Willful misapplication<\/li>\n<\/ul>\n\n\n\nPlan trustees must have coverage for 10% of their plan assets. Solo business owners and their spouses are exempt.<\/p>\n\n\n\n
Who needs to have an ERISA fidelity bond?<\/h2>\n\n\n\n
ERISA requires 401(k) plan administrators, or anyone who handles funds or other property, to be bonded. These bonds must be purchased before any funds are placed into the company 401(k) plan. ERISA bonds must also only be purchased by a surety on the Department of Treasury\u2019s listing of approved sureties. In fact, ERISA makes it illegal to handle, receive, exercise custody of plan funds, or distribute funds without obtaining the fidelity bond.<\/p>\n\n\n\n
ERISA also requires:<\/strong><\/p>\n\n\n\n\n- That fidelity bonds cover each 401(k) plan administrator for 10% of the funds they handle<\/li>\n\n\n\n
- That fidelity bonds do not include deductibles<\/li>\n\n\n\n
- Minimum coverage of $1,000<\/li>\n\n\n\n
- Maximum coverage of $500,000 ($1,000,000 if the plan includes employer securities)<\/li>\n<\/ul>\n\n\n\n
Are there penalties for not having an ERISA fidelity bond?<\/h2>\n\n\n\n
The Department of Labor (DOL) is placing more emphasis on ERISA bonds, so it\u2019s important to obtain a bond in the early stages of setting up your company\u2019s 401(k) plan. While there are no specific penalties associated with the lack of a fidelity bond, you may find yourself subject to liabilities in the event of fraud and even a plan audit by the DOL in the future if it is found that you don\u2019t have a fidelity bond listed in your Form 5500.<\/p>\n\n\n\n
The Form 5500 specifically asks if you had an ERISA bond for the previous plan year to which the answer should be yes, if you do in fact have one. However, if this is not the case, you may receive a letter from the DOL followed by additional consequences.<\/p>\n\n\n\n
How do I get an ERISA fidelity bond?<\/h2>\n\n\n\n
Many plan providers don\u2019t mention the need for an ERISA bond at the point of sale because some clients may not be interested in paying expensive plan fees. However, the great news is that ERISA bonds are an inexpensive necessity. Unlike some plan providers, ePlan Services mentions the need for the ERISA fidelity bond at the time of plan setup.<\/p>\n\n\n\n
If you\u2019re considering your fidelity bond options, contact your plan insurer. For questions or more information on the importance of fidelity bonds, contact ePlan Services today.<\/p>\n\n\n\n
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