ERISA Bond

An ERISA bond is a type of surety bond that covers administrators and other fiduciaries of retirement plans regulated by ERISA. In this case, the fiduciary is the principal, and the plan and its beneficiaries are the obligees. ERISA surety bonds protect against acts of fraud and dishonesty by retirement plan fiduciaries, such as:

• Theft or misuse of plan funds
• Forgery of documents
• Assuming duties that create a conflict of interest
• Using their position as a fiduciary for personal profit

In the event of alleged misconduct by the fiduciary, the obligee may file a claim with the surety against the bond, which the fiduciary will be responsible for paying back.

An ERISA bond must have a coverage amount (known in surety bond terms as a penalty sum) equal to at least 10 percent of the plan assets that the fiduciary handles. In most cases, the minimum amount of coverage required is $1,000 and the maximum amount is $500,000. For plans that include employer-issued securities such as company stock, the maximum coverage amount is $1 million.