ERISA Bond: Obtaining Your Plan's Required Fidelity Bond
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. 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.
How to Obtain an ERISA 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 which can be found at:
Surety Bonds: Circular 570
Helpful Tips:
- The bond requirement generally applies once you have your first eligible employee beyond company owners.
- Even if eligible employees do not participate/make contributions to the plan, you are required to obtain a bond.
- A bond is quite economical and it’s easy to obtain one. A 3 year bond usually costs $180-$250. A 1 year bond is usually around $120.
- Tell the surety company that you need an “ERISA Bond pursuant to Employee Retirement Income Security Act section 412.”
- 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).
- This a federal insurance policy so it doesn’t matter what state you are located in.
- Make sure that the bond provider you select understands the requirements of an ERISA bond and will be responsible for helping you not only obtain an adequate bond but also monitor for necessary increases.
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 an ERISA Bond. Be careful, a firm not experienced with the ERISA Bond requirement may try to sell you a “fiduciary” policy or “errors and omissions” insurance. You need am ERISA 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.
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.
For more information about renewing your plan's ERISA Bond please visit:
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.