ERISA bonds
Posted on December 6, 2007
Filed Under General |
What are ERISA bonds?
In 1974, the Employee Retirement Income Security Act (ERISA) was enacted to regulate most types of employee benefit plans. This Act requires a fidelity bond covering a fiduciary (those responsible for managing the plan) and a person who handles funds or other property of such a plan. The coverage is intended to protect the plans from dishonesty and fraud committed by individuals who are associated with them. Erisa bonds are required by the Federal Government for any established financial plan a company may have.
In addition to providing fiduciary liability, employee benefits liability or ERISA bonds, there is an opportunity to place professional liability coverage and bonds for the professional organizations providing pension and 401K services
to the sponsor employer if they don’t already have it.
ERISA bonds have historically had little exposure, and therefore the underwriting is relatively simple and the pricing reasonable (relative to the professional liability coverages).
ERISA bonds are very economical and easy to buy - most insurance agents offer these bond’s to small companies at very low annual rates. ERISA bonds are not only inexpensive, but they are readily available and easy to purchase.
The annual premiums for these special ERISA bonds (also called “fiduciary bonds”) are very low, averaging approximately $200 per year or less (Example: a ERISA bond that covers a 401(k) plan with $100,000 in assets can cost as little as $100 per year–an ERISA bond covering plan assets of $1 million costs approximately $275 per year).
Erisa bonds are also known as pension trust bond
Investment
Investments for a 401k plan are sometimes supplied by the vendor and sometimes by another party, the investment custodian. Investment Advisors who control Plan Assets and make investment decisions for ERISA Plans are required to maintain an Investment Advisors ERISA Bond.
Investment Advisors are required to have this bond with limits of a percentage of assets under management, up to a maximum of $500,000* for each qualifying plan.
Investment performance is cyclical: a mutual fund that’s blazing hot today may be as cold as ice tomorrow, and vice versa. Investment returns should also factor into your decision.
The investment advisor is required to have this bond with limits of a percentage of assets under management, up to a maximum of $500,000, for each qualifying plan.
ERISA protects the plan’s assets by requiring that those persons or entities who exercise discretionary control or authority over plan management or plan assets, anyone with discretionary authority or responsibility for the administration of a plan, or anyone who provides investment advice to a plan for compensation or has any authority or responsibility to do so are subject to certain fiduciary responsibilities.
You can get erisa bond from JW Bond Consultants, Inc.
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