Q:

What is an ERISA bond?

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Quick Answer

Employee Retirement Income Security Act, or ERISA, bonds are fidelity bonds that protect employee benefit plans from fraud and other criminal acts by those who handle plan assets, reports the U.S. Department of Labor. Plan administrators must obtain the bonds from sureties or reinsurers from a U.S. Department of the Treasury-approved list.

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Full Answer

Retirement plans must bond anyone working with funds or other retirement plan assets, including administrators, plan sponsors, plan employees and sometimes service providers, explains the U.S. Department of Labor. This includes all those with power to transfer funds or negotiate plan property, disburse assets, sign checks or have physical contact with funds and checks. Plans are able to purchase the bonds with plan assets, as the purpose of the bonds is plan protection.

The law stipulates that ERISA bonds must cover all bonded people for at least 10 percent of the amount of the plan assets they handled the previous year, states the U.S. Department of Labor. An ERISA bond amount must be at least $1,000, and the maximum bond amount for an individual is $500,000, or $1 million if the plan contains employer securities. A person who handles assets from more than one plan requires bonding for each plan. A plan can optionally purchase a bond for a larger amount than ERISA requires.

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