Two words that have caused a lot of headaches and stress for finance chiefs in recent years: Fiduciary Duty. As a result, an increasing number of employers are turning to an additional safeguard.
The safeguard we’re referring to is fiduciary liability insurance.
It’s a step many of your peers are taking to protect themselves from a fiduciary breach. And with good reason.
All it takes is a minor misstep to wind up on the hook for a fiduciary breach. That’s even true in certain situations where the mistake is accidental.
What’s worse, company execs — such as the CFO — have been held personally liable in a number of fiduciary breach lawsuits.
Plus, many financial industry experts don’t foresee the new Fiduciary Rule going away under the Trump administration. That means even more stringent standards for plan sponsors to adhere to.
For employers, the questions becomes: “How do I know if fiduciary liability insurance is right for me?”
At the 2016 Association for Financial Professionals conference, a panel discussion tackled this topic and offered some insight for finance pros on the fence about this option.
Strictly a voluntary proposition
When it comes to fiduciary liability insurance, employers need to keep in mind that employers are never required to carry this protection.
The policy is strictly a voluntary proposition.
In many cases, employers purchase the coverage for their fiduciaries. However, some individuals will purchase this insurance to cover themselves. Reason: The insurance policies will cover claims and losses from fiduciary duty breaches.
According to experts, the ideal candidates for fiduciary liability insurance are: Retirement plans with policies that allow for recourse against any fiduciary who breached its duty to the plan.
Before employers start getting quotes on this type of policy, it’s best to check your company’s general liability insurance policy first. That’s because many policies cover some fiduciary liability and, depending on your situation, that may be enough.
Based on the presentation “401(k) Plan Management Best Practices” at the 2016 Association for Financial Professionals conference in Orlando.
