This episode is brought to you by Republic Indemnity. With over 51 years of experience as a California Workers' Compensation Carrier, with an average employee tenure of 17 years and an average account tenure of 10 years, Republic has an 8 plus superior AMVEST financial rating and is backed by the strength and support of Great American Insurance. Republic Indemnity is how producers, policy holders, and injured workers can overcome the complexities of Workers' Comp and get a clear way forward. Thanks for having me, always good to be back.
Of course. Now, many Rancia-Misa clients offer Risa retirement plans to attract and retain talented employees, reduce turnover, and build employee trust. So for liability purposes, who is considered a plan fiduciary? Yeah, a good way to think about this in regards to who is a plan fiduciary can be defined both by title as well as their actual role they take in the plan.
So typically, a plan fiduciary is any person who is exercising discretionary control or authority over plan management or administration, exercising any authority or control over the management or disposition of plan assets, or rendering investment advice for fee or other compensation. So those are the roles or the activities you're taking, but as far as the actual role or title within a leadership framework, it may include plan trustees, plan administrators, members of an investment committee, investment managers, and corporate officers with plan oversight. So what should employers know about exposure to liability for fiduciaries of a plan? Yeah, there's a lot to understand.
Savvy business leaders understand the US labor code exposures employers to significant liabilities. And really, this liability is due to the strict fiduciary duties the law requires of plan sponsors and those fiduciaries. So the liabilities are many, but what's important to understand, it's a little scary, is fiduciaries who do not follow established principles of conduct, maybe personally liable to restore any losses to the plan following a breach of fiduciary duty. Okay, so when it comes to breaches, what are some of the common complaints or allegations?
Yeah, good question. A complaint of a breach of fiduciary duty may allege improved investment choices, excessive fees, lack of investment diversity, poorly selected service providers, or a failure to follow plan documents. All right, now that we have established who is considered a fiduciary and how they may be liable for mismanagement of an arrest plan, how can an employer protect itself, the employees, investments, plan assets, and the individual fiduciaries? Yeah, the best way or one way is certainly through insurance, through risk transfer.
And there's really two lines of insurance coverage that an employer can pursue and bind. The first is we're going to try to protect the plan assets, the actual investments that are under control. And we're going to do that with a risk of fidelity coverage. So this will pay the insured for direct loss of money and security, belonging to an employee benefit plan caused by theft or forgery committed by a fiduciary.
And typically, what you're going to see is the minimum required limits are generally 10% of the plan assets, with a $500,000 maximum, when there is that requirement in place. But certainly, you're not limited to $500,000. So if you'd like to go above that, then we just need to fill out an application and seek underwriting approval. So that's protecting the plan assets, which is really important.
To protect the fiduciaries, which could be many different people, that's when we're going to pursue fiduciary liability insurance. So in the event of a claim, lawsuit or government investigation, the policy will pay on behalf of the insured all costs of defense and damages up to the limit of liability. Okay, now we know liability insurance isn't perfect. Should employers be aware of any common exclusions in the fiduciary liability coverage?
Yeah, there's two that would probably be smart to be aware of. And that is that the policy will not protect against intentional wrongdoing of any of the fiduciaries. And it's not going to cover claims against outside service providers. So especially with our nonprofits, they may not have some internal who's going to be managing the plan.
So they're going to use a vendor. If a claim rises against that vendor, our insureds policies are not going to respond to that. That's where the vendor's going to have to have their own fiduciary liability insurance coverage. Yeah, that makes sense.
So same with listeners who have questions about how to mitigate risk for their ERISA plans. What's the best way to get in touch with you? The best way is phone or email. I'm at 619-9370-175.
That's my direct line. Or sbrown at rantramacer.com. All right, well same. Thanks for joining in Studio One.
Thanks for having me. Stay. Thanks for joining in to our latest episode of Produced by Studio One. If you enjoyed what you heard, please share this episode and subscribe.
For more insights like this, visit us at rantramacer.com and subscribe to our weekly newsletter.