Surety bonds • Fidelity bonds
ERISA Bonds: Requirements, Amounts, and Cost for 401(k) and Benefit Plans
Federal law generally requires everyone who handles the funds of a 401(k) or other ERISA employee benefit plan to be covered by a fidelity bond. The bond must be at least 10% of the plan funds handled in the prior year, with a $1,000 minimum, and the required maximum is generally $500,000 per plan, or $1,000,000 for plans holding employer securities. Published prices start around $35 a year.
This guide explains who must be bonded, how to calculate the amount, approved sureties, what ERISA bonds cost, and how they differ from fiduciary liability insurance. Blake Insurance Group is an independent agency and does not give legal or tax advice; your plan administrator or advisor can confirm your plan’s needs.
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Who must be bonded
According to the U.S. Department of Labor, anyone who “handles” plan funds or other property must generally be bonded. That usually includes the plan administrator and officers or employees who receive, hold, or pay out plan money. Service providers and fiduciaries need to be bonded only if they handle plan funds. Completely unfunded plans, paid only from an employer’s general assets, are exempt, and certain banks, insurance companies, and registered broker-dealers have their own exemptions.
How to calculate the bond amount
| Plan funds handled last year | 10% of funds | Required bond |
|---|---|---|
| $8,000 | $800 | $1,000 (minimum) |
| $250,000 | $25,000 | $25,000 |
| $1,000,000 | $100,000 | $100,000 |
| $6,000,000 | $600,000 | $500,000 (maximum) |
Based on rules explained by the U.S. Department of Labor. Plans holding employer securities have a $1,000,000 maximum. The bond must cover the plan from the first dollar of loss; deductibles are allowed only above the required amount.
Approved sureties and other rules
- Treasury-listed surety. The bond must be placed with a surety on the U.S. Treasury’s Circular 570 list (or, in some cases, Lloyd’s of London).
- Multi-year terms are allowed, but the plan must check at the start of each plan year that the amount is still enough.
- No conflicts. The plan and parties in interest may not have a significant financial interest in the surety or broker.
Source: U.S. Department of Labor.
How much an ERISA bond costs
| Bond amount | 1-year term | 3-year term |
|---|---|---|
| $25,000 | $35 | $87 |
| $50,000 | $60 | $149 |
| $100,000 | $88 | $219 |
| $250,000 | $120 | $299 |
| $500,000 | $172 | $429 |
Prices published by Jet Surety; they may vary by state and plan. See our fidelity bond cost guide for other employee dishonesty bonds.
ERISA bond vs. fiduciary liability insurance
An ERISA fidelity bond protects the plan from losses caused by fraud or dishonesty and is required by law. Fiduciary liability insurance protects fiduciaries from claims of breaching their duties and is optional. Fiduciary liability insurance does not satisfy the ERISA bonding requirement (U.S. Department of Labor).
ERISA bond FAQs
How much ERISA bond coverage do I need?
At least 10% of the plan funds handled in the prior year, with a $1,000 minimum. The required maximum is generally $500,000 per plan, or $1,000,000 for plans holding employer securities.
How much does an ERISA bond cost?
Published prices start around $35 a year for a $25,000 bond, and about $172 a year for $500,000.
Does a small 401(k) plan need an ERISA bond?
Generally yes, if anyone handles plan funds, unless the plan is completely unfunded or an exemption applies.
Can an ERISA bond have a deductible?
Not on the required amount. The bond must cover the plan from the first dollar of loss.
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Important information
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Cost figures. Published averages and ranges are cited from the sources named, as of the dates shown. They are not quotes and may not reflect your price, which depends on the insurer, the surety, your credit, the bond type, and underwriting.
Availability. Coverage, prices, discounts, and eligibility vary by insurer, state, and applicant, and are subject to underwriting. The issued policy controls.
Your next step
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