Overview of ERISA Bond Requirements
This is a type of fidelity bond required of every person who handles employee retirement plans, a so-called “plan official”. Under the Employee Retirement Income Security Act (ERISA), such officials, or fiduciaries, are in charge of managing the funds and assets in a plan, and must become bonded as a guarantee for their compliance with the Act’s conditions on handling plans.
If these conditions are violated, and assets are mishandled or stolen, a claim can be filed against the bond as a way to secure compensation for people who have suffered losses as a result. The amount of compensation extended by the surety in such a case may be as high as the full penal sum of the bond.
To find out how surety bonds work, and why they are required, see our detailed ‘What is a surety bond’!
Keep reading for an overview of the cost of your bond, what can trigger a claim against this bond, and how to get bonded.
Want to find out more about the bonding requirements for this bond? Call us at 866.450.3412 anytime!
Cost of Your Bond
The cost of your bond is a fraction of the full amount of the bond you obtain.
The full amount for ERISA bonds is determined specifically for every case and depends on the type of assets that are part of a benefit plan. There are two types of assets - qualifying and non-qualifying or, put differently, assets held by a plan directly and indirectly.
Qualifying assets are assets that are held by financial institutions such as banks or held by insurance companies, while non-qualifying assets are assets that are not held by financial institutions which can include property, artwork, gold, collectibles and the like.
Accordingly, when a plan holds only qualifying assets or up to 5% of non-qualifying assets, the amount of the bond required by the plan official is 10% of the plan’s funds.
If a plan includes 5% or more of non-qualifying assets, the amount of the bond must be equal to the greater of either 10% of the total value of all assets in the plan or equal to 100% of the value of non-qualifying assets in the plan. The maximum amount of ERISA bonds is limited to $500,000, though there are exemptions if a plan includes employer-sponsored securities, setting the maximum amount to $1,000,000.
The cost of getting bonded will be a fraction of this total amount. The cost depends on the personal credit score of the fiduciary getting bonded, as well as on other personal financial indicators - such as their financial statements or their industry experience.
Applicants who have a high credit score, one of 700 FICO or more, typically get the lowest rates. Such applicants can expect to receive a rate .75%-1.5% on their ERISA bond. Applicants with slightly lower rates can expect a 1%-2.5% rate on their bond.
Want to know how much your bond will cost? Complete our bond application form to receive a free and exact quote on your bond!
Getting Bonded With Bad Credit
If you want to get this type of bond but have a low credit score, you can still get bonded, thanks to our Bad Credit Program.
This program allows you to obtain your bond, despite your low score. Rates under the program are higher than those for high score applicants, but are always determined on a case-by-case basis, and all financial factors of an applicant are taken into account.
To get a free quote on this type of bond, and to learn more about the program, visit the program page!
Claims Against Your Bond
The purpose of this bond, as it has been specifically defined in ERISA is to protect against dishonesty and fraud on the part of the fiduciary handling the plan. Dishonesty and fraud can include theft, misappropriation, theft, intentional misapplication of funds, and the like.
The ERISA bond is not intended to protect against other instances that result in losses to a fund which is why in some instances a Fiduciary Liability Insurance is also obtained but this is not required by ERISA.
If a fiduciary does steal or misappropriate any of the funds in a plan, a claim can be filed against their bond to compensate for any losses and damages that have occurred to the plan as a result. The surety then extends compensation up to the full amount of the bond. In return, the fiduciary needs to repay the surety for any compensation it has extended.
Get Your Bond Now!
Start your application by completing our bond form. We will then provide you with a free quote on your bond along with further information on completing your application. Your bond will be issued in two working days after we receive your final application papers.
We will send you your bond by post as well as by e-mail.
Do you want to know more about this type of bond? Call us at 866.450.3412 for more information regarding the bonding process, or your bond’s cost.
