ERISA Fidelity Bond
A federally required bond protecting employee benefit plan assets against fraud or dishonesty by persons who handle plan funds or property.
What It Is
An ERISA Fidelity Bond is a bond required by Section 412 of the Employee Retirement Income Security Act for every person who handles funds or other property of an employee benefit plan. The bond protects the plan against losses caused by acts of fraud or dishonesty.
The required bond amount is at least 10 percent of the funds handled by the bonded person, with a minimum of $1,000 and a maximum of $500,000 per plan ($1,000,000 if the plan holds employer securities). Smaller plans without employer securities are commonly bonded at the 10 percent of assets level up to the $500,000 cap.
The bond must be obtained from a surety on the Department of the Treasury's Listing of Approved Sureties (Department Circular 570). The plan, not the employer or fiduciary, must be the named insured.
Why It Matters for Brokers
The ERISA Fidelity Bond is one of the few absolute legal requirements in employee benefits, and Form 5500 explicitly asks whether the bond is in place. A missing or insufficient bond is one of the easiest issues for the DOL to identify in an audit and a top reason for compliance findings. Brokers who place benefit plans without confirming bond coverage, or who fail to update the bond when plan assets grow, expose clients to enforcement action and themselves to E&O claims. The bond is inexpensive (often a few hundred dollars annually for typical plans) so there is no economic argument for skipping it.
Real-World Example
A 401(k) plan with $4.8 million in assets requires a bond of at least $480,000 (10 percent of plan assets, under the $500,000 cap). The benefits broker confirms a $500,000 ERISA Fidelity Bond is in place, with the plan named as insured and a Treasury-approved surety listed. Two years later the plan grows to $7 million and the broker proactively raises the bond to the $500,000 cap, which is sufficient because employer securities are not held. Form 5500 reports compliance and the DOL audit closes without findings.
Common Mistakes
- 1Naming the employer or trustees as insured rather than the plan itself, which voids the regulatory protection the bond is designed to provide.
- 2Using a surety not listed on Treasury Circular 570, which is non-compliant regardless of bond amount.
- 3Failing to increase the bond as plan assets grow, leaving the plan under the required 10 percent threshold and creating an audit finding.
- 4Confusing the ERISA Fidelity Bond with fiduciary liability insurance, leaving the plan compliant but the fiduciaries personally exposed.
How brokerageaudit.com Handles This
Compliance Monitoring tracks ERISA Fidelity Bond renewal dates and asset growth, alerting the producer when the bond falls below 10 percent of plan assets. Document Pipeline files the bond declarations and Treasury surety confirmation against the plan record so Form 5500 questions are answered without manual research.