All OTHER states Bond - ERISA Policy in All States
Table of Contents
Brief Summary
If anyone at your company touches retirement or benefit plan money, federal law says they must be bonded before they do it. An ERISA fidelity bond covers the plan against theft or fraud by the people who handle its funds. It is sized off last year's plan assets, checked at the start of each plan year, and it is the bond Form 5500 asks about.
ERISA section 412 (29 U.S.C. 1112) requires every fiduciary and every person who handles funds or property of an employee benefit plan to be bonded. The bond must equal at least 10% of the funds handled, with a $1,000 minimum and a $500,000 maximum, rising to $1,000,000 for plans holding employer securities and pooled employer plans. It protects the plan against loss from fraud or dishonesty and must be written by a Treasury approved surety.
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Want the rule behind this bond? Read the ERISA fidelity bond guide: the 10 percent formula, who must be bonded, exemptions and what it costs.
How to Apply for an All OTHER states Bond:
- Total the plan assets handled during the preceding plan year.
- Multiply by 10% and apply the $1,000 minimum and the $500,000 or $1,000,000 maximum.
- If claiming the small plan audit waiver, add coverage for any non qualifying assets at their full value.
- List the plan or plans to be named as insured on the bond.
- Have the bond issued by a Treasury Circular 570 surety and keep it with plan records.
- Report the bond coverage on the plan's Form 5500 and review the amount at the start of each plan year.
Detailed Information About the All States All OTHER states Bond:
Who has to be bonded
ERISA section 412 applies to every plan official, meaning any fiduciary and anyone who handles plan funds or other property. That usually includes the plan sponsor's staff who approve distributions, sign checks or move contributions, as well as outside administrators with that kind of access. It is unlawful for an unbonded person to handle plan funds, and unlawful for a plan official to let them.
How much coverage
The amount is fixed at the start of each plan year.
- At least 10% of the funds handled during the preceding reporting year. New plans estimate the current year.
- Never less than $1,000.
- Need not be more than $500,000.
- For plans holding employer securities, and for pooled employer plans, the maximum is $1,000,000.
Under 29 CFR 2580.412-11, the bond must cover losses from the first dollar up to the required amount. A deductible inside the required amount is not allowed.
Who is exempt
Section 412 exempts plans that pay benefits only from the general assets of an employer or union, registered broker dealers subject to a self regulatory organization's fidelity bond rules, and certain banks and insurance companies with trust or insurance powers, federal or state supervision, and capital and surplus above the regulatory minimum.
Small plan audit waiver
Small pension plans claiming the audit waiver under 29 CFR 2520.104-46 must either keep at least 95% of plan assets in qualifying plan assets, or bond every person handling the non qualifying assets for at least the value of those assets. That can push the required bond above the usual 10% figure.
Who can write it
The surety must be acceptable on federal bonds under 31 U.S.C. 9304 to 9308, which means a company listed in Treasury Department Circular 570. The bond cannot be bought through an agent or surety controlled by the plan or a party in interest.
Eligibility and Requirements for an All States All OTHER states Bond:
- Covers every fiduciary and every person who handles plan funds or property.
- Coverage at least 10% of funds handled, $1,000 minimum.
- Maximum of $500,000, or $1,000,000 for plans holding employer securities or pooled employer plans.
- No deductible within the required bond amount.
- Surety listed in Treasury Department Circular 570.
- Not procured through any agent or surety in which the plan or a party in interest has control or a significant financial interest.
All States All OTHER states Bond FAQs:
Take the funds handled by the covered people during the preceding plan year and multiply by 10%. The result cannot be below $1,000 and need not exceed $500,000, or $1,000,000 if the plan holds employer securities or is a pooled employer plan.
No. The ERISA bond protects the plan against fraud or dishonesty by people who handle its money. Fiduciary liability insurance protects the fiduciaries themselves against claims of breach. Only the bond is required by section 412.
Not within the required amount. 29 CFR 2580.412-11 requires the bond to insure from the first dollar of loss up to the required bond amount.
Not if the only assets used to pay benefits are the general assets of the employer or union. Section 412(a)(1) exempts the administrator, officers and employees of those plans.
The surety prices it mainly on the bond amount and the length of the term you choose. Quotes are based on the plan's assets and the number of plans covered.
