ERISA requires plan fiduciaries to obtain a fidelity bond, but does not require them to carry insurance. This week we asked NAPA Net readers what they carry – and what they recommend.
Just over half (53%) of this week’s respondents said that fiduciary insurance/coverage levels were not only a factor in their current RFP process, but were a growing one. About a quarter (27%) said that it was a factor, while the remaining 20% said it wasn’t.
As for what kind(s) of insurance they recommend:
- 87% said fiduciary liability insurance;
- 50% said employee benefits errors & omissions (E&O); and
- 28% said ERISA bond, beyond the minimum required.
Roughly a quarter said they don’t recommend anything (or at least not anything beyond the ERISA bond minimum)
Apparently this is something of a moving target: 58% said that recommendation had changed in the past five years, and another 13% said it had changed “considerably” in that time frame. For the remaining 29%, of course, it was apparently status quo.
Take-up Rates
There’s recommending, of course, and then there’s take up. Among this week’s respondents, a clear plurality (37.5%) “generally” take nothing beyond the ERISA bond minimum. That said, roughly a quarter each said their clients generally take employee benefits E&O, and one in eight opt for fiduciary liability insurance. The remaining quarter? Well, for them there is no such thing as “generally.”
Those findings do represent a change over the past five years: 37.5% said it was, and another 12.5% said it was a considerable shift for them. About 1 out of 10 said it was some change – more in the amount than the type. As for the rest? They hadn’t seen any shifts here.
As one reader explained, “The insurance agent generally determines the appropriate amount. Important to use someone familiar with it.”
“I still encourage/insist on a defendable prudent process for decision-making; I do not want committees to rely on insurance in lieu of effort,” explained another.
But my favorite comment this week came from the reader who said, “Yes, sponsors are already resisting the “Fiduciary Duty” lecture. I prefer to approach sponsors and participants from an education standpoint, and the education for sponsors starts with the name Schlichter.”
Thanks to everyone who participated in our weekly NAPA Net reader poll!
Got a question you’d like to run by your fellow NAPA-Net readers? Curious about the industry perspective? Post it in the comments section below, or email me at [email protected].
