How do erisa bonds work




















Bonds must be obtained from a provider "sureties" approved by the Department of the Treasury. Human Interest has a few providers we recommend to our clients, but the choice is really up to you, and we can provide some general guidance if you're unsure!

It can help cover company and personal assets against lawsuits. Since it's not mandated, it's less common, and businesses can choose whether or not they want the extra protection. Don't let providers scare you into thinking it's an absolute must.

Human Interest, as a company, has both an ERISA fidelity bond and fiduciary liability insurance, since we're unique in that we serve as a fiduciary for all of our clients' plans. The bottom line? Make sure the people in your organization who handle your k plan investments act in a way that is in the best interest of participants and beneficiaries. This includes managing the investments and adhering to the plan terms so make sure to do your research and ask your k provider for help.

Article By. Liz Sheffield. Liz Sheffield has more than a decade of experience working in HR. Her areas of expertise are in training and development, leadership development, ethics, and compliance. Our newsletter delivers succinct and timely tips, reviewed by Financial Advisors, to help you navigate the path to financial independence. ERISA bonds cover losses caused by acts of fraud or dishonesty by anyone handling funds or other property of the plan.

Fraud or dishonesty includes, but is not limited to, larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication and other acts. In a typical bond, the plan is the named insured and a surety company insurer is the party that provides the bond. The persons covered by the bond are the persons who handle funds or other property of the plan.

Producer Login. Fulltext search. Since the ERISA bond covers the employer-sponsored plan itself, plan funds can be used to pay the bond premiums. Under the act, "funds" is a broad term that includes a wide range of assets. The term goes far beyond the publicly traded stocks, bonds, mutual funds, and exchange traded funds that make up most retirement plans. In listing ways a plan might invest, the DOL makes a point to mention "land and buildings, mortgages, and securities in closely-held corporations," as well as contributions from both the employer and employees.

All of these types of assets are covered by the term "funds," whether they come in the form of cash, check, or property. The ERISA bond needs to be in place to protect against any assets being embezzled or somehow misdirected before they are invested. ERISA makes it an unlawful act for any person to "receive, handle, disburse, or otherwise exercise custody or control of plan funds or property" without being properly bonded. The Department of Labor offers six factors that define when a person is "handling" funds during the prior year.

They are posed as questions, and if the answer to any of these questions is "yes," then that person is "handling" funds:. For one, bonds must be issued by an underwriter, such as a surety company or reinsurer. The Treasury keeps a "Listing of Approved Sureties" to select from. There's also one other catch: ERISA bonds must be issued by an independent insurance company and acquired through an independent insurance broker. If you have any hint of financial interest in either, you can't buy your ERISA bond through that business.

For instance, if you own a retail store, and you also have a big stake in a local insurance agency, you couldn't buy the ERISA bond for your retail store through that insurance agency. ERISA bonds are not required for:.

Department of Labor. Accessed July 13, Legal Information Institute. Bureau of the Fiscal Service. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.

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