Who is considered a Fiduciary?

Any individual included in the plan document by name or title, or anyone who has discretionary authority over the administration or management of a plan or its assets. The term is intentionally loosely defined to hold accountable all individuals who may be responsible for misuse of plan assets or a loss to plan participants.

Any employee who has discretionary authority over a plan or who assists in its administration can be exposed to liability. This list of individuals might include an appointed fiduciary, a plan administrator, a human resources employee, or anyone who helps to administer a plan.

When do I need Fiduciary Liability Insurance? And what is ERISA act 1974?

Are you a fiduciary? Are your personal assets at risk? Are you subject to lawsuits, fines, and penalties? Many people are and don't know it.

If you are an owner or officer who makes decisions about your company's 401(k) plan or other qualified employee benefit plan(s), odds are, your personal assets are at risk! Under the ERISA act of 1974 (Employee Retirement Income Security Act), fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of their alleged errors, omissions, or breach of their fiduciary duties.

Employment Liability Insurance does not cover all situations of fiduciary responsibility, especially those regarding imprudent investment of funds.

Why do I need Fiduciary Liability Insurance?

Under ERISA, fiduciaries may be held personally liable for breach of their responsibilities in the administration or handling of employee benefit plans. Fiduciary Liability Insurance is not required by ERISA. However, it is strongly recommended if you are a fiduciary of a welfare and/or pension plan because your personal assets are at stake. Many fiduciaries believe incorrectly that their ERISA fidelity bond protects their personal assets.

Furthermore, many think that this type of coverage is included in their D&O policy. Most D&O policies exclude fiduciary liability exposures as well as those exposures pertaining to the Employee Retirement Income Security Act (ERISA).

ERISA also broadly defines the types of employee benefit plans for which fiduciaries are responsible. This extensive list can include pension plans, profit sharing plans, employee stock ownership plans (ESOPs), and even health and welfare plans.

Moreover, designated fiduciaries are not the only targets of such lawsuits; targets can also include the employer and even the plan itself. Claims can be brought by plan participants, participants’ legal estates, the Department of Labor, and the Pension Benefit Guaranty Corporation. Such claims may include allegations of:

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