Today, many of the companies we provide insurance to offer a wide range of benefit plans to their employees like 401-K, ESOPs, defined contribution plans, health and welfare benefit plan, or plans related to compensation for unemployment, social security, or disability. These plans require one or multiple employees of the company to be designated as managers of the benefit plans.
Such managers owe fiduciary responsibility to all the employees as well as government regulatory authorities for proper administration and functioning of the plans. The fiduciary relationship is further underlined by the Employee Retirement Income Security Act (ERISA) of 1974. The law mandates that a.) Managers of benefits plans serve as fiduciaries and b.) are personally responsible for any mistake, omission, or breach of their duties as managers of the benefit plans. Managing these plans can become a liability to our customers. We help companies save on commercial insurance coverage and further help them by protecting them with fiduciary liability insurance policies that are included in most standard commercial insurance policies.
The nature of the liability of the plan’s manager and all other employees performing the duties of the fiduciary, as laid down by the ERISA, is very wide in its scope and application. The employees, their estates, or even the Department of Labor and the Pension Benefit Guarantee Corporation can claim compensation for the following breaches:
Further, fiduciaries also stand responsible for errors and omissions of third parties offering administrative services like consulting, actuarial calculations, accounting, investment advisors, and legal advice in relation to the benefit plans.
The wide and expansive definition of breaches puts all companies offering benefits plans to its employees at risk of prolonged litigation that can be debilitating for the company’s as well as the employee’s financial condition.
The risk is exacerbated by the fact that the law disallows companies from indemnifying or compensating employees held personally liable for such breaches. Further, standard commercial insurance policies often have clauses that exclude fiduciary liability. In such a scenario, opting for a standalone fiduciary liability insurance is the simplest and most elegant way to safeguard your company’s fortunes.
The biggest advantage of buying a fiduciary liability insurance plan is that the managers won’t be relying solely on corporate indemnification for their personal liability. With benefit plans managing assets of considerable value, even a minor claim for compensation can lead to disastrous consequences for the company as well as the manager. Such a plan ensures that this risk is completely negated.
Secondly, the fiduciary can perform his or her duties without fear of loss of personal assets. While rule related to personal liability rule has been mandated to ensure proper administration of the plans, there is always the risk of even bona-fide judgment calls turning out to be a mistake over the long run. Paying the premium for this plan ensures fear of claims or litigation does not become the sole factor in management of the plans.
Finally, such a plan will allow companies to manage transactions like mergers, amalgamations, takeovers, etc that involve inevitable increase in fiduciary risk without any hassles. Our fiduciary liability insurance plans will ensure all parties—the company, fiduciary, as well as the employees—are protected at all times.
If you are searching for a one-stop destination for a fiduciary liability plan along with other commercial and credit insurance services, use the link below to provide your contact details, and a member of our Leykell Insurance staff will be in touch to discuss your requirements.