# What Is An ERISA Bond And How To Buy One? Source: https://planprovider.pro/blog/what-is-erisa-bond > Managing an employee benefit plan involves navigating a complex web of Department of Labor (DOL) regulations. December 30, 2025 Managing an employee benefit plan involves navigating a complex web of Department of Labor (DOL) regulations. Managing an employee benefit plan involves navigating a complex web of Department of Labor (DOL) regulations. For plan sponsors and HR professionals, distinguishing between the various requirements—such as liability insurance, financial audits, and fidelity bonds—can be challenging. However, understanding the ERISA fidelity bond is non-negotiable for compliance. Failure to secure the correct bond coverage can trigger enforcement actions, penalties, or even trigger a full [401k audit](https://planprovider.pro/blog/what-is-401k-audit) requirement for small plans that might otherwise be exempt. This guide clarifies what an ERISA bond is, who needs one, and how to properly secure it. **Understanding The ERISA Fidelity Bond Requirement** An ERISA fidelity bond is a specific type of insurance policy that protects the plan against losses due to acts of fraud or dishonesty by "plan officials." It is mandated by the Employee Retirement Income Security Act of 1974 (ERISA). It is critical to understand that this bond protects the plan and its participants, not the company or the fiduciaries themselves. It specifically covers losses resulting from acts such as theft, embezzlement, forgery, misappropriation, and other fraudulent activities committed by those who handle plan funds. According to the [Department of Labor](https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/erisa), every person who "handles funds or other property" of an employee benefit plan must be bonded. This generally includes the plan administrator, officers, and employees of the plan sponsor who have access to plan assets or decision-making authority over the funds. **Calculating The Correct Bond Amount** One of the most common questions plan sponsors ask is: "How much coverage do we need?" Under ERISA Section 412, the amount of the bond must be fixed at the beginning of each plan year. The standard rule is that the bond must be at least **10% of the plan's funds or other property handled**. • **Minimum:** The bond amount cannot be less than $1,000. • **Maximum:** The bond amount is generally not required to exceed $500,000. • **Exception:** If the plan holds employer securities (company stock), the maximum bond amount increases to $1,000,000. For small plans (generally those with fewer than 100 participants), carrying the correct bond amount is often a condition for waiving the requirement to hire an independent [401k auditor](https://planprovider.pro/auditors/401k). If a small plan holds "non-qualifying assets" (like real estate or limited partnerships) and does not have adequate bonding, it may be forced to pay for a full financial statement audit, which is significantly more expensive than the bond itself. **ERISA Bond Vs. Fiduciary Liability Insurance** A common pitfall for new plan sponsors is confusing the ERISA fidelity bond with Fiduciary Liability Insurance. They are not the same, and having one does not satisfy the need for the other. **ERISA Fidelity Bond:** • **Mandatory** under federal law. • Protects the **plan assets** from theft/dishonesty. • Does not protect the employer or fiduciary from lawsuits. **Fiduciary Liability Insurance:** • **Optional** (though highly recommended). • Protects the **fiduciaries** (you and your company) against claims of mismanagement, bad investment decisions, or administrative errors. • Does not satisfy the ERISA bonding requirement. **Consequences Of Non-Compliance** Failing to maintain a sufficient ERISA bond is a fiduciary breach. On the annual Form 5500 filing, plan administrators must explicitly report whether the plan was covered by a fidelity bond and the amount of coverage. Answering "No" to this question is a red flag that can invite scrutiny from the DOL. Furthermore, if a loss occurs and the plan is not bonded, the plan fiduciaries may be held personally liable to restore the losses to the plan. Additionally, inaccurate reporting on government forms can lead to other complications, similar to the [cost and penalties for late or rejected Form 5500 audits](https://planprovider.pro/blog/cost-and-penalties-for-late-or-rejected-form-5500-audits). **How To Buy An ERISA Fidelity Bond** Purchasing a ERISA bond is generally a straightforward and affordable process. However, you must ensure the bond meets specific statutory requirements. You cannot simply buy a generic crime policy; the bond must specifically reference ERISA requirements. Follow these steps to ensure you buy the right coverage: 1. **Determine the Asset Value:** Review your plan’s total assets at the beginning of the plan year to calculate the required 10% coverage. 2. **Verify the Provider:** The bond must be acquired from a surety or reinsurance company that is named on the Department of the Treasury’s approved providers. [Compare provider and buy an ERISA bond here.](https://planprovider.pro/erisa-bonds) 3. **Check for "Inflation Guard":** Some bonds include an inflation guard provision that automatically increases coverage as your plan assets grow, helping you avoid under-bonding penalties in future years. 4. **Confirm No Deductibles:** An ERISA bond generally cannot have a deductible that would reduce the recovery amount for the plan. Whether you are managing a small plan or a large corporation, compliance is key. If your plan has grown significantly, you may eventually transition from needing just a bond to requiring a full audit. When that time comes, you can search our marketplace to find a qualified [employee benefit plan auditor](https://planprovider.pro/) to help you meet your changing regulatory obligations. [← Back to all posts](https://planprovider.pro/blog)