A quick note on terminology (plan assets)

Throughout this post, we use “plan assets” in place of the DOL’s technical phrase “funds or other property.” Practically, that covers contributions, investments, and anything the plan uses—or may use—to pay benefits. Bonding applies to people who handle plan assets (i.e., whose duties create a risk that plan assets could be lost through fraud or dishonesty).

1) What is an ERISA bond?

An ERISA fidelity bond is a special insurance required by ERISA that protects the plan (not the employer or individuals) against loss caused by fraud or dishonesty by people who handle plan assets. It covers theft, embezzlement, forgery, and similar dishonest acts. Required coverage cannot have a deductible (first-dollar coverage up to the required amount).

2) Why are ERISA bonds required?

ERISA §412 requires bonding to safeguard plan assets from losses caused by fraud or dishonesty by plan officials. It’s a foundational protection built into the statute and regulations.

3) Who must be bonded?

Everyone who handles plan assets must be covered. “Handling” is broader than touching cash—it includes the power to move money, sign checks, direct disbursements, or supervise those activities. This can include service providers if their duties involve handling plan assets. Certain regulated financial institutions may be exempt.

4) Who is the named insured?

The plan must be the named (or clearly identified) insured so it can make a claim under the bond. Bonds can be written per plan or cover multiple plans (via an omnibus clause), but each plan’s required coverage must be preserved.

5) Is being bonded the same as fiduciary liability insurance?

No. The ERISA bond protects the plan from dishonest acts. Fiduciary liability insurance protects fiduciaries (and sometimes the plan) from claims of fiduciary breach. Fiduciary insurance is optional and does not satisfy the ERISA bonding requirement.

6) How much should the bond be for?

Each covered person must be bonded for at least 10% of the amount of plan assets they handled in the preceding year, with a minimum of $1,000. Generally, the maximum required per plan official is $500,000—or $1,000,000 for plans that hold employer securities. If multiple officials effectively handle all of a plan’s assets, it’s common to use total plan assets as a practical proxy when sizing individual 10% amounts, but the technical rule is always tied to the amount of assets each person actually handled.

7) Inflation Guard (automatic limit increase)

Many ERISA bonds include an “inflation guard” or automatic increase provision. If, at the inception of the policy, your Limit of Insurance Per Occurrence is at least equal to the ERISA‑required amount, the insurer agrees to automatically increase that limit to equal the amount required under ERISA at the time you discover a loss (often subject to a cap—e.g., up to $500,000). This helps keep a multi‑year bond compliant as plan assets grow—without midterm endorsements. Important: if your plan holds employer securities, ERISA’s maximum required amount is generally $1,000,000; verify that any inflation guard cap is adequate for your plan.

8) Who is responsible for making sure the plan has proper bonded coverage?

Responsibility is shared. Individuals who handle plan assets must be bonded, and anyone who authorizes others to handle plan assets must ensure those people are properly bonded before they begin. When you hire a trustee, TPA, or similar service provider that handles plan assets, confirm they are exempt or properly bonded.

Buying the right bond (and avoiding pitfalls)

• Use an approved surety: Place the bond with a surety (or reinsurer) on the U.S. Treasury’s Circular 570 list.
• Name the plan as insured: Ensure the plan is the named (or clearly identified) insured. If using an omnibus clause for multiple plans, preserve each plan’s required amount.
• No deductibles on required coverage: ERISA-required coverage must be first-dollar up to the required amount; do not use a deductible that shifts risk back to the plan.
• Check the bond form: Understand blanket vs. schedule bonds. Blanket bonds often cap recovery per occurrence; schedule bonds can provide separate limits per person—pick what fits your risk profile.
• Re-check annually: At the start of each plan year, confirm required limits (10%/minimum/maximums), asset changes, and that your surety remains on Circular 570.

Quick examples

• $1,000,000 plan; multiple officials handle all plan assets → Each must be bonded for at least $100,000 (10% of assets they handle), subject to the plan’s max.
• Plan holds employer securities → Max required per official generally increases to $1,000,000.
• One person handles two plans ($100k in Plan A; $500k in Plan B) → That person needs at least $60,000 total coverage, with per‑plan protection preserved.

Small‑plan audit waiver tip (if applicable)

If a small plan (<100 participants) uses the DOL’s audit waiver and more than 5% of assets are non‑qualifying, anyone handling those non‑qualifying assets must be bonded for 100% of their value (in addition to the standard ERISA bond).

Disclaimer

This blog post is for general informational purposes only and is not legal or insurance advice. Consult your counsel and broker about your specific plan design, asset mix, and bonding needs.