ERISA Bond, Best Practices

[Bruce1]

How does everyone else work with their clients to obtain ERISA bonds? Do you purchase and maintain the ERISA bond for your clients, do you have them reach out to their insurance agent? 

What's the best practice?

[Belgarath]

We have them contact their insurance agent.

[Peter Gulia]

I’ve seen some business practices that vary with surrounding circumstances:

If a TPA got its client with a referral from an insurance intermediary, the TPA might refer the plan’s fiduciary to that insurance intermediary.

If a TPA is an affiliate of an insurance intermediary or an insurer, the TPA might refer the plan’s fiduciary to the TPA’s sister (unless the TPA knows about its client’s relationship with another insurance intermediary).

If a TPA is not licensed to solicit casualty insurance (and it has no affiliate so licensed), a TPA might nonetheless maintain a relationship or awareness with an insurer so a client that lacks an insurance intermediary might apply directly.

A TPA might put a yes-or-no checkoff for buying fidelity-bond insurance in one’s service-agreement onboarding forms.

A TPA’s service agreement might provide that the TPA has no obligation to provide any service until the TPA has received proof that fidelity-bond insurance covers the plan.

A TPA might push clients to get fidelity-bond insurance. If a plan is uncovered, that can increase the TPA’s expenses. No matter how carefully a TPA has designed and operated its business to support fact-finding that the TPA is not a plan’s fiduciary, defeating or dismissing claims that the TPA ought to have done something to prevent the theft might incur attorneys’ fees and related expenses, which one might not recover from the victimized participants nor from the (perhaps insolvent) client.

This is not advice to anyone.

[ErnieG]

We usually have advisors work with the client's Property & Casualty professional not only for the ERISA Bond, but also the check other coverages, such as Cyber Liability and Employment Practices Liability as they relate to the establishment and operation of the Plan.

[Gina Alsdorf]

Also, you should note, fidelity bonds don't cover contractors, usually. I've seen this be an issue.