Do Any Of Our Staff Members Need To Be Bonded?

Many plan administrators have requested information regarding retirement plan Fidelity Bonds. In other words, do any of the fiduciaries associated with the retirement plan need to be bonded because of their involvement with the plan’s assets? Here are the basics:

1. ERISA plans are required to secure a Fidelity Bond. ERISA plans are non-church plans with employer contributions.
2. Non-ERISA plans are not required to secure a Fidelity Bond. Non-ERISA plans include church plans and non-church plans that do not include employer contributions.

If you are not sure if your plan is ERISA or non-ERISA, contact Envoy Financial.

1. ERISA Plans
   ERISA Section 412 requires that every fiduciary of a retirement plan who handles the funds of such a plan be bonded. ERISA’s bonding requirements are intended to protect retirement plans from risk of loss due to fraud or dishonesty on the part of persons who “handle” plan funds or other property. ERISA refers to fiduciaries named in the Plan Document as “named fiduciaries”. ERISA refers to individuals who handle plan assets as “functional fiduciaries”. 
   
   A functional fiduciary must be bonded for at least 10% of the plan’s assets. In most instances, the maximum bond amount that can be required under ERISA with respect to any one fiduciary is $500,000 per plan. Not all fiduciaries need to be bonded. Only those who “handle” funds or other property of the retirement plan are required to be bonded. 
   
   The Fidelity Bond must protect the plan against loss by reason of acts of fraud or dishonesty on the part of persons required to be bonded. In the bond, the plan is the named insured. The persons “covered” by the bond are the functional fiduciaries. As the insured party, the plan can make a claim on the bond if an individual who handles the plan’s assets causes a loss to the plan due to fraud or dishonesty. 
   
   Most property and casualty insurance carriers are able to provide the Fidelity Bonds. Bonds must be placed with an insurance provider that is named on the Department of the Treasury's Listing of Approved Sureties, Department Circular 570 which can be obtained at fms.treas.gov/c570/c570.html.
2. Non-ERISA Plans
   Non-ERISA retirement plans are not subject to this requirement. No Fidelity Bond is required.

For any questions related to Fidelity Bonds, please contact our Plan Sponsor Service team at (888) 879-1376, option 4 or by email.