Implement fiduciary liability insurance
Top 10 ways to reduce your fiduciary liability #7
Many people are confused about fiduciary liability insurance and believe they are already sufficiently covered. But this is often not the case. It is a good idea to review any policy to confirm that it specifically addresses coverage for ERISA fiduciary breaches and claims, and to what extent it does so.
If the policy does not specify coverage for ERISA fiduciary breaches, a so-called ERISA rider or separate policy might be considered. If plan co-fiduciaries are indemnified by the company, the company should be named beneficiary. If there is no indemnification, the fiduciaries should be named beneficiaries.
It’s important to note that fiduciary liability insurance is not the same as a fidelity bond. A fidelity bond required under ERISA specifically protects the plan against losses due to fraud or dishonesty on the part of individuals (such as plan fiduciaries) who handle plan funds or other property. Fiduciary liability insurance generally protects fiduciaries and their personal assets from lawsuits alleging breaches of fiduciary responsibility, such as imprudent investment decisions or selections of vendors.