Phil Pavarini is a licensed insurance producer and is compensated when a bond is placed through this site. This page is general information, not legal, tax or fiduciary advice, and it is not a substitute for reading your plan document or contract or for advice from your own counsel. Figures shown are current as of the date on this page.
This is one of the least expensive compliance items a plan sponsor will ever buy, which is worth saying plainly because the amount of anxiety attached to it is out of all proportion to the cost.
Pricing is driven mainly by one variable: the bond amount. A standard ERISA bond is usually written without a personal credit check, financial statements or an underwriting interview. That follows from what the product is. A surety bond is priced on the chance you will fail and the surety will have to chase you for the money, so your credit matters enormously. A fidelity bond is insurance against theft by a defined group of people, and the carrier is not looking to the buyer for reimbursement, so the buyer’s balance sheet usually matters little. Larger bonds, unusual plan assets or a prior loss can still draw underwriting questions.
What moves the price, in order#
- The bond amount. This is nearly the whole calculation. Rates are tiered and each tier costs less per thousand than the one below it, so the premium rises much more slowly than the bond amount does.
- The term. Two and three year terms carry a discount against the annual rate. On a small bond this can be the difference between paying three minimum premiums and paying one.
- Minimum premium. Below a certain bond size the rate stops mattering because the carrier’s minimum takes over. At the bottom of the range you are buying the minimum premium regardless of whether the bond is $1,000 or $10,000, which means the smallest plans should simply round the amount up generously.
- Everything else. Industry, plan type, number of people covered and the sponsor’s financials have little or no effect on a standard ERISA bond.
A realistic way to think about the number#
Rather than quoting a figure that will be stale, here is the shape of it. Premium as a percentage of the bond amount falls steeply as the bond gets larger. A $10,000 bond and a $100,000 bond are not ten times apart in price, and a $500,000 bond is nowhere near fifty times the price of the $10,000 one.
The practical consequence is the advice given everywhere else on this site: round up. Going from the calculated $134,000 to a round $150,000 costs very little and buys headroom. Going from $500,000 to $1,000,000 on a large plan, where the statute only requires $500,000, is a real decision with a real number attached, but it is still a small number against a plan of that size.
The way to get the actual figure is to price the amount you need. The application for this bond asks for the bond amount and shows the premium.
Know the amount you need? Apply for this bond, or read the full bond details.
Who pays, and from where#
The bond is a plan expense in the ordinary sense: it is required by law, it protects the plan, and it is reasonable. It can be paid from plan assets.
Many sponsors pay it from company funds instead, for a practical reason rather than a legal one. The amount is small, and paying it from the plan means it appears in participant fee disclosure and in the plan’s expense reporting, which invites a question that is not worth the time it takes to answer. Either approach is defensible, and the choice is usually settled by whoever is doing the bookkeeping.
Where people overspend#
Two places, and they are opposite errors.
Buying $500,000 by default. Some sponsors, told there is a $500,000 maximum, buy $500,000. For a plan with $600,000 in it the requirement is $60,000, and the extra is buying coverage nobody will ever use at a cost that is small but entirely wasted. The maximum is a ceiling on what can be required, not a recommended amount.
Buying a package that is mostly something else. The ERISA bond is sometimes bundled with fiduciary liability coverage and sold as one number. Fiduciary liability is a genuinely useful product, and it usually costs considerably more than the bond. Bundling is fine if you want both. It is not fine if you believed you were buying a bond and did not notice you had bought a policy. Ask for the two premiums separately.
Common questions
Is there a credit check for an ERISA fidelity bond?
Usually not, for a standard ERISA bond. Credit is a major factor in commercial surety, where the surety expects to be reimbursed after a claim. A fidelity bond works like insurance against dishonesty, so the buyer’s credit is generally not a major rating factor. Underwriting practice varies by carrier, and larger or unusual bonds can draw more questions.
Is a three year ERISA bond cheaper than renewing every year?
Usually yes, meaningfully so on small bonds where the carrier minimum premium dominates. The trade-off is that a three year term removes two renewal notices, and renewal notices are often the only thing that prompts a sponsor to recalculate the amount. Pair a long term with an inflation guard or a calendar reminder.
Why is a $500,000 bond not fifty times the price of a $10,000 bond?
Because rates are tiered and each tier costs less per thousand of coverage than the one below it, and because at the bottom of the range the carrier minimum premium applies regardless of the amount. Premium rises far more slowly than the bond amount, which is the main argument for rounding up.
Can the plan pay for the bond?
Yes. It is a required expense that protects the plan, so payment from plan assets is permitted. Many sponsors pay it from company funds anyway because the amount is small and it keeps the item out of participant fee disclosure. Either is fine.
Do I need to shop this around?
The product is standardized by statute, so there is far less variation than in most insurance purchases. What is worth checking is not the premium but the form: that the plan is named, that there is no deductible on the required amount, that the surety is on the Treasury list, and that a discovery period is included.
Get the bond filed today
Answer a few questions and see pricing for this bond. A standard ERISA fidelity bond is usually written without a personal credit check and is often issued quickly, because the bond protects the plan rather than guaranteeing your performance.
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