---
title: "ERISA Fidelity Bond Requirements: Amount, Rules, Exemptions"
description: "What ERISA section 412 requires: the 10 percent formula, the $1,000 floor, the $500,000 cap, the no-deductible rule, and who is exempt."
canonical: https://americassuretybonds.com/requirements/erisa/
author: "Phil Pavarini, Insurance Agent"
publisher: "America's Surety Bonds"
date_published: 2026-10-03
date_modified: 2026-10-03
language: en-US
---

[Home](https://americassuretybonds.com/) > [Requirements](https://americassuretybonds.com/requirements/) > ERISA Bond

# The ERISA fidelity bond

*The federal bond nearly every retirement plan has to carry, and the one most often carried wrong.*

By Phil Pavarini, Insurance Agent.

> 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.

If your company sponsors a 401(k), a pension, a profit sharing plan or almost any other retirement plan with at least one non-owner employee in it, federal law requires a bond. It is not optional, it is not waived for small plans, and it is not satisfied by the fiduciary liability policy your broker may have sold you alongside it.

The requirement is **ERISA section 412**, codified at 29 U.S.C. 1112, with the operating rules in 29 CFR part 2580. The one sentence version: every person who handles plan funds must be covered by a bond that pays the plan if they steal from it, in an amount of at least 10 percent of the funds they handle.

Almost everything people get wrong about this bond comes from one misunderstanding, so it is worth putting up front. **This is not insurance for you.** The plan is the insured. If you take money out of the plan, the bond pays the plan back and then the carrier comes after you personally. You are required to buy, out of plan or company assets, a product whose only purpose is to protect the plan from you.

## The short version

The five facts that answer most of it:

- **Amount.** At least 10 percent of the plan funds handled, minimum $1,000, maximum $500,000. The cap is $1,000,000 if the plan holds employer securities. [How to calculate it](/requirements/erisa/bond-amount/)
- **Who.** Every plan official who handles funds or property, which is broader than the trustees. [What handling means](/requirements/erisa/who-must-be-bonded/)
- **No deductible.** The bond has to pay from the first dollar. [The rule and why it exists](/requirements/erisa/no-deductible/)
- **Named insured.** The plan has to be named on the bond, or a claim cannot be made. [Same page](/requirements/erisa/no-deductible/)
- **Exemptions.** Owner-only plans, banks, insurers and registered broker-dealers. [Who is genuinely out](/requirements/erisa/exemptions/)

## Why the bond exists at all

Congress wrote ERISA in 1974 after a run of cases in which union and company pension funds were simply looted by the people administering them. Section 412 is the structural answer to that. Rather than trying to police every plan, the statute requires that anyone who can touch the money be covered by a bond that makes the plan whole if they take it.

The design has one consequence worth dwelling on. Because the bond exists to protect participants from insiders, the statute makes it **unlawful** to buy the bond from a surety or through an agent in whose business the plan or a party in interest has any control or significant financial interest. You cannot bond yourself through your own captive. That prohibition is in the statute itself, at 29 U.S.C. 1112(c), and it is the kind of thing that is invisible right up until a DOL investigator asks who sold you the bond.

## What it covers, and what it does not

The covered peril is narrow and specific. The statute says the bond must protect the plan against **loss by reason of acts of fraud or dishonesty** by a plan official, acting alone or in collusion with others. That is theft, embezzlement, forgery, misappropriation, and wrongful abstraction. It is a crime coverage.

It is not a coverage for bad decisions. If a trustee picks a terrible fund lineup, charges the plan excessive fees, fails to remit deferrals on time, or breaches the duty of prudence in any of the hundred ways a fiduciary can, the ERISA bond does nothing. That exposure is insurable, but by a different product, and the two are confused so routinely that it has [its own page here](/requirements/erisa/vs-fiduciary-liability/).

The practical test: if the fact pattern would interest a prosecutor, the bond is probably in play. If it would interest a plaintiff’s ERISA firm, it probably is not.

## Where it shows up

Three places, in roughly this order of unpleasantness.

**The Form 5500.** Every year the plan reports whether it was covered by a bond and for how much. A blank or a "no" on that line is a flag sitting in a public database. [What the line asks and how it is read](/requirements/erisa/form-5500-line-4e/)

**The plan audit.** Auditors check the bond against the prior year’s funds handled as a routine procedure. This is the most common way a sponsor finds out their bond has been the same $10,000 since 2011 while the plan grew to $4 million.

**A DOL investigation.** An inadequate bond is not usually what starts an investigation, but it is frequently what an investigator finds early. It is cheap to fix, it is easy to prove, and it colors everything that follows, because a sponsor who did not keep a $300 bond current is not going to be given the benefit of the doubt on the harder questions.

## The honest summary of what this costs

This is a small purchase relative to the plan it protects. Pricing is driven mainly by the bond amount, multi-year terms are commonly available, and a standard ERISA bond is usually written without a personal credit check or financial statements. [What moves the price](/requirements/erisa/cost/)

The reason to get it right is not the money. It is that the bond is the single most visible compliance item on the plan, it is checked every year by at least two parties, and getting it wrong is a self inflicted wound that costs almost nothing to avoid.

Know the amount you need? [Apply for this bond](https://americassuretybonds.propeller.insure/axelerator-public/) or read the [full bond details](https://americassuretybonds.com/state/All-States/ERISA-Policy/All-OTHER-states).

Related: [Homeowner Protection Bond](https://americassuretybonds.com/requirements/homeowner-protection-bond/), [Freight Broker Bond (BMC-84)](https://americassuretybonds.com/requirements/freight-broker-bond/), [Medicare DMEPOS Bond](https://americassuretybonds.com/requirements/dmepos-bond/).

## In this section

- [How much bond](https://americassuretybonds.com/requirements/erisa/bond-amount/) - Ten percent of funds handled, with a floor and a ceiling. The timing is where people slip.
- [Who must be bonded](https://americassuretybonds.com/requirements/erisa/who-must-be-bonded/) - The test is handling, not job title. It reaches further than most sponsors assume.
- [Who is exempt](https://americassuretybonds.com/requirements/erisa/exemptions/) - Four real exemptions, and a much longer list of things people wrongly believe are exemptions.
- [401(k) plans](https://americassuretybonds.com/requirements/erisa/401k/) - The most common version of this requirement, and the one with the most bad advice attached.
- [No deductible](https://americassuretybonds.com/requirements/erisa/no-deductible/) - A deductible on the required amount, or a bond that does not name the plan. Both are common and both are fatal.
- [What it costs](https://americassuretybonds.com/requirements/erisa/cost/) - Small, driven almost entirely by the bond amount, and cheaper on a three year term.
- [How to get one](https://americassuretybonds.com/requirements/erisa/how-to-buy/) - Four pieces of information, usually same-day issue, and five things to verify on the form.
- [Form 5500](https://americassuretybonds.com/requirements/erisa/form-5500-line-4e/) - One yes-or-no box and one dollar figure, sitting in a database anyone can search.
- [Non-qualifying assets](https://americassuretybonds.com/requirements/erisa/non-qualifying-assets/) - A small plan holding real estate, notes or private investments can need a bond many times the section 412 amount.
- [Bond vs fiduciary liability](https://americassuretybonds.com/requirements/erisa/vs-fiduciary-liability/) - One is required and protects the plan from you. The other is optional and defends you.
- [By state](https://americassuretybonds.com/requirements/erisa/by-state/) - The requirement is federal and does not change at a state line. These pages route the application.

## Common questions

**Is an ERISA bond required for every 401(k) plan?**

For every plan that is covered by Title I of ERISA, which in practice means every plan with at least one participant who is a common law employee rather than an owner or an owner’s spouse. A solo 401(k) covering only the owner is generally outside Title I and therefore outside the bonding requirement. Hire one employee who becomes eligible, and the plan is in.

**Does the ERISA bond protect me as the business owner?**

No, and this is the most important thing to understand about it. The plan is the insured. The bond pays the plan if a covered person steals from it, and the carrier then has the right to recover from the person who did the stealing. You are required to buy protection against yourself. If you want coverage that defends you, that is fiduciary liability insurance and it is a separate purchase.

**How much does an ERISA bond cost?**

Far less than people expect. Pricing is driven by the bond amount rather than by your credit or your financials, and the amounts involved are small: a $100,000 bond is a common size and a modest annual premium. Multi-year terms are standard in this market and usually cost less per year than renewing annually.

**Can I just use my company crime policy?**

Sometimes, and the DOL has explicitly said so. A commercial crime or employee dishonesty policy can be endorsed to satisfy section 412, provided the plan is named or otherwise identified, the required amount has no deductible applied to it, and the coverage meets the statutory terms. What does not work is assuming your existing policy already does this. Most do not without the rider.

**What happens if the plan has no bond?**

It is a fiduciary breach, and the people responsible for procuring the bond are the ones exposed. In practice the first consequence is usually the auditor or the third party administrator flagging it, followed by a corrected Form 5500. The DOL has no fixed penalty schedule aimed at the bond itself, but an unbonded plan is an obvious finding in any investigation and it tends to invite a closer look at everything else.

## Related guides

- [How much bond](https://americassuretybonds.com/requirements/erisa/bond-amount/)
- [401(k) plans](https://americassuretybonds.com/requirements/erisa/401k/)
- [Who is exempt](https://americassuretybonds.com/requirements/erisa/exemptions/)
- [What it costs](https://americassuretybonds.com/requirements/erisa/cost/)
- [Bond vs fiduciary liability](https://americassuretybonds.com/requirements/erisa/vs-fiduciary-liability/)

---

**Phil Pavarini, Insurance Agent.** Licensed insurance producer (NPN 8314541, CA License No. 4481016), licensed in 49 states and the District of Columbia. Has placed probate, fiduciary, court, contractor and commercial surety since 2004, and writes about the bonds he actually files.

This website is a referral and informational platform. It is not a surety, an insurer, a bonding company, or a law firm. Bond inquiries may be referred to a licensed agency, agent or carrier for quoting, underwriting and issuance. If you already have a bond, the agent of record and the issuing surety are identified on your bond form, power of attorney, or invoice. Please direct all questions about an existing bond to that party. Content on this site is general information only and is not legal, tax or financial advice. Bond requirements vary by jurisdiction and change frequently. Verify all requirements with the applicable court, agency or obligee.

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