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U.S. Master™ Pension Guide, 2009 Edition
Revised for 2009 to include relevant provisions of the Heroes Earnings Assistance Relief Tax (HEART) Act and the Emergency Economic Stabilization Act.
The Employee Benefits Security Administration (EBSA) has issued Field Assistance Bulletin 2008-04 that provides guidance on fidelity bonding requirements under ERISA §412. EBSA investigators frequently confront fidelity bonding questions during their examinations of ERISA plans. The Field Assistance Bulletin was developed to address these issues and is presented in a question-and-answer format consisting of 42 frequently asked questions (FAQs).
ERISA §412 requires all persons, including fiduciaries, who handle funds or other property of an employee benefit plan to be bonded in accordance with the ERISA law and regulations unless they are covered by an exemption. Each plan official is required to be bonded for at least 10% of the amount he or she handles, but in no event less than $1,000. The maximum bond amount required under ERISA §412 with regard to any one plan is $500,000 per plan official, or $1 million per plan official in the case of a plan that holds employer securities.
Topics covered under the EBSA guidance
The field guidance covers a variety of issues related to compliance with ERISA’s fidelity bonding requirements, including, among other things: whether a bond may use an omnibus clause to name insured plans; how to calculate the bond amount when multiple plans are covered under a single bond; whether the $1 million bond maximum applies in the case of plans that hold employer securities solely as a result of investments in pooled investment funds; and whether third party service providers are subject to the bonding requirements if they handle plan funds.
EBSA makes it clear that fiduciaries must be bonded only if they “handle” funds or other property of an employee benefit plan and do not fall within one of the exemptions in ERISA §412 or the regulations.
A bond can insure more than one plan. An “omnibus clause” may be used as an alternative way to identify multiple plans as insureds on one bond, rather than specifically naming on the bond each individual plan in a group of plans.
According to the EBSA guidance, the $1 million bond amount for plans that hold employer securities does not apply to every plan that holds employer securities. It is the DOL’s view that a plan is not considered to be holding employer securities, for purposes of the increased bonding requirement, merely because the plan invests in a broadly-diversified common or pooled investment vehicle that holds employer securities, but which is independent of the employer an dany of its affiliates.
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