Situations of Fiduciary Liability

Fiduciaries that oversee the administration of employee benefit plans are under constant risk of being held liable for their actions as they relate how the plans are administered or operated. While coverage for a specific claim will vary under the terms of the insurance policy the fiduciary holds, the following areas are some of the more common fiduciary crime scenarios.

Areas of Defined Contribution

In this area of benefits, there are several things that could happen. A third-party service provider misrepresents or deceives the employer about the operations or embezzles the contributions. Administrators could also be held liable for not processing requests or changes in a timely manner. Companies that use their own stock for a plan investment can also be held responsible if the value declines significantly.

Areas of Defined Benefit Pension Plans

There could be trouble when employees or their family realizes there has been a miscalculation of pension benefits. Claims could be opened when investments arent monitored or the investment managers. Breaches of personal information and conversion of a defined benefit to cash without supplemental adjustments are also reasons for a claim to be filed.

The risks are complex, and the situations can vary greatly. Fiduciary insurance is a way to address the financial impact these claims could have on a company or the fiduciary responsible for the situation.