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What is an ERISA Bond?

The Employee Retirement Income Security Act (ERISA) was passed by Congress in 1974 to protect employee retirement funds. Among other things, it requires managers of retirement funds to obtain an ERISA Bond

An ERISA Bond is a type of fidelity bond that serves as a form of protection for those involved in employee benefits plans, such as 401(k) plans, pension funds, deferred-compensation plans, and profit-sharing plans. It protects the funds in an employee's health or retirement plan in case of acts of fraud or dishonesty by persons who handle plan funds or property.

The Obligee is the plan itself, aka the contributors to the plan, while the business or the fiduciary of the plan is the Principal. The surety (also called bonding company) issues the bond guaranteeing the performance of the Principal.

Why do you need an ERISA Bond?

Officials who manage or administer these plans or perform fiduciary duties are required to obtain an ERISA Dishonesty Bond. This includes any employer, regardless of size, who is responsible for managing or administering a retirement plan.

If a plan fiduciary engages in dishonest or fraudulent activities that harm a party involved in employee benefits plans, the injured party can file a claim on the bond to recover damages. When the surety investigates the claim and finds it valid, it will compensate the injured party up to the bond amount. The principal on the ERISA Bond is financially responsible for reimbursing the surety company for any claims paid out, plus fees and expenses incurred.

How much does an ERISA Bond Cost? 

Your bond amount (policy limit) must be at least 10% of the plan amount, and your bond will have a three-year term. ERISA surety bond costs vary based on the required bond amount and the type of assets held under the plan. Every fiduciary of an employee benefit plan is required to post a bond equal to 10% of the plan assets. If the plan includes non-qualifying assets worth more than 10% of the plan’s funds, the bond amount is the value of the non-qualifying assets.

EZ Surety Bonds has upfront pricing for Qualified ERISA Bonds:

Table of bond amounts for Qualified ERISA Bonds ranging from $10,000 to $500,000, with associated 3-year premium costs.

How to Know if You Need a Surety Bond

You’ll know if you need a surety bond because some entity will have required you to obtain one. They must also inform you of which specific bond type you’ll need. There are thousands of bonds across the country, all of which vary by state and industry.

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