I was asked recently about fidelity insurance. As I mentioned in a prior post, fidelity insurance is employee theft coverage; AKA employee dishonesty insurance.
Fiduciary coverage is very different.
Fiduciary coverage is liability protection against allegations that you have violated the federal law governing employee benefit plans – known as ERISA.
Fidelity is crime insurance – against the loss of assets stolen by an employee.
Fiduciary is liability insurance – protecting you from a lawsuit brought by an employee or an outsider.
To further confuse matters…
ERISA requires that the assets of an employee benefit plan (retirement fund, 401k, etc.) be protected by a fidelity bond.
So, any employer with a benefit plan needs two types of insurance.
First, there is fiduciary coverage to protect from a lawsuit alleging a violation of ERISA.
Second is a fidelity bond protecting the assets of the plan from theft and fraud.
Class dismissed.
