Posted over 8 years ago

Is an ERISA Fidelity Bond Required for a Solo 401k Plan?

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QUESTION

ANSWER

No because a solo 401k does not fall under Title I of ERISA. Instead a solo 401k is for owner only employee businesses. The purpose of an ERISA Fidelity bond is to protect common-law employees (non-business owners) who participate in their employers 401k from theft from the business owner(s) and trustees since they have direct access to their 401k participant accounts.

What is an ERISA Bond? An ERISA bond is much like an insurance policy. The employer generally must purchase a bond to protect the plan assets from risk of loss due to fraud or dishonesty on the part of persons who ”handle” plan assets.

In the event of loss to the plan on account of fraud or dishonesty, the bond is used to restore the plan assets.

What is the required bond amount? The individual must be bonded for 10 percent of the full dollar value of the plan.

The following chart provides sample premiums for a bond, based on varying amounts being held in the 401(k) Plan: Amount Handled 10% 1 yr. premium 5 yr. premium $100,000 $10,000 $100.00 $250.00 $200,000 $20,000 $101.12 $252.80 $300,000 $30,000 $121.90 $304.76 $400,000 $40,000 $138.92 $347.30 $500,000 $50,000 $155.93 $389.82
You can order a bond online from a number of different providers. The bond providers listed below are simply illustrative. You can find other bond providers by doing a web search under “ERISA bond.” Among the providers are: BondsExpress, a Ralf Rigo Agency www.bondsexpress.com Poulton Associates, Inc. www.poulton.com/fidurate.asp South Coast Surety www.southcoastsurety.com/pension_trust.htm Colonial Surety Direct www.colonialsurety.com/cobrand/erisapension.asp Travelers http://www.travelers.com/iwcm/BusIns/BondFP/commercialSurety/bondExpress

Additional information regarding 401(k) bonding requirements can be found on the Department of Labor’s website: http://www.dol.gov/ebsa/regs/fab2008-4.html

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