Recent U.S. Department of Labor (DOL) and Employee Benefits Security Administration (EBSA) actions have signaled a more permissive posture toward certain “non-traditional” retirement plan investments, particularly digital assets and alternative investment components within defined contribution structures. For plan sponsors, advisers, and service providers, this has practical implications for governance, operational controls, and litigation risk. For the surety market and brokers placing an ERISA bond, the key question is whether these developments change ERISA bond coverage, increase ERISA bond exposure, or both. The technically precise answer is that EBSA’s recent policy shifts can encourage a broader range of plan investment arrangements, which may alter operational risk pathways relevant to an ERISA fidelity bond, but they do not rewrite the statutory trigger or basic peril insured by an ERISA fidelity bond under ERISA § 412. (U.S. Department of Labor, EBSA, 2025a; 29 U.S.C. § 1112, 2024).

The starting point is to separate fiduciary governance rules from ERISA fidelity bond requirements. ERISA’s bonding mandate is in ERISA § 412, codified at 29 U.S.C. § 1112, which generally requires that every fiduciary and every person who “handles” plan funds or other property be bonded. The bond must protect the plan against loss “by reason of acts of fraud or dishonesty” on the part of the plan official, directly or through connivance with others. (29 U.S.C. § 1112(a), 2024). EBSA’s Field Assistance Bulletin 2008-04 and its ERISA bonding publication emphasize that “handling” is a functional test focused on whether a person’s duties create the opportunity to cause a loss through fraud or dishonesty, including through access, authority, or the ability to initiate or direct a disbursement. (U.S. Department of Labor, EBSA, 2008; U.S. Department of Labor, EBSA, 2015). As a result, ERISA bond coverage is not an “investment performance” backstop. The ERISA bond and ERISA fidelity bond framework is a crime protection regime aimed at dishonest takings, not a guarantee against market loss or alleged imprudence. (29 U.S.C. § 1112, 2024; U.S. Department of Labor, EBSA, 2015).

Against that statutory backdrop, EBSA has recently moved to remove or soften prior guidance that was widely read as discouraging certain non-traditional investment exposures in 401(k) menus. On cryptocurrency, EBSA issued Compliance Assistance Release (CAR) 2025-01 rescinding its earlier 2022 release that urged “extreme care” before adding cryptocurrency options to 401(k) investment menus. EBSA stated that the “extreme care” standard is not found in ERISA and that the agency’s approach should return to ordinary fiduciary principles. (U.S. Department of Labor, EBSA, 2025a). On alternatives, EBSA rescinded the December 21, 2021, supplemental statement that had cautioned fiduciaries against reading the June 3, 202,0 private equity information letter as a broad endorsement of private equity in participant-directed plans, and that expressed skepticism that many plan fiduciaries, especially in smaller plans, could prudently evaluate these options. (U.S. Department of Labor, EBSA, 2021; U.S. Department of Labor, EBSA, 2025b). The underlying 2020 information letter remains an important reference point because it contemplated private equity exposure not as a stand-alone participant election but as a component inside a professionally managed asset allocation vehicle, such as a target date fund or balanced fund, subject to fiduciary process expectations. (U.S. Department of Labor, EBSA, 2020).

These developments matter because they can influence plan behavior. When regulators remove “discouragement” language, more sponsors may explore crypto platforms, brokerage windows with expanded menus, or professionally managed vehicles that include alternative sleeves. That, in turn, can change the plan’s operational architecture, the identity and number of parties who “handle” plan property, and the nature of custody and transaction authorization. None of this changes the legal definition of an ERISA fidelity bond or the statutory requirement to maintain an ERISA bond, but it can change how a prudent broker or underwriter evaluates ERISA bond exposure. (U.S. Department of Labor, EBSA, 2008; U.S. Department of Labor, EBSA, 2015).

For the ERISA fidelity bond carriers, the most important practical insight is that expanded investment flexibility can increase complexity in ways that amplify the “opportunity for dishonesty” that the bonding regime is designed to address. Crypto arrangements often introduce wallet custody models, private keys, exchange accounts, specialized administrators, and transaction workflows that are operationally different from traditional mutual fund recordkeeping. Alternative investment sleeves can introduce periodic valuation, capital call-like mechanics within vehicles, and additional third-party interfaces. Complexity alone does not cause fidelity losses, but it tends to widen the set of persons with access and authority, which is precisely what the “handling” concept targets. Thus, while ERISA bond coverage remains centered on fraud or dishonesty, the practical footprint of who should be bonded and how much bond limit is appropriate may require closer analysis when non-traditional investments are introduced. (U.S. Department of Labor, EBSA, 2008; 29 U.S.C. § 1112, 2024).

It is also critical to be exact about what does and does not become “covered” merely because DOL or EBSA is more neutral about investment type. If a retirement plan adds a volatile asset class and the plan suffers market loss, that is not an ERISA fidelity bond loss. If a plan is sued for imprudent selection or monitoring of a crypto option, that is typically a fiduciary breach allegation rather than a fidelity event. EBSA itself distinguishes the ERISA fidelity bond from fiduciary liability coverage by describing the bond as protection against fraud or dishonesty, not protection against fiduciary breaches. (U.S. Department of Labor, EBSA, 2015; U.S. Department of Labor, EBSA, 2008). For Surety One, Inc. readers, the underwriting and risk management takeaway is that you do not treat “expanded investment permissibility” as an automatic expansion of ERISA bond coverage. You treat it as a potential change in the control environment that can affect ERISA bond exposure, especially the probability of a dishonest act occurring within a more complex handling chain.

Further, and a more technical point, is that modern non-traditional asset custody can produce loss scenarios that are not straightforward “employee dishonesty” events. For example, losses caused by external hacking, platform insolvency, or technology failure may not match the statutory concept of loss “by reason of acts of fraud or dishonesty on the part of the plan official,” unless the facts show dishonest acts or collusion by bonded persons who handle plan assets. (29 U.S.C. § 1112(a), 2024). This is where the contract wording and claims causation analysis become decisive, even though the statutory ERISA bond requirement has not changed. Practically, an ERISA bond placement in a crypto-enabled plan should drive careful diligence on who has authority to initiate transfers, how approvals are authenticated, whether segregation of duties exists, and whether the plan’s structure concentrates too much unilateral control in any one role. These are classic fidelity controls reframed for modern asset types, and they are consistent with EBSA’s “handling” framework. (U.S. Department of Labor, EBSA, 2008; U.S. Department of Labor, EBSA, 2015).

In summary, DOL and EBSA have modified the regulatory “tone” around certain non-traditional retirement plan investments through rescissions and guidance adjustments, notably by rescinding the 2022 crypto caution document and rescinding the 2021 private equity supplemental statement. (U.S. Department of Labor, EBSA, 2025a; U.S. Department of Labor, EBSA, 2025b). Those modifications can increase the likelihood that plans consider a broader menu of assets and structures, which can increase operational complexity and potentially shift the plan’s “handling” map. But these actions do not amend ERISA § 412, do not change the statutory requirement to carry an ERISA bond, and do not convert poor investment outcomes into ERISA fidelity bond claims. The practical effect is best described as an indirect change in ERISA bond exposure and risk controls rather than a direct change in ERISA bond coverage. (29 U.S.C. § 1112, 2024; U.S. Department of Labor, EBSA, 2015).

Surety One, Inc. supports plan sponsors, advisers, and administrators in navigating this evolving landscape with an ERISA fidelity bond program built for real-world plan operations. As retirement plans broaden menus and adopt more complex administrative and custody workflows, the practical question is not whether the ERISA fidelity bond requirement has changed, but whether your current ERISA fidelity bond limit, “handling” analysis, and control environment still align with your plan’s actual exposure profile. Surety One, Inc. streamlines placement of the ERISA bond, delivers clear documentation for compliance files, and provides knowledgeable guidance on the persons and functions that can trigger bonding under ERISA § 412 so that you can maintain robust ERISA fidelity bond protection while keeping fiduciary governance, service provider oversight, and operational controls defensible.

~ C. Constantin Poindexter, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS

References

  • 29 U.S.C. § 1112. (2024). Bonding (ERISA § 412).
  • U.S. Department of Labor, Employee Benefits Security Administration. (2008, November 25). Field Assistance Bulletin No. 2008-04: Guidance Regarding ERISA Fidelity Bonding Requirements.
  • U.S. Department of Labor, Employee Benefits Security Administration. (2015). Protect Your Employee Benefit Plan with an ERISA Fidelity Bond.
  • U.S. Department of Labor, Employee Benefits Security Administration. (2020, June 3). Information Letter 06-03-2020 (Private Equity as a Component of a Professionally Managed Asset Allocation Fund).
  • U.S. Department of Labor, Employee Benefits Security Administration. (2021, December 21). Supplemental Statement on Private Equity in Defined Contribution Plan Designated Investment Alternatives (rescinded August 12, 2025).
  • U.S. Department of Labor, Employee Benefits Security Administration. (2025a, May 28). Compliance Assistance Release No. 2025-01: 401(k) Plan Investments in “Cryptocurrencies.”
  • U.S. Department of Labor, Employee Benefits Security Administration. (2025b, August 12). News Release: EBSA Rescinds 2021 Supplemental Statement on Alternative Assets in 401(k) Plans.