Excuses, Excuses, Excuses...

There are plenty of excuses for not purchasing a Fiduciary Liability Policy. Let's take a look at some of them.

1. "I have a fidelity bond to cover my fiduciary exposure." Although nearly 50% of fiduciaries think their ERISA-mandated fidelity bond protects their personal assets, it doesn't! The ERISA Fidelity Bond protects the Plan from loss due to dishonest acts of trustees. The fiduciary liability policy protects the personal assets of a plan fiduciary due to allegations of breach of fiduciary duties.

2. "We have turned over all investment activities for our plans to a bank, insurance company, professional investment firm or TPA. We are not involved in handling the plan, so we are not at risk." Plan fiduciaries can never fully insulate themselves from liability, nor transfer the responsibilities for compliance to another party. Plan fiduciaries can take steps to reduce their personal liability by hiring a competent team of experts, but the fiduciary remains ultimately responsible for the management and administration of the benefit plan. Delegating management or administration of a benefit plan to a bank, insurance company, professional investment firm or TPA does not mean delegating fiduciary responsibilities.

3. "We have a 401(k) plan and our employees make their own investment decision, thus eliminating our exposure." The Department of Labor investigates how fiduciaries educate employees regarding available investment options. Plan fiduciaries are also ultimately responsible for determining what investment options will be available to participants and have a duty to monitor those investment vehicles to ensure performance measures.

4. "This coverage is included in our D & O (or other) policy." Look carefully! Most policies exclude fiduciary liability exposures as well as those exposures pertaining to the Employee Retirement Income Security Act (ERISA).

5. "My attorney or accountant said I don't need this coverage ." You may want to get that in writing. ERISA was designed to hold fiduciaries accountable and personally liable for a breach of their fiduciary duties imposed upon them under the law. Remember fiduciaries' personal assets are at risk!

6. "I can't afford this coverage." The question is, can you afford not to purchase a fiduciary liability policy. It is less expensive to purchase a fiduciary liability policy than to retain a competent ERISA defense attorney. Premiums are surprisingly affordable.

7. "My employees would never sue me." While employees (plan participants), are the parties most likely to bring suit against the plan fiduciaries and sponsoring company for a breach of their duties, many times the Department of Labor will bring a class action suit against the plan fiduciaries on behalf of the employee participants.

Every organization has different needs from their Fiduciary Liability Policies. Contact us at Poulton Associates to find the best carrier for your needs or for more information on Fiduciary Liability Insurance.