What is an ERISA Fidelity Bond?

A fidelity bond is a specific type of insurance mandated by ERISA §412 to protect plans from losses that result from acts of fraud or dishonesty by plan fiduciaries and/or certain other persons (Called "plan officials") who "handle" plan funds or property. Examples include: larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction and wrongful conversion. A fidelity bond is not the same as fiduciary liability insurance (which is mandated by ERISA, but which is desirable because it protects plans from losses caused by fiduciary breaches.)


"Handling" plan assets include all duties or activities with respect to which there is a risk that funds or other property could be lost in the event of fraud or dishonesty on the part of such a fiduciary or plan official (whether acting alone or with others). Examples of “handling” include:

  • physical contact (or power to exercise physical contact or control) with cash, checks or similar property;

  • power to transfer funds or other property from the plan to oneself or to a third party, or to negotiate such property for value;

  • disbursement authority or authority to direct disbursement;

  • authority to sign checks or other negotiable instruments; or

  • supervisory or decision-making responsibility over activities that require bonding.

Plan –fiduciaries and plan officials are prohibited from handling plan assets unless they are bonded and are also prohibited from permitting others who are not bonded to handle plan assets. Thus, with certain exceptions, (for example banks with adequate capital), anyone who handles ERISA plan assets should be covered by an adequate ERISA fidelity bond. The issuer and amount of the bond must be reported on the plan’s Form 5500 each year.


Generally, ERISA requires that the bond be equal to at least 10% of plan assets (up to $500,000/$1,000,000 if employer securities are involved). In situations where a small plan holds more than 5% of its assets in “non-qualified” assets, the bond must also cover 100% of the amount of the non-qualified assets. See: Small Plans Do Need an Audit Unless.... The issuer of the bond must be on an approved list of insurers published by the Treasury Department and may not have any deductible. See: https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm.Plan fiduciaries who fail to satisfy ERISA’s bonding requirements could be personally liable for losses to a plan caused by their failure to secure(or make a proper claim on) a required fidelity bond.


ERISA’s bonding requirements can be surprisingly complex. More information about ERISA’s bonding requirements can be found at:

  1. https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/protect-your-employee-benefit-plan-with-an-erisa-fidelity-bond.pdf.

  2. https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2008-04.


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