ERISA Bond: Review and Renew - Keeping Your Bond in Compliance
Because you sponsor a company retirement plan, you may be required by the Internal Revenue Service (IRS) to obtain and maintain an ERISA Bond (a.k.a. Fidelity Bond). In the simplest terms an ERISA Bond is an insurance policy for your plan participants.
The bonding requirements as they apply to qualified retirement plans are codified in the Internal Revenue Code Title 29 § 1112. Plan fiduciaries and persons who handle retirement plan funds are required by Title I of ERISA to be bonded unless one of the limited exceptions is met.
How to Review and Renew Your ERISA Bond (a.k.a. Fidelity Bond)
An ERISA Bond can NOT be obtained from any bonding or insurance company and rather, must be placed with a surety company or reinsurer named on the IRS’s Listing of Approved Sureties, Department Circular 570:
ERISA Bond Checklist
A Department of Labor (DOL) Investigator will ordinarily determine whether a plan is in compliance with the bonding, reporting, and disclosure provisions of ERISA by completing an ERISA Bonding Checklist. We have provided important checklist items to assist you with ensuring that you maintain your Plan’s ERISA Bond in compliance with government regulations. The complete checklist can be found at
Bonding Requirements Checklist: DOL
- Does the bond amount need to be increased or can it be decreased?
- Is the bond specifically issued to and in the name of the Retirement Plan (not the company/organization)?
- Does the bond provide for payment to the Plan in the event of loss?
- Is the company that has issued the bond listed in Treasury Circular 570? Circular 570: Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies.
- Name of Company____________________________________________
- Has the bond lapsed, does it need to be renewed?
- Policy Lapse Date_____________________________________________
- Policy Renewal Date__________________________________________
- If the bond contains a deductible, is an elimination of deductible Rider attached? (ERISA prohibits a deductible associated with a Fidelity Bond)
- Does the bond protect against fraud or dishonesty?
- Does the bond cover all persons who “handle” funds?
- Does the bond have a one-year discovery period?
ERISA Bond Amount
An ERISA Bond company will generally have their own questionnaire and computation sheet to help you determine the amount that the Bond should be issued or renewed for.
In general, the amount of bonding should not be less than ten percent of the amount of funds held in the plan, but in no event less than $1,000, nor more than $500,000, with certain exceptions.
It is important that you monitor the Bond each year and increase the Bond amount (especially if the Bond does not include an auto escalation clause) each year. Failure to maintain a Bond in the amount required by regulations will result in a plan violation.
ERISA Bond Providers
We have provided several companies that can assist you with the required ERISA Bond:
Follow the “Quote & Purchase” link under “Stand-Alone ERISA fidelity bonds…” near the bottom of page. Enter #WA0153 so that LRS automatically receives a copy of your bond as well as important notices. Let them know we sent you their way, by entering Leading Retirement Solutions’ # WA0153.
LRS may accept a service or referral fee for assisting you with the setup of your Bond.
- Your Business Insurance Provider
The insurance agency from whom you secure your “Business” related insurance, may offer a Fidelity Bond. Be careful, a firm not experienced with the Fidelity Bond requirement may try to sell you a “fiduciary” policy or “errors and omissions” insurance. You need a Fidelity Bond pursuant to ERISA section 412.
- Call us if you want to include us in a conversation with your bond company, to make sure you obtain the right policy.
Helpful Tips for Renewal
- A bond is quite economical and it’s easy to obtain one. A 3 (three) year bond is most cost effective and usually costs $180-$250. A 1 (one) year bond is usually around $120.
- You want to also make sure the bond includes an auto escalation clause so that the bond increases each year without you having to call into the insurer and request an increase (clients don’t always remember to do this, which then results in a plan violation).
- Make sure that the fidelity bond provider you select understands the requirements of a fidelity bond and will be responsible for helping you not only obtain an adequate bond but also monitor for necessary increases. We can provide you with a list of several companies that can assist you with the required ERISA Bond, at renewal time. Email service@leadingretirement.com with your request.
- Call us if you want to include us in a conversation with your ERISA Bonding company, to make sure the Bond is properly renewed.
Leading Retirement Solutions
(206) 430-5084 phone
(800) 974-2814 (toll free)
service@leadingretirement.com
www.leadingretirement.com
Our mission: to proactively support organizations and lead them toward a secure future.