Fiduciary Liability Insurance

Frequently Asked Questions

• What is the difference between an ERISA Bond and Fiduciary Liability Insurance?

  An ERISA Fidelity Bond is required by the U.S. Department of Labor and protects the assets of the retirement plan from theft. Fiduciary Liability Insurance protects plan sponsors and their companies in the event of an actual or alleged breach of duty. Remember, even if you are not liable, you can be sued—and the defense costs alone can be ruinous. For example, it can cost over $600 per hour to secure a lawyer with an ERISA specialty if you are named in a lawsuit.

• If my ERISA bond is not from Colonial, can I still obtain Fiduciary Liability Insurance from Colonial?

  Yes! As part of our commitment to helping U.S. SMBs grow and thrive in an increasingly complex environment, Colonial’s Fiduciary Liability Insurance is now available to any company that sponsors a retirement plan and already has the ERISA bond in place. As a value add, with the purchase of Fiduciary Liability Insurance. Colonial includes Cyber Liability Insurance, with limits up to $50,000.

• How can I obtain Colonial’s best value for Plan Sponsors?

  Colonial’s multi-year packages provide the greatest overall convenience, efficiency and value to plan sponsors. Packages include Fiduciary and Cyber Liability Insurance, as well as the ERISA Bond. By locking in your multi-year rate, you save money and time while ensuring continuous compliance and protection.

• What does fiduciary liability insurance cover?

  It covers the legal defense costs and your personal liability for actual or alleged breaches of fiduciary duties in connection with employee benefit plans. Thousands of ERISA lawsuits are filed each year, and with staggering defense costs required to defend those suits. Fiduciary liability insurance is necessary because while the ERISA bond covers the plan for any loss by theft, it does not cover fiduciaries for lawsuits brought by third parties.

• How worrisome are ERISA lawsuits to Small Businesses?

  Very! With years of successful litigation involving big businesses having set the precedent, “cookie cutter” allegations against small businesses are now on the rise. Each year, thousands of ERISA lawsuits expose fiduciaries to claims by plan participants and beneficiaries. Claims include: failing to make timely contributions, not following plan documents, failing to prudently invest based on employee expectations, paying excessive fees, and failing to respond to requests for rollovers, distributions, and investment changes and ever a Cyber breach.

• My company has committees and service providers who share fiduciary responsibilities for the plan. Do I still have fiduciary liability?

  Yes.  The reality is that under ERISA law, any individual involved in the management of an employee benefit, such as a 401k plan, can be personally liable to the participants and beneficiaries.