Protect Your Employee Benefit Plan from Fraud with an ERISA Bond
Protect your future financial security and that of your employees. Find out how by speaking with a VANTREO concierge broker.
If you were to discover that the funds in your company's retirement plan had been misappropriated, or worse yet, embezzled, what recourse would you have? Would you or your employees still have enough savings to retire?
Without an ERISA bond, you and your employees could face the loss of retirement savings. The good news is that ERISA (the Employee Retirement Income Security ACT) has rules in place, as well as certain standards of conduct, that apply to private sector benefit plans and for those who are in charge of investing and managing those assets. This includes the ERISA bond requirement.
How an ERISA Bond Can Help
ERISA's provisions were enacted for the purpose of addressing the concerns of business owners and employees regarding the mismanagement and/or the abuse of the funds in private pensions, as well as other employee benefit plans.
Because of these concerns, ERISA requires that those who handle plan funds and other related property must be covered by a bond that will protect the plan from loss due to dishonesty and/or fraud.
What is covered by ERISA Bonds?
ERISA bonds provide coverage that can protect your employee benefit plan against acts of dishonesty or fraud. Such acts can include - but are not limited to - the following:
- Willful misapplication
- Wrongful conversion and / or abstraction
*Note that the plan's deductibles and other similar features will not be covered by an ERISA bond.
It is important to understand that an ERISA bond is not the same thing as fiduciary liability insurance. While a fiduciary liability insurance plan can protect a fiduciary - and in some cases, the benefit plan itself - against losses that are caused by a breach of fiduciary responsibility, an ERISA bond will specifically insure your employee benefit plan against losses that are the result of dishonesty or fraud by those who handle the plan's funds.
In addition, while fiduciary liability insurance coverage is important, it is not a requirement. An ERISA bond, however, is required for every person who handles funds or other property of an employee benefit plan. In fact, unless such an individual is bonded, it will be considered by ERISA as unlawful if he or she receives, handles, disburses, or otherwise exercises custody or control of plan funds or property.
Why consider obtaining an ERISA Bond?
An ERISA bond will be required for a benefit plan administrator, as well as for those who are officers and employees of the benefit plan or plan sponsor who may handle plan funds based upon their job duties. These duties may include the receipt, the safekeeping, and/or the disbursement of plan funds.
This type of bonding may also be necessary for other individuals, such as those who are service providers to a benefit plan and who have various decision making authority with regard to the plan.
What to look for when purchasing an ERISA Bond
When purchasing an ERISA bond, it is important to ensure that the employee benefit plan is named - or otherwise specifically identified - as an insured party on the bond. In doing so, the employee benefits plan can then recover the losses that are covered by the ERISA bond.
It is also essential to ensure that each covered person meets the requirements in terms of coverage amount. For example, all persons who are bound by the ERISA requirement must be bonded in an amount that is equal to at least 10% of the amount of funds that they handled in the previous year.
However, the amount of any ERISA bond cannot be less than $1,000. It is also not required that an individual be bonded for more than $500,000 - or $1 million for employee plans that hold employer securities.
Why Choose VANTREO as Your ERISA Bond Advisor?
When you work with VANTREO as your ERISA Bond advisor, you have a team of experts behind you that are focused on your and your company's specific needs. So, <Contact Us> at (800) 967-6543 for additional information on how to best move forward.
Discover the VANTREO difference.