You may not think communications with plan administrative staff could cause a fiduciary breach, but you would be wrong. Plan administrative staff members are functionally plan fiduciaries when they communicate with plan participants and their beneficiaries.
According to the appeal court in In re: Emily DeRogatis (2nd Cir. 2018), because plan administrative staff are functionally fiduciaries in this scenario and therefore have a fiduciary duty to the plan participants and their beneficiaries, the administrative staff has the duty to provide complete and accurate information when speaking to plan participants and their beneficiaries. This applies to written and verbal communications.
The court determined that if the plan itself was clear in communicating benefits to participants, misstatements by the administrative staff would not undermine the plan itself. In those cases, there would be no fiduciary breach. But where the plan itself is not clear, misrepresentations by the administrative staff could be a breach of fiduciary duty. Length of the document, ease of understanding language in the document, index availability, and typeface used were considered by the court in determining whether the plan made its benefits clear.
Unclear plan summaries can cause people to ask administrative staff their questions regarding benefits, and if they misrepresent the facts regarding the plan benefits, you could have a fiduciary breach on your hands.
How can you protect your administrative staff from a breach of fiduciary duty just due to an unclear plan? Fiduciary liability insurance!
Where the ERISA fidelity bond is set in place to protect the participants of the plan it, however, does not protect YOU as the fiduciary.
Colonial Surety Company is a Treasury Listed surety company providing ERISA fidelity bonds packaged with fiduciary liability insurance including a cyber liability insurance endorsement at no extra cost. Colonial is one of the leading providers of ERISA related products, offering bonds approved by the Dept. of Labor. We make it easy to obtain your bond instantly as well as allowing you to purchase retroactive insurance for the years the plan was not previously covered.
Under ERISA, fiduciaries may be held personally liable for a breach of their responsibilities in the administration or handling of employee benefit plans. Under ERISA 410, the plan cannot relieve you of this responsibility with indemnification language, however, it specifically permits persons with personal liability to purchase fiduciary liability insurance. Covering yourself with fiduciary Lliability insurance gives you a piece of mind that you are protected. Learn how to bundle your ERISA bond and Fiduciary Liability Insurance for a discounted rate.
If you would like to learn more about purchasing an ERISA fidelity bond, or an ERISA fidelity bond package including fiduciary liability insurance and a cyber liability insurance endorsement at no extra cost, call 877.650.9661 or email ERISADept@colonialsurety.com. Learn more about becoming a Pension Professional Partner here.