New ERISA Requirement for Fidelity Bonds
For Plan years beginning on or after January 1, 2008,
the insurance limit threshold as set forth by ERISA
guidelines for Fidelity Bond coverage for Fiduciaries of
Plans that invest in Employer Securities will
increase from $500,000 to $1,000,000. The
Security" means any common or preferred stock
issued by the Employer including any subsidiaries or
What's Behind the News?
The Employee Retirement Income Security Act
(ERISA) requires a Fidelity Bond covering a Fiduciary
(those responsible for managing the Plan) and any
person who handles funds or other property of such a
Plan. The coverage is intended to protect the Plans
from dishonesty and fraud committed by individuals
who are associated with them. According to the Act,
the amount of coverage necessary for each plan is
equal to no less than 10% of the amount of Plan funds
handled, subject to a $500,000 maximum Bond
The Pension Protection Act of 2006 was signed into
law on August 17, 2006. The Act significantly
overhauls the funding rules for Defined Benefit Plans
and eases some administrative hurdles for 401(k)
Plan sponsors who wish to offer investment advice to
Plan participants as well as those that want to
automatically enroll new employees. Most Plans will
also face new or enhanced reporting and disclosure
Who Will This Impact?
There is no impact to a Company unless it has
Employer Securities in any of its Plans. If it does have
Employer Securities in any of its Plans, then it must
confirm that the Fidelity Bond, whether covered
through a Commercial Package Policy or Crime
Policy, is sufficient to comply with current ERISA
guidelines. The ERISA Fidelity Bond guidelines
effective for Plan years beginning January 1, 2008 are
Plans with no Employer Securities:
ERISA Bond limit must maintain a threshold equal to
10% of the total Plan(s) assets, subject to an ERISA
requirement "ceiling" of $500,000.
Plans with Employer Securities: ERISA Bond limit must maintain a threshold equal to
10% of the total Plan(s) assets, now subject to an
requirement "ceiling" of $1,000,000.
What Should You Do?
Some questions to consider when reviewing your
coverage to make sure it satisfies ERISA
requirements as well as protect the Fiduciaries of your
Does your Company have any
Employer Securities in its Plans?
If "yes" to above, is there a Fidelity
Bond in place to satisfy Bonding requirements under
the ERISA Act of 1974 as amended by the Pension
Protection Act of 2006?
If "no" to above, does the limit meet
Fidelity Bond requirements for Plans with no Employer
Does your Company have a
Fiduciary Liability policy in place?
For more information regarding this new ERISA
requirement, please contact your WGA Account