Coverage for Condo Association Fidelity Bonds – Simply simply, fidelity insurance protects condo associations from employee theft. Typically, the policy equals the quantity of money accessible to or managed by the board. Due to the fact that budgets might fluctuate annually, it is necessary to examine this coverage at least once a year.
What is coverage for fidelity bonds?
A fidelity bond under ERISA is a form of insurance that protects the plan against damages resulting from acts of fraud or dishonesty. Fraud or dishonesty encompasses, but is not limited to, activities such as larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, and intentional misapplication.
ERISA and Fidelity Bonds – Since 1974, the Employee Retirement Income Security Act (ERISA) has required employer sponsors of employee benefit programs such as 401(k) plans to hold fidelity bonds. A fidelity bond protects the employee benefit plan against losses caused by the conduct of corporate workers who are responsible for handling the plan’s assets.
- This often comprises individuals who process payroll and those who regularly work with the employee benefit plan.
- A fidelity bond must cover the whole year of the employee benefit plan.
- An ERISA fidelity bond safeguards the employee benefit plan against losses resulting from employee fraud and dishonesty, such as: Theft Theft and Embezzlement Falsification Misappropriation Willful misapplication The Employee Retirement Income Security Act (ERISA) mandates that trustees of employee benefit plans maintain fidelity bond coverage equivalent to at least 10 percent of the plan’s total assets.
The minimum amount of the bond is $1,000, and a plan cannot be compelled to have more than $500,000 in coverage, unless: $1 million for plans holding 10% of plan assets in employer stock or 100% of the value of non-qualifying assets for plans holding “non-qualifying assets” such real estate.
You will need a fidelity bond to establish a 401(k) plan for your business. Without it, the trustee or fiduciary of the plan would be personally accountable for any financial losses, and your plan will be vulnerable to employee theft and fraud. ERISA bonds are only available through sureties and reinsurers.
In addition, these sureties or reinsurers must be included in the Department of the Treasury’s Listing of Approved Sureties, Department Circular 570. In some instances, it is possible to obtain fidelity bonds from underwriters at Lloyd’s of London. Who is required to get an ERISA fidelity bond? Bonding is required for the plan administrator, plan officials and staff, and anybody whose tasks involve the administration of a plan’s assets.
Who requires a loyalty bond?
Required by ERISA – Section 412 of ERISA stipulates that “every fiduciary of an employee benefit plan and any individual who handles money or other property of such a plan should be bonded.” ERISA mandates that fiduciaries maintain bond coverage in the amount of: At least 10 percent of the managed plan assets, with a minimum of $1,000 and a maximum of $500,000 (or $1 million for plans holding company shares).
- The law mandates that this fidelity bond protects a plan against losses caused by fraud or dishonesty, theft being the most apparent example, on the part of persons who manage plan assets or other property of an employee benefit plan.
- This coverage covers plan fiduciaries, but is not limited to them.
The term “handling” is defined as: Actual physical contact with the funds or the ability to have contact with or control funds The ability to transfer funds or other property from the plan or to negotiate the value of this property Having disbursement authority Having the authority to sign checks and other negotiable instruments Having supervisory or decision-making authority over these activities The only exemption to the bonding requirements of Section 412 is for “unfunded” employer and union programs.
Unfunded plans are ones that provide benefits using just the general assets of the union or company. To qualify as unfunded, these assets must not be separated from the general assets of your organization until benefits are given. Does not discuss legal actions against plan administrators or anyone who embezzle or steal funds.
Importantly, ERISA fidelity bonds exist to replace employee benefit plan assets that have been misappropriated. It does not protect anybody, even firm employees, against obligations, such as legal claims for crimes they may have committed. The coverage provided by these bonds is quite different from that of fiduciary liability insurance, which focuses on accidental mismanagement.