Fidelity Bonds are also known as ERISA bonds. Every person who “handles funds or other property” of an employee benefit plan is required by regulators to be bonded. In other words, as a plan sponsor, you must obtain your own fidelity bond to insure your plan against certain activities and losses to the plan caused by those that do handle plan funds at your company.
We will report the fidelity bond amount on your plan’s annual Form 5500 filing if we act as the TPA and Recordkeeper for your plan (If your plan uses us for recordkeeping services only in an unbundled capacity, please contact your TPA directly for more information).
Do I need a Fidelity Bond?
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Most retirement plans will require a fidelity bond.
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Solo 401(k) plans (plans that exclusively cover a business owner with no employees, or that person and his or her spouse) are not subject to the fidelity bond requirement. Retirement plans sponsored by a church or government entity are also exempt.
What information will I need to obtain a Fidelity Bond?
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We cannot apply on behalf of your business for a fidelity bond; generally, fidelity bonds are available through your business insurance provider.
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The bond should name all retirement plans that you sponsor.
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You can find your plan’s name on the home screen of your sponsor portal.
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You must make sure that the bond amount is at least 10% of the plan's current assets.
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Example: A $1,000.00 fidelity bond covers the first $10,000 in plan assets.
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You can find your plan’s total assets on the home screen of your sponsor portal
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The Plan Administrator is your company name.
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Please note: all plans that we administer do not hold any “non-qualifying assets”
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The bond should name all trustees or fiduciaries.
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This may include, but is not limited to, anyone with administrative function over the plan or payroll at your company, Vestwell Trust Company, your Investment Management Firm, and any other fiduciaries associated with the plan.
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You can find your Investment Management Firm by navigating to your employer portal > My Plan tab > Documents > Investment Management Agreement
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What if my plan assets grow?
Most fidelity bonds are offered in 1-3 year terms. Some providers offer “inflation guards” to automatically meet the minimum coverage requirement for the term of the bond. Please consult with your licensed insurance representative for specific product details.
What if I don't get a bond?
ERISA is clear that it is unlawful for non-exempt plans to not be bonded. Moreover, you could be held personally liable for any losses that a fidelity bond would otherwise cover.
How hard is it to get a fidelity bond?
Fidelity bonds are typically easy to acquire and affordable. Generally, your business insurance or property and casualty insurance provider can assist. To see a list of certified companies that provide fidelity bonds, click here.
How do I let you know of my fidelity bond coverage amount?
If we act as the TPA and Recordkeeper for your plan, there are two ways to record your fidelity bond coverage on our platform. We do not need a copy of your policy documents.
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Navigate to your online sponsor portal > Go to the “Plan To-Dos” section at the bottom of the home page > Select the “Plan Insurance” task and enter the data there.
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During our annual testing process which begins in the first quarter of each year, we will email you asking you to complete a few tasks. You can enter your fidelity bond coverage on the Year End Questionnaire task.
To read more about fidelity bonds, click here.
Please note: A fidelity bond is not the same as crime or fiduciary insurance. Explaining the differences is beyond the scope of this article, but it is important to understand that fidelity bonds offer some protection against financial losses due to criminal acts, but they differ in scope and focus. Fidelity bonds are a type of crime insurance that specifically covers employee-related dishonesty and theft, while crime or fiduciary insurance policies offer broader coverage, including losses from various criminal acts, including those committed by third parties.