The ERISA Bond and You

The ERISA Bond and You

Retirement plan protection begins with selecting the right partners for your business. With well-known partners, TAG Resources connects plan sponsors, financial advisors, and wealth management professionals to the best in the business to begin building the layer of protection needed for your retirement plan.
One area where TAG Resources layers a protective advantage is with the our umbrella ERISA Fidelity Bond policy. The ERISA Fidelity Bond offers very specific coverage; all too often, this gets confused with fiduciary liability insurance– which it is not. TAG’s ERISA Fidelity Bond is written by GreatAmerican (the primary carrier), with several other carriers adding additional pro-rata limits. It’s larger than any single carrier will write alone.

For additional information, please read my blog post, Digging Deeper—Questions to Ask an Outsourced 3(16) or Fiduciary Provider.

The ERISA Fidelity Bond we offer our clients was specifically written to address the 3(16) and fiduciary roles we play with our clients.

The ERISA Fidelity Bond is to “…provide protection to the plan against loss because of acts of fraud or dishonesty on the part of the plan official, directly or through connivance with others.” There are a few 3(16) fiduciaries that, like TAG, have taken the stance where both the 3(16) AND the Plan Sponsor need to be covered by an ERISA Bond.  To give you some background, the Employee Retirement Income Security Act of 1974 requires that every person who handles ERISA plan assets be covered by a Fidelity Bond. The Fidelity Bonds basic purpose is to protect against theft of ERISA plan assets. The limits on these bonds are 10% of plan assets, capped at a maximum payout of $500,000. It is crystal clear that a Plan Sponsor is required to have this Bond. If the employer chooses to outsource to a 3(16) Plan Administrator, does this trigger the need for a second Bond? Does the Plan Administrator have the authority to direct money and make decisions on your client’s plan? Yes, indeed.

The 3(16) needs to be bonded as well, for each company. As with fiduciary insurance, there is a very small population of people that know how to do this—but there are some great programs out there. NAPLIA runs a program wherein a 3(16) like TAG can offer an ‘umbrella’ bond solution that covers both the 3(16) and the Plan Sponsor; this is what we do. Again, ask the questions so that you know this basic risk is covered—by all parties!

For more on ERISA Fidelity Bonds, read this article from NAPA: 5 Things People Get Wrong About ERISA Fidelity Bonds
nd this article to learn about the differences between ERISA Bonds and Fiduciary Liability Insurance

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