EBSA Explains Plan Official Bonding Requirements

The Field Assistance Bulletin (FAB) 2008-04 provides guidance to the agency’s national and regional offices on the fidelity bonding requirements under section 412 of the Employee Retirement Income Security Act (ERISA). According to an EBSA news release, the guidance in the FAB covers a variety of issues related to compliance with ERISA’s fidelity bonding requirements, including:

• what losses and ERISA bond must cover
• whether a fidelity bond is the same as fiduciary liability insurance
• how to calculate the bond amount when multiple plans are covered under a single bond
• whether the $1 million bond maximum applies in the case of plans that hold employer securities solely as a result of investments in pooled investment funds
• whether third-party service providers are subject to the bonding requirements if they handle plan funds.

EBSA explained that Section 412 of ERISA requires all persons, including fiduciaries, who handle funds or other property of an employee benefit plan (otherwise referred to as plan officials) to be bonded in accordance with section 412 and the department’s regulations unless they are covered by an exemption.

Each plan official is required to be bonded for at least 10% of the amount he or she handles, but in no event less than $1,000. The maximum bond amount required under section 412 with regard to any one plan is $500,000 per plan official, or $1 million per plan official in the case of a plan that holds employer securities.

FAB 2008-04 is here.