Federal law requires that all fiduciaries of pension and/or profit sharing plans be bonded.  The law reads that everyone who has direct or indirect control over the plan is a fiduciary.  Therefore, each member of the retirement committee, the members of the Board of Directors and each individual trustee must be bonded.

Type of Bond

The bond must be a surety bond, which provides protection to the plan and trust against loss by acts of fraud or dishonesty on the part of the person(s) bonded.

Amount of Bond

Provided that at least 95% of the plan assets are invested in “qualified plan assets”, the minimum amount of the bond (calculated at the beginning of each plan year) is the greater of $1,000 or ten percent (10%) of the plan assets.  The maximum amount of the bond you need is $500,000.  If you have more than one plan, the assets of the plans may be combined to determine the amount of coverage.

Qualifying Plan Assets

Qualifying plan assets include but are not limited to the following types of investments: (a) qualifying employer securities, (b) participant loans, (c) assets held by a regulated financial institution (i.e., registered mutual fund), and (e) investments and annuity contracts issued by an insurance company.

If plans assets include investments other than those described above, please contact The Pension Studio so that we can assist you in determining if there are additional bonding requirements.   Failure to comply with the additional bonding requirements can result in additional administrative burden and expense.    This includes being required to obtain a written opinion from and independent public accountant, which must accompany the annual 5500 Form. 

Securing the Bond                                                                  

Clients should ask their property and casualty insurance broker to obtain the bond.  They can also obtain a bond by clicking here.