If your business offers retirement benefits like 401(k) plans or pension plans, you may have heard of an ERISA bond. These bonds are a critical requirement under the Employee Retirement Income Security Act of 1974 (ERISA) and help protect both your business and your employees. But what exactly is an ERISA bond, and why is it so important? Let’s break it down.
What is an ERISA Bond?
An ERISA bond, also known as an ERISA fidelity bond, protects employee benefit plans from losses caused by fraud or dishonesty. It ensures that those who handle plan funds—such as fiduciaries or administrators—act responsibly and in the best interest of plan participants.
Why Are ERISA Bonds Needed?
- Legal Compliance: ERISA mandates bonding to protect benefit plans. Failing to meet this requirement can result in penalties or increased scrutiny from regulators.
- Fraud Protection: The bond safeguards retirement funds from theft, embezzlement, or other dishonest acts by individuals managing plan assets.
- Coverage Requirements: The law requires the bond to cover at least 10% of the plan’s assets, with a minimum of $1,000 and a maximum of $500,000 per plan. If your plan includes employer securities, the maximum coverage increases to $1 million.
Who Needs an ERISA Bond?
Anyone who has access to, or manages, employee benefit plan funds must be bonded. This typically includes:
- Plan fiduciaries (e.g., employers, administrators, trustees).
- Third-party service providers with fund management responsibilities.
How to Obtain an ERISA Bond
At Professional Insurance Programs, we can help you determine if you need an ERISA bond and help you set one up.
Navigating ERISA compliance can be complex. As a trusted insurance partner for Wisconsin businesses, we understand the unique needs of employers managing employee benefit plans. Contact us today to learn more about ERISA bonds and how we can support your business.