ERISA generally requires that every fiduciary of an employee benefit plan including 401k plans, and every person who handles funds or other property of employee-participants shall be bonded. The purpose of the bonding requirement is to protect employee benefit plans from risk of loss due to fraud or dishonesty on the part of persons who "handle" plan funds or other property. These individuals are called "plan officials" and include anyone who has:
** Physical contact with cash, checks or other Plan property.
** Power to transfer or negotiate Plan property for a price.
** Power to disburse funds, sign checks or produce negotiable instruments from the Plan assets.
** Decision making authority over any individual described above.
The fidelity bond must be at no less than 10% of plan assets with a minimum of $1,000 and a maximum of $500,000. And like all aspects of ERISA, there are important exceptions.
If you are a 401k plan sponsor or plan fiduciary and would like more information, or referrals to vendors of low-cost fidelity bonds, please contact us at (818) 501-4020