Is an ERISA Fidelity Bond the same thing as fiduciary liability insurance?
No. The fidelity bond required under ERISA specifically insures a plan against losses due to fraud or dishonesty (e.g., theft) by persons who handle an organizations 401k plan funds or property.
Fiduciary liability insurance, on the other hand, insures fiduciaries, and in some cases the plan, against losses caused by breaches of fiduciary responsibilities. Although many plan fiduciaries may be covered by fiduciary liability insurance, it is not required and does not satisfy the fidelity bonding required by ERISA.
How much coverage must the bond provide?
Generally, each person must be bonded in an amount equal to at least 10% of the amount of funds he or she handled in the preceding year. The bond amount cannot, however, be less than $1,000, and the Department cannot require a plan official to be bonded for more than $500,000, or $1,000,000 for plans that hold employer securities. These amounts apply for each plan named on a bond.
For example, assume your company’s plan has funds totaling $1,000,000. The plan trustee, named fiduciary and administrator are three different company employees that each have access to the full $1 million, and each has the power to transfer plan funds, approve distributions, and sign checks. Under ERISA, each person must be bonded for at least 10% of the $1 million or $100,000.
(Note: Bonds covering more than one plan may be required to be over $500,000 to meet the ERISA requirement because persons covered by a bond may handle funds or other property for more than one plan.)
How much does an ERISA Bond cost?
Typically, ERISA Bonds are relatively inexpensive. A group with $3,000,000 in plan balance can expect a premium of $300 for a multi-year bond.
Can I get an ERISA bond from any bonding or insurance company?
No. Bonds must be obtained from a surety or reinsurer that is named on the Department of the Treasury’s Listing of Approved Sureties, Department Circular 570.
Conservation United is working with the proper companies who can place multi-year ERISA Bonds. Contact us today!
