Insurance & Risk Management
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Protecting the fiduciaries of employee benefit plans can be complicated. If your company sponsors a retirement or health plan for employees and if you are involved with the management of that plan, you are likely considered a “Fiduciary” and can be held personally liable for what happens to the plan (under ERISA law).
Fiduciary Insurance policies protect the fiduciaries (people managing employee benefit plans) for money they are legally obligated to pay as a result of an actual or alleged “wrongful act” or breach of their fiduciary duty. The policy also provides coverage for defense costs associated with defending a claim made against the fiduciary for an actual or alleged wrongful act.
DELAYED BALANCE TRANSFER – A couple employees claimed that the newly selected 3rd party plan administrator improperly delayed transferring fund balances in the plan from one investment option to another, as directed by the participants. Subsequently, the employees sued the plan trustees for more than $50,000 in lost investment income. Defense expenses were $25,000.
FAILURE TO PROVIDE INFORMATION – An employee approaching retirement age discovered she had never enrolled in the company’s 401(k) plan. The employee sued the company and plan trustees alleging the plan administrator failed to properly advise her on how to enroll and the enrollment was not automatic. She sued the company for $130,000.
FAILURE TO DIVEST AN UNDERPERFORMING INVESTMENT OPTION – Plan participants alleged that the fiduciaries of a 401k plan had failed to divest the plan of an investment option that was not keeping pace with the performance of a comparable index and resulted in poor returns. The participants sued the company for lost returns and legal costs.
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