U.S. employers that offer retirement plans like 401(k)s must comply with fiduciary standards set by the Employee Retirement Income Security Act of 1974 (ERISA). A key ERISA requirement is the use of fidelity bonds to protect plan assets from loss due to fraud or dishonesty by individuals who manage or handle those funds.
For independent agents and brokers who already place group benefits or retirement-related products, ERISA bonds are a natural extension of your services. These bonds are easy to place, competitively priced, and relatively low risk. Offering them helps clients meet Department of Labor requirements while reinforcing your role as a trusted advisor in employee benefits compliance.
Who needs to be bonded?
Under ERISA, anyone who “receives, handles, disburses, or otherwise exercises custody or control” over retirement plan funds must be bonded. The bond amount must equal at least 10% of the plan assets handled in the previous year, with a minimum of $1,000 and a standard cap of $500,000.
Plans that hold non-qualifying assets, such as limited partnerships, mortgages, real estate, or employer securities may require bonds up to $1 million. Each plan must be bonded individually. If a company sponsors multiple retirement plans or has multiple fiduciaries, each must carry the appropriate coverage.
Some plans are exempt from ERISA bond requirements, including church plans, government plans, insured welfare plans, solo 401(k)s, and completely unfunded plans.
What do ERISA bonds cover?
ERISA bonds protect employee benefit plans from losses due to specific acts of fraud or dishonesty, such as embezzlement, forgery, theft, or misappropriation by those with access to plan funds.
Common violations involve breaches of fiduciary duty, improper denial of benefits, or interference with employee rights. If a covered loss occurs, the surety reimburses the plan and may seek recovery from the responsible party.
Why should agents offer bonds?
By offering ERISA bonds, independent agents help clients stay compliant and demonstrate their commitment to fiduciary integrity. These bonds signal that an employer takes its responsibilities seriously, offering peace of mind to employees and stakeholders alike.
Guiding clients through ERISA compliance and offering practical solutions also helps build long-term trust and positions agents as a valuable partner in protecting employees’ financial futures.
To learn more about ERISA bonds and who needs them, click here.
