An ERISA fidelity bond is a type of insurance that protects the plan against losses caused by acts of fraud or dishonesty. Fraud or dishonesty includes, but is not limited to, larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion,
willful misapplication, and other acts. Deductibles or other similar features are prohibited for coverage of losses within the maximum amount for which the person causing the loss is required to be bonded. In addition, it is important to make sure that the plan is named (or
otherwise specifically identified) as an insured party on the bond so that the plan can recover losses covered by the bond.

Who must be bonded?
Every person who “handles funds or other property” of an employee benefit plan is required to be bonded unless covered under an exemption under ERISA. ERISA makes it an unlawful act for any person to “receive, handle, disburse, or otherwise

Who are the parties to an ERISA Fidelity Bond?
In a typical bond, the plan is the named insured and a surety company (insurer) is the party that provides the bond. The persons covered by the bond are the persons who handle funds or other property of the plan. As the insured party, the plan can make a claim on the bond if a plan official causes a covered loss to the plan due to fraud or dishonesty.

Must service providers to the plan be bonded?
It depends. A service provider, such as a third-party administrator or investment advisor, must be bonded if the service provider or its  employees handle funds or other property of your employee benefit plan. 

How much coverage is required?
Generally, each person must be bonded in an amount equal to at least 10% of the amount of funds he or she handled in the preceding year. The bond amount cannot, however, be less than $1,000, and the Department cannot require a plan official to be bonded for more than $500,000, or $1,000,000 for plans that hold employer securities. These amounts apply for each plan named on a bond. For example, assume your company’s plan has funds totaling $1,000,000. The plan trustee, named fiduciary and administrator are three different company employees that each have access to the full $1 million, and each has the power to transfer plan funds, approve distributions, and sign checks.

Who is responsible for making sure the plan has enough bond coverage?
The responsibility for ensuring that the plan has proper bonding coverage may fall upon
a number of individuals simultaneously. All persons who handle plan funds or other
property are responsible for complying with the bonding requirements themselves. In
addition, any other person who has authority to authorize another person to perform
handling functions is also responsible for ensuring that those persons are properly
bonded. For example, if a fiduciary hires a trustee for a plan, the fiduciary must ensure
that the trustee is properly bonded or covered by an exemption.

May the plan pay for the bond out of plan assets?
 Yes. The plan can pay for the bond using the plan’s assets. The purpose of ERISA’s bonding requirements is to protect the plan. Such bonds do not protect the person handling plan funds or other property or relieve Yes. The plan can pay for the bond using the plan’s assets. The  purpose of ERISA’s bonding requirements is to protect the plan. Such bonds do not protect the person handling plan funds or other  property or relieve them from their obligations to the plan, so the plan’s purchase of the bond is allowed.