5 Key Questions on Staffing Fiduciary Liability
1. What’s fiduciary liability?
Fiduciary Liability is the liability that exists under ERISA for the employees of an organization who design, administer and manage an employer's pension, savings, profit-sharing, employee benefit, and health and welfare plans. Fiduciary liability insurance protects employers, their directors and officers and stockholders, as well as those employees who are authorized to administer the plan against errors and omissions claims made against them by employees and plan beneficiaries.
2. Who’s a fiduciary?
A fiduciary is defined as a person or persons who exercise discretionary authority or control with respect to the management or administration of the plan or its assets. These individuals can be held personally liable to the plan beneficiaries for breach of their fiduciary duties in administering and managing the plan.
3. What’s the Affordable Care Act’s impact on fiduciary liability exposures?
The ACA has dramatically amended and expanded ERISA, and therefore, the duties of employers offering fully or partially self-funded plans. In addition to the basic mandate of offering minimum coverage and making it affordable, this can present employers with many other challenges relating to the plan structure in the areas of auto enrollment requirements, mandatory coverage offerings, premium differentials based on participation in health and wellness incentive programs, W2 reporting and more.
In addition, employers are responsible for proper and timely communication to employees of options, alternatives and ongoing administration of such employee benefit plans. The combination of these new requirements is likely to stretch and stress employers and their HR staff, which can increase the likelihood of unintentional errors and omissions.
The ACA has also resulted in more frequent and intensive ERISA compliance reviews of self-funded plans. Finding errors in plan administration can result in fines and potential civil or even criminal action against the plan fiduciaries.
4. What coverage is available?
Carriers are starting to address ACA civil fines and penalties within their Fiduciary liability coverage form. Coverage is most commonly found via a “sublimit” in the amount of $100,000-$250,000 and coverage terms can vary from carrier to carrier.
The ACA has also increased exposure in the area of employee benefit liability (EBL) coverage. Employee benefit liability is related to Fiduciary Liability and provides coverage for the failure to enroll an employee in a benefit plan, as well as the administration of improper advice regarding a plan’s benefits.
Whether a result of incorrectly understanding the ACA or just an internal paperwork error, an employer may find that they’ve wrongly misclassified a “full-time” employee as a “part-time” employee and may find themselves named as a defendant in a civil suit by an employee claiming the employer failed to provide them with healthcare coverage.
5. What’s the bottom line?
Fiduciary Liability is relatively inexpensive to purchase. Due to the complexities of navigating the ACA and the additional workload imposed on your employees, it’s a coverage we highly recommend to our staffing clients. This can often times be “bundled” onto the same policy as your directors & officers or other management liability coverage for savings. EBL is most commonly structured as an “add on” coverage to general liability policies and is also very affordable.
For more information, check out our latest fiduciary liability video.
- Why Staffing Companies Need Fiduciary Liability Coverage
- ERISA Bonds vs. Fiduciary Liability Insurance
- How to Avoid a $400,000 Fiduciary-Related Claim
- Self-Funded Plans Are Like a Great Chili
- Errors & Omissions Insurance: A Cost-Effective Approach to Protecting Your Business
- Liability E-Book
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