401k Retirement Committee Members Fiduciary Protection
401k retirement committee members need fiduciary liability insurance protection. However, 401k retirement committee members do not automatically receive fiduciary liability insurance protection included with an Errors and Omissions Policy. In most cases, 401k retirement committee members are excluded from protection. So how can a retirement plan committee manage the risk and obtain 401k fiduciary liability insurance protection? After a recent Plan Sponsor University (TPSU) Fiduciary Education Program at University of California, Irvine, California, Mr. Fred Barstein, Founder and CEO of TPSU interviewed Mr. Kameron Jones, Adjunct Lecturer of The Plan Sponsor University. Mr Barstein and Mr. Kameron discussed the concepts of Risk Mitigation, Board of Directors Risk and the benefits of 401k fiduciary liability insurance.
Full Transcript Here
This is Fred Barstein with 401KTV and I am here with our new lecturer, Cameron Jones, from NFP. Welcome, Cameron.
Okay if we ask you a few questions?
So, Cameron is a senior investment advisor representative at the home office for the Retirement Division of NPF, and NFP is, according to a recent article in Investment, is the second-largest retirement plan aggregator, so that’s pretty good. They also have insurance and benefits. NFP does that as well along with the retirement.
Cameron, I wanted to … Today, the issue of fiduciary insurance came up.
I was surprised. A lot of people have it, right?
But not all fiduciary insurance is the same, right? Created equally. So, can you explain the different types of policies or the nuances of them?
Yes. So, at NFP, what we’ve discovered with having expertise on both the qualified plan consulting risk mitigation side of the house and on the insurance side of the house was that oftentimes within employers, the risk management team wasn’t necessarily talking to the 401K Committee.
When they were out buying insurance to insure the risk of fiduciary liability, they didn’t really know all the risk mitigation that was going into place. So, we’ve really started reviewing a lot of these policies and found a lot of times when you just have risk management teams or just insurance specialists writing it, they might have either glaring donut holes in the coverage, because they just don’t know a lot about the 401K qualified plan space, or it might actually be double coverage, because there might be some sort rider fiduciary liability baked into other policies, like your EPLI or your DNO.
Some examples of the donut holes which we find are common are first of all in the application process. A lot of fiduciary liability policy application ask you the question, “Has your plan ever been out of compliance?” Well, the issue with that is that’s a very broad-based thing to prove. So if you say, “No, we’ve never been out of compliance,” and they find you were late on a contribution, or some small thing happened, they can now potentially default on that entire policy, so, be careful with the application. As well as it might have some basic things like it only covers employees. Well as you know, a lot of committees out there might have non-employees on the committee. You know, retirees, people on the Board. So, there’s some things where knowledge of the qualified plan space is somewhat required when you’re looking at the right type of policy for your committee.
So, there’s best practices in getting it now. It’s a relatively new phenomenon. Now, you have to be careful that you get it on it. Well, great, that’s great advice, and I think that we recommend that, you know … And it’s relatively inexpensive that most if not all should have some sort of fiduciary liability, especially to protect their members of their committee.
Final question. It’s your first TPSU program. What did you think of the program and everything?
I loved it. I’ve never seen an environment where there’s more communication amongst the people actually in the room. I think a lot of these plan sponsors get the most out of talking to each other. I think you addressed it in a presentation today that adults don’t like to necessarily listen to experts sometimes. They like to learn from their peers. So, it fosters an environment of really communication, sharing ideas, and by the end of it, when you’re able to share that best practices, you get a lot of actionable steps that truly add value in these employers’ lives.
Well, great. Thanks for participating and supporting TPSU. I know that NFP is a big supporter of it and we appreciate it, because we’re bringing a lot of good education to thousands and thousands of plan sponsors, so good.
Thank you for watching 401KTV and stay tuned.