ERISA stands for Employee Retirement Income Security Act. The legislation was signed into law back in the 1970s to prevent fraud. The law requires anyone who handles someone’s retirement funds to be bonded.
The bonding laws are intended to protect retirement and employee benefit plans from becoming victim to fraudulent activity. That means a fidelity bond must be in place to protect the finds.
An official who handles such plans is required to be bonded for at least ten-percent of the amount of the funds that person handles. Fund managers can have a maximum bond amount of $1, 000, 000.
What Does an ERISA Bond Entitle Someone to Do?
Bondholders have a lot of responsibility and authority when it comes to handling benefit plans and funds.
Transfer: Bondholders have the power to transfer funds from the plan, including themselves or a third party or entity.
Disbursements: People with ERISA bonds are also able to authorize and disburse payments on behalf of the benefit owner.
Supervise: A bondholder will often act as the supervisor and make decisions about account activity.
What Happens if Someone Fails to Maintain Their Bond?
The important question is not only what is an ERISA bond, but what could happen if someone doesn’t have one? There’s no a specific fine or monetary penalty tied to not having the right bonding coverage. However, organizationally, not having the bonding could be disastrous.
For instance, fiduciaries can be held personally liable under federal ERISA guidelines for any loss of a plan that wasn’t covered under a bond.
Who Issues ERISA Bond?
Bonds are required to through a reinsurer or a surety that is approved by the federal government. The fiduciary is not allowed to have any sort of financial interest in the surety, reinsurer or the broker who provided the bond.
Are Any Benefit Plans Exempt?
While the vast majority of benefit plans are subject to ERISA laws, there are a few exemptions. Some examples would include government plans, or certain types of church benefit plans. Also, some plans that are only maintained to comply with federal unemployment or workers’ compensation laws are exempt from federal bonding regulations.
What is an ERISA Bond: How Do You Get One?
If you need ERISA bonding, contact Southwest Bonds today at 623-974-6453. Our qualified experts can help you get the kind of bonding you need to take your career to the next level.
We are experts in virtually every type of bond. When you need someone you can trust to get the proper bonding, be sure to contact us. We have the knowledge and tools to make sure your experience is pleasant and effective. Trust Southwest Bonds for service that leads the industry.