Why Directors Are Accountable To Their Shareholders.
FIDUCIARY LIABILITY COVERAGE Fiduciary liability, also known as pension trust liability, provides coverage for loss that the insured becomes legally liable to pay because of a claim made against the insured for any alleged wrongful act by such insured or by any other person for whom the insured is legally responsible. Fiduciary liability coverage provides one way of reducing the risk and providing protection for the sponsor organization and individual fiduciaries. Fiduciary liability is personal, absolute and unlimited.
Plan Plan Fiduciaries can never completely insulate themselves from liability. Plan Fiduciaries can take steps to reduce their personal liability, however ultimately they are responsible for the management and administration of the benefit plan. Taking the time to develop and document such policies and procedures will help to protect the plan participants and plan fiduciaries, as well as the plan sponsor. Under a fiduciary liability policy, the insured includes the following:The sponsor organizationThe plan(s)Any natural person in his/her capacity as fiduciary or administrator of the plan(s) Most fiduciaries are unaware of their personal financial risk or that of the sponsor organization. The sponsor organization, the plan, and anyone exercising any discretionary authority or control over the management or administration of an employee benefit plan or its assets, can be sued by employees for any alleged breach of fiduciary duty. Pricing for fiduciary liability insurance is based upon individual benefit plan assets, annual contributions, past loss experience and funding practices of employers. It is difficult for many employee benefit plan decision makers to grasp the "personal liability" concept. Such coverage has no bearing on any allegations of liability for mismanagement of benefit plan assets, or the decision to utilize a TPA, for example. Also, with the demands of employees relating to benefit plan options, enrollment periods and continuous changes in individual coverage details, many human resources managers are just too busy to dwell on possible liability scenarios. Fiduciary Fiduciary Liability protects the fiduciaries of employee benefit plans for sums they are legally obligated to pay as a result of actual or alleged "wrongful act" or breach of their fiduciary duties. Under the law, a fiduciary can be held personally responsible for shortages in the benefit plan's assets resulting from a breach of fiduciary duty, such as improper investment of funds. Liability A fiduciary liability policy protects the personal assets of a plan Fiduciary due to allegations of breach of fiduciary duties. 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. And just because an employer chooses to utilize a third party administrator (TPA) for 401(k) plans or managed care arrangements doesn't relieve the employer of the personal liability imposed upon persons with discretionary judgment authoritythe personal liability aspect of ERISA cannot be delegated to another person or organization. Yet, the potential for fiduciary liability extends beyond actual causation. |