ERISA insurance and indemnification

The Employee Retirement Income Security Act (ERISA) imposes personal liability on fiduciaries who breach fiduciary obligations to an ERISA plan. As Department of Labor (DOL) investigations and private-plaintiff litigation increases, ERISA plans, sponsors, and their boards of directors, administrators, trustees and fiduciaries need adequate insurance coverage and enforceable indemnification arrangements that comply with ERISA and state law. Indemnification arrangements that fail to comply with ERISA can be voided by a court, potentially leaving fiduciaries without protection.

Key arrangements to review include plan documents, committee charters and insurance contracts. Key items to review in an indemnification arrangement include:

  • ensuring that the language complies with ERISA
  • contingencies to account for potential changes in ERISA law and factual developments underlying litigation
  • interaction between insurance and indemnification and priority of payment

Important items to review under an insurance policy include:

  • who is an “insured” under a policy
  • the scope of coverage, including whether DOL investigations and subpoenas are covered and coverage for settlement costs
  • defense arrangements, choice of counsel and recoupment
  • breadth of conduct exclusions (e.g., exclusions for fraud or willful misconduct)
  • coverage before and after corporate transactions or plan modifications
  • coverage for benefits claims

Our employee benefits team analyzes these arrangements so that fiduciaries understand their indemnification obligations and can determine whether there are gaps in coverage or areas in need of enhancement.