A common and risky compliance issue for retirement plan sponsors is insufficient ERISA fidelity bond coverage. Experts explain some of the consequences, including the risk of being held personally liable for losses.
Exposure Risks for Plan Sponsors
Failure to have a current ERISA fidelity bond that appropriately covers the retirement plan at all times puts plan sponsors at risk. Consequences include increased likelihood of a Department of Labor (DOL) audit, lawsuits—and even being held personally liable for losses. As experts at the National Association of Retirement Plan Advisors (NAPA) explain:
Through examinations of Forms 5500, the IRS has determined that one of the two most common compliance issues among plans is not having adequate ERISA fidelity bond coverage. The DOL, pursuant to ERISA Sec. 412 and related regulations, generally requires every fiduciary of an employee benefit plan and every person who handles funds or other property of a plan be bonded to protect the plans from risk of loss due to fraud or dishonesty on the part of the bonded individuals….
There are substantial risks associated with not meeting ERISA’s bonding requirements:
- Failing to report a sufficient bond on the Form 5500 can trigger a plan audit.
- It is against ERISA law for plan officials to be without an ERISA bond.
- Plan fiduciaries can be held personally liable for losses that should have been covered by a fidelity bond.
In the event a DOL investigation is triggered, 401k Specialist advises that the onsite auditors typically use a “fidelity bond checklist” to analyze the ERISA fidelity bond for compliance with DOL requirements.
ERISA Fidelity Bond Basics Explained
The ERISA fidelity bond required by the Department of Labor to protect the assets of your retirement plan from theft can only be obtained from a surety listed by the U.S. Department of Treasury. That’s why plan sponsors across the country trust leading national ERISA bond provider, Colonial Surety Company for help ensuring compliance. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Additionally, plan sponsors can opt for cost-saving multi-year coverage, ensuring the ERISA bond remains Department of Labor compliant for the life of its term.
Obtain ERISA Fidelity Bond Here Now.
Personal Liability?
Any individual involved in the management of a retirement plan can face personal exposure for breach of fiduciary duty. What if you were held personally liable for losses to the plan? Who would defend you? What would that cost? How would you pay for a settlement? Consider how even the allegations of a fiduciary breach would divert attention and resources from your work—and life. Yuck, right? Why risk that?
At Colonial, along with your ERISA bond, as a plan sponsor, you can also affordably obtain fiduciary liability coverage. Importantly, this protects you—and your assets— from personal liability in the event of an alleged fiduciary breach. With Colonial’s package, the annual premium is less that what you would pay for even one hour with an expert ERISA lawyer.
Colonial can even help you round out your protection with cyber liability coverage. Expectations for plan fiduciaries continue to rise as the cybersecurity of retirement plan data and funds requires more and more attention. Colonial’s cyber liability insurance, included with ERISA packages, provides a smart, services-based solution to help plan sponsors successfully manage data breaches while minimizing liability for the company and plan.
Remember: the required ERISA bond protects the assets of the retirement plan from theft; Fiduciary Liability coverage protects you and your assets from personal liability; and, Cyber Liability coverage can safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
With Colonial, you can easily and quickly secure your affordable coverage package today. Take a few minutes and do it now: Complete ERISA Bond Package.
Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors – and keep their businesses compliant – with pain-free, efficient, and friendly service every time.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country.