An Information of the 401K Fidelity Bond
It was actually in the year 1974 on which the ERISA or such Employment Retirement Income Security Act was implemented for regulating the many kinds of benefit plans for workers. The ERISA section 412 as well as the regulated regulations demand that each fiduciary of an employee benefit plan and also every individual who deals with funds or the other property of such plan has 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. Persons who are going to handle the property or funds of the employee benefit plan are called plan officials in the ERISA. The Act necessitates that there has to be a fidelity bond which should be placed to cover the fiduciary or those responsible in managing the plan as well as those individuals who would handle the funds or property. Such fidelity bonds are actually intended to protect those plans from dishonesty or fraud committed by those individuals who are associated with them.
It is required that the plan official be bonded for at least ten percent of the amount of funds that one handles. In various cases, the maximum bond value that may be required under the ERISA with respect to such plan official is half a million dollars for every plan. But, there are higher limits that may be purchased. 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 would be to ensure that the bond amount is equal to a hundred percent of the value of such non-qualifying assets or one may arrange for the annual full-scope audit, the CPA would physically confirm the presence of the assets at the beginning as well as the end of the plan year.
The 401K has surely worked with Colonial Surety Company which is known to be the leader in providing ERISA or the 401K fidelity bonds. Actually, they are a national insurance company that is able to render services to all 50 states with their license and in all of the US territories and they have been providing such insurance products for several decades now. Know that they are the biggest direct seller of the fidelity bonds in the United States.