Mitigating Fiduciary Risks for Education Through 403(b) Multiple Employer Plans (MEPs).


Earlier this year, RCM&D released the Outlook 2019: Top 10 Risks for Educational Institutions. Topping that list was the continued ERISA and fiduciary liability litigation against higher education institutions. The impact of these cases led many insurance companies to change their underwriting appetite for new fiduciary business, cap the available limits they are willing to offer and/or increase retentions on excessive fee claims based on overall risk profile.

In an effort to mitigate the risks associated with fiduciary liability litigation—many state associations for private educational institutions are looking into establishing 403(b) Multiple Employer Plans (MEPs). These programs help to cut the administrative burdens and retirement plan management responsibilities of each individual institution as well as:

  • Achieve economies of scale for their participants.
  • Improve access to best in class funds and service providers.
  • Mitigate fiduciary liability risks by ensuring consistency in benchmarking fees, investment options, participant education, etc.

Working with the Council of Independent Colleges in Virginia (CICV), RCM&D became one of the first brokers in the country to successfully structure a comprehensive fiduciary liability insurance program for an education 403(b) MEP. This program encompasses over 14 schools and $700 million in assets under management. You can learn more about RCM&D’s approach by downloading our informational material here. Some commonly asked questions we receive regarding insurance needs of the 403(b) MEPs include:

  • How are premiums developed? Premiums are based on a variety of underwriting factors including experience of service providers, indemnification provisions with vendors, governance documents of the 403(b) MEP, investment options and total plan assets.
  • What limits do we need? The majority of 403(b) MEP’s will purchase a minimum of $10,000,000; however, limits up to $20,000,000 and higher should be considered based on the size of the MEP.
  • Does fiduciary liability insurance also cover defense costs? Yes. Defense costs are covered in addition to the payment of damages.
  • Will each MEP member still need to carry their own fiduciary liability policy? Yes. Each individual member can still be sued for historical claims related to old plans and other ERISA qualifying plans other than the 403(b). The institution can also still face litigation for their decision to join the MEP.
  • Can the premium be paid from plan assets? Yes. If the premium is paid from plan assets, there are specific coverage endorsements that must be added to the policy to protect the individual fiduciaries related to waiver of recourse.

If you have any questions about your organization’s fiduciary liability coverage or about including fiduciary liability coverage for your 403(b) MEP please reach out directly to a trusted advisor from the RCM&D’s Education Practice.

To receive a copy of the 2019 Outlook: Top Risks for Educational Institutions, please complete the form to the right.

Complete this form to request an email copy of the full 2019 Outlook: Top 10 Risks for Educational Institutions report.