ERISA Bonds and your 401K Plan

10 May 2010, Comments: Comments Off on ERISA Bonds and your 401K Plan

The Employee Retirement Income Security Act of 1974 is a statute that regulates the establishment, administration and operation of employee benefit plans including both retirement and health plans.  One of the purposes of ERISA is to protect benefit plans against loss by acts of fraud or dishonesty.

ERISA Bonds  are fidelity instruments which secure ERISA funds against theft by persons entrusted with them.  They do not apply to negligence based claims or suits.  The law requires the Bonds to be carried in an amount equal to 10% of your ERISA plan assets.  The minimum bond amount is $1,000 with a maximum of $500,000 although some exceptions apply. 

If you are a company who offers an employer sponsored retirement plan such as a 401K you are required to have an ERISA bond and to provide the bond information on Form 5500 Annual Return/Report with the Federal Government.

Using an outside contractor does not eliminate all of the employer’s potential liability.  Plan fiduciaries are those who manage and control plan assets or who have authority or responsibility for administration of a plan.  This can include plan trustees, administrators or members of a plan’s investment committee.

ERISA Bonds can be covered in several different ways.  It may be provided within a crime policy or a property policy that includes crime coverage.  It can also be purchased as a stand alone ERISA Bond at a very reasonable cost.   Contact one of our knowledgeable agents at HWP Insurance to assist you in determining the best way to cover your ERISA Bond needs.  We have insurance offices conveniently located in Carlsbad and Temecula.

ERISA is a complex statute with many different elements.  You can get more information about ERISA and meeting your fiduciary responsibilities from the US Department of Labor at http://www.dol.gov/dol/topic/health-plans/erisa.htm .

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