Fiduciary Liability

Department of Labor EBSA Enforcement Results and Priorities

Many fiduciaries find audits by the Department of Labor (DOL) mysterious, so it helps when the DOL provides any type of guidance.  The DOL’s Employee Benefits Security Administration (EBSA) recently released 2018 statistics for its enforcement of the Employee Retirement Income Security Act of 1974 (ERISA).  When combined with EBSA’s recent commentary on its enforcement initiatives, fiduciaries can be better prepared to address compliance issues before a DOL audit.  The following is an analysis of the recently released 2018 statistics, as well as a look at the “national enforcement projects” for EBSA investigators.  EBSA continues to target its published enforcement priorities, is focusing on major cases, and is recovering higher overall amounts in its investigations.  The Voluntary Fiduciary Correction Program also continues to grow.

2018 Statistics compared to 2017

One specific trend to note is the increase of monetary recovery by EBSA.  In Fiscal Year 2018, EBSA closed 1,329 civil investigations, with 860 of those cases (64.7%) resulting in $1.1B monetary recoveries for plans or other corrective action.  In comparison, during Fiscal Year 2017, EBSA closed more than 1,707 civil investigations with 1,114 of those cases (65.3%) resulting in $682.3M in monetary recoveries for plans or other corrective action.  While EBSA closed fewer investigations in FY 2018 than it did in FY 2017, the total monetary recovery from enforcement actions increased by $400M from FY 2017, as detailed in the table below.

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What is a Waiver of Recourse?

The ERISA-mandated recourse provision discussed in the preceding section – which applies if the fiduciary insurance is paid out of plan assets – means that a breaching fiduciary’s personal assets would still be at risk for all losses caused by the fiduciary notwithstanding the fiduciary insurance policy. To prevent the right of the insurer to recoup any payments from the individual fiduciary, therefore, the fiduciary liability insurance policy must include a “waiver of recourse” provision.

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What is Fiduciary Liability Insurance?

A fiduciary liability insurance policy is a contract designed to protect plan trustees, other fiduciaries and the employee benefit plan against claims alleging breach of their fiduciary duties to the plan or claims alleging they committed an error in the administration of the plan.

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