If you are having any difficulty understanding the requirement(s) for an ERISA fidelity bond, the following is directly from and authored by the “Authority”, the U.S. Department of Labor.
ERISA section 412 and related regulations (29 C.F.R. § 2550.412-1 and 29 C.F.R. Part 2580) generally require that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan shall be bonded. ERISA’s bonding requirements are intended to protect employee benefit plans from risk of loss due to fraud or dishonesty on the part of persons who ”handle” plan funds or other property. ERISA refers to persons who handle funds or other property of an employee benefit plan as “plan officials.” A plan official must have an ERISA bond of at least ten percent of the amount of funds he or she handles, subject to a minimum bond amount of $1,000 per plan with respect to which the plan official has handling functions. In most instances, the maximum bond amount that can be required under ERISA with respect to any one plan official is $500,000 per plan. Effective for plan years beginning on or after January 1, 2008, however, the maximum required bond amount is $1,000,000 for plan officials of plans that hold employer securities.
Pursuant to Section 412 ERISA fidelity bond must protect the plan against loss by reason of acts of fraud or dishonesty on the part of persons required to be bonded, whether the person acts directly or through connivance with others. The term “fraud or dishonesty” for this purpose encompasses risks of loss that might arise through dishonest or fraudulent acts in handling plan funds or other property. This includes, but is not limited to, larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication, and other acts where losses result through any act or arrangement prohibited by 18 U.S.C. § 1954. The ERISA bond must provide recovery for loss occasioned by such acts even though no personal gain accrues to the person committing the act and the act is not subject to punishment as a crime or misdemeanor, provided that within the law of the state in which the act is committed, a court would afford recovery under a fidelity bond providing protection against fraud or dishonesty. 29 C.F.R. § 2580.412-9. Deductibles or other similar features that transfer risk to the plan are prohibited.
Bonds must be placed with a surety or reinsurer that is named on the Department of the Treasury’s Listing of Approved Sureties, Department Circular 570 (available at fms.treas.gov/c570/c570.html). Under certain conditions, ERISA fidelity bonds may also be placed with the Underwriters at Lloyds of London. 29 C.F.R. § 2580.412-25, § 2580.412.26. In addition, neither the plan nor a party-in-interest with respect to the plan may have any control or significant financial interest, whether direct or indirect, in the surety, or reinsurer, or in an agent or broker through which the bond is obtained.
National surety leader, Surety One, Inc., is one of the largest writers of ERISA bonds. We offer:
ERISA bonds for plans with non-qualifying assets;
ERISA bonds for ESOPs,
ERISA bonds for labor union and multi-employer plans; and erisa bond limits to $5 million.
Visit us at www.ERISA-Bonds.com, call anytime at (787) 333-0222 or (800) 373-2804, or email Underwriting@SuretyOne.com for an ERISA bond application or any bonding need.