Embroker helps you get fiduciary liability insurance to protect both your business and employees from claims related to the mismanagement of benefit plans and the legal liability arising out of their role as fiduciaries.
An employee benefits plan is a benefit separate from the salary an employee receives from the employer. It’s outlined and directed according to a written plan document. Employee benefit plans are generally divided in two categories: employee welfare and retirement benefit plans.
Retirement plans are designed to ensure that employees will have a sufficient income once they retire. They include things such as defined benefit pension plans, 401(k)s and stock purchase options. On the other hand, welfare benefits programs can vary greatly. Typical benefit plans include medical and dental coverage, paid-time-off, disability and life insurance as well as educational assistance programs.
If your company offers these types of benefits, then you most likely have a department of people that oversees them. But did you know that if one of them makes a mistake your company could be held liable?
Fiduciary liability insurance is the best form of risk management for protecting the interests of your company and your employees in these types of situations. Fiduciary liability insurance is designed to protect the business from claims of mismanagement and the legal liability arising out of their role as fiduciaries. A fiduciary liability policy covers associated legal costs to defend against claims of errors and a breach of fiduciary duty. One of the reasons why some businesses don’t know much about fiduciary liability is the fact that the ERISA does not legally require it.
There are many different types of employer liability coverages, but only fiduciary liability insurance will protect both the company and the individuals against fiduciary-related claims of negligence, mismanagement, or actions that are not in the best interest of the plan participants.
Anyone who is cited in a benefit plan document, as well as anyone who is considered to have decision-making power over the management of the plan and its assets, can be regarded as a fiduciary. Typical fiduciaries are employers, the company’s directors, and officers, and plan administrators and trustees.
Employee Retirement Income Security Act (ERISA) of 1974 is a federal law passed to ensure that employees get the benefits promised in their retirement or welfare plans. Keep in mind that the law doesn’t require the employer to set up such plans – it just guarantees that their provisions will be fully respected.
ERISA also requires the business to take out a fidelity bond equal to a minimum of 10% of an employee benefit plan’s total assets. This bond serves to protect the plan’s assets from fiduciaries misusing or mishandling the funds in any way.
Keep in mind that ERISA bonds are not fiduciary bonds, even though the terms are often used interchangeably. The ERISA bonds will protect the plan itself, while fiduciary liability insurance protects the people in charge of the plan.
Analyzing Insurance Costs for Startups
Embroker Vertical Insurance Index
How much are you paying for your insurance? Are you purchasing the right policies? Find out what founders are doing, and the trends that you may not have seen.
