The Bond You Must Have — and the Coverage You’ll Wish You Had
Few statutory obligations are as quietly consequential as the one ERISA imposes on the people who handle retirement plan money. Section 412 of the Employee Retirement Income Security Act requires that every individual who manages or exercises authority over plan funds be covered by a fidelity bond. It is not a suggestion, a best practice, or a box to be checked at leisure. It is the law, and the Department of Labor is exceptionally well positioned to know whether you have honored it.
That visibility is no accident. Each year, plan administrators must file the federal Form 5500, and Schedule H asks the question directly: Is the plan bonded, and for how much? The answer is recorded, archived, and searchable. A plan that reports itself unbonded — or underbonded — has, in effect, handed regulators a signed confession. There is no ambiguity to hide behind and no paperwork left to interpret. The disclosure is self-executing, and the Department need only read what you have already told it.
The consequences of falling short are not merely administrative. Failure to satisfy this elementary requirement can expose responsible parties to civil penalties and, in appropriate cases, to criminal liability. For an obligation so easily met, the cost of neglecting it is strikingly severe. The fidelity bond exists to protect the plan and its participants against loss caused by acts of fraud or dishonesty — embezzlement, theft, forgery, the misappropriation of funds entrusted to those who serve. It is, in the truest sense, the participants’ first line of defense.
Yet not every plan fits neatly into the standard underwriting box, and this is precisely where experience becomes indispensable. Plans holding non-qualifying assets face heightened bonding requirements — coverage at the full value of those assets rather than the customary ten percent ceiling — and many carriers simply decline the exposure. Employee stock ownership plans, with their concentrated holdings and distinctive structures, demand an underwriter who understands them. Labor union plans and multi-employer arrangements introduce layers of governance and contribution flow that reward specialized attention. These are not obstacles to be apologized for; they are the very situations in which the right surety partner earns its place.
Surety One, Inc., the nation’s leader in surety, bonds precisely these plans — those with non-qualifying assets, ESOPs, and labor union and multi-employer structures — with the confidence and capacity that come from decades at the center of this market. Where others hesitate, we underwrite. Securing your ERISA fidelity bond is a matter of a single conversation, and the obligation it satisfies is one you cannot afford to leave unmet. Visit us at www.ERISA-Bonds.com, call anytime at (800) 373-2804, or write to Underwriting@SuretyOne.com.
Here is the distinction that catches so many sponsors, trustees, and committee members unprepared: the fidelity bond does not protect you. It protects the plan from those who would steal from it. It does nothing whatsoever to shield the fiduciaries themselves from the far more common modern peril, . . . a lawsuit alleging that you breached your duty of prudence, made an imprudent investment, mismanaged plan fees, or simply failed to monitor a service provider closely enough. Under ERISA, fiduciaries are personally liable for such breaches. The exposure reaches your own assets. Participants sue, regulators investigate, and the bond you dutifully purchased stands silent, because that is not the risk it was ever designed to bear.
This is the gap that fiduciary liability insurance is built to close. It defends the people who serve in good faith but find themselves accused of doing too little, too late, or too imprudently, i.e., covering legal defense, settlements, and judgments arising from alleged breaches of fiduciary responsibility. In an era of aggressive class-action litigation over plan fees and investment lineups, it is no longer a luxury. It is the coverage prudent fiduciaries arrange before the demand letter arrives, not after.
Secure both, and you protect the plan and the people entrusted to steward it. Learn how at ERISA-Bonds.com for your bond and FiduciaryLiabilityCoverage.com for your broad trustee or sponsor coverage. Reach our underwriting desk at the numbers above. The bond is mandatory, . . . the liability coverage is wisdom. The most prudent fiduciaries carry both, and sleep well.
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