If you chose the plan’s investments, ERISA makes you personally liable for the choice.
Cover for the people who administer an employee benefit plan — who are personally liable under ERISA for their decisions, and who are not protected by the fidelity bond the plan is legally required to carry.
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What fiduciary liability businesses actually need.
Breach of fiduciary duty
Claims over imprudent investment selection, excessive fees, or failure to monitor.
Without it — ERISA imposes PERSONAL liability on fiduciaries — personal assets, not the company’s.
Administrative errors
Enrollment failures, wrong benefit calculations, late deposits of employee contributions.
Without it — The most common claim, and it comes from ordinary payroll administration.
Defense costs
Legal costs of defending a fiduciary claim or a Department of Labor investigation.
Without it — Excessive-fee litigation is expensive to defend even when the plan wins.
Settlor and plan-design claims
Disputes over amendments, terminations and communication to participants.
Without it — Changing or ending a plan generates claims from the people it affected.
Not the same as the ERISA bond
The bond protects the PLAN from theft. This protects the FIDUCIARY from liability.
Without it — Employers who bought the bond routinely believe they are covered for both.
What fiduciary liability operators ask us.
What is the difference between an ERISA bond and fiduciary liability?
They protect different people from different things, and confusing them is the single most common mistake here. An ERISA fidelity bond is REQUIRED by law and protects the PLAN and its participants against theft or dishonesty by anyone handling plan funds — generally at 10% of funds handled, minimum $1,000, maximum $500,000 or $1,000,000 where employer securities are held. Fiduciary liability insurance is VOLUNTARY and protects the FIDUCIARIES — the people who run the plan — against claims that they breached their duty. Buying the bond satisfies the statute and leaves the individuals completely unprotected.
Who is actually a fiduciary?
More people than the org chart suggests, because ERISA defines it by FUNCTION rather than by title. Anyone exercising discretionary authority over the plan or its assets, or giving investment advice for a fee, is a fiduciary — which routinely captures owners, the CFO, HR staff who administer enrollment, and members of an investment committee, whether or not anyone told them. Personal liability attaches to individuals, so these are people whose own assets are exposed by a job they may not know they are doing.
We use a third-party administrator. Are we off the hook?
No. You can delegate the work and you cannot delegate the duty to select and MONITOR whoever you delegated it to. Failure to monitor a provider is itself a recognized breach, and the plan sponsor remains a fiduciary throughout. A TPA relationship is a reason to document your selection process and your ongoing reviews, not a reason to stop having one.
Is this only a problem for large plans?
No, and small plans are the growth area for these claims. Excessive-fee litigation started with very large plans and has moved steadily down-market, and the administrative failures that generate most claims — late remittance of employee deferrals, enrollment errors, wrong eligibility calculations — are, if anything, more likely at a small employer with one person handling payroll. Late deposit of employee contributions is specifically a Department of Labor enforcement priority.
Does our D&O policy cover this?
Almost never. Standard directors and officers forms carry an explicit ERISA exclusion, precisely because fiduciary liability is meant to be a separate purchase. Employers who assume the D&O policy picks it up are usually wrong, and it is worth checking the exclusion rather than assuming — this is a cheap coverage relative to the personal exposure it removes.
Not ready to talk? The guides answer the questions this page raises in more depth. Already insured with us and need a certificate or a policy change? Ask the service team rather than starting a quote — it is faster and it goes to the people whose job it is. We also write home and auto, which is usually cheaper alongside the business policy than apart from it.