The Employee Retirement Income Security Act (ERISA) requires privately held companies who sponsor a retirement plan such as a 401k, SEP IRA, or SIMPLE IRA to purchase a fidelity bond. Some notable exceptions may include Government Agencies, Religious Institutions, and Nonprofit Organizations.
Are IRA accounts ERISA qualified?
Yes & No. Individual retirement accounts such as an traditional IRA’s and Roth IRA’s are not ERISA qualified because they are managed by an individual plan holder
Traditional and Roth IRAs are not ERISA qualified because these plans are managed by the individual plan holder, not his or her employer.
However, SEP IRA and SIMPLE IRA plans are ERISA qualified as they are employer-sponsored by small to mid-sized businesses because they require less administrative work & compliance fees for the employer.
What limit do I need for my Fidelity Bond?
The ERISA bond or policy must equal 10% percent of the funds handled by a trustee or fiduciary with a minimum limit of $1,000 per plan and a maximum limit of $500,000 per plan. Plans holding employer securities are required to carry a maximum limit of $1,000,000.
Are there any other options?
Yes & No. Some companies may be willing to add the plan name as an additional insured on your crime & fidelity policy. As long as the Employee Theft coverage limit is equal or greater than 10% of plan assets, a separate bond would not be required.
Check with your insurance broker or agent to see whether you are covered and, if not, how much a bond or policy would be.
If you have any questions about your ERISA Fidelity Bond, please reach out and connect with me or my team in any of the following ways;
SEP IRA Plan – SEP stand for Simplified Pension Plan
SIMPLE IRA Plan – SIMPLE stand for Savings Incentive Match Plan for Employees
ERISA – The Employee Retirement Income Security Act of 1974 was enacted to protect employee benefit plans against loss by acts of fraud or dishonesty and instituted a fidelity bond requirement for plan trustees.