When it comes to navigating the complexities of retirement plan management, retirement plan sponsors should know the answer to this crucial question: What is fiduciary liability insurance?
Understanding the definition and purpose of fiduciary liability insurance can be helpful to retirement plan sponsors as litigation against sponsors expands and the intricacies of fiduciary responsibility become ever clearer. It can also be crucial in protecting yourself and the retirement program you manage.
Many people involved in the administration of these programs are not aware of their direct, personal responsibility. We've put together this “101” guide for retirement plan administrators like you to learn about fiduciary liability insurance and how it can safeguard your role as a retirement plan administrator.
Fiduciary liability insurance is a form of protection for individuals and entities who manage and have authority over employee benefit plans. It covers associated legal costs and claims resulting from allegations of fiduciary breaches.
Litigation against retirement plan sponsors is rising, highlighting the need for fiduciary liability insurance. Many administrators are not aware that they can be held personally liable for any mismanagement or breaches of fiduciary duty. To protect yourself and your retirement program from potential lawsuits, having the right insurance coverage is essential.
Fiduciary liability insurance is designed to provide financial protection and coverage for claims related to the management of employee benefit plans, including retirement programs. Fiduciary liability insurance offers a defense against a slew of potential administrative missteps, ranging from improper advice or disclosure to misrepresentations and wrongful denial of benefits. Recently, fee management has been highlighted as well.
Given the dramatic rise in premiums and more stringent requirements set by carriers, this insurance can prove vital in maintaining the financial health and integrity of a company's retirement program. It offers coverage for:
As a retirement plan administrator, this coverage ensures that you are protected from personal liability. It also safeguards the interests of retirement program participants and can demonstrate to plan participants that fiduciaries take their responsibilities seriously.
With increasing litigation against retirement plan sponsors, having adequate fiduciary liability insurance is more important than ever. Premiums for this type of insurance have increased significantly recently, making it essential to understand coverage options and requirements. You should also consider the policy's scope, including specific exclusions and limitations.
Insurance carriers now have more complex requirements for issuing policies, including an established and repeatable fiduciary process — which is often a required underwriting criterion. TruePlan can help design, implement and manage the fiduciary process, improving your chances of securing an appropriate insurance policy (see details below).
Real-world scenarios underscore the value of fiduciary liability insurance. For instance, a sponsor who faces litigation due to alleged mismanagement may rely on this insurance to cover costly legal defenses and, potentially, the lion's share of any court-awarded damages. A real-world example is Spano vs. Boeing, where plaintiffs alleged Boeing charged excessive fees to 401(k) plan participants.
TruePlan is a trusted partner that specializes in fiduciary risk management for retirement plan administrators. We provide expertise in designing, implementing and managing a comprehensive fiduciary process. By working with TruePlan, you can enhance your fiduciary risk management strategy, meeting the requirements set by insurance carriers and securing the appropriate policy for your retirement program.
To get more information on this topic, check out our help fiduciary resources:
As a retirement plan administrator, understanding and securing fiduciary liability insurance is of utmost importance. With the expanding litigation landscape, it is essential to protect yourself and retirement program participants from potential claims.
If you have questions or concerns about fiduciary liability insurance for retirement plan administrators, contact us today to learn more about our retirement plan services and how we can best support you.