Company Finance Staff Face Fiduciary Risks

Fiduciary liability insurance is similar to directors and officers insurance, but it applies specifically to a company’s financial managers. The exposure is a result of 1974’s Employee Retirement Income Security Act; its original aim was to protect pension plan funds. It has broadened its focus since then and today applies to a variety of funds, such as employee 401 (k) and profit-sharing plans, among others.

Who Is at Risk?

Whether you are a director, manager or an accountant and have a role in managing vendors, enrollment or administration of these plans, you are likely at risk as a fiduciary. Even if you do not oversee these functions, but hire others to do so, you may be included in a lawsuit covering a variety of fund misuses.

Types of Exposure

Claims can be made by employees/plan participants or by state and federal labor departments for a variety of reasons. These include:

  • Conflicts of interest: Company executives selling personal stocks to the employee stock plan at inflated values.
  • Breaching fiduciary duty: When the trustee has not acted in the best interest of the plan or its beneficiaries.
  • Not filing reports: Labor departments may investigate improper loans, delinquent employer contributions or failure to file reports.

Properly insuring your fund trustees in an important factor in conducting business. Fiduciary liability insurance can be tailored to meet your company’s needs and the specific risks you face.