ERISA Bonds: Get Your Fidelity Bond Online

The Employee Retirement Income Security Act of 1974 (ERISA) is a law that has different rules and regulations for company benefit plans and those that manage the assets of those employee benefit plans, especially with regard to the investments of those plans.  ERISA bonds are an integral component of the company’s services in extending the right retirement plans for its employees. These bonds, required by the Employee Retirement Income Security Act (ERISA) of 1974, offer a layer of security to protect the plan from losses due to fraud or dishonesty. There are various types of ERISA bonds, including fidelity bonds, fiduciary liability insurance, and crime insurance

What is an ERISA Bond and Why Fiduciaries Need It in 2025

If you manage an employee benefit plan, you’re responsible for safeguarding workers’ retirement savings—and the U.S. Department of Labor (DOL) is watching. The ERISA Bond isn’t just a box to check—it’s a legal requirement under the Employee Retirement Income Security Act (ERISA), designed to protect plan assets from fraud or dishonesty.

But here’s what many fiduciaries get wrong: not all bonds are created equal, and failing to understand or maintain the right coverage could lead to regulatory fines, personal liability, or even litigation.

Let’s break down what an ERISA Bond is, why you need it, and how to avoid costly compliance mistakes.

Why the ERISA Bond Exists

The ERISA Bond—also known as an ERISA fidelity bond—is mandated under ERISA §412. It protects employee benefit plans from losses due to fraud, theft, embezzlement, or other dishonest acts committed by the plan fiduciary or anyone who handles plan funds.

In short, it’s a safety net for employees—and a compliance shield for you.

ERISA FRAMEWORK & LEGAL AUTHORITY

ERISA Section 412

ERISA Section 412 specifically addresses the bonding requirement for fiduciaries and other individuals who handle plan funds. This section mandates that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan must be bonded. The bond is intended to protect the plan against losses due to fraud or dishonesty by the bonded individuals. The required bond amount must be at least 10% of the amount of the funds handled, with a minimum bond of $1,000 and a maximum of $500,000 per plan (or $1 million for plans that hold employer securities). The bond must be obtained from a surety or reinsurer that is approved by the Department of the Treasury. Compliance with Section 412 is a critical aspect of fiduciary responsibility under ERISA.

ERISA Regulations

ERISA regulations are comprehensive and detailed, providing the framework within which employee benefit plans must operate. These regulations cover a wide range of areas including fiduciary responsibilities, reporting and disclosure requirements, and participation and vesting standards. Fiduciaries are required to act prudently and in the best interest of the plan participants and beneficiaries. They must diversify plan investments to minimize the risk of large losses and follow the plan documents insofar as they comply with ERISA. The regulations also require that plans provide participants with important information about plan features and funding, and ensure that plan participants have a process to claim benefits and appeal denied claims. Adherence to ERISA regulations is essential for maintaining the integrity and reliability of employee benefit plans.

Pension Benefit Guaranty Corporation (PBGC)

The Pension Benefit Corporation (PBGC) is a federal agency created by ERISA to protect the retirement incomes of American workers in private-sector defined benefit pension plans. PBGC ensures that participants in these plans receive their vested benefits if their plans terminate without sufficient assets to pay all benefits. The agency operates two insurance programs: the single-employer program and the multiemployer program. The single-employer program covers plans sponsored by individual companies, while the multiemployer program covers collectively bargained plans sponsored by multiple employers. PBGC is funded by insurance premiums paid by plan sponsors, as well as by the assets and recoveries from failed plans. The agency plays a critical role in the ERISA framework, providing a safety net for millions of American workers and retirees.

REQUIREMENTS & COMPLIANCE

ERISA Fidelity Bond Requirements

One of the critical components of ERISA compliance is the requirement for ERISA fidelity bonds. ERISA mandates that every person handling funds or other property of an employee benefit plan must be bonded. This ERISA fidelity bond is designed to protect the plan against losses caused by acts of fraud or dishonesty. The minimum bond amount is generally 10% of the amount of funds handled, with a minimum bond of $1,000 and a maximum of $500,000 per plan (or $1 million for plans that hold employer securities). The fidelity bond must be issued by a surety company or reinsurer that is named on the Department of the Treasury’s Listing of Approved Sureties. Ensuring the correct bond amount and securing it from an approved provider are crucial steps in meeting ERISA’s fidelity bond requirements.

ERISA Compliance

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for retirement and health benefit plans in private industry to provide protection for individuals in these plans. Compliance with ERISA is crucial for plan sponsors and fiduciaries, as it ensures the integrity and security of employee benefit plans. ERISA compliance involves adhering to various provisions, including fiduciary responsibilities, reporting and disclosure requirements, and participation and vesting standards. Non-compliance can result in significant penalties and legal consequences. To maintain compliance, plan administrators must be diligent in their oversight and management of benefit plans, ensuring that all activities align with ERISA’s stringent requirements.

Benefits of ERISA Bonds

ERISA bonds offer a range of benefits to employers and plan sponsors. Here are some of the most important ones:

• Protection Against Fraud and Dishonesty

A key benefit of ERISA bonds lies in their protection against fraud and dishonesty. A fidelity bond insures against losses due to fraud or dishonesty related to handling employee benefit plan funds. They ensure that every fiduciary of an employee benefit plan and every person who handles funds or other property of the plan is bonded. Consequently, if an employee or other plan participant contravenes the codes and steals or misuses plan funds, the bond will cover the loss, up to the amount of the bond. ERISA bonds, therefore, play a significant role in safeguarding plan participants against financial losses arising from fraudulent or dishonest actions.

• Compliance with Federal Law

Another important benefit of ERISA bonds is that they help employers and plan sponsors comply with federal law. ERISA necessitates that employee benefit plans be bonded to shield plan participants from losses due to fraud or dishonesty. Failure to adhere to this requirement can invite severe penalties and legal liability. Thus, obtaining an ERISA bond enables employers and plan sponsors to comply with federal law and stave off the chance of penalties and legal action.

• Financial Security for Plan Participants

Lastly, ERISA bonds also offer financial security for plan participants. They protect the assets against fraud and dishonesty, ensuring a safety net for the retirement savings of the participants. This coverage provides a sense of peace to the plan participants, knowing their savings are secure, and they are less likely to encounter financial losses due to fraudulent or dishonest behaviour. Overall, ERISA bonds offer a range of important benefits to employers, plan sponsors, and plan participants. By providing protection against fraud and dishonesty, ensuring compliance with federal law, and providing financial security for plan participants, ERISA bonds help to ensure the integrity and stability of employee benefit plans. These vital protections include fidelity bond coverage, which is one of the key fidelity bond requirements under ERISA, helping to safeguard the content of the plan’s assets.

ERISA bonds are an essential requirement for employee benefit plans. They protect the plan from losses due to fraud or dishonest acts committed by plan fiduciaries, and ensure the reliable distribution of funds to participants. The cost of ERISA bonds varies depending on several factors. In this section, we will discuss the premium rates, factors influencing cost, and ways to reduce the cost of ERISA bonds, including a thorough audit of the plan’s financial practices.

How Much Coverage Do You Need?

Under 29 U.S. Code §1112 (ERISA §412), the bond must be at least 10% of plan assets, up to a maximum of $500,000 (or $1,000,000 for plans with employer securities). For example:

• A plan with $250,000 in assets must carry at least $25,000 in bond coverage.
• A plan with $3 million in assets must carry $300,000 in bond coverage.

You must renew the bond annually or purchase a multi-year bond to maintain continuous coverage.

The Department of Labor offers official bonding guidance here.

Common Bond Amount Examples

For plans holding employer securities (such as ESOPs and KSOPs), the maximum required bond is raised to $1,000,000.

Takes less than 10 minutes · Same-day electronic delivery · No obligation to complete

A Simple Way to Think About It

Fidelity Bond = “Someone stole from the plan.” Fiduciary Liability = “Someone made a bad decision managing the plan.”

ERISA Bond vs. Fiduciary Liability Insurance: Key Differences

One of the most common misconceptions is that ERISA bonds and fiduciary liability insurance are the same—or that one can substitute for the other. They cannot. These are entirely different types of coverage that serve distinct purposes.

Do You Need Both?

While only ERISA bonds are legally required, most fiduciaries should strongly consider purchasing fiduciary liability insurance as well, especially if:

• Your plan has more than 100 participants
• You serve on a plan committee or have discretionary authority
• Your plan offers employer stock or alternative investments
• You could be personally sued for plan-related decisions

Many insurance carriers now offer bundled packages that include ERISA bonds, fiduciary liability insurance, and cyber liability coverage at a discount.

APPLICATION & PROVIDER

How to Get Your ERISA Bond

Obtaining an ERISA bond is straightforward and can often be completed entirely online in minutes. Here’s the step-by-step process:

1. Calculate Your Required Bond Amount

Determine your plan’s total assets as of the first day of the plan year. Multiply by 10% to find your minimum required bond amount. Apply the minimum ($1,000) and maximum ($500,000 or $1,000,000) caps.

2. Choose a Treasury-Approved Surety Provider

ERISA bonds must be purchased from a surety company listed on the Department of the Treasury’s Listing of Approved Sureties (Circular 570). Verify the company is properly authorized before purchasing.

Important: Neither the plan nor any interested party may have control or financial interest in the surety company.

3. Complete the Application

You’ll need to provide:

• • Plan name and EIN (Employer Identification Number)
  • Bond amount required
  • Names of individuals handling plan funds
  • Plan year and assets information
  • Desired bond term (1-year or multi-year)

Real-World Case Study: How an ERISA Bond Prevented Financial Disaster

What Happened

Over a two-year period, the payroll manager systematically diverted $90,000 in employee 401(k) contributions to a personal account. The fraud was discovered during a routine plan audit when the auditor noticed discrepancies between payroll records and plan contribution deposits.

The Role of the ERISA Bond

Because the company maintained an active ERISA fidelity bond with $450,000 in coverage (10% of plan assets), the following occurred:

• The plan immediately filed a claim with the surety company
• The bond covered the full $90,000 loss with no deductible
• Plan participants’ accounts were made whole within 45 days
• The company avoided a costly lawsuit from affected employees
• The DOL audit found the company in compliance with bonding requirements
• The company’s reputation and employee trust were preserved

What Would Have Happened Without the Bond

If the company had failed to maintain proper ERISA bond coverage:

• Plan fiduciaries would have been personally liable for the $90,000 loss
• The company would have faced significant DOL penalties for non-compliance
• Employee lawsuits would likely have followed, with additional legal costs
• The total financial impact could easily have exceeded $200,000-$300,000
• Reputational damage would have been severe

ERISA Bond Facts

•  An ERISA bond is a type of surety bond that is required by the Employee Retirement Income Security Act (ERISA) of 1974.
• The purpose of the ERISA bond is to protect employee benefit plans from misappropriation of funds by plan fiduciaries.
• The ERISA bond must be purchased from a surety company that is licensed to do business in the state where the plan is located.
• The amount of the ERISA bond must be at least 10% of the plan’s total assets, up to a maximum of $500,000.
• The ERISA bond must be renewed annually and the surety company must be notified of any changes to the plan’s assets.
• The ERISA bond does not provide coverage for any liability or losses incurred by the plan.
• The ERISA bond does not cover any claims made by the plan’s participants or beneficiaries.

The bonding requirement is not limited to just plan trustees, employees of the plan and employees of the plan sponsor. Bonding coverage may also be required for other persons, such as service providers to the plan, whose duties involve access to plan funds or decision-making authority that can give rise to a risk of loss through fraud or dishonesty. Where a plan administrator, service provider, or other person who must be bonded is an entity, such as a corporation or association, ERISA’s bonding requirements apply to the natural persons or person who “handles” the funds.

The term “funds or other property” generally refers to all funds or property that the plan uses or may use to pay benefits to plan participants or beneficiaries. Plan “funds or other property” includes all plan investments including land and buildings, mortgages, and securities in closely-held corporations. It also includes contributions from any source, such as employers, employees, and employee organizations that are received by the plan, and cash, checks and other property held for the purpose of making distributions to plan participants or beneficiaries. A person is deemed to be “handling” funds or other property of a plan whenever his or her duties or activities could cause a loss of plan funds or property due to fraud or dishonesty, whether acting alone or in collusion with others. The general criteria for determining “handling” include: Physical contact with cash, checks or similar property; Power to transfer funds from the plan to oneself or to a third party; Power to negotiate plan property (e.g., mortgages, title to land and buildings or securities); Disbursement authority or authority to direct disbursement; Authority to sign checks or other negotiable instruments; or Supervisory or decision-making responsibility over activities that require bonding.

COMMON QUESTIONS & CONCLUSION

ERISA Bond FAQ

Conclusion: Stay Protected, Stay Compliant

If you’re handling retirement funds or benefit plans, don’t leave yourself exposed. An ERISA bond isn’t just a legal formality—it’s a critical part of protecting plan assets, your business reputation, and your personal liability. At Swiftbonds, we make compliance simple, fast, and affordable.

Get bonded today and ensure your plan—and your future—is secure.