Date Published: May 14, 2013
An ERISA surety bond is a type of fidelity bond. A fidelity bond is an employee dishonesty bond, where a business can make a claim if its employees steal from it. Proof of loss does not include a conviction clause.
The ERISA specific fidelity bond covers the 401k, pension, or other employee benefit plans sponsored by a business. The bond is required as part of the Employee Retirement Income Security Act. The bond must be in an amount equal to or greater than 10% of the plan assets. The bond can be for more than $500k if the plan has “non-qualified” assets in it. The types of assets in a pension or 401k plan is tightly regulated. There can be assets that do not meet the requirements, however these assets are considered non-qualifying and the 10% fidelity rule on these assets does not max out at $500k.
An ERISA bond is fairly easy to obtain and inexpensive, unless non-qualified assets make up more than 50% of the total plan assets. Once this occurs, surplus lines carriers are the only ones willing to provide the ERISA bond and the cost of the bond can be significantly higher than plans with 50% or less assets being non-qualified.
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