Erisa Bond Guide

An ERISA bond is a type of fidelity bond (or insurance) required under the Employee Retirement Income Security Act (ERISA). It protects employee benefit plans—such as 401(k)s and pensions—from losses caused by fraud, dishonesty, or theft by the people who manage those funds.

These bonds are required by law to ensure that plan fiduciaries (like trustees or administrators) handle assets responsibly. If a fiduciary steals, embezzles, or misuses plan funds, the bond pays to replace the lost money.

Covered acts include:

• Theft or embezzlement
• Forgery or larceny
• Misappropriation or willful misapplication
• Other forms of fraud or dishonest behavior

Though often called ERISA bond insurance, it’s technically a surety bond—meaning the fiduciary may be required to pay the bond company back if a claim is paid out.

Cybersecurity and ERISA Bonds

While ERISA bonds protect against losses from fraud or theft by individuals handling plan funds, they do not cover cybersecurity incidents like hacking or data breaches. However, fiduciaries are still responsible for protecting plan data and assets. The Department of Labor has issued cybersecurity best practices for plan sponsors and fiduciaries. Failure to follow them could be seen as a breach of fiduciary duty, even if it’s not covered by an ERISA bond.

Anyone who handles funds or property of an employee benefit plan is required to be bonded under ERISA. This includes people with access to plan assets, authority over disbursements, or decision-making power related to those funds.

Common roles that require ERISA bonds:

• Plan trustees and administrators
• Employees with access to plan funds
• Employers managing benefit plans
• Service providers or financial managers with control over plan assets

You are considered to be “handling plan funds” if you:

• Physically access cash, checks, or plan property
• Have the authority to transfer or disburse plan assets
• Can sign checks or negotiate securities
• Supervise or direct others who handle these tasks

Exemptions:

Some regulated financial institutions are exempt, including:

• Banks
• Registered brokers and dealers
• Insurance companies approved by federal or state agencies

Fiduciaries who don’t handle plan assets do not need to be bonded.

ERISA requires that anyone who handles plan funds must be covered by a bond equal to at least 10% of the plan assets handled in the previous year.

• The minimum bond amount is $1,000
• The maximum is $500,000
• For plans that hold employer securities, the maximum increases to $1,000,000

Plans That Require ERISA Bonds:

• 401(k), 403(b), and defined-benefit retirement plans
• Employee stock ownership plans (ESOPs)
• Profit-sharing plans
• Health plans like HMOs, FSAs, disability insurance, and life insurance

Plans That Are Exempt:

• Unfunded plans paid directly by the employer
• Church plans
• Government plans
• Any plans exempt from Title I of ERISA

It’s important to understand the difference between an ERISA bond and fiduciary liability insurance, as they protect different parties in very different ways.

ERISA Bond

• Protects the plan (and its beneficiaries)
• Covers losses due to fraud, theft, or dishonest acts by anyone handling plan funds
• Required by law under ERISA
• No deductible — the person responsible must repay the full bond amount if a claim is paid
• This is a surety bond, not traditional insurance

Fiduciary Liability Insurance

• Protects the fiduciary (person or business managing the plan)
• Covers legal costs and liability from mistakes or mismanagement (not intentional fraud)
• Optional coverage, not legally required
• May include deductibles
• This is a true insurance policy

In short: ERISA bonds protect the plan. Fiduciary insurance protects the person.

You can get an ERISA bond through a surety provider approved by the U.S. Department of the Treasury (see Circular 570). Here’s how the process works:

Step 1: Gather Your Info

To apply, you’ll need basic details about your plan, including:

• Legal name of the benefit plan
• Number of trustees
• Prior loss history (if any)
• Contact and address information

Step 2: Submit Your Application

Most applications can be completed online in just a few minutes. We offer a fast-track process through our ERISA bond application.

Step 3: Get Your Bond

• Bonds under $500,000 are usually issued the same day and emailed to you within hours.
• Bonds over $500,000 may require additional underwriting and take slightly longer.

The cost of an ERISA bond is a small percentage of the total bond amount, typically starting around $100 per year for smaller plans.

Factors that affect pricing:

• Dollar amount of coverage
• Number of employees covered
• Type of business or plan involved

To get exact pricing, fill out our quick application here.

Under ERISA, the required bond amount must be at least 10% of the plan assets handled, subject to the following limits:

• Minimum: $1,000
• Maximum: $500,000
• Maximum increases to $1,000,000 if the plan holds employer securities (like company stock)

These limits ensure that benefit plan participants are protected from major losses due to fraud or dishonesty by individuals handling plan assets.

For additional help understanding ERISA bond rules and compliance, check out:

• Department of Labor: ERISA Bond Requirements
• Treasury Circular 570 – Approved Surety Providers
• Your plan’s ERISA attorney or administrator
• Bonding experts at JW Surety (contact us for help)

 What is an ERISA bond?

An ERISA bond is a type of fidelity bond required by the Employee Retirement Income Security Act. It protects employee benefit plans, like 401(k)s or pensions, from fraud, theft, or dishonest acts by people handling plan funds.

Why is a fidelity bond required under ERISA?

Fidelity bonds are required to protect plan participants from financial losses caused by dishonest or fraudulent acts by fiduciaries. The requirement helps ensure that plan assets are handled responsibly.

What is the penalty for not having an ERISA bond?

Failing to secure an ERISA bond when required is a violation of federal law and could result in civil penalties, enforcement actions by the Department of Labor, and potential personal liability for fiduciaries.

How does an ERISA fidelity bond work?

If a bonded individual steals or misuses plan funds, the bond pays to restore those funds. The person responsible is then required to repay the bond provider. The bond protects the plan—not the fiduciary.

How much should an ERISA bond cost?

Costs typically start around $100 per year for small plans. Premiums vary based on the bond amount (usually 10% of plan assets), number of covered employees, and plan type.

When is an ERISA bond required?

An ERISA bond is required when any individual or entity has access to plan funds or property. This includes fiduciaries, administrators, and service providers with control over plan assets.

What is the difference between an ERISA bond and a crime policy?

An ERISA bond is legally required and protects the plan itself. A crime policy is optional insurance that covers the employer or organization from theft, including non-ERISA-related incidents.

Is an ERISA bond the same as a surety bond?

Yes—ERISA bonds are a type of surety bond. While often called “ERISA bond insurance,” they function as surety products, meaning the bonded person is liable to repay the bond provider if a claim is paid.

Are there different types of fidelity bonds?

Yes. Fidelity bonds include ERISA bonds, business service bonds, and employee dishonesty bonds. ERISA bonds specifically apply to benefit plans and are federally mandated.

What are the guidelines for ERISA fidelity bonds?

The bond must cover at least 10% of plan assets handled, with a minimum of $1,000 and a maximum of $500,000 (or $1 million for plans holding employer securities). The surety provider must be listed on the Department of the Treasury’s Circular 570.