What Is An ERISA Bond?
An ERISA bond is a type of fidelity bond used to protect people who participate in employee benefit plans such as a defined benefit plan, a pension fund, or a 401 K plan. The Employee Retirement Income Security Act (ERISA) of 1974 requires fiduciaries, or the individuals appointed to oversee and manage employee benefit plans, to obtain an ERISA surety bond protecting these plans and their benefactors from potential fraud, mismanagement and theft.
What Is The Purpose Of ERISA Compliance Surety Bonds?
The Employee Retirement Income Security Act (ERISA) sets rules and standards of conduct for private sector employee benefit plans and those that invest and manage their assets. ERISA, which is administered by the U.S. Department of Labor (DOL), was enacted to address public concern that funds of private pension and other employee benefit plans were being mismanaged and abused. An important requirement of the ERISA law is that people who handle plan funds and property must be covered by a surety bond.
This bond protects employee benefit plans against losses caused by acts of fraud or dishonesty. Fraud or dishonesty includes, but not limited to, larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication and other acts. Deductibles and other similar features are prohibited for coverage of losses, and it is important to make sure the plan is named as an insured party on the bond.
Who Needs An ERISA Surety Bond?
It is unlawful for any person to receive, handle, disburse or otherwise exercise custody or control of plan funds or property without being bonded. Bonding is usually necessary for the plan administrator and those officers and employees of the plan, or plan sponsor, that handles funds.
Bonding may also be required of other persons, such as service providers to the plan, that have access to plan funds or decision-making authority.
What Bond Amount Is Needed For An ERISA Bond?
Bond amounts are equal to at least 10% of the amount of funds handled in the preceding year by the person being bonded. The bond amount cannot be less than $1,000, and the DOL cannot require a plan official to be bonded for more than $500,000, or $1,000,000 for plans that hold employer securities.
It is recommended that you contact the Department of Labor for the specific bond amount you will need prior to bonding.
How Are ERISA Surety Bonds Purchased?
The first step is to complete our quick online application for your free, no obligation bond quote. Submission takes only five minutes, and our underwriting staff will be in contact with you within a couple of hours with pricing. If you prefer to speak with our knowledgeable staff, please call 1-866-722-7873 and one of our Underwriters will assist you in applying for your bond.
After you receive approval, you must sign an indemnity agreement with the surety and provide payment for your bond premium. In most cases, we can issue bonds the same day we receive your signed documents and payment.