ERISA Fidelity Bond

What is ERISA?

In 1974, the Employee Retirement Income Security Act (ERISA) was enacted to regulate most types of employee benefit plans. This Act requires that a fidelity bond be in place to cover the fiduciary and those persons who handle funds or other property of such a plan.

According to the Act, the amount of coverage necessary for each plan is no less than 10 percent of the amount of plan funds handled. There is a $500,000 maximum bond amount and a $1,000 minimum. The amount of the minimum required bond is fixed at the beginning of each fiscal year of the plan. Higher limits can be purchased.

Under ERISA, a “fiduciary” is defined as a person who “(i) exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) has any discretionary authority or discretionary responsibility in the administration of such plan…” (ERISA, Sec. 412, U.S. Code 1002(21)(A))

ERISA bonds are intended to protect retirement plans from fraud and dishonesty committed by individuals who are associated with them. The term “fraud or dishonesty” includes such events as larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication or other fraudulent or dishonest acts.

Defined Benefit Pension Plans, Money Purchase Pension Plans, Profit Sharing Plans, 401 (K) plans, stock bonus plans, employee stock ownership plans (ESOPs) and Keogh or H.R. 10 plans that have employee participants are among the types of retirement plan which are required to have ERISA Bonds.

ERISA Bonds fall into two categories:

  1. ERISA Bonds which respond to claims involving the insured’s own employee benefit plans. This is the type of bond we provide for your company.
  2. Advisors ERISA Bonds that cover fiduciaries for claims involving client employee benefit plans. These bonds are required for Investment Advisors, Brokers, and Fiduciaries who provide plan or investment services for their clients. Higher limits may be required.

Contact us today for help with your ERISA Bond needs. A member of the Bond Department will be happy to assist you.

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For a free consultation or review of your insurance policies, please contact us.

(617) 773-9200