Your fiduciary duty: fidelity bonding

More than just a good idea, ERISA requires that all employee benefit plans have a fidelity bond. If it’s been awhile since you reviewed the amount of your fidelity bond, make a note to check it to be certain that you are adequately covered.

Who needs to be covered: All persons who handle funds or other property for an employee benefit plan, unless they are covered by an exemption.

How much coverage: Each plan official needs a bond that covers 10% of the amount handled, but not less than $1,000. The maximum bond amount needed is $500,000 per plan official, per plan. In the case of a plan that has employer securities, the maximum amount is $1 million per plan official.

Why bonds are needed: The purpose of the bond is to protect employee benefit plans from loss due to fraud or dishonesty. It’s unfortunate, but necessary.

How bonds are different from fiduciary liability insurance: A bond protects the plan from fraud or dishonesty. Liability insurance (not required, but a good idea) insures the plan from losses due to a breach of fiduciary responsibility – a less defined area.

As with many ERISA and DOL rules, there are numerous details and extenuating circumstances. For more information, see a list of 42 FAQs with answers.