Fidelity Bond/Crime Solution.
The fiduciary insurance experts at Encore Fiduciary have designed a Crime insurance policy expressly for employee benefit plans. Most employee benefit plans are required to purchase a Fidelity bond to cover losses due to intentional acts to deprive a benefit fund of fund assets. But not all bonds meet the stringent standards of the Employee Retirement Income Security Act (ERISA) as they are designed to address generic risks. And not all policies have the necessary coverage for today’s wired and connected world.
For example, some bonds fail to cover all necessary parties, and other bonds fail to provide full coverage for fraud and dishonesty as required by ERISA. Trustees of benefit plans and their insurance professionals can be confident that Encore Fiduciary’s Fidelity Bonds/Crime policy has been designed by insurance experts who understand how to comply with complex ERISA and other fiduciary laws.
Employee benefit plans governed by ERISA must purchase a fidelity bond to protect against employee theft of assets. Unlike many bonds that do not meet ERISA’s high standards, the Encore fidelity bond provides a broad scope of employee theft coverage and meets the fraud and dishonesty standard mandated by ERISA. Encore also has coverage offerings to protect against third-party liability, like computer theft, funds transfer fraud, and social engineering scams. is to protect against the individual liability of plan fiduciaries.
The Department of Labor is actively auditing employee benefit plans to review whether plans have secured a fidelity bond that meets Employee Retirement Income Security Act (ERISA) standards. The Department has discovered that many industry-standard bonds do not meet the ERISA fraud and dishonesty standard. Policies that cover only employee “theft” are narrower in scope of coverage, and fail to satisfy ERISA Sections 412 (a) and (b).
When it comes to protection from employee theft or dishonesty, cheaper is not always better. A non-compliant bond can expose trustees to losses and claims of breach of fiduciary duty. Some bonds fail to cover all necessary parties. Other bonds fail to provide full coverage for fraud and dishonesty as required by ERISA. And not all fidelity bonds have the necessary coverage for today’s electronic world.
Encore’s fidelity bond provides a better bonding solution. In trust fund audits, the Department has validated that the Encore fidelity bond complies with ERISA’s fraud and dishonesty standard.
Moreover, Encore goes beyond the ERISA standard to provide coverage for any person who handles plan assets — even when they are not required to be bonded under ERISA. This is the broadest coverage available in the market.
Fiduciaries must make prudent decisions to protect their employee benefit plans. Prudent fiduciaries need a better fidelity bond. Find out why Encore Fiduciary is the prudent choice for the insurance needs of employee benefit plans.
Fidelity bonds are offered with Encore’s Fiduciary Liability Insurance policy for comprehensive protection of employee benefit plans. Limits are available up to $15 million on a primary or excess basis. Features include a “duty to defend and choice of counsel” form, coverage for voluntary compliance programs, settlor coverage, expansive penalty coverage, an umbrella of penalty coverage — the Encore Penalty box — and miscellaneous/other penalty coverage.
A fidelity bond is a contract under which the issuer of the bond, typically a surety company or an insurance company, agrees to reimburse a benefit fund for losses caused by theft, fraud, or other dishonest acts covered by the bond. The primary insuring agreement is coverage for employee theft. By contrast, a fiduciary insurance policy covers losses caused by negligence or other acts or omissions not intended to cause the benefit fund to lose assets.
The bond is intended to protect the plan from loss by reason of fraudulent acts or dishonesty on the part of persons required to be bonded. The scope of coverage requirement under ERISA is “fraud or dishonesty.” A fidelity bond covers losses due to intentional acts to deprive a benefit fund of fund assets, the plan, or participants.
The ERISA standard is that each person who handles plan assets must be bonded. The ideal bond not only names the plan as the insured and covers the plan’s trustees and employees, but also covers any natural persons employed by a vendor who would be required to be bonded.
A growing threat to businesses is the rise of “social engineering fraud” or “payment instruction fraud.” In these schemes, scammers use official-seeming email communications to induce company employees to transfer company funds to the imposters’ account. Most crime insurers have taken the position that payment instruction fraud is not covered under commercial crime policies because the schemes do not involve a “hacking” of the company’s systems and because the actual fund transfers are voluntary. Payment Instruction Fraud coverage is nevertheless crucial because of the growing number of social engineering schemes to trick plan officials into sending plan assets. This coverage will usually be sublimited on a crime policy and may require additional application disclosures to confirm plan controls to guard against social engineering scams. This coverage is not available on the fiduciary policy but is an option available if the plan purchases Encore’s crime policy for employee benefit plans.
Encore provides expert in-house claims service to its management and professional liability insureds. We have decades of industry experience resolving complex claims and are advocates for clients in which we work proactively to manage claims, reduce claims expense, and drive excellent results. We keep defense lawyers honest to prevent litigation waste, and work with law firms who share our results-oriented values.
Policy offered on admitted basis through Hudson Insurance Company, one of the most dedicated carriers for employee benefit plans. Hudson has an A.M. Best rating of “A+” (Superior), financial size category XV ($2.0 billion or greater) and is a Department of Treasury approved surety, which is a requirement of ERISA.
We’ve put our fiduciary experience and expertise on paper and online in the “Fiduciary Liability Insurance Handbook,” for you to download and gain insight into why it is so critical that coverage is designed to fit an employer’s or entity’s benefit plan. Obtain your complimentary copy here.
Encore Fiduciary, division of Specialty Program Group LLC. Doing business in California as SPG Insurance Solutions License No. 0L09546.
© 2024 Encore Fiduciary. All Rights Reserved.
An expert representative will contact you immediately.
To better serve you, please share a few more details about you and your interest(s).
