The term “fiduciary breach” often evokes images of significant mishaps within company-sponsored retirement plans, leading to notable legal disputes. Yet, a more common and equally troublesome issue for business owners is failing to secure the mandatory ERISA fidelity bond, as stipulated by the Department of Labor (DOL), which can lead to serious complications.
ERISA Bonds: Essential Insights
The DOL mandates that retirement plan sponsors secure and maintain an ERISA Fidelity Bond, designed to shield employer-sponsored retirement plans from fraudulent and dishonest activities. Non-compliance is not only a breach of fiduciary duty but also poses substantial risks:
Your annual Form 5500 filing must disclose the presence of a fidelity bond. The DOL scrutinizes plans lacking bond coverage or those with insufficient coverage relative to the plan’s assets, potentially triggering a DOL audit. Not having an appropriate bond is considered a fiduciary breach, making plan fiduciaries personally accountable for losses that could have been mitigated by the bond.
Per Section 412 of the ERISA Act of 1974, it’s mandated that “Every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan…shall be bonded as provided in this section…”. For compliance, sponsors should remember:
- New plans must have a fidelity bond from the outset, with the bond amount based on estimated plan contributions, starting at a minimum of $1,000.
- Annually, the bond’s coverage must equal at least 10% of the handled funds, with a minimum of $1,000 and a cap at $500,000, though higher coverage amounts are permissible.
- Bonds must be procured from a surety or reinsurer listed on the Department of Treasury’s Listing of Approved Sureties.
Navigating ERISA Bond Compliance
Colonial Surety Company, a Treasury-listed leader in ERISA bonds, assists plan sponsors and fiduciaries in obtaining their ERISA bonds swiftly and efficiently, offering added services for ongoing compliance and protection:
- Retroactive coverage to address any lapses in ERISA bond compliance
- Multi-year options for sustained coverage at stable rates
- Affordable, full protection packages (ERISA Bond+Fiduciary+Cyber) to protect personal and business assets from breach allegations under ERISA standards with extended coverage for multi-year plans.
Discover more about ERISA Bonds from our specialists and ensure your compliance today:
ERISA Fidelity Bonds Made Easy
Rated “A Excellent” by A.M. Best Company and listed by the U.S. Treasury, Colonial Surety Company has been serving the nation since 1930. As a trusted provider for the pension industry, we offer ERISA bonds, fiduciary liability insurance, and cyber-liability insurance, ensuring plan sponsors, pension professionals, and financial advisors remain compliant with effortless and reliable service.