Fiduciary Liability – Where does it come from?

  • Employee Retirement Income Security Act (ERISA) of 1974.
  • Common Law.
  • State Statute.

Who comes under ERISA?

  • Fiduciaries.
  • “Surprised Fiduciaries.”
  • “Parties in interest.”
  • Employees of above

What happens when you violate ERISA?

  • Fines.

Who are fiduciaries?

  • The person who administers your company’s benefits.
  • Anyone who is involved in the rendering of:
      a) Management of benefit plans and their assets.
      b) Investment advice to benefit plans or their participants

Who are “Surprised Fiduciaries”?

  • Company officers and directors.
  • Member’s of a plan’s Investment or Administrative Committee.
  • Insurance Agents, Stock Brokers, and Accountants.


  • Despite any indemnification agreement that may exist, EACH FIDUCIARY IS PERSONALLY RESPONSIBLE to the benefit plan for any loss caused by improper action, or inaction, on his/her part.
  • If two or more fiduciaries both contribute to a loss EACH IS LIABLE FOR THE FULL AMOUNT AND NEITHER CAN MAKE THE OTHER SHARE THE REPAYMENT.

A few fiduciary liability examples:

  • Fiduciary/Employer failed to carry required amount of Fidelity cover at time of loss (ERISA requires, as a minimum, Fidelity cover in the amount of 10% of the plan funds or $500,000, whichever is less).
  • Fiduciary/Employer failed to realize that the above bonding requirement applies separately to every plan sponsored by the employer. An employer sponsoring a pension plan, a health insurance plan, a group life plan, a sick day plan and a paid vacation plan could easily have a $2,500,000 Fidelity coverage obligation!
  • Imprudent choice of insurance company, mutual fund or third-party service provider.
  • Faulty advice or counsel!
  • Fiduciary purchases Fiduciary liability cover with his/her own money is subject to insurer’s “RIGHT OF RECOVERY” clause against any insured who breaches their fiduciary responsibility.
  • Improper amendments to plan documents
  • Denial or change of benefits
  • Improper disclosure to plan participants
  • Administrative error, etc.


  • Insurance for this exposure is cheap depending on asset size – – premiums usually run from $100 to $1,000 annually.