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WHAT IS A FIDELITY BOND:

The Fidelity Bond requirement detailed in ERISA Section 412 is a form of insurance intended to protect a plan and its participants from risk of loss due to fraud or dishonesty by persons who handle plan funds or other plan assets.

Additional information regarding bonding requirements can also be found at the Department of Labor website:  http://www.dol.gov/ebsa/regs/fab2008-4.html

WHY IS IT IMPORTANT?

Plan fiduciaries and persons who handle retirement plan monies are required by Title I of ERISA to be bonded (have insurance) unless one of the limited exceptions is met. In general, the amount of bonding should not be less than 10% (ten percent) of the amount of funds handled, but in no event less than $1,000, nor more than $500,000, with certain exceptions. The bonding requirements as they apply to qualified retirement plans are codified in the Internal Revenue Code Title 29 § 1112.  When an employee, beyond the company owners, becomes eligible to participate in the plan, you are no longer exempt from the bonding requirement and you must obtain a fidelity bond.

Make sure that the fidelity bond provider you select understands the requirements of a fidelity bond and will be responsible for helping you not only obtain an adequate bond but also monitor for necessary increases.  Rains Plan Group and our team members can assist you with determining your Fidelity Bond requirements.  Please let us know if you have additional questions as we are always here to help.

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The Fidelity Bond is one of the more mysterious retirement plan requirements.  Before the year wraps up, it is important that you take the time to verify that your required retirement plan Fidelity Bond is in place and in compliance.

1. New Retirement Plans: 

If your company started up a new retirement plan this past year and your company employs individuals beyond company owners, obtain your Fidelity Bond by December 31, 2012.

  • If you need assistance in securing a Fidelity Bond provider, let us know and we will provide a list of independent providers for your consideration.
  • A Fidelity Bond is cost effective; we often see a 1 year policy for approximately $125 and a 3 year policy for $185-$250.
  • A Fidelity Bond may be purchased using plan assets or may be paid by the Company/Plan Sponsor.
  • A Fidelity Bond may not require a deductible and must insure the plan from the first dollar of loss.
  • “Fiduciary Liability Insurance” is NOT the same as a Fidelity Bond and will NOT meet the Fidelity Bonding requirements detailed in ERISA Section 412.

2. Existing Retirement Plans:  If you currently maintain a Fidelity Bond, make sure that you:

  • Timely renew your bond, as required; and
  • Verify that your bond is in an amount sufficient to cover the amount of assets in your plan (a particularly important step if your plan has grown over the past year).

3. When you obtain and/or renew your Fidelity Bond:

  • Make sure you have a complete copy of the fidelity bond policy.  Rains Plan Group will need this to complete your plan’s 2012 IRS Form 5500 reporting requirements.
  • We encourage you to transmit a copy of the entire fidelity bond policy to Rains Plan Group.  If you want us to review the policy and help you to verify that the correct type of policy has been obtained, we would be more than happy to assist you with that process.
  • Rains Plan Group and our team members can assist you with determining your Fidelity Bond requirements and securing the required Fidelity Bond.  You can contact us at office@rpgretirement.com or by calling (206) 430-5084.
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