ERISA Fidelity Bond


If you need a referral to an agent for a Travelers or Hartford insurance bond please contact us. To purchase a 5-year bond online through Colonial Surety click here. We find the Travelers or Hartford 3-year bond to be a bit more cost effective as their pricing schedule can be seen here.

Section 412 of ERISA requires that all fiduciaries and any other persons who handle or are responsible for the assets of a qualified plan must be bonded with an ERISA Fidelity Bond. The bond is to reimburse the plan if any plan assets are lost through the fraud or dishonesty of persons handling plan funds. Fraud or dishonesty includes such acts as theft, forgery, embezzlement, misappropriation, or willful misapplication of plan assets. There have been some recent cases where Department of Labor has sued trustees who have not secured bonds and caused them to permanently remove themselves and appoint an independent trustee.

FAILURE TO SECURE A BOND WILL REQUIRE YOUR PLAN TO OBTAIN A CERTIFIED AUDIT FROM AN ACCOUNTANT, WHICH MUST BE ATTACHED TO THE 5500. THIS AUDIT CAN PROVE QUITE COSTLY. NOT ONLY IS THE BOND REQUIRED BUT NOT GETTING ONE IS EXPENSIVE.

Federal regulations state that the “administrators, officers and employees” of a qualified plan who “handle” plan assets must be bonded. Every individual must be bonded for at least 10% of the amount of plan funds he handles up to a maximum of $500,000, but in no case for less than $1,000. The amount of funds considered to be handled by each person shall be the total funds subject to risk of loss through acts of fraud and dishonesty and such person during the preceding year.

You can obtain the necessary bond by calling your casualty insurance agent and asking him to get an ERISA Fidelity Bond for your plan. You may already have a bond as part of your basic casualty coverage. Be sure that your agent understands that a fidelity bond is not the same as fiduciary liability insurance. Tell your agent the persons to be bonded and for what amounts. This includes all fiduciaries (trustees) and anyone who handles plan monies (e.g. payroll clerk). A bond in the name of the plan alone will suffice.

The bond must be one which reimburses the plan from the first dollar of loss up to the full amount for which the person causing the loss is bonded. If you have questions, please call us. We can also recommend people to help you with the bond. These are people we have worked with whom we know are competent and fair.

The bond must provide a period of no less than one year after termination or cancellation in which to discover a plan loss. It may be a blanket, schedule or individual bond.

ONCE YOU HAVE OBTAINED A BOND FOR YOUR PLAN, BE SURE TO FORWARD A COPY OF THE INFORMATIONAL PAGE TO US. PLEASE BE SURE THAT THE BOND PAGE YOU FORWARD TO US CONTAINS THE FOLLOWING INFORMATION:

*Full Plan Name     *Effective Date     * Amount of Bond      *Expiration Date

NOTE:            Purchasing a 3-year bond can be much less expensive than a 1-year bond. Some insurance companies may quote you an outrageous price for your bond (example: $5 for each $1,000 of coverage). Following are approximate premiums we have seen charged for a 3-year bond:

$10,000 bond — $110*

$50,000 bond — $180*

$100,000 bond — $250*

 *Approximate premiums —- actual premium could be higher or lower

Please note that you may be quoted the same premium for a $50,000 bond as you would for a $10,000 bond. If this is the case, we suggest you purchase the largest bond you can for the same premium.