The DOL is proposing to allow advisers to aggregate new and existing clients in the same geographic area into one common 401(k) plan. RIAs and Broker-Dealers, before you green light this opportunity for your advisers, review your Professional Liability insurance policy to ensure that it does not contain an exclusion which precludes coverage for claims arising out of Multiple Employer Welfare Arrangements (MEWAs). Although MEWAs are vehicles for the marketing of health and welfare benefits by employers for their employees, your insurance carrier may take the position that the exclusion would apply to Multi Employer 401(k) plans as well.
If the DOL passes this new regulation to allow for the aggregation of 401(k) plans, it would be prudent to confirm with your insurance carrier that the MEWA exclusion in your Professional Liability insurance policy does not apply to 401(k) plans. Do not rely on a verbal confirmation. Get it in writing, before a claim is made and preferably, before you allow your advisers to begin offering Multi Employer 401(k) plans.
Lilian Morvay is available to review your Professional Liability policy and provide guidance about the scope of coverage under your insurance policy.