What is Fiduciary Liability?
Fiduciary Liability is an insurance policy that provides coverage for individuals who are involved in administering or managing employee benefit plans.
Who is a Fiduciary?
Under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary is:
- anyone that is mentioned in the plan document by name or title;
- anyone that exercises discretionary decision-making authority with respect to plan administration or management; or
- anyone who gives investment advice to a plan or its participants.
This may also include “functional fiduciaries,” which are individuals deemed to be a fiduciary by virtue of their actions. For example, the plan sponsor (employer), directors and officers, plan administrator, plan trustee, and internal investment committee members are commonly considered fiduciaries.
What is ERISA?
ERISA is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection to plan participants.
What is a plan?
Employee benefit plans covered by Fiduciary Liability insurance fall into two categories:
- Welfare plans, such as medical, vision, dental, life, and disability plans
- Retirement plans, such as defined benefit pension plans, 401(k) plans, 403(b) plans, Employee Stock Ownership Plans (ESOPs), and stock purchase plans
As a fiduciary, are my personal assets at risk?
Possibly. Section 409 of ERISA explicitly imposes personal liability on plan fiduciaries who violate their fiduciary duties, meaning fiduciaries might have to personally pay for any losses they cause from their personal assets. To compound matters, ERISA also prohibits plans from indemnifying fiduciaries, which means the benefits plan cannot pay for defense costs, awards, or settlements on behalf of a fiduciary.
I have an Employee Benefits Liability policy. Why do I need a Fiduciary Liability policy?
Employee Benefits Liability (EBL) does not provide coverage for ERISA liability. EBL policies provide coverage for errors or omissions in plan administration (e.g., failure to enroll an employee into a plan). A Fiduciary Liability policy covers ERISA liability, as well as errors and omissions in plan administration.
What is an ERISA bond for?
ERISA bonds are a type of surety bond that provides protection for the plan and participants against losses caused by acts of theft or fraud committed by an employee involved in plan administration. Under ERISA Section 412(a), an ERISA bond is required, ensuring that any employee who handles plan funds or property is bonded. Note that ERISA bond coverage is available under our Crime coverage part / policy.
All of our investment decisions and plan administration have been transferred to a third party (investment advisor, trustee, etc.). Do I still have liability?
Yes. As a fiduciary you have the ability to delegate some duties but not liability. Even when using a third party, you still have significant responsibilities including selecting the right third-party service provider who will act in the best interest of your plan participants, monitoring and assessing the performance of both the plan and the third party, and replacing the third party if they are underperforming.
What types of allegations does Fiduciary Liability insurance cover?
Fiduciary Liability insurance covers allegations of ERISA violations and errors and omissions related to plan administration. Common allegations include:
- Wrongful denial of benefits to which an employee is entitled
- Inappropriate investment advice or disclosure
- Lack of diverse investment options or too many investment options
- Conflict of interest regarding investments
- Fiduciaries engaging in prohibited transactions
- Failure to select appropriate third party
- Failure to monitor third party
- Failure to enroll an employee in benefit plan in a timely manner
- Failure to transfer employee contributions in a timely manner
- Excessive fees charged by a third party for investment options
What is the maximum limit you offer?
We offer limits of up to $10M.
What sublimits do you offer?
Subject to underwriting, we offer the following sublimits.
- Section 502(i) penalties - up to $250,000
- Section 502(l) penalties - up to $250,000
- Section 502(c) penalties - up to $250,000
- Pension Protection Act penalties - up to $250,000
- COBRA penalties - up to $250,000
- Section 4975 penalties - up to $250,000
- Health Care Reform Act penalties - up to $250,000
- United Kingdom Pensions penalties - up to $250,000
- HIPAA penalties - up to $1,500,000 (but not greater than policy limit)
Can you write Fiduciary Liability insurance on a standalone basis?
Yes, we can write standalone Fiduciary Liability insurance.
What size risks can you consider?
We consider coverage for private companies and not-for-profits with up to $250M in plan assets with our admitted product and up to $500M in plan assets with our surplus product.
Will you accept a competitor's application to quote?
Yes, we can use a competitor's application to quote and bind Fiduciary Liability insurance. Upon binding, we require the insured to sign our signature bundle, which confirms the limit, coverage and premium. This is not a warranty statement; rather, it is a confirmation of what they are binding.
Form 5500 Integration
What is the Form 5500?
Form 5500 is filed annually with the US Department of Labor to provide information about benefit plans governed by ERISA, including information on the plan’s qualification, financial condition, investments, and operations.
How is this information used?
Coalition’s application includes some of the information provided by employers on the Form 5500, so we can prefill the application with that data to save brokers time when quoting Fiduciary Liability coverage. Learn more about quoting with the Form 5500 data by watching our short demo video.
How did Coalition get this information?
The Department of Labor makes this information publicly available in its EFAST Search tool.
How often will this data be updated?
Form 5500 is filed annually with the US Department of Labor. Coalition will regularly refresh the data in our system as it’s made available by the Department of Labor.
Insurance products are offered in the U.S. by Coalition Insurance Solutions Inc. (“CIS”), a licensed insurance producer and surplus lines broker (Cal. license # 0L76155), acting on behalf of a number of unaffiliated insurance companies, and on an admitted basis acting on behalf of Zurich American Insurance Company (NAIC # 16535). See licenses and disclaimers. Copyright © 2023. All rights reserved. Coalition and the Coalition logo are trademarks of Coalition, Inc.