On September 10, 2026, the United States Attorney for the Middle District of Florida unsealed an indictment charging the two founders of a Tampa real estate investment company with ten counts of theft from employee benefit plans and five counts of theft in connection with health care (U.S. Department of Justice, 2026). The allegation is that, beginning in the spring of 2024, the company continued to withhold 401(k) deferrals from its employees’ wages without remitting them to the plan, and that from September 2024 it did the same with the employees’ share of health insurance premiums. The amounts recited in the indictment are modest. The company is not. Its principals are separately defending a Securities and Exchange Commission action alleging a $152mn fraud on more than 5,500 investors, a mail fraud indictment, and a state attorney general inquiry (Business Observer, 2026). Both defendants are presumed innocent, and nothing in this essay assumes otherwise.
The case is worth the attention of every sponsor and every advisor to sponsors for a reason that has little to do with the defendants. Five of the fifteen counts concern a health plan. The question of ERISA bond welfare plan coverage, whether the section 412 fidelity bond that nearly every sponsor purchases for its retirement plan reaches its group health plan at all, is one most sponsors have never asked, most brokers have never raised, and most bonds, as written, answer badly.
The retirement plan bond and the assumption that travels with it
Section 412 of ERISA requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan be bonded against loss by reason of fraud or dishonesty, in an amount of not less than ten percent of the funds handled, subject to a floor of $1,000 and a ceiling of $500,000 per plan (29 U.S.C. § 1112(a)). The statute speaks of “employee benefit plans,” a term that includes both pension plans and welfare plans (29 U.S.C. § 1002(3)). The Department of Labor’s regulations implementing the requirement draw no distinction between the two; they define “funds or other property” to include all funds or property the plan uses or may use to pay benefits, and they define “handling” by reference to the risk that those funds could be lost through dishonesty (29 C.F.R. §§ 2580.412-4, 2580.412-6).
In practice the bond is purchased for the 401(k) plan because the Form 5500 asks whether the plan is bonded, the plan’s auditor asks the same question, and the recordkeeper will not accept a plan without an answer. The sponsor’s health plan, which may hold no trust, file no Schedule H, and employ no auditor, generates none of those prompts. The result is that the typical ERISA bond names the retirement plan as the insured and no one else, and the sponsor assumes, if it thinks about the matter at all, that the health plan is either covered by extension or exempt. Neither assumption survives examination.
When ERISA bond welfare plan coverage is required
The Department’s guidance states the exemption narrowly. Bonding is not required for a plan that is “completely unfunded,” meaning one whose benefits are paid directly out of the employer’s general assets (U.S. Department of Labor, 2008). A fully insured health plan in which the employer pays the entire premium from its own treasury, with no employee contribution and no separate account, is unfunded in that sense, and the persons who handle the employer’s money are not handling plan funds. The exemption extends, by the Department’s long standing position in Technical Release 92-01, to plans whose employee contributions are made through a cafeteria plan under section 125 of the Internal Revenue Code and are not segregated from general assets, which the Department has declined to treat as plan assets for trust purposes and, by the same logic, for bonding purposes (U.S. Department of Labor, 1992).
That exemption has edges, and the Florida facts sit on one of them. Amounts withheld from employees’ wages as their share of premiums are participant contributions. Under the Department’s plan asset regulation, participant contributions become plan assets as of the earliest date on which they can reasonably be segregated from the employer’s general assets (29 C.F.R. § 2510.3-102). The Department’s bonding guidance adds that plan funds include “contributions from any source, such as employers, employees, and employee organizations that are received by the plan” (U.S. Department of Labor, 2008). A sponsor that withholds premium contributions and holds them, in a separate account or in its operating account, pending remittance to the carrier is handling plan funds during the interval. Where the sponsor remits promptly, the interval is short and the exposure is small. Where the sponsor stops remitting, the interval becomes the loss.
The relief of Technical Release 92-01 is also narrower than sponsors assume. It excuses the trust requirement for cafeteria plan contributions and, in the Department’s enforcement discretion, the bonding requirement that follows from it, but it does so on the premise that the contributions are applied to premiums in the ordinary course. A sponsor that collects cafeteria plan contributions and diverts them is not within the premise, and the Department’s criminal referral in the Florida matter reflects its view that withheld premiums, however collected, belong to the employees whose wages they came from. For sponsors whose health plans are self funded, or funded through a VEBA or other trust, the analysis is simpler and the conclusion the same: the plan holds funds, those funds are handled, and section 412 applies without any need to reach the plan asset regulation.
ERISA bond welfare plan coverage in the bond itself
Assume, then, that the sponsor’s health plan must be bonded. The next question is whether the bond the sponsor holds does so, and that is a matter of the instrument rather than the statute.
The Department’s guidance is explicit that the plan must be named, or otherwise specifically identified, as an insured on the bond, and that the statutory amount applies to each plan so named (U.S. Department of Labor, 2008). A bond that names “the ABC Company 401(k) Plan” does not insure the ABC Company Group Health Plan, and a surety presented with a claim for withheld premiums will say so. Many sureties will add a welfare plan to an existing bond on request, and some forms are written to cover all plans sponsored by the named employer, but the sponsor must ask and must read the schedule. The ten percent calculation then runs separately for each plan, and for a health plan the funds handled are the employee contributions that pass through the sponsor’s hands in a year, which for a mid sized employer may be a larger figure than its 401(k) deferrals. A bond sized for the retirement plan and extended to the health plan without recalculation may be inadequate for both.
The insuring agreement raises a second issue. The regulations define fraud or dishonesty to include larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, and willful misapplication (29 C.F.R. § 2580.412-9). A sponsor that withholds premium contributions and spends them on operating expenses has committed wrongful conversion and willful misapplication by any reading. But a sponsor that withholds them, fails to remit, and allows coverage to lapse while telling employees their coverage is in force has done something more: it has caused the employees to forgo other coverage and to incur medical expenses in reliance on a plan that no longer existed. The bond pays the plan’s loss of funds. It does not pay the participant’s unreimbursed medical bills, and the gap between the two is the distinctive feature of welfare plan theft. In a retirement plan the loss is an account balance that can be restored. In a health plan the loss is a hospital stay that was never covered, and no fidelity instrument is written to pay it.
ERISA bond welfare plan coverage and the insolvent sponsor
A company does not stop remitting employee contributions while it is otherwise healthy. The failure to remit is the symptom that appears when the money has run out, and by the time an indictment is unsealed the sponsor is typically in receivership, in bankruptcy, or under a forfeiture notice. The Florida company is all three in substance (Business Observer, 2026). That reality has two consequences for ERISA bond welfare plan coverage.
The first is that the bond is, in the ordinary case, the only solvent source of recovery for the plan. Section 409 makes the breaching fiduciary personally liable to restore the plan’s losses with earnings, and the Department will pursue that liability, but a judgment against an individual who faces forfeiture, restitution to thousands of defrauded investors, and a custodial sentence is a judgment that will not be paid. A bond that names the welfare plan and is sized to the contributions actually handled converts the plan’s claim from an unsecured claim against an insolvent estate into a claim against a surety. A bond that does not name the welfare plan leaves the participants where the indictment found them.
The second is that the surety’s own recovery will be negligible. A surety that pays the plan is subrogated to the plan’s rights against the wrongdoer, and in the ordinary fidelity loss that subrogation has value. Where the wrongdoer is the subject of a receivership, a bankruptcy, and a criminal restitution order with multiple victim classes, the surety stands in a queue with the SEC’s receiver, the investors, the lenders, and the Treasury, and it stands near the back. Sureties price the ERISA bond on the assumption that subrogation yields little, which is one reason the instrument is inexpensive and another reason sponsors should buy it in an amount that reflects the exposure rather than the minimum.
The fiduciaries who did not steal
The bond is a guarantee of honesty, and its reach ends where dishonesty ends. In a company whose principals have been indicted, the remaining question for every other person connected with the plan is why they did not notice, and that question is answered under section 404, not section 412. The controller who processed the payroll and saw the withholdings accumulate. The human resources director who told employees their coverage was current because the enrollment system said so. The outside benefits administrator that continued to issue confirmations against a group policy the carrier had cancelled for nonpayment. The plan’s named fiduciary, if anyone other than the indicted principals held that title. Each of them will be asked, by the Department, by the receiver, and by participants holding unpaid medical bills, whether a prudent fiduciary in their position would have reconciled withholdings against remittances, and each of them will need a defense.
Those claims are claims for breach of fiduciary duty, and ERISA bond welfare plan coverage does not respond to them. Fiduciary liability coverage does. It insures the sponsor, its committee, and its individual fiduciaries against claims alleging breach of ERISA duties, including the duty to monitor co fiduciaries and service providers under sections 404 and 405, and it funds the defense of Department investigations and the negotiation of Voluntary Fiduciary Correction Program submissions where correction is still possible. In a welfare plan loss the participant claims are particularly difficult to defend, because the damages are medical expenses incurred in reliance on coverage the participants were told they had, and the measure of loss is not an account shortfall but a human one. The defense cost in such a matter routinely exceeds the ERISA bond limit of the plan involved before any liability is determined (Poindexter, 2026b). Our underwriters at FiduciaryLiabilityCoverage.com see unremitted contribution claims against non principal fiduciaries with regularity, and they are the claims that most often reach the individuals who assumed the principals were handling it.
What a sponsor should do
The practical conclusions follow from the analysis. A sponsor should determine whether its health plan is funded for bonding purposes, which means asking whether employee contributions are withheld, whether they pass through any account the sponsor controls, and whether the plan is self funded or trusteed. If the answer to any of those is yes, the plan must be bonded, and the sponsor should confirm that its ERISA bond welfare plan coverage is express: the health plan named on the schedule, the amount calculated on the contributions actually handled, and the form written to the regulatory definition of fraud or dishonesty without narrowing it (Poindexter, 2026a). The same confirmation should be made for any other funded welfare plan the sponsor maintains, including dental, vision, disability, and life plans with employee contributions. A sponsor with several plans and one bond should confirm that the bond’s per plan limits are separately stated, since a single aggregate shared across plans does not satisfy section 412 for any of them. Placement is a matter of minutes through ERISA-Bonds.com, and the incremental premium for adding a welfare plan to an existing bond is small against the exposure it closes.
The sponsor should then confirm that the fiduciary liability policy reaches every person who could be named: the entity, the committee, the individuals who perform fiduciary functions without the title, and the successor fiduciaries who will be appointed to clean up if the principals are removed. The two instruments are not substitutes. The bond restores the plan after theft. The policy defends the people who were trusted alongside the thief and will be asked why they did not see it coming. A sponsor that holds both, and has read both, has done what the statute requires and what the Florida indictment counsels. A sponsor that holds a bond naming its 401(k) plan and assumes the health plan is covered has, on the facts that produced fifteen federal counts in Tampa, insured the wrong loss.
~ C. Constantin Poindexter, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS, CPLP
C. Constantin Poindexter is the founder and former CEO of Surety One, Inc., President of Janus Assurance Re, a thirty year surety and reinsurance underwriting veteran, attorney, and the author of The Contractor’s Guide to Surety Bonds. He also publishes at erisablog.com. To speak with an underwriter about an ERISA fidelity bond or fiduciary liability insurance placement, call (800) 373-2804 or access a live chat from either site.
References
- Business Observer. (2026, September 10). Legal troubles mount as founders of Tampa Bay REIT indicted for stealing from employees.
- Definition of “plan assets,” participant contributions, 29 C.F.R. § 2510.3-102.
- Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1002(1), 1002(3), 1104(a), 1105, 1109, 1112(a).
- Poindexter, C. Constnatin (2026a). ERISA fidelity bonds: A practical underwriting guide (2026 ed.) [White paper]. Surety One, Inc. https://constantinpoindexterauthor.com/publications/
- Poindexter, C. Constantin (2026b). Fiduciary liability insurance: A practical coverage and risk guide (2026 ed.) [White paper]. Surety One, Inc. https://constantinpoindexterauthor.com/publications/
- Temporary Bonding Rules, 29 C.F.R. pt. 2580, including §§ 2580.412-4, 2580.412-6, and 2580.412-9.
- Theft or embezzlement from employee benefit plan, 18 U.S.C. § 664.
- Theft or embezzlement in connection with health care, 18 U.S.C. § 669.
- U.S. Department of Justice, U.S. Attorney’s Office for the Middle District of Florida. (2026, September 10). RAD Diversified REIT co-founders indicted for stealing funds from their employees’ benefit plans [Press release].
- U.S. Department of Labor, Employee Benefits Security Administration. (1992). Technical Release 92-01: Enforcement policy regarding the trust and reporting requirements for certain contributory welfare plans.
- U.S. Department of Labor, Employee Benefits Security Administration. (2008). Protect your employee benefit plan with an ERISA fidelity bond [Publication]; Field Assistance Bulletin 2008-04: Guidance regarding ERISA fidelity bonding requirements.
