So, your number has come up—The Department of Labor (DOL) is auditing your employee benefit plan (it’s happening more often these days). It may go on for a long time and get expensive. DOL auditors will interview plan officials and request scads of documents. The plan’s attorney may be putting in some long hours (and billing for them).

Do you think your fiduciary liability insurance will pay these costs? Not likely.


Fiduciary liability insurance policies cover claims resulting from wrongdoing—but not the expenses of responding to an investigation.

All is not lost, however. Pre-claim investigation coverage is among the newer kinds of insurance for fiduciaries, and Daniel Aronowitz writes about it in the June issue of Benefits Magazine. Aronowitz, an attorney and frequent speaker at International Foundation conferences, is the lead executive of Euclid Specialty Managers. The company specializes in fiduciary and other management liability insurance for employee benefit plans.

arnowitz bit
Aronowitz share insights from his session “Current Trends in Fiduciary Liability Coverage” at the Annual Employee Benefits Conference in a Benefit Bits Video.

Pre-claim investigation coverage will cover the cost of an attorney to represent the plan in a DOL investigation. Some carriers also offer interview coverage that will handle defense costs if a different enforcement unit, such as the Department of Justice or the Securities and Exchange Commission, is investigating.

Originally, fiduciary liability policies covered breaches of fiduciary responsibility but weren’t designed to cover business expenses. Now, some carriers will amend policies or expand the definition of wrongful act to cover nonfiduciary claims that arise from “settlor” functions (such as establishing, terminating or amending a plan and choosing the plan design and features). In his article, Aronowitz points out some things trustees should consider before opting for that coverage.

Another new kind of coverage was developed after regulatory agencies introduced programs that let ERISA plans proactively fix fiduciary violations. Plans can use the IRS Employee Plans Compliance Resolution System to correct mistakes that otherwise would jeopardize tax qualification. Or they can use the DOL Voluntary Fiduciary Correction Program to fix violations that might lead to enforcement actions and penalties. New policies take care of the expenses involved in the voluntary compliance programs—the lawyers, accountants, fees, penalties and/or sanctions.

[Related: Annual Employee Benefits Conference, November 8-11]

Policies now may cover certain penalties faced by employee benefit plans—but only if plans have policies modified specifically to do so. For example, plans can be penalized for failing to respond to written requests for plan information, for HIPAA violations, for failing to remit contributions within a certain time frame and for certain violations of the Affordable Care Act. Aronowitz cautions in his article that plans need to be sure they have sublimits that will cover these potential penalties.

These and other new coverages Aronowitz describes in his article have been developed to respond to the increasingly complex legal and regulatory environment in which benefit plans operate. It’s little wonder that trustees and administrators may wonder if they have all the coverage they need.


Chris Vogel, CEBS

Senior Editor—Publications at the International Foundation

Favorite Foundation service/product: Benefits Magazine, of course—especially “What’s Working” articles

Benefits related topics she loves to cover: Behavioral science behind steering employees to best retirement and health care options; innovative health care and wellness plan designsFavorite Foundation conference/event moment: Every minute of the Employee Benefits SymposiumPersonal Insight: “Leisure time” for Chris is far from inactive. You might find her gardening, cooking up a storm of healthy foods, traveling to historic places, biking with her husband, reading 24/7 or knitting sweaters for her grandson. Whatever activity, she’ll be doing it with an inspiring enthusiasm.


Recommended Posts

FAQs on Workplace Emergency Savings Accounts Under SECURE 2.0  

Jenny Gartman, CEBS

The U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) has issued FAQs on optional pension-linked emergency savings accounts (PLESAs) as part of the implementation of the SECURE 2.0 Act of 2022 (ERISA section 801). SECURE 2.0 authorized 401(k), 403(b) and governmental […]

Foundation Survey Results–Focus on Mental Health Initiatives in Apprenticeship Programs

Justin Held, CEBS

The International Foundation just released Top Trends in Apprenticeship Programs—2024 Survey Results, the 8th iteration of their apprenticeship program benchmarking survey. In addition to focusing on trends, such as individual and program challenges, life skills, and partnerships, this iteration takes a deep […]