ERISA Bonds
What is an ERISA Bond?
ERISA refers to the Employee Retirement Income Security Act of 1974.
The ERISA act requires that a bond is acquired by every person who handles property or funds of an employee benefit plan. The minimum amount of the bond is $1,000 and the maximum is $500,000; however, the amount of the bond is set at 10% of the amount of the funds or property handled by the plan during the year.
There are three main parties involved in an ERISA bond: the sponsor, the trustee, and the participant.
The sponsor is the organization or employer that develops the ERISA plan. The trustee is the individual (typically an employee of the sponsor) who oversees the plan. While the trustee might generally hire third party consultants to perform specialized tasks, the trustee is responsible for maintaining the plan. The participant is the individual who invests money in the plan.
A fourth party, the investment manager, is sometimes hired to provide advice regarding investment. These managers are given discretion to invest or access assets.
Note: If a plan has more than 5% non-qualified assets, the plan must be bonded for 100% of those non-qualified assets and still not for less than 10% of all plan assets. Trust deeds, collectibles, limited partnerships, real estate, and interest in closely held companies all qualify as non-qualified assets.
Assets held by a bank, broker, or insurance company are considered qualified assets.
To apply for an ERISA bond, download our application below, then send it to our team once comnpleted: