ERISA Fidelity Surety Bonds

The one bond federal law actually requires you to carry.

If anyone handles funds for your retirement or benefit plan, ERISA requires a fidelity bond. BF Bond issues them quickly and inexpensively, and most plan sponsors are covered the same business day.

The Basics

What is an ERISA fidelity bond?

The Employee Retirement Income Security Act requires that every person who handles funds or other property of an employee benefit plan be covered by a fidelity bond. It is one of the few bonds mandated by federal statute rather than by a contract or a licensing board, and compliance is not optional for a covered plan.

The bond protects the plan and its participants, not the employer and not the person bonded. If a trustee, plan administrator, or employee with authority over plan assets steals or misuses them, the plan is made whole from the bond, and the surety then recovers from the individual responsible. That distinction matters: this is protection for the participants savings, which is exactly what Congress intended.

A common and expensive misunderstanding is confusing this with fiduciary liability insurance. They are not the same and one does not satisfy the other. The ERISA bond covers dishonesty and is legally required. Fiduciary liability insurance covers breaches of fiduciary duty, such as imprudent investment decisions, and is voluntary. Well-run plans generally carry both, for different reasons.

ERISA bonds at a glance

Required amount

At least 10 percent of the plan funds handled, with a statutory minimum of $1,000 and a maximum of $500,000

Employer securities

The maximum rises to $1,000,000 for plans holding employer securities

Premium

Among the lowest in surety. Multi-year terms are available and usually cheaper than renewing annually

Who requires it

Federal law, enforced by the Department of Labor, and reported on your Form 5500

Also called

ERISA bond, 412 bond, employee benefit plan bond, pension bond

Who Requires One

Plans and people that require bonding

The requirement follows anyone with authority over plan money, whatever their job title.

401(k) & Pension Plans

Sponsors of defined contribution and defined benefit retirement plans, the most common plans subject to the requirement.

Trustees & Administrators

Plan trustees, administrators, and officers with authority to direct or disburse plan assets.

Staff Handling Funds

Payroll and finance employees who physically handle contributions or can direct where plan money goes.

Welfare Benefit Plans

Certain health and welfare plans with plan assets, which are frequently overlooked in compliance reviews.

How It Works

Bonded in four steps

Apply online

Complete our short ERISA application in about five minutes. You will need the plan asset figure.

Set the amount

We calculate the required bond from the funds handled and flag if employer securities raise your maximum.

Approve your quote

A firm premium with no obligation, usually the same business day. Ask about multi-year terms to save.

Bond issued

Your bond is issued with the plan named correctly, ready for your records and your Form 5500 reporting.

Questions

ERISA bond FAQs

How much ERISA bonding am I required to carry?

At least 10 percent of the plan funds handled at the start of the plan year, subject to a statutory minimum of $1,000 and a maximum of $500,000. That maximum rises to $1,000,000 for plans holding employer securities. If plan assets grow during the year, review the amount at the next plan year rather than assuming last year figure still complies.

How much does an ERISA bond cost?

Very little relative to most bonds. Premiums for typical plan sizes are modest, and because the required amount is capped by statute the cost does not scale indefinitely with your plan. Multi-year terms of two or three years are commonly available and usually work out cheaper than renewing each year, which also removes the risk of an accidental lapse.

What is the difference between an ERISA bond and fiduciary liability insurance?

They cover different risks and one cannot substitute for the other. The ERISA bond is required by law and covers dishonest acts, meaning theft or misuse of plan assets, and it protects the plan. Fiduciary liability insurance is voluntary and covers claims that you breached your fiduciary duties, for example by selecting imprudent investments or excessive fees, and it protects you. Prudent sponsors carry both.

Who exactly has to be bonded?

Anyone who handles plan funds or property, which the regulations define by function rather than title. That includes anyone with physical contact with plan money, the power to transfer or negotiate it, disbursement authority, or the ability to direct those who do. Trustees, plan administrators, and payroll or finance staff frequently qualify. A blanket bond covering all such persons is usually simpler than naming individuals.

What happens if my plan is not bonded?

It is a compliance failure. The Form 5500 asks directly whether the plan is bonded and for the amount, so an unbonded plan is disclosed to the Department of Labor by your own filing. That answer is a known trigger for further inquiry, and correcting it after the fact is more disruptive than simply carrying the bond, which costs very little.

Does my plan require a bond if a third party administers it?

Usually yes. Engaging a recordkeeper or third-party administrator does not remove the requirement for your own people who still handle plan funds, and a service provider bond does not automatically cover your trustees or staff. Check what the provider bond actually names. If there is any doubt, carrying your own is inexpensive certainty.

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Get your plan compliant today.

Five minutes to apply. Ask about a multi-year term so the bond cannot quietly lapse between filings.