Fiduciary liability insurance protects individuals and organizations that serve as fiduciaries of employee benefit plans (401(k), pension, health, welfare) against claims alleging breach of fiduciary duty under ERISA (Employee Retirement Income Security Act). Coverage includes defense costs, settlements, and judgments arising from allegations of imprudent plan management, excessive fees, inadequate investment monitoring, and failure to follow plan documents.
Any organization that sponsors employee benefit plans — retirement plans (401(k), 403(b), pension), health plans, and welfare benefit plans. Under ERISA, fiduciary liability extends to anyone who exercises discretionary authority over plan management or assets, including executives, HR directors, benefits committee members, and outside plan advisors. Personal liability can attach to individual fiduciaries, making this coverage essential.
Fiduciary liability policies are claims-made and cover claims alleging breach of fiduciary duty in the administration and management of employee benefit plans. Coverage includes ERISA Section 502(a) claims, DOL investigations, voluntary correction program costs, and prohibited transaction excise taxes. Policies typically exclude fiduciary duties related to employer stock and ESOP transactions as these require separate coverage.
Fiduciary liability limits typically range from $1M to $10M, with most mid-market companies carrying $2M-$5M. Retentions range from $5K to $50K. Premium is driven by plan assets under management, number of plan participants, plan types, and administrative practices. A company with $100M in plan assets typically pays $8K-$25K annually for $3M in fiduciary liability coverage.
Participants in a company's 401(k) plan filed a class action alleging the plan committee selected high-fee investment options when lower-cost alternatives were available, costing participants an estimated $2.3M in excess fees over 5 years. The fiduciary liability policy covered $650K in defense costs and a $1.1M settlement.