ERISA/Fidelity Bonds
ERISA Bond
An ERISA bond for an investment advisor is a specially underwritten bond that is required of all ERISA fiduciaries. Section 412 under ERISA states every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan shall be ?bonded? against fraud or dishonesty. Investment advisors who control plan assets and make investment decisions for ERISA Plans are required to maintain an investment advisors ERISA bond.
Investment Advisors are required to have this bond with limits of a percentage of assets under management, up to a maximum of $500,000 for each qualifying plan. Under the The Pension Protection Act of 2006 bonding limits were increased to $1,000,000.
Bonds can be written on an individual basis, where each plan is identified, or written as a blanket bond covering all plans.
Underwriters will need to review the following information:
- Sample investment management agreements
- Custodial authority of the funds
- Name of the Plan
- Type of Plans
- Assets under management
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Fidelity Bond
A fidelity bond indemnifies the employer for loss of money or other property sustained through dishonest acts of bonded personnel. The scope of acts insured against includes larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, willful misapplication or other fraudulent or dishonest acts committed by the employee, whether acting alone or in collusion with others.
An investment advisor fidelity bond (aka Form 14 Fidelity Bond) offers a variety of different bond coverage depending upon the insuring agreements that you choose.
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