An Information of the 401K Fidelity Bond
Actually, in 1974 the ERISA or that Employee Retirement Income Security Act was being enacted to be able to regulate many types of benefit plans for workers. The ERISA section 412 along with other regulations require that each fiduciary of that worker benefit plan and every person handling the funds or other property need to be bonded.
Such bonding requirements of the ERISA are required for the protection of the benefit plans from such risk of loss because of dishonesty or fraud of individuals who are handling those funds or any other property. In the ERISA, those individuals who would handle the funds or property of the employee benefit plan are referred to as plan officials. The Act demands that there must be a fidelity bond that should be placed to cover such fiduciary or the ones responsible in managing the plan and also the individuals who handle those funds or a property of the plan. These fidelity bonds are meant for protecting the plans from fraud or dishonesty committed by the persons who are linked to them.
It is required that the plan official be bonded for at least ten percent of the amount of funds that one handles. In a lot of cases, the largest bond amount which can be demanded under ERISA with respect to a plan official is $500,000 for each plan. However, there are also higher limits which one can buy. But for the plan officials who are holding such employer securities, then the largest bond amount offered is $1,000,000.
Know that the employee benefit plans with over five percent of such non-qualifying plan assets which are held in limited partnerships, collectibles, artwork, real estate, mortgages or the securities of the closely-held companies and they are held outside of such regulated institutions like the bank, registered broker-dealer, insurance company or other organizations which are authorized to serve as trustee for those individual retirement accounts, those plan sponsors must do one of these things. One needs to make sure that the bond amount is 100 percent of value of those non-qualifying assets or one can also arrange for such annual full-scope audit in which the CPA is going to physically confirm the existence of those assets at the start and the end of that plan year.
401K has worked together with Colonial Surety Company that is recognized as a leader in 401K fidelity bonds or ERISA fidelity bonds. They are actually a national insurance company which is licensed in all fifty states and also territories of the US and they have been providing insurance products since 1930. They are surely the biggest direct seller of such fidelity bonds in the US.
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