Has any service provider paid on a fiduciary warranty?

[Peter Gulia]

Some service providers offer a “fiduciary warranty” that a customer plan’s menu of investment funds meets ERISA § 404(c)’s broad-range condition and is prudently selected. This warranty sometimes is, or is described as, an indemnity.

Has any holder of a fiduciary warranty been sued or threatened?

Has any service provider paid a loss or expense on its fiduciary warranty?

 

[Peter Gulia]

If BenefitsLink neighbors have seen no experience, I’ll assume what I intuit: a fiduciary warranty might be nice sales stuff, but does not cover a real risk.

[CuseFan]

I kind of view that stuff like extended service warranties - if you are selling me a quality product (or service) then why should I pay more for insurance that I'll very likely never need? Some insurance specialist was probably seeing all these fiduciary breach lawsuits concerning investments and thought hey, we can scare people into buying protection they'll never need and make some more money.

 

[Gina Alsdorf]

I don't know that the "warranty" is the reason people pay out but I have seen various settlements over the years that pay out what would have been warrantied. It seems to be that customer service issues and strategic relationships drive outcomes more than the promises made.  

[MoJo]

So the only "warranties" I've seen indicate that the platform options are "suitable" for retirement plans, but that the actual selection from those options, and their applicability to a specific plan, or a fiduciary function, and not covered under the warranty.  For a service provider to be overly involved in that plan level selection process would essentially make them a fiduciary - and most absolutely deny fiduciary status, unless they have an investment arm, or provide (limited) 3(16) services (as we do).  Otherwise, we are a "non-discretionary, directed, ministerial service provider."