Every person who “handles funds or property” of an employee benefit plan must be covered by an ERISA Fidelity Bond unless they fall under an ERISA Act exemption. But exactly how much fidelity bond coverage does one need?
In general, each person covered by an ERISA Fidelity Bond must be bonded in the amount of 10% of the amount of plan funds they handled within the previous year. Regardless of the amount of plan funds handled, however, no ERISA Fidelity Bond amount can be under $1,000, and the Department of Labor cannot force a plan official to be bonded for an amount greater than $500,000, or $1,000,000 if the plan contains employer securities. These amounts apply for every named plan on a bond.
If the plan contains non-qualifying assets, however, a different amount may be required. Instead of the aforementioned 10% of asset value required, the non-qualifying assets must be covered by an ERISA Fidelity Bond equaling 100% of non-qualifying plan assets, as long as those non-qualifying assets make up more than 5% of total plan assets. Some examples of non-qualifying assets include real estate, private stock, and other non-publicly traded securities.
An important aspect to keep in mind is that, although an ERISA Bond protects the participants of your plan, this does not cover you as the fiduciary. It’s vital you also invest in fiduciary liability insurance to protect all parties involved. Colonial also offers Fiduciary Liability Insurance to protect you, the fiduciary, against any claims resulting from your role as plan fiduciary.
ERISA Fidelity Bonds are available from Colonial in multi-year packages, combined with Fiduciary Liability Insurance, and are available for 1-3 years. ERISA Fidelity Bonds are also able to be purchased alone, outside of a package.
Colonial Surety Company is an insurance company licensed in all 50 states and US territories, treasury listed and rated A Excellent by A.M. BEST Company.