For employers, ERISAs are a necessary aspect of properly operating a business. But what are they, and how do they work? We are here to help answer these questions and provide the bonding services you need. At Surety by NFP, we are the industry leader in ERISAs. We bond Nationwide!
An ERISA surety is a type of bond that protects an employee retirement plan from losses incurred through dishonesty or fraud by fiduciaries who handle the plan’s funds. These bonds are sometimes called Fidelity Bonds. They are similar to an insurance policy, but they do not have a deductible and the retirement plan itself is the beneficiary instead of a person.
What Does ERISA Stand For?
ERISA stands for Employee Retirement Income Security Act. Congress passed this law in 1974 in order to help protect employees from losing retirement funds because of fraud or dishonesty. The Department of Labor oversees the regulations of ERISA, and they define fraud or dishonesty as “larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication, and other acts.” The Hartford has a fantastic information about E-bonds. In other words, ERISA stands for something your business shouldn’t be without.
Who needs one?
Almost every type of business is required to have ERISA surety bond coverage if it offers an employer-sponsored retirement plan. There are a few exceptions, which are covered below. Employers that do have proper coverage are required to cover every person who is responsible for handling funds or property of employee retirement plans. They are important to have because you need to protect your employee benefit plan from risk of loss due to dishonesty or fraud on behalf of the individual who maintains plan funds or other property.
ERISA Coverage – Against Employee Theft
Who is exempt from having one?
There are three situations in which they are not required. The first pertains to government plans, church plans, and certain other plans, all of which are discussed in the Title 1 section of ERISA. The second situation is for financial organizations that are already highly regulated, such as banks, registered brokers, and insurance companies. The third situation is when the entirety of a plan is funded by the employer instead of an outside source.
How do they work?
As mentioned, ERISAs work basically like an insurance policy, except the retirement guided plan itself is the beneficiary. Thus, the plan pays for itself using plan funds. Every person who handles plan funds must be bonded for up to ten percent of the amount he or she handled the previous year, with a $1,000 minimum and a $500,000 maximum per person. An exception to the maximum limit comes into play, however, if the plan contains employer securities, in which case the maximum is $1,000,000 per person. Benefit News is a good resource to learn more about ERISAs, but you should call us and learn how easy it is to get bonded.
ERISA sureties can be purchased from a surety company or reinsurer that is independent from the business purchasing the bond. We offer bonding options at an affordable rate. We are NFP! – one of leaders in the bonding industry. We can write any type of bond in any state across the country. Allow us the opportunity to pass on our experience to you, and make sure you are properly bonded. If you want to learn more, Travelers is a fantastic resource, and is one of our carriers that we write with. Call us for all your ERISA needs. Ask us the question, ‘what is an ERISA Bond‘, and we’ll gladly show you how easy they are to acquire. We are happy to answer any questions you may have about those, or any other bond type, as well as better explain, ‘what does ERISA stand for.’ We hope this article helps. We do both fidelity or surety.
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