What Are Fidelity Bond Requirements Under ERISA?

Under the Employee Retirement Income Security Act, every person who handles funds or other property of a covered employee benefit plan must be covered by a fidelity bond issued by a surety company approved by the U.S. Treasury. The fidelity bond requirements under ERISA set the bond at a minimum of 10 percent of the funds that person handled during the preceding plan year, with a floor of $1,000 and a cap of $500,000 for most plans. Plans that hold employer securities and pooled employer plans use a higher cap of $1,000,000.¹

Who Has to Be Bonded

The bonding rule reaches every fiduciary of an ERISA-covered plan and every other person who handles plan funds or property. The statute calls them plan officials. In practice this usually means plan administrators, trustees, officers, and any employees whose duties give them access to plan assets in a way that creates a risk of loss through dishonesty.¹

“Handling” is broader than physically touching cash. Anyone whose duties create a risk that plan funds could be lost through fraud or dishonesty is handling funds, including people with decision-making authority over plan investments or the power to authorize disbursements.² Signing authority over a plan bank account is enough, even if the person never writes a check.

The bond must come from a corporate surety company that Treasury has approved to issue bonds on federal obligations.¹ The plan itself must be a named insured, not just the sponsor or administrator.³

Plans and People That Are Exempt

Not every plan needs an ERISA bond. Unfunded plans, meaning plans whose benefits are paid entirely out of the general assets of an employer or union with no separate fund, are exempt.¹ Church plans and governmental plans fall outside ERISA Title I and are not subject to the bonding rule at all.⁴

Certain regulated financial institutions are also exempt, along with their employees, even when those employees handle plan funds. This covers banks and insurance companies already subject to fidelity bonding under their own regulatory framework, and it covers registered broker-dealers when they are subject to a self-regulatory organization’s fidelity bond requirements.⁴

The Secretary of Labor can also grant individual exemptions where a plan shows adequate financial responsibility or an alternative arrangement that protects participants equally well.¹

How Much Coverage the Bond Has to Provide

Each plan official must be bonded for at least 10 percent of the funds they handled during the preceding plan year. The calculation uses the highest amount that person handled during that year, not an average or a year-end balance.⁵

Three fixed boundaries frame the result:

The bond can never be less than $1,000, no matter how small the plan.¹
The Department of Labor cannot require a bond above $500,000 for most plans.¹
Plans that hold employer securities, such as company stock in an ESOP, and pooled employer plans use a $1,000,000 cap instead.¹

A trustee who handled $3 million in plan assets during the prior year needs a bond of at least $300,000. A trustee who handled $8 million would calculate to $800,000 under the formula but the requirement caps at $500,000 for a typical plan, or $1,000,000 if the plan holds employer securities or is a pooled employer plan.

New plans with no preceding reporting year set the bond amount based on an estimate of the funds the official will handle during the current year.² Every plan must recalculate the amount at the start of each plan year to keep up with growth or shrinkage in assets.⁵

What Counts as Funds Handled

Funds or other property of the plan means all assets the plan uses or could use to pay benefits. That includes employer and employee contributions, cash, checks, government obligations, marketable securities, and any other property convertible into cash or held for eventual distribution. Plan investments in real estate, mortgages, and closely held securities also count. Permanent operating assets, such as office furniture or delivery equipment, generally do not.⁵

The amount handled by a specific person is the total value of funds that were at risk of loss through that person’s fraud or dishonesty during the preceding year.² A plan administrator with signing authority over an account holding $2 million has handled $2 million for bonding purposes.

Acceptable Bond Forms

ERISA regulations recognize individual bonds, name schedule bonds, position schedule bonds, and blanket bonds, along with combinations of these forms.⁵ The form you choose affects how much the plan can recover after a loss.

An individual bond covers a single named person for a specified amount.
A name schedule bond lists multiple people by name, each covered for a stated amount. Coverage is separate for each person, so a loss caused by two covered people together can be recovered up to the full limit for each of them.
A position schedule bond works the same way but lists job positions rather than individual names. Whoever holds the position is automatically covered.
A blanket bond covers all of the employer’s officers and employees without naming them. Blanket bonds typically limit recovery to an aggregate amount per occurrence, so a single theft by two colluding employees only produces one per-occurrence payout.⁵

Schedule bonds tend to offer stronger protection against collusion, and they usually cost more than a blanket bond at the same stated limit. Either form is permissible so long as it meets ERISA’s requirements. One requirement applies across every form: the bond must provide first-dollar coverage with no deductible within the required bond amount.²

The Prior Dishonest Act Exclusion

Most fidelity bonds exclude coverage for any person the plan knows has previously committed fraud or dishonesty, and a bond may automatically cancel coverage for anyone a plan official later learns has engaged in dishonest acts.⁵ If a surety refuses to bond a particular person, the plan has to remove that person from any role involving the handling of plan funds. Letting an unbonded person continue in that role violates federal law.

Reporting the Bond on Form 5500

Plans report their bond coverage on the annual Form 5500. On Schedule H, or Schedule I for small plans, the plan indicates whether it is covered by a fidelity bond and reports the aggregate amount of coverage for all claims.³ For the coverage to count, the plan itself has to be a named insured. Plans using the newer Schedule DCG for individual plan information report the same bond data there. Schedule A, which covers insurance information, is not used for a fidelity bond.

What Happens If You Don’t Comply

Federal law makes it unlawful for any plan official to handle plan funds without proper bonding, and equally unlawful for anyone with authority over plan operations to allow an unbonded person to perform those functions.¹ The Department of Labor’s Employee Benefits Security Administration enforces the requirement through audits and investigations.

An administrator who fails to maintain the required bond takes on personal exposure. If a loss occurs and no bond is in place, the plan’s fiduciaries carry the financial consequences instead of the surety. Even without an actual loss, the DOL can pursue corrective action against a plan that reports insufficient or missing bond coverage on Form 5500. At the start of each plan year, the administrator has to verify that the bond amount still meets the minimum, that the surety is still a Treasury-approved company, and that every plan official who handles funds is covered.⁵

Putting the Bond in Place

Before applying, pull together the plan’s legal name, its Employer Identification Number, the total value of plan assets, and the number of people who handle plan funds or property. Identify the highest amount of funds any single person handled during the prior year, because that figure drives the coverage calculation.

Applications are available through licensed surety agents, insurance brokers, and directly from surety company websites. The surety will look at plan size, the number of people to be covered, and any prior losses from employee dishonesty. A history of theft or fraud produces higher premiums, and in some cases the surety will decline to bond a specific individual, which forces the plan to remove that person from fund-handling duties.

Once the application is approved and the premium paid, the surety issues a bond certificate showing the bond number, effective date, and coverage amount. Keep it on file for the Form 5500 and for any DOL audit. Because the required amount is recalculated each plan year, an annual review belongs on the compliance calendar so coverage keeps up with changes in plan assets.

1
Office of the Law Revision Counsel. 29 USC 1112 – Bonding
2
eCFR. 29 CFR Part 2580 – Temporary Bonding Rules
3
Department of Labor. 2025 Instructions for Form 5500 Annual Return/Report of Employee Benefit Plan
4
U.S. Department of Labor. Protect Your Employee Benefit Plan With an ERISA Fidelity Bond
5
U.S. Department of Labor. Field Assistance Bulletin No. 2008-04