An Information of the 401K Fidelity Bond
Actually, in 1974 the ERISA or that Employee Retirement Income Security Act was being enacted to be able to regulate many types of benefit plans for workers. The ERISA section 412 as well as the regulated regulations demand that each fiduciary of an employee benefit plan and also every individual who deals with funds or the other property of such plan has to be bonded.
Such bonding requirements of the ERISA are required for the protection of the benefit plans from such risk of loss because of dishonesty or fraud of individuals who are handling those funds or any other property. Persons who are going to handle the property or funds of the employee benefit plan are called plan officials in the ERISA. The Act demands that there must be a fidelity bond that should be placed to cover such fiduciary or the ones responsible in managing the plan and also the individuals who handle those funds or a property of the plan. Such fidelity bonds are actually intended to protect those plans from dishonesty or fraud committed by those individuals who are associated with them.
It is required that every plan official should be bonded for 10 percent of the amount of such funds that one would handle. In various cases, the maximum bond value that may be required under the ERISA with respect to such plan official is half a million dollars for every plan. But, there are higher limits that may be purchased. But for the plan officials who are holding such employer securities, then the largest bond amount offered is $1,000,000.
Know that those employee benefit plans with more than 5 percent of those non-qualifying plan assets that are actually held in those limited partnerships, the real estate, collectibles, securities and mortgages of such closely-held companies and they are being held outside those regulated institutions such as the insurance company, broker-dealer, bank or other organizations which are authorized to function as trustee for the individual accounts for retirement, plan sponsors must do one of which. One needs to make sure that the bond amount is 100 percent of value of those non-qualifying assets or one can also arrange for such annual full-scope audit in which the CPA is going to physically confirm the existence of those assets at the start and the end of that plan year.
401K has worked together with Colonial Surety Company that is recognized as a leader in 401K fidelity bonds or ERISA fidelity bonds. They are a popular national insurance company that functions in all 50 states and other US territories and they have already been offering insurance products since the year 1930. They are actually the biggest direct seller of fidelity bonds in the US.