Fiduciary Insurance Misconceptions | A Guest Post
One frequently asked question is: I have an ERISA Fiduciary bond — is that the same thing as fiduciary insurance?
The answer is no. ERISA bonds cover only theft, while a fiduciary policy is designed to cover errors and/or omissions.
So, that begs the question: what is a fiduciary liability policy?
A fiduciary liability policy protects the personal assets of a plan fiduciary resulting from allegations of a breach of fiduciary duties.
What if I am not named in the plan documents as a fiduciary, am I still covered?
Most quality fiduciary insurance policies will cover deemed fiduciaries based on their activities connected to any ERISA plan at the Plan Sponsor.
Do fiduciary policies only cover 401ks?
There are two broad categories of benefit plans falling under ERISA where fiduciary coverage would extend:
1. Retirement Plans: defined benefit pension plans, profit sharing such as 401(k)s , stock bonus plans and even employee stock ownerships plans (ESOP)
2. Welfare Plans: medical dental, life and disability
What can fiduciary insurance policies cover?
1. Breach of fiduciary duties
2. Negligent errors and omissions
3. Improper disclosures to plan participants
4. Remiss investment advice
5. Imprudent choice of outside service provider (OSP)
6. Faulty advice of counsel
7. Improper amendments to plan documents
Isn’t this coverage included in our Directors and Officers Policy or Employment Practices liability Insurance?
Review the policy carefully; most other policies exclude fiduciary liability exposures, as well as those exposures pertaining to ERISA.