A fidelity bond is a form of insurance that protects employee benefit plans from losses due to fraudulent acts by individuals handling plan assets. ERISA requires plans to purchase a fidelity bond of at least 10% of plan assets up to $500,000. Anyone with access to plan assets, including employees and service providers, must be covered. Plans report bond coverage on Form 5500 to allow the Department of Labor to monitor compliance. A plan fiduciary can be liable for losses if proper bonding is not maintained.

1. F AQ: ERISA’S FIDELITY BONDING REQUIREMENT 1
What is a fidelity bond?
A fidelity bond is a form of insurance protection that covers the bondholding employer for losses
incurred as a result of fraudulent or dishonest acts by the individuals specified under the bond. Funded
retirement and welfare plans subject to the Employee Retirement Income Security Act of 1974 (ERISA)
must obtain a fidelity bond covering at least 10% of the plan’s assets, up to a maximum of $500,000
per loss. Additional coverage may be required for plans offering employer stock as an investment
option. The cost of the bond may be paid from plan assets.
A fidelity bond is different than fiduciary liability insurance, which is an optional form of coverage. A
fidelity bond protects the plan from losses attributable to the fraudulent or dishonest actions of those
with access to the plan's assets, whereas fiduciary liability insurance generally protects the fiduciary
from losses due to a breach of fiduciary duty.
Who must be bonded?
ERISA requires that every person who handles plan assets be covered by a fidelity bond. This may
include the plan’s fiduciaries, employees, and the natural persons employed by the plan’s servicing
vendors that handle plan assets. If the employer’s fidelity bond does not cover the natural persons
employed by the plan’s servicing vendors, the employer is advised to ensure that the servicing vendor
has obtained a fidelity bond or similar insurance covering the employer’s plan assets.
An individual "handles" plan funds or property if he or she has the authority to transfer funds, negotiate
property for value, or disburse or direct disbursement of cash or property.
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This FAQ is not intended to be legal advice and should not be construed as such. Information relayed herein is
representative of the Multnomah Group’s current understanding of the law. While the Multnomah Group has made every
reasonable effort to ensure that the information contained herein is factual, we do not warrant its accuracy. Additionally,
this FAQ does not embody a comprehensive legal study, but rather reflects the information most often sought by our
clients. As the information contained herein is general in nature, you are urged to contact your legal adviser with questions
related to the specific application of these rules to your plan.

2. How does the Department of Labor know if my plan is covered by a fidelity bond?
A plan is required to report on its Form 5500 whether the plan is covered by a fidelity bond, making it
easy for the DOL to monitor compliance with the bonding requirements. A plan fiduciary who fails to
ensure that those persons who handle plan assets are properly bonded may be personally liable for
any losses to the plan attributable to the fraud or dishonesty of others.
Where can I find additional information?
Your consultant at the Multnomah Group can assist you with any fidelity bond questions you may
have. You may also refer to the DOL’s Field Assistance Bulletin 2008-04, which contains 42 fidelity
bond related questions and answers.
Multnomah Group, Inc.
Phone: (888) 559-0159
Fax: (800) 997-3010
www.multnomahgroup.com
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