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Lessons for Governmental Fund Trustees from the Financial Crisis and How to Protect Yourself

Lessons for Governmental Fund Trustees from the Financial Crisis and How to Protect Yourself. Daniel Aronowitz President, Ullico Casualty Company. Introduction. Lesson #1 : Indemnification Gaps. Governmental plan trustees often have two dangerous misconceptions:

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Lessons for Governmental Fund Trustees from the Financial Crisis and How to Protect Yourself

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  1. Lessons for Governmental Fund Trustees from the Financial Crisisand How to Protect Yourself Daniel Aronowitz President, Ullico Casualty Company

  2. Introduction

  3. Lesson #1: Indemnification Gaps • Governmental plan trustees often have two dangerous misconceptions: • That ERISA fiduciary standards do not apply to them; and • That they are protected by sovereign immunity • The reality: • Governmental trustees are held to high fiduciary standards similar to the federal ERISA duties; and • State law contains significant limits on indemnification protections for governmental fiduciaries

  4. Indemnification Gaps

  5. Lesson #2: You are a Target • Governmental trustees are increasingly a target of fiduciary claims: • Imprudent investments, including real estate and alternative investments • Breaches of fiduciary duty in selecting and monitoring a service provider • Social investing • Insufficient funding • Dishonesty claims/Pay to Play

  6. You are a Target

  7. Lesson #3: Delegate Fiduciary Responsibility Whenever Possible

  8. Delegate Fiduciary Responsibility Whenever Possible

  9. Lesson #4: Lower Your Expectations

  10. Lesson #5: Due Diligence Matters

  11. Lesson #6: Don’t be a Turkey – Protect Yourself

  12. Purchase ComprehensiveFiduciary Liability Insurance • Critical policy features: • Claims-Made Coverage – Do You Have Full Prior Acts Coverage? • What is the Date of Your Prior and Pending Litigation Exclusion? • Do You Have Coverage for Administration ErrorsIn Addition to Fiduciary Duties? • Do You Control Your Defense? • Do You Have the Right to Select Defense Counsel? • Do You Have Severability of the Application and Exclusions to Protect “Innocent” Trustees?

  13. Purchase ComprehensiveFiduciary Liability Insurance • Critical policy features continued: • Do You Have to Pay a Claim Deductible Out of Your Own Pocket? • When Will You Be Reimbursed? • How Much Insurance Should Your Fund Buy? • What Claims are Covered? DOL Audits? • How Can You Lock in Coverage for Potential Claims? • What Penalty Coverage Do You Have? CAP; 502(c); HIPAA? • Does Your Policy Require a QPAM for Real Estate Investments?

  14. Questions Daniel Aronowitz President 1625 Eye Street, NW Washington, DC 20006 202.682.4992 daronowitz@ullico.com John V. O’Brien Vice President, Marketing 1625 Eye Street, NW Washington, DC 20006 202.962.2980 jobrien@ullico.com

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