Fling an ERISA bond is a fiduciary duty required by the Employee Retirement Income Security Act of 1974 (ERISA), with few exceptions. The bond must be issued by a surety company that appears on the U.S. Treasury’s circular of insurers acceptable for federal obligations, referred to at the “T-List” and in an amount equal to no less than ten percent (10%) of plan asset balance in the preceding year. The ERISA may not be less than $1,000 nor greater than $500,000 unless the plan is an ESOP or holds non-qualified assets. Most plans grow in value raising the question of sufficiency of surety. An ERISA fidelity bond inflation guard speaks directly to this concern. A principal that purchases an ERISA bond in an amount equal to ten percent of assets today may be legitimately concerned about meeting the mandatory coverage months down the road. Inflation guard provisions relieve the burden on plan administrators and surety companies by automatically adjusting the bond penalty to match the new “ten percent” threshold.
So what does an ERISA fidelity bond inflation guard look like and how do you know that YOUR bond includes one? The language of ERISA bonds is approved only by the Department of Labor, an agency that can and does require overhauls from time to time. Insurers that issue ERISA bonds generally include very broad terminology in order to avoid frequent rewording and the burden of form approvals. An ERISA bond inflation guard is an endorsement to primary coverage, often named an “ERISA policy limit endorsement”. Wording is very similar and look like the following, . . .
The most we will pay for loss in any one “Occurrence” is the applicable Limit of Insurance Per Occurrence as shown [in the declarations]. However, if at the inception date of the “Premium Period” during which a covered loss is discovered, the Limit of Insurance Per Occurrence is equal to or greater than that required by the Employee Retirement Income Security Act (ERISA) for each employee benefit plan named in the Declarations, then the Limit of Insurance Per Occurrence that is applicable to the employee benefit plan(s) named as Insured(s), shall automatically
increase to equal the amount required under ERISA at the beginning of the Insured plan’s/plans’ fiscal year during which the loss is discovered, or $500,000, whichever is less.
It is clear in the language in bold that no action is needed in order to maintain the appropriate bond threshold. ERISA bonds are almost universally issued with a minimum three-year duration. Would a plan sponsor or administrator be required to increase the bond at the expiration of the three-year period? Again, the ERISA fidelity bond inflation guard wording is instructive. ” . . . if at the inception date, . . . “, the bond purchased is equal to no less than ten percent of assets, then NO INCREASE is required at renewal. Further, most bonds are written as continuous obligations meaning they go on and on until canceled by the surety.
Application for an ERISA bond is easy. A simple six-line application is sufficient for the underwriting of standard (qualified asset) plans and the premiums are very inexpensive. Visit https://ERISA-Bonds.com to access an electronic application or learn more about ERISA fidelity bonds here. Call (800) 373-2804 or email Underwriting@SuretyOne.com for more information about an ERISA fidelity bond inflation guard or other general crime policy coverages. ¿Necesita información y/o solicitud para esta fianza de fidelidad en SU idioma? ¡Fácil! Cliquée aquí.
