An Information of the 401K Fidelity Bond
Actually, in 1974 the ERISA or that Employee Retirement Income Security Act was being enacted to be able to regulate many types of benefit plans for workers. The ERISA section 412 as well as the regulated regulations demand that each fiduciary of an employee benefit plan and also every individual who deals with funds or the other property of such plan has to be bonded.
Such bonding requirements of the ERISA are required for the protection of the benefit plans from such risk of loss because of dishonesty or fraud of individuals who are handling those funds or any other property. The persons who would handle the funds or property of an employee benefit plan are known as plan officials in the ERISA. The Act demands that there must be a fidelity bond that should be placed to cover such fiduciary or the ones responsible in managing the plan and also the individuals who handle those funds or a property of the plan. Those fidelity bonds are there to provide protection to the plans from fraud or dishonesty which are committed by the people who are actually associated with them.
It is required that every plan official should be bonded for 10 percent of the amount of such funds that one would handle. In various cases, the maximum bond value that may be required under the ERISA with respect to such plan official is half a million dollars for every plan. But, there are higher limits that may be purchased. But, there is a maximum bond amount of a million dollars for the plan officials of those plans which hold the employer securities.
Know that the employee benefit plans with over five percent of such non-qualifying plan assets which are held in limited partnerships, collectibles, artwork, real estate, mortgages or the securities of the closely-held companies and they are held outside of such regulated institutions like the bank, registered broker-dealer, insurance company or other organizations which are authorized to serve as trustee for those individual retirement accounts, those plan sponsors must do one of these things. It is required to make sure that the amount of the bond is a full equivalent of the value of those non-qualifying assets or an annual full-scope audit may be arranged in which the CPA is going to physically confirm the existence of those assets from the start to the end of the plan year.
The 401K has surely worked with Colonial Surety Company which is known to be the leader in providing ERISA or the 401K fidelity bonds. They are a popular national insurance company that functions in all 50 states and other US territories and they have already been offering insurance products since the year 1930. Know that they are the biggest direct seller of the fidelity bonds in the United States.