ERISA Bond Requirements:
What Every Employer Needs to Know

If your business sponsors a 401(k) or other employee benefit plan, federal law requires certain people involved in handling that plan's funds to be covered by an ERISA fidelity bond. Here's what you need to know.

ERISA bonds protect plan participants from theft or fraud, not from investment losses.

What is an ERISA bond?

An ERISA fidelity bond is required under the Employee Retirement Income Security Act (ERISA) of 1974. It protects a retirement or benefit plan's assets against losses caused by fraud or dishonesty — theft, embezzlement, or forgery — by the people who handle the plan's funds. It is fundamentally different from fiduciary liability insurance, which covers a separate type of risk.

Who is required to be bonded?

Generally, anyone who "handles" plan funds or other plan property must be covered by the bond. This typically includes:

• Plan administrators and trustees
• Employees who have access to plan funds or authority to transfer them
• Anyone with the power to sign checks drawn on plan assets
• Third-party administrators in some circumstances, depending on their role

The bond does not need to name each individual — it can cover a class of people (e.g., "all officers and employees") which is the most common and practical approach for small and mid-sized businesses.

How much coverage do you need?

The general rule under ERISA is that the bond amount must be at least 10% of the plan's assets as of the beginning of the plan year, with a required minimum of $1,000 per plan. There is also a statutory maximum:

• Minimum bond amount: $1,000
• Standard maximum: $500,000 per plan
• Higher maximum for plans holding employer securities: $1,000,000

If your plan's assets grow, your bond amount typically needs to increase at the next renewal to stay compliant with the 10% rule.

ERISA bond vs. fiduciary liability insurance

These are commonly confused, but they cover very different risks:

• ERISA Fidelity Bond: Required by law. Covers losses from dishonesty or theft by plan handlers. Protects the plan and its participants.
• Fiduciary Liability Insurance: Optional (though strongly recommended). Covers claims that a fiduciary breached their duties — mismanagement, poor investment decisions, or ERISA violations. Protects the fiduciaries themselves, not just the plan.

Many businesses carry both, since the ERISA bond alone does not protect the individuals making fiduciary decisions from being personally sued.

What happens if you don't have one?

Failing to maintain adequate ERISA bond coverage is a compliance failure that can trigger action from the Department of Labor, potential personal liability for plan fiduciaries, and complications during your plan's annual Form 5500 filing, which specifically asks about bonding compliance.