An ERISA fidelity bond is a special insurance policy that protects employee benefit plans from risk or loss due to fraud or dishonesty under the Employee Retirement Income Security Act of 1974.  The definition of fraud and dishonesty under ERISA bonds includes “larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication, and other acts”.

While fiduciary liability insurance generally insures the employee benefit plan against risk or loss caused by breaches of fiduciary responsibilities, an ERISA fidelity bond insures a plan against risk or loss due to fraud or dishonesty on the part of a person.

ERISA requires every fiduciary of an employee benefit plan (and everyone who handles plan funds) to be bonded.  ERISA bonds must have very specific terms and conditions in order to be compliant with the law and the Department of Labor’s regulations.  An ERISA bond can not include any deductible or other similar features that would result in an economic effect that is similar to a deductible in the insurance contract.

If you handle the funds or other property of an employee benefit plan, you are required to be bonded unless you are covered under an exemption under ERISA.  It is an unlawful act for any person to “receive, handle, disburse, or otherwise exercise custody or control of plan funds or property” without being bonded.

ERISA bonds must be obtained from a surety or reinsurer named on the Department of the Treasury’s Listing of Approved Sureties Circular 570.