Pension Bonds & Fiduciary Liability Coverage
For Risks Associated with Employee Pension & Benefit Plans
If you provide your employees with a pension or benefit plan that is covered by the Employee Retirement Income Security Act (ERISA) such as a pension or 401k plan, ERISA requires a bond to protect the plan and its participants against fraud or dishonesty by a plan fiduciary.
Under ERISA, the bond must be valued at an amount that is at least 10% of the plan’s assets, with a minimum bond of $1,000 and a maximum bond of $500,000 (or $1,000,000 if plan’s assets are invested in employer securities). If you fail to obtain a bond, you could be subject to fines or penalties. The coverage is affordable and easy to put in place.
Another type of protection that should be considered if your business sponsors employee benefit or pension plans is Fiduciary Liability coverage. This coverage, which can be purchased on its own or in combination with other management liability coverage, protects individuals who are fiduciaries or administrators of these plans. Under ERISA, a fiduciary can be held personally liable for losses to a benefit plan as a result of their negligence or breach of duty.
A plan’s fiduciaries usually include the trustee, investment advisers, and all individuals exercising discretion in the administration of the plan. Whether an individual or an entity is a fiduciary is based on whether they are exercising discretion or control over the plan. Protection for the plan’s fiduciaries should be considered in light of today’s litigious environment.
(Information provided is a summary only. For complete terms and limitations, please refer to the applicable Certificate or Policy of Insurance. Specimen copies available upon request.)