Your Guide to ERISA Bonds

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What is ERISA?

ERISA is the Employment Retirement Income Security Act, a federal law enacted in 1974 to regulate retirement and health plans in private industry. Its regulations apply to most retirement plans, but not those:

  • Maintained or established by governmental entities or churches for their employees,
  • Offshore plans (those held outside of the United States), or
  • Certain other specialized plans.

ERISA was enacted to provide more transparency and protection for employee retirement funds. It established requirements that plans provide participants with detailed plan information so they understand how their money is being managed and invested as well as how to obtain benefits.

It also requires that plans establish avenues for participants to pursue grievances for denial of benefits or suspected mishandling of funds.

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What are ERISA bonds, and how do they protect retirement funds?

ERISA established fiduciary responsibilities for those who manage and control retirement plan assets. These are specific standards of conduct that require each individual (“fiduciary”) to act in the best interests of the plan (the “principal” or “beneficiary”) rather than their own interest. According to the Department of Labor, “the primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses.”

Because plan administrators have significant power over employee’s retirement funds, ERISA does not rely on good faith to ensure that fiduciaries fulfill these duties. Instead, it requires that plan administrators with fiduciary duties obtain surety bonds.

If an administrator commits misconduct like fraud or embezzlement or otherwise intentionally breaches their duty in a way that financially damages the plan, a type of surety bond called an ERISA fidelity bond protects the plan from loss. Fidelity bonds are essentially a form of insurance against wrongful or illegal acts by a plan’s fiduciaries.

However, unlike fiduciary liability insurance, ERISA fidelity bonds operate to replace funds stolen from a company’s employee benefit plan. Such bonds do not insure anyone against any civil or criminal liabilities.

The coverage these bonds provide is entirely distinct from that of fiduciary liability insurance, which can protect a plan and its fiduciaries against losses caused by unintentional mismanagement.

Any individual who manages or handles funds, property, or other assets in employee benefit plans, including pensions, must obtain a first-party ERISA fidelity bond. A person fits this description if they fall into any of these categories:

  • They have physical contact with checks, cash, or other similar property.
  • They can secure physical possession of plan funds.
  • They have the potential ability to transfer plan funds to themselves or to third parties.

It also applies to individuals who supervise the handling of plan funds. Typically, this group includes plan trustees, plan sponsors, plan administrators, members of a plan’s investment committee, plan employees, and plan sponsor employees. Fiduciaries who do not handle funds are not required to obtain an ERISA fidelity bond.

Sometimes, plans will outsource some of their plan maintenance or investment functions. Some of these outside providers must also be bonded under ERISA bond requirements, but others are exempt. The plan fiduciaries are responsible for accurately determining what bonding is necessary and ensuring outside service providers are properly bonded. It may be necessary to obtain “third-party” ERISA bonds covering these contractors.

Like other types of surety bonds, ERISA bonds cost a small percentage of the bonded amount. Typically, the amount bonded is 10% of the funds that an official handles, with a minimum of $1,000 and a maximum of $500,000 (or $1,000,000 for plans that include employer-sponsored securities like company stock or bonds).

This guideline applies to plans that have mostly “qualifying” assets (funds in bank accounts, mutual funds, products, and insurance policies). For plans that hold more than 5% of their value in “non-qualifying assets” (e.g., real estate, fine art, collectibles, etc.), the bonds must be written for 10% of the total value of the plan’s assets or for the value of all non-qualifying assets – whichever is greater.

The cost of each bond is based on the covered individual’s credit history and personal and business finances. The issuer of the bond – the surety – determines the cost by assessing the level of risk involved in the bonding. It considers factors like credit score, business documents, and assets and liquidity. Bonds typically are more expensive for parties that have less favorable credit.

Because ERISA fidelity bonds protect the plan and its assets, the plan is permitted (but not required) to pay for their cost.

ERISA fidelity bonds can be written for a term of at least one year. Bonds that cover multiple years typically contain an “inflation guard” provision. Their coverage amounts automatically satisfy ERISA each year, regardless of inflation and plan growth.

ERISA fidelity bonds must meet the substantive requirements of ERISA section 412 and the appropriate regulations for the persons and plans involved. Only bonds obtained from a surety or reinsurer named on the Department of the Treasury’s Listing of Approved Sureties, Department Circular 570 (available on the Bureau of the Fiscal Service website), or in some cases from underwriters at Lloyds of London, are allowable under the law.

Neither the plan nor any interested party is permitted to have any control or significant financial interest (directly or indirectly) in any surety, reinsurer, agent, or broker through which the bond is obtained.

Plans may meet their ERISA fidelity bond requirements using several different types of bond forms, including the following:

  • Individual Bonds
  • Name schedule – Covering the listed individuals
  • Position schedule – Covering each of the job position listed in the schedule
  • Blanket – Covering all officers and employees of the insured generally

Discussing your options with an experienced financial professional can help you reduce the cost of bonding while ensuring your plan protects its assets and meets its obligations.

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It’s easier and faster than ever to get the ERISA fidelity bonds you need. Apply online and our professional underwriters will help you understand your options and complete the bonding process quickly and easily.



Founders Ryan Swalve and Zach Mefferd formed the vision for when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.