For many employers, offering an employee benefit plan like a 401(k) is a way to attract and retain workers. But it will mean nothing if your business collapses under staggering litigation costs that can occur if the plan fiduciaries do not administer it according to the federal Employee Retirement Income Securities Act of 1974 (ERISA). Having the right insurance is critical to the well being of your company - particularly given growing exposures in today's volatile climate.
Why you need protection
Defending a claim, even if it is without merit, is expensive and time-consuming. According to a Tillinghast survey, the average cost of paid claims was $994,000, with an average reported defense cost of approximately $365,000. Moreover, 69% of substantive ERISA litigation in district courts is resolved in favor of plaintiffs and the occurrence of ERISA litigation is on the rise.
ERISA expands your duties and liabilities
A plan fiduciary is anyone who has discretionary control over employee benefit plan assets. As fiduciaries, those individuals managing your company's retirement and health plans have an obligation to act solely in the interest of plan participants and beneficiaries - not the company - when making decisions about the plans. And, as fiduciaries, they're held personally liable to the plan participants and beneficiaries for errors or omissions or any breach in their fiduciary duties as outlined in ERISA.
Those duties include:
- Making prudent investment-related decisions, including diversifying the investments
- Prudently selecting and monitoring outside firms hired to manage the plans
- Providing benefits
- Defraying expenses as is reasonable
- Following plan terms
Be prepared for today's growing exposures
It's never been more important than now to be protected. The downturn in financial markets, company downsizing and changes in law put fiduciaries at greater risk than ever. Contact Buckman-Mitchell, Inc. for more information about fiduciary liability coverage today.
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This material does not amend, or otherwise affect, the provisions or coverages of any insurance policy or bond issued by Travelers. It is not a representation that coverage does or does not exist for any particular claim or loss under any such policy or bond. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy or bond provisions, and any applicable law. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations.
