Protect Your
Retirement Plan
With Fidelity Bonds through Tenet Financial Group you can protect yourself and your savings against fraud.
What is a Fidelity Bond?
Insurance to help you protect your retirement plan and assets in the event of fraudulent acts.
Fidelity bonds are a way to ensure protection for policyholders from fraudulent or dishonest actions by a plan, trustees, or company employees who handle plan assets. With the creation of a retirement plan, fidelity bonds are required for plan officials who oversee the plan’s assets. Unlike traditional bonds, fidelity bonds do not accumulate interest and are not tradable.
Simply put, Fidelity Bonds are insurance to prevent loss from fraudulent acts. Examples include fraudulent trading, theft and forgery. Fidelity bonds can cover not only loss of monies but stolen or damaged property.
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Differences Between ERISA & Fiduciary Liability Insurance
ERISA bonds and fiduciary liability insurance are often confused, but they serve different purposes. While ERISA bonds are required by law and protect against fraud, fiduciary liability insurance covers legal liability and expenses for unintentional errors or omissions in fiduciary responsibilities. ERISA fidelity bonds insure those who handle plan assets, including trustees, while fiduciary liability insurance covers the trustees themselves.
It’s essential to obtain an ERISA fidelity bond not only to comply with the law but also to safeguard your plan from fraudulent actions. Each fiduciary is jointly and severally liable, making them responsible for their own actions and those of the other fiduciaries.
Differences Between ERISA & Fiduciary Liability Insurance
In addition to being required by law, it is in your best interest to obtain an ERISA fidelity bond to protect your plan from fraudulent actions. Each fiduciary is jointly and severally liable; meaning that each fiduciary is liable for their own, as well as, the actions of all the other fiduciaries.
In addition to being required by law, it is in your best interest to obtain an ERISA fidelity bond to protect your plan from fraudulent actions. Each fiduciary is jointly and severally liable; meaning that each fiduciary is liable for their own, as well as, the actions of all the other fiduciaries.
What is an ERISA Fidelity Bond?
An ERISA fidelity bond is required to protect the plan’s participants from acts of fraud and dishonesty by those individuals overseeing the plan. In general, the bond amount must be for 10% of the plan’s assets. The bond cannot be for less than $1,000, regardless of the value of the Plan’s assets. The maximum amount of bonding required, regardless of the Plan’s assets is typically $500,000.
However, when a plan holds employer securities, the maximum amount required is increased to $1 million. Here are some other important things to know about ERISA Fidelity Bonds:
- ERISA fidelity bonds can cover multiple plans. For this to occur, the bond must cover the minimum required for each plan combined.
- Not having proper bonding is a breach in fiduciary responsibilities and may be penalized as such. Fiduciary breaches often carry heavy penalties.
- A retirement plan can purchase an ERISA fidelity bond. Using plan assets to purchase a bond does not violate ERISA’s fiduciary provisions.
What is an ERISA Fidelity Bond?
An ERISA fidelity bond is required to protect the plan’s participants from acts of fraud and dishonesty by those individuals overseeing the plan. In general, the bond amount must be for 10% of the plan’s assets. The bond cannot be for less than $1,000, regardless of the value of the Plan’s assets. The maximum amount of bonding required, regardless of the Plan’s assets is typically $500,000.
However, when a plan holds employer securities, the maximum amount required is increased to $1 million. Here are some other important things to know about ERISA Fidelity Bonds:
- ERISA fidelity bonds can cover multiple plans. For this to occur, the bond must cover the minimum required for each plan combined.
- Not having proper bonding is a breach in fiduciary responsibilities and may be penalized as such. Fiduciary breaches often carry heavy penalties.
- A retirement plan can purchase an ERISA fidelity bond. Using plan assets to purchase a bond does not violate ERISA’s fiduciary provisions.
The ERISA Factor
The Employee Retirement Income Security Act of 1974 (“ERISA”) is a federal law that established standards and guidelines for retirement plans. Under ERISA Section 412, those that “handle” a plan’s assets must be bonded. Employee Benefits Security Administration (EBSA) explains the criteria for determining a handler of a plan:
- Physical contact with cash, checks or similar property;
- to transfer funds from the plan to oneself or to a third party;
- Power to negotiate plan property (e.g., mortgages, title to land and buildings or securities);
- Disbursement authority or authority to direct disbursement;
- Authority to sign checks or other negotiable instruments; or
- Supervisory or decision-making responsibility over activities that require bonding.
The ERISA Factor
The Employee Retirement Income Security Act of 1974 (“ERISA”) is a federal law that established standards and guidelines for retirement plans. Under ERISA Section 412, those that “handle” a plan’s assets must be bonded. Employee Benefits Security Administration (EBSA) explains the criteria for determining a handler of a plan:
- Physical contact with cash, checks or similar property;
- to transfer funds from the plan to oneself or to a third party;
- Power to negotiate plan property (e.g., mortgages, title to land and buildings or securities);
- Disbursement authority or authority to direct disbursement;
- Authority to sign checks or other negotiable instruments; or
- Supervisory or decision-making responsibility over activities that require bonding.
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