Surety Bonds

When a plan covers employees in addition to the owner, the Department of Labor requires a fidelity bond on the trustees and any other fiduciaries in the amount of 10% of the qualifying plan assets, rounded up to the next $1,000. Sometimes these are also referred to as ERISA bonds or surety bonds. Qualifying assets are assets such as stocks, bonds, mutual funds and bank accounts. Generally, 401(k) plans are totally invested in qualifying assets. In the rare instance that a plan has non-qualifying assets, the bond must be for 100% of the value.

We will obtain one for you from Colonial Surety. We will go on-line and fill out the information for your bond for you. Colonial Surety will then send you an email so that you can review it and pay for it.

A one year minimum bond of $10,000 (which covers up to $100,000 in qualifying assets) has an annual premium of $100. If you sign up for a 5-year bond, there is about a 30% discount on the premium and the bond automatically goes up with your assets over the 5 year period so that your coverage is always enough. For those reasons, we use the 5 year bond.