Glossary
ERISA bond, defined
A federally mandated form of coverage that protects an employee benefit plan against loss from fraud or dishonesty by the people who handle its money.
In practice
Anyone who receives, disburses or manages plan assets must be covered, including the owner. The amount is fixed by federal rule as a proportion of the assets handled, subject to a cap, and the plan itself must be the named insured. It is inexpensive and often written for a three-year term. It is not fiduciary liability coverage: it pays for theft, not for bad decisions. Plan auditors and the annual filing ask whether it is in place, and a missing one is a common audit finding for small plans. Many carriers issue it as a standalone form; some crime policies can be endorsed to add it.
A worked example
Suppose a small firm's retirement plan holds $400,000 and the office manager who processes deposits diverts $30,000 into a personal account. The plan claims under the form, which has a $50,000 limit, and is made whole; the employer separately pursues the manager. Hypothetical figures.
Applies to: Surety Bonds