A Rising Need for Fiduciary Insurance

If your firm offers any sort of employee benefit plan --- say a 401(k) or health insurance plan --- you need to consider whether you're a candidate for fiduciary liability insurance. These policies protect against claims alleging improper investments, improper disclosures about the plan, or improper choice of outside service providers, among other actions.

Say a company is planning to initiate an early retirement program in a few months, and employees who participate will receive extra benefits. An employee who retires a month before the program kicks off isn't told about it. That may lead to a claim of improper disclosure, says Barry Slevin, an attorney with Slevin & Hart, P.C., a law firm focused on employee benefits, and based in Washington D.C. An improper investment could occur when plan administrators invest in the company's stock, knowing that the company's future is uncertain, Slevin adds.

Claims of a breach of fiduciary duty can be brought either by a plan participant or a government agency, such as the Department of Labor. Even if the claims have no merit, defending against them can be pricey. That's not all. As a fiduciary, your home, bank accounts and other personal assets can be at risk.

What's more, you probably have a higher risk of being named in a claim than you think.

For instance, even if you're not actually named as a fiduciary to the plan, if you have discretionary authority over the plan, you probably are a fiduciary-in-fact, says Michael Keeling, an attorney and president of the , a group that represents sponsors of employee stock option plans. "When you've got your hands close to an ERISA or ESOP plan, you're more than likely to be a fiduciary," he says. "It's taking a lot of risk to assume that you're not a fiduciary unless you're named in the document.""8"