans that fall under ERISA regulations include pension benefit plans, certain types of stock option planc, and welfare pay plans such as medical benefits, disability plans, and vacation pay plans.

A company with Fiduciary Liability would have a duty to defend policy, which obligates the insurance company to assume the defense of a covered claim. The insurance company would use an experienced law firm to defend the company within the limits of liability and, as part of the defense obligations, pay the associated expenses.

Examples of Fiduciary Liability Claims include:

  • The trustees of an Employee Stock Ownership Plan (ESOP) were sued by the Department of Labor( DOL) and company employees who
    faulted the fiduciaries for making imprudent investment decisions. The court ultimately found the fiduciaries failed to conduct impartial reviews of investment options.
  • The plan fiduciaries for a 401(k) Plan received a letter from DOL advising them that after an extensive investigation it appears that they have violated several provisions of ERISA. The DOL alleges the plan fiduciaries did not forward amounts withheld from employees on a timely basis, improperly allowed the plan to make loans to shareholder-employees, made delinquent employer contributions to the plan, failed to make timely distributions to terminated employees, and filed Annual 5500 Reports which falsely indicated that the plan was funded in accordance with the minimum funding requirements of ERISA.
  • A particular state department of labor advises a company that it may commence a lawsuit against it for the funds that it allegedly lost from its 401(k) Plan. The company reportedly transferred the funds from a 401(k) plan managed by one company to another.

Please contact INSUREtrust for assistance with your particular Fiduciary Liability needs and questions.

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