Employers are accountable for the benefit options offered to employees. According to the Employee Retirement Income Security Act of 1974 (ERISA), fiduciaries are liable for losses to a benefit plan. This applies if the losses occurred as a result of their alleged errors or omissions or breach of their fiduciary duties.
Employees and the government can file a lawsuit against a company, its fiduciaries, and its plans. This is why most companies should consider the protections offered by fiduciary liability coverage.
Fiduciary liability coverage can protect against several types of claims. Some of the most common include denial of benefits, administrative errors, improper advice or counsel, and wrongful termination of a plan.
Any company that offers a retirement plan might need protection against errors in plan administration and breaches of duty under ERISA.
Fiduciary Liability Insurance also fills the gaps in traditional coverage. General Liability (GL) insurance or Directors and Officers (D&O) liability insurance doesn’t cover every possible lawsuit against fiduciaries. A business needs protection against the more expensive and complex ERISA violation claims.
Fiduciaries without fiduciary liability insurance will have to pay for lawsuit defense costs, judgments, and settlements on their own. It’s possible to mitigate fiduciary liability exposure, but not entirely eliminate it. Having fiduciary liability coverage is the best way to protect a business.