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Last Updated March 21, 2009
Requirement that applies to individuals having control or authority over qualified plan assets- or generally handle plan assets- to protect the plan against fraud. Under this requirement, such individuals are bonded by a corporate surety company or a fidelity bond.
ERISA requires a plan fiduciary and any person handling plan assets to be bonded, generally in an amount between $1,000 and $500,000. An exception to the bonding requirement generally applies for a fiduciary (or a director, officer, or employee of the fiduciary) that is a corporation authorized to exercise trust powers or conduct an insurance business if the corporation is subject to supervision or examination by Federal or State regulators and meets certain financial requirements. Certain exceptions apply.
Generally, the individual must be bonded for at least 10% of the asset he/she handles. DOL Temp. Reg. 2580.412-6(b) defines when plan assets are ‘handled’
ERISA Section 412(a), DOL Reg. §2509.75,
Additional Helpful Information
PPA 2006 provides an exception to the ERISA bonding requirement for an entity registered as a broker or a dealer under the Securities Exchange Act of 1934, if the broker or dealer is subject to the fidelity bond requirements of a self-regulatory organization (within the meaning of the Securities Exchange Act of 1934). The provision is effective for plan years beginning on or after August 18, 2006.
- Plans that cover only the business owner/s are not usually subject to bonding requirements. DOL Reg. §2510.3-3
- According to the DOL, a fidelity bond is a type of insurance that protects the plan against loss resulting from fraudulent or dishonest acts of those covered by the bond..