What Is Fiduciary Liability Insurance?
If your company sponsors a 401(k), health plan or other employee benefit plan, the people who choose investments, pick providers and administer the plan are fiduciaries under ERISA — and they can be held personally liable for losses to the plan. Fiduciary liability insurance pays their defense costs and settlements.
Fiduciary Insurance vs. the ERISA Bond
The ERISA fidelity bond is required by law (generally 10% of plan assets, minimum $1,000, typically capped at $500,000). It protects the plan if someone steals from it. It does not protect fiduciaries from lawsuits. Fiduciary liability insurance is optional and protects the people — and it's what responds to excessive-fee suits, administrative errors and late-deposit claims.
Common Claims
- Excessive fees or underperforming funds on the plan menu
- Late deposits of employee 401(k) deferrals
- Enrollment, eligibility or COBRA notice errors
- Health-plan benefit denials
- DOL investigations and voluntary correction costs
D&O policies usually exclude ERISA claims, so a D&O policy alone leaves this gap open.
What It Costs
Price depends on plan assets, number of participants, plan types and whether you use outside 3(16)/3(38) fiduciaries. Added to a management liability package, a $1M fiduciary limit has recently quoted around $500 a year with no deductible for small professional-services firms on Cowbell's program underwritten by Zurich.
