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. The ERISA section 412 as well as the regulated regulations demand that each fiduciary of an employee […]
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. The ERISA section 412 as well as the regulated regulations demand that each fiduciary of an employee benefit plan and also every individual who deals with funds or the other property of such plan has to be bonded.
Such bonding requirements of the ERISA are required for the protection of the benefit plans from such risk of loss because of dishonesty or fraud of individuals who are handling those funds or any other property. Persons who are going to handle the property or funds of the employee benefit plan are called plan officials in the ERISA. The Act demands that there must be a fidelity bond that should be placed to cover such fiduciary or the ones responsible in managing the plan and also the individuals who handle those funds or a property of the plan. 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 the plan official be bonded for at least ten percent of the amount of funds that one handles. In a lot of cases, the largest bond amount which is necessary under the ERISA is $500,000 for every plan. However, there are also higher limits which one can buy. But for the plan officials who are holding such employer securities, then the largest bond amount offered is $1,000,000.
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. One would be to ensure that the bond amount is equal to a hundred percent of the value of such non-qualifying assets or one may arrange for the annual full-scope audit, the CPA would physically confirm the presence of the assets at the beginning as well as the end of the plan year.
The 401K has surely worked with Colonial Surety Company which is known to be the leader in providing ERISA or the 401K 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. They are actually the biggest direct seller of fidelity bonds in the US.