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Are you
- a Sole Proprietor with no employees?
- a Group of Partners with no employees.
- the ONLY employee in your personal corporation.

If you answered "Yes" to any one of the above questions, you do not need to carry an ERISA Bond. However, understanding the requirements listed below will be pertinent if you do hire employees in the future.

If you have Employees , your Plan is required to carry an ERISA Bond.

Qualified Plans are required to carry a bond in an amount equal to 10% of the value of the Plan's Assets at the beginning of the year.

If ALL Plan assets are at a recordkeeper or in a bank or brokerage account, where their exact value is calculated daily, the 10%bond is all that is required.

Plan Assets on January 1: $875,000
10% of $875,000 = $87,500
Round up and purchase a $100,000 bond

The minimum bond available is $10,000, so Plan asset values under $100,000 will be covered with a minimum bond. The maximum coverage requirement is a $500,000 bond, which covers plan assets of $5,000,000 or more.

IN ADDITION some plan investments may require the Plan to provide a higher amount of bonding. Assets described by the DOL and The IRS as "non-qualifying" must be bonded at 100% of their value. "Non-qualifying assets" are generally those investments whose value cannot be readily ascertained on a daily basis by a third party source. Examples of non-qualifying assets include limited partnerships, real estate, mortgages, notes and loans. (Proper plan participant loans are considered qualifying assets.)

Plan listed above with $100,000 of the $875,000 invested in real estate.
10% of $875,000 = $87,500
100% of $100,000 = $100,000
Plan must purchase a bond with $100,000 total value.
Example 2:
Plan with $2,000,000 in assets, $100,000 in real estate
10% of 2,000,000 = $200,000
100% of 100,000 = $100,000
Plan must purchase a bond with $200,000 in total value.
Example 3:
Plan with $875,000 in assets, $400,000 of the total is invested in real estate
10% of $875,000 = $87,500
100% of $400,000 = $400,000
Plan must purchase a bond with $400,000 in total value.

The Plan may purchase the bond from Plan Assets, or the entity employing the people handling funds can purchase the bond. This is usually the Plan Sponsor. Every person who has access to the Plan Assets must be bonded. The financial Advisor to the Plan and the Third Party Administrative Services Provider typically are not required to be bonded as they are not considered to be handling funds, but merely following the instructions of the Plan Trustee.

It is important to purchase your bond through an authorized company. There is a list on the Department of Labor (DOL) website http://www.fms.treas.gov/c570/c570_a-z.html that lists authorized insurers or Click here for a link to local recommended ERISA bond providers.

Many Plan Sponsors submit that their Employee Dishonesty Insurance in the Employers Business Liability policy is sufficient. Innovative Pension does not review the bond you submit, other than to verify the amount of coverage for 5500 input. The DOL indicates they are rejecting policies that don't include specific ERISA coverage. Please check with your insurance agent to make sure you have the proper coverage.

Click here for a link to DOL website for Q&A on ERISA Bonds
Click here for a link to local recommended ERISA bond providers.

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