Should Church Plans Purchase Fiduciary Liability Insurance?

“Should church plans purchase fiduciary liability insurance?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

Assuming the church plan has not elected to be covered under the Employee Retirement Income Security Act (ERISA), ERISA’s fiduciary provisions do not apply to church plans. Having said that, a number of non-ERISA plans have traditionally purchased fiduciary liability insurance to address potential fiduciary-related claims under state law. Some state laws governing fiduciary conduct specifically exempt churches from their provisions, so fiduciary liability insurance might not protect against much depending on the state law that is applicable to a particular church plan and the nature of the particular claims.

Due to this lack of certainty, church plan fiduciaries might take significant comfort from having insurance coverage. Thus, churches should consult with retirement plan counsel with specific expertise in this area to determine the prudence of purchasing fiduciary liability insurance, as well as whether the particular coverage terms are appropriate for a non-ERISA plan.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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