Services Tips for The Average Joe

Things to Know Regarding the 401K Fidelity Bond

It was actually in the year 1974 on which the ERISA or such Employment Retirement Income Security Act was implemented for regulating the many kinds of benefit plans for workers. ERISA section 412 and the regulated regulations require that the fiduciary of such employee benefit plan and each person who manages the funds or a property of another must be bonded.

The bonding requirements of the ERISA are needed to protect the benefit plans from risk of such loss as a result of fraud or dishonesty of the people who handle those funds or any other property. The persons who would handle the funds or property of an employee benefit plan are known as plan officials in the ERISA. The Act necessitates that there has to be a fidelity bond which should be placed to cover the fiduciary or those responsible in managing the plan as well as those individuals who would handle the funds or property. These fidelity bonds are meant for protecting the plans from fraud or dishonesty committed by the persons who are linked to 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 a lot of cases, the largest bond amount which can be demanded under ERISA with respect to a plan official is $500,000 for each plan. But, higher limits may also be purchased. But, there is a maximum bond amount of a million dollars for the plan officials of those plans which hold the employer securities.

Know that the employee benefit plans with over five percent of such non-qualifying plan assets which are held in limited partnerships, collectibles, artwork, real estate, mortgages or the securities of the closely-held companies and they are held outside of such regulated institutions like the bank, registered broker-dealer, insurance company or other organizations which are authorized to serve as trustee for those individual retirement accounts, those plan sponsors must do one of these things. It is required to make sure that the amount of the bond is a full equivalent of the value of those non-qualifying assets or an annual full-scope audit may be arranged in which the CPA is going to physically confirm the existence of those assets from the start to the end of the 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. Know that they are the biggest direct seller of the fidelity bonds in the United States.