What is ERISA’s Bonding Requirement for Our Employee Benefit Plan?


Suppose you’re a plan fiduciary that handles a 401(k) for your company. It can be tough to keep up with the prerequisites for the Employee Retirement Income Security Act of 1974, or ERISA. How do you know the exact bonding requirements for your specific plan?

ERISA generally requests that every fiduciary who manages “funds and other property” of a firm’s employee benefit plan be bonded. The ERISA bond, commonly referred to as a fidelity bond, safeguards plan participants against losses from dishonesty or fraud by planning fiduciaries or others handling the plan’s funds either directly or through cooperation with other individuals. This type of protection is dissimilar to fiduciary liability insurance.

Subsequently, to assist you in meeting ERISA bonding expectations, we’ve answered a few common questions of the law’s requirements regarding 401(k) plans.

What Funds Are Subject to the Bond Requirement?

Funds simply mean “all property which is used or may be used as a source for the payment of benefits to plan participants, including all plan investments.”

What Type of Bond is Required under ERISA?

According to the Department of Labor, fiduciaries must obtain an ERISA fidelity bond to safeguard plan participants from losses due to fraud or dishonesty.

Are Any Plans Exempt from ERISA Law?

No, there is no small plan or small quantity exception to the bonding requirement. Nonetheless, some fiduciary organizations like FDIC-insured banks, trust companies, etc., as well as registered brokers and dealers subject to the fidelity bonding obligation of a self-regulatory organization, are therefore exempt.

We at Colonial Surety Company never want fiduciaries to be vulnerable to lawsuits. With Fiduciary Liability Insurance, fiduciaries can protect themselves from covered plan participant lawsuits. What’s more, you can successfully manage a data-breach and safeguard the plan with Cyber Liability Insurance—all found in our ERISA bond combos and packages. Click here to obtain your ERISA fidelity bond package today.