Think your business is safe from fiduciary liability claims? Think again. Fiduciary liability insurance protects companies and plan administrators from legal and financial risks associated with managing employee benefit plans. In this article, we expose the seven costly risks you didn’t see coming and how to safeguard your business.
1. Mismanagement of Employee Benefits
Failing to properly manage employee benefits can lead to costly lawsuits. Solution: Ensure compliance with ERISA (Employee Retirement Income Security Act) guidelines and maintain accurate records.
2. Breach of Fiduciary Duty
Employers have a legal duty to act in the best interest of employees when managing benefit plans. Solution: Work with legal advisors to ensure all decisions align with fiduciary responsibilities.
3. Errors in Plan Administration
Mistakes in benefit plan administration can result in denied claims and legal disputes. Solution: Implement regular audits and training programs to minimize errors.
4. Investment Mismanagement
Poor investment choices can lead to financial losses and lawsuits from employees. Solution: Hire professional financial advisors to manage investments and ensure compliance with fiduciary laws.
5. Failure to Monitor Third-Party Service Providers
Relying on third-party administrators doesn’t absolve employers from liability. Solution: Regularly review third-party service agreements and monitor their performance.
6. Inadequate Documentation
Without proper documentation, defending against fiduciary claims becomes challenging. Solution: Maintain thorough records of all fiduciary decisions and communications.
7. Lack of Fiduciary Liability Insurance
Many businesses assume their general liability policy covers fiduciary risks—it doesn’t. Solution: Invest in a fiduciary liability insurance policy tailored to your company’s needs.
Conclusion
Avoiding these seven costly risks is crucial for protecting your business and employees. Have you reviewed your fiduciary liability insurance coverage recently? Share your thoughts in the comments below!
For more information visit Fiduciary Liability Insurance
