ERISA Bond Requirements

Learn the criteria...

Bonding Requirements

Every retirement plan must have a fidelity bond in place as required by ERISA §412 (with rare exception) and annually disclose the policy limit on the plan’s Form 5500. These bonds insure against a potential loss of funds resulting from fraud or dishonesty by individuals with access to them.

Amount of Bond

The amount of the bond coverage is determined at the beginning of each plan year and must not be less than 10% of the value of the publicly-traded assets held at that time or $1,000. The maximum required bond coverage for these assets is $500,000. Additional bonding may be required, however, if assets are held by the plan whose value is not readily determinable, thus requires annual valuation (e.g., non-public stock, artwork, real estate). The additional bond coverage required for these assets must be at least equal to their collective value at the beginning of the year. Regardless of the type of assets held by the trust, the maximum required bond coverage is $1,000,000.

When purchasing your bond, plan ahead! Using ambitious approximates of your annual contribution expectations, estimate the value of the plan trust in 3 years. Since most bonds are issued in 3 year blocks, it only makes sense to perform this exercise and you won’t have to worry about your coverage all the time. Alternatively, you may consider adding a provision to your bond which automatically increases the policy limit to the required amount.

See your insurance agent to see if they offer ERISA or Fiduciary Bonds or click here to purchase a bond.

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