Fidelity Bond Information

DOL Bond Requirements – The Employee Retirement Income Security Act of 1974 requires that a fidelity bond be purchased in an amount that is not less than 10% of the total amount of the Trust's assets, with a minimum of $1,000 and a maximum of $500,000. The Act raises the maximum bond amount to $1,000,000 for a plan that holds employer securities, regardless of whether a bonded person actually handles employer securities. Fidelity bond information must be reported on Form 5500, and the Department of Labor has brought action against employers who fail to provide adequate bond coverage. Employers with “nonqualified” assets that are not fully covered by a fidelity bond are also subject to the annual requirement of an independent audit of their plan, which can result in considerable expense to the Employer.

If you have any “nonqualified” assets in your Plan, the bonding requirement is the greater of 100% of the value of those “nonqualified” assets or 10% of the total assets of the plan. “Nonqualified Assets” are ANY plan assets that do not meet the following criteria:

Any assets held by: a bank or similar financial institution, as defined in Sec. 2550.408b-4(c); an insurance company qualified to do business under the laws of a state; an organization registered as a broker-dealer under the Securities and Exchange Act of 1934; or any other organization authorized to act as a trustee for individual retirement accounts under section 408 of the Internal Revenue Code. The term “qualifying plan assets” also includes assets that the Department believes present “little risk of loss to participants and beneficiaries as a result of acts of fraud or dishonesty,” participant loans meeting the requirements of ERISA section 408(b)(1) and qualifying employer securities, as defined in ERISA section 407(d)(1). (Contact your BPC plan administrator if you have questions about “nonqualified” assets in your Plan).

Many clients comply with this bonding requirement by amendment to their business insurance package. Please call whoever handles the property/casualty coverage for your company. Please note that there are certain requirements that must be met (ex: Plan must be identified by name, no deductible is allowed for this coverage, etc.).

Fidelity bonds are also available via the Internet. The following are some internet providers of fiduciary bonds:
ERISA Direct, Travelers, and CNA Surety.