Sized correctly to the DOL 10% rule
Section 412 fidelity bonds for pension, 401(k) and welfare-benefit plans. Right-sized coverage, inflation-guard renewals, filed on the correct wording so Form 5500 always reports a compliant bond.
Section 412 in plain English
Section 412 of the Employee Retirement Income Security Act of 1974 (ERISA) requires that every fiduciary and every person who handles funds or other property of an employee-benefit plan be bonded. The bond runs to the plan — not the plan sponsor — and protects plan participants against loss caused by fraud or dishonesty on the part of covered persons.
The minimum bond amount is 10% of the funds handled in the previous plan year, with a $1,000 statutory floor and a $500,000 ceiling for most plans ($1,000,000 for plans holding employer securities). "Funds handled" generally means plan assets attributable to the individual fiduciary at the beginning of the reporting year, plus any contributions received during the year.
How to size the bond from your Form 5500
The clean method: take the plan's total assets at the beginning of the plan year (Form 5500 line 1a), multiply by 10%, round up to the nearest whole-thousand rate tier, and file the bond at that number. If the plan holds employer securities, the applicable ceiling is $1M rather than $500k, so plans in that band should size to the actual 10% figure up to the higher cap.
If plan assets grow mid-year and the 10% figure moves past the current bond amount, the bond needs to be increased. An inflation-guard rider — cheap to add — adjusts the coverage automatically at anniversary so plan growth never creates a Form 5500 compliance gap.
Fiduciaries and other persons who handle funds
The ERISA bond has to cover every person who handles plan funds — the plan trustees, the plan administrator, the plan sponsor's officers with authority to disburse or receive plan contributions, and the employees of the plan sponsor who touch plan cash. Third-party service providers (TPAs, recordkeepers, directed trustees) are usually covered by their own bond, but a named-fiduciary endorsement on the plan's bond is common practice and inexpensive.
Inflation-guard and mid-year adjustments
Standard ERISA bond term is one year, matching the plan year. At renewal we pull the plan's most recent Form 5500 asset total, recompute the 10% requirement, and — if the plan has grown — issue at the new amount. On inflation-guard bonds, the coverage adjusts up automatically without a separate underwrite; the renewal invoice simply reflects the new coverage.
Mid-year increases are also straightforward. A single-page rider filed same-day increases the coverage retroactively to the ledger date if the plan has crossed a coverage threshold mid-cycle.
Why we calendar every ERISA bond in the book
The Form 5500 asks each year whether the plan is bonded, at what amount, and by which carrier. An honest "no" or an under-coverage answer flags the plan for DOL review and creates personal exposure for the plan fiduciary if a participant loss occurs. In practical terms: the bond must be in force before the return is filed. That's why we calendar every ERISA bond 45 days out and invoice renewal early — no plan sponsor ever needs to explain a lapse to their auditor because ACS missed a date.
Frequently asked questions
Good to KnowNo. The ERISA bond covers the plan against employee fraud or dishonesty; fiduciary liability insurance covers the fiduciary personally against claims of breach of duty. Different products, both usually needed.
Small plans pay $100–$300 annual premium at $10k–$100k coverage; larger plans at $500k coverage typically run $300–$600. Multi-year term bonds discount the annual rate.
Add an inflation-guard rider (automatic adjustment) or file a mid-year increase rider. Either way the coverage moves up before Form 5500 is filed.
Same 10% rule; the numbers just tend to be larger because multi-employer plans hold more assets. We size to the highest asset value the plan touched last year.
Send the plan asset total
Send the plan name, prior-year total assets and whether employer securities are held. That's enough to quote the bond within a business day.
- 201-661-2381 — Anthony Spina, direct line
- aspina@acsbonding.com
- 1200 MacArthur Blvd., Suite 302A, Mahwah, NJ 07430
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