By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policyfor more information.

Industry Insights

Words of wisdom from our business insurance experts.

What's an ERISA Fidelity Bond and how much does it cost?

3 min read
November 20, 2023
What's an ERISA Fidelity Bond and how much does it cost?

In simple terms, an ERISA fidelity bond is type of Commercial Crime insurance that protects the money in retirement or employee benefit plans from being stolen or mishandled (typically from internal financial employees).

Here's a quick breakdown:

  1. Who Needs It? People who are in charge of managing the money in retirement or employee benefit plans.
  2. Why is it Needed? To make sure that if someone handling the money does something dishonest or steals from the plan, there is insurance (the fidelity bond) to cover those losses.
  3. How Much is Needed? The amount of insurance needed is a percentage of the total money in the plan, and it has to be a minimum amount (like a safety net) to ensure there's enough coverage.
  4. Who Provides It? The insurance, or fidelity bond, has to come from a reliable source, like a qualified insurance company.
  5. What It Doesn't Cover? It doesn't cover losses from bad investment choices or if the value of investments goes down. It specifically focuses on protecting the money from theft or dishonest actions.

It's a safety net to make sure the money in retirement or benefit plans is kept safe and doesn't disappear because of someone doing something dishonest with it.

An ERISA fidelity bond is a type of insurance required by the Employee Retirement Income Security Act of 1974 (ERISA) in the United States. ERISA is a federal law that sets standards for private sector employee benefit plans, such as pension and retirement plans. The purpose of the ERISA fidelity bond is to protect the assets of employee benefit plans from dishonest acts or theft by individuals who handle the plan's funds.

Key points about ERISA fidelity bonds:

  1. Requirement: ERISA mandates that every person who handles funds or other property of an employee benefit plan must be covered by a fidelity bond. This includes plan administrators, trustees, and anyone else who manages the plan's assets.
  2. Coverage: The fidelity bond provides coverage for losses caused by fraud or dishonesty on the part of individuals handling the plan's funds. This coverage helps ensure that the plan's assets are protected against misappropriation.
  3. Amount of Coverage: The amount of coverage required is generally equal to at least 10% of the plan's total assets at the beginning of the plan year, with a minimum required coverage of $1,000 and a maximum of $500,000 (as of my last knowledge update in January 2022; these figures may have changed).
  4. Issuer of the Bond: The fidelity bond must be issued by a qualified surety or reinsurer, and it must be in the name of the plan.
  5. Exclusions: Fidelity bonds typically exclude coverage for losses resulting from poor investment decisions or market fluctuations. They specifically focus on losses caused by fraudulent or dishonest acts.

The purpose of the ERISA fidelity bond is to instill confidence in employees participating in benefit plans and to protect the financial integrity of those plans. It helps ensure that individuals responsible for managing plan assets are held accountable and that there is a means of recovery in case of dishonest actions. Failure to maintain the required fidelity bond can result in penalties and other consequences for plan administrators.

The cost of ERISA Fidelity Bonds depend on a few factors such as location, company size, number of employees, safeguards, and other protocols to protects internal theft. It also depends on the limits and deductible you desire.

Generally speaking, the cost of this insurance range from $2,500 per year to $10,000 per year on average.

The best way to understand this coverage and the potential annual costs is to speak with an insurance advisor. Get in touch today.

Tyler Crawford
by Tyler Crawford
Email AuthorLinkedIn Profile
Talk to a risk
management specialist
schedule consultation