ERISA requires all employee benefit plans to have a fidelity bond to protect against losses due to fraud or dishonesty by persons who handle plan funds or property. However, there are some exemptions to this requirement.
Plan Exemptions
Plans that are entirely unfunded or that are not subject to Title I of ERISA are exempt from the bonding requirements. This includes plans that are maintained solely to comply with workers' compensation, unemployment compensation, or disability insurance laws.
In addition, plan fiduciaries that are banks or insurance companies subject to state or federal supervision or examination, and that meet certain capitalization requirements, are also exempt from the bonding requirements.
Employee Exemptions
ERISA also provides exemptions for certain employees who handle plan funds or property. Specifically, employees who have no discretionary authority or control over plan assets and who are not named as fiduciaries in the plan document are exempt from the bonding requirements.
It is important to note that the exemptions do not relieve plan fiduciaries from their fiduciary responsibilities under ERISA. Plan fiduciaries must still act prudently (so that there isn't a bond claim) and in the best interests of the plan participants and beneficiaries, and they may still be held liable for losses caused by their own breaches of fiduciary duty.
In summary, while most employee benefit plans are required to have a fidelity bond under ERISA, there are exemptions for certain plans and employees. Plan sponsors and fiduciaries should consult with legal counsel to determine whether their plan is exempt from the bonding requirements.
