# ERISA bond requirements. Who needs one, how much, and what it covers.

Source: https://ethosbenefits.com/benefits-101/erisa-bond
Type: Benefits 101
Topic: ERISA and plan documents
Author: Meghan Anderson, Account Executive
Reviewed by: Patrick Ansara, Partner and Director of Client Operations
Publisher: Ethos Benefits
Published: 2025-06-03
Last updated: 2026-11-03
Cite as: "ERISA bond requirements," Ethos Benefits, https://ethosbenefits.com/benefits-101/erisa-bond, updated 2026-11-03.

**Short answer:** An ERISA bond is a fidelity bond that ERISA section 412 requires for every fiduciary and other person who handles a benefit plan's funds or property. It protects the plan against theft, fraud and other dishonest acts, and must cover at least 10% of the funds handled, with a $1,000 minimum and a $500,000 cap per plan.

## What is an ERISA bond?

An ERISA bond is insurance that protects an employee benefit plan from losses caused by fraud or dishonesty by the people who handle its money. Section 412 of the Employee Retirement Income Security Act requires it, which is why it is also called an ERISA fidelity bond or a section 412 bond. The detailed rules are in 29 CFR Part 2580 and the Department of Labor's Field Assistance Bulletin 2008-04.

Every ERISA bond has three parties:

- **The plan** is the named insured. If a covered person steals from it, the plan files the claim and receives the payment.
- **The surety** is the company that issues the bond. It must be on the Treasury Department's list of approved sureties.
- **The bonded persons** are the fiduciaries, employees and service providers who handle plan funds or property.

The bond pays the plan back. It does not protect the person who committed the theft, and it does not relieve that person of liability to the plan.

## Who must be bonded?

Every fiduciary and every other person who "handles" funds or other property of an ERISA plan must be bonded, unless an exemption applies. In practice that usually means the plan administrator, trustees, and the officers and employees of the employer whose jobs involve receiving, holding or paying out plan money.

"Handling" means more than touching cash. The DOL treats a person as handling plan funds whenever their duties could cause a loss through fraud or dishonesty, alone or with others. The usual signs are:

- Physical contact with cash, checks or similar property
- Power to transfer funds from the plan to oneself or a third party
- Power to negotiate plan property, such as securities or real estate
- Authority to make or direct disbursements, or to sign checks
- Supervisory or decision-making responsibility over any of the above

A few points the DOL has clarified:

- **Fiduciaries who don't handle funds** do not need a bond. A fiduciary who only gives advice, or a committee member whose decisions need someone else's approval before money moves, may fall outside the rule.
- **Service providers** such as a TPA or recordkeeper must be bonded if they or their employees handle plan funds. An investment adviser is not bonded just for giving advice. The fiduciary who hires a service provider is responsible for confirming it is bonded or exempt before it touches plan money.
- **Entities are bonded through people.** When the administrator or service provider is a company, the bonding rule applies to the individuals inside it who handle the funds.

## Does your health plan need a bond?

A health or welfare plan needs a bond only when it has funds or other property that someone handles. Many employer health plans have no separate plan assets, so no bond is required. Retirement plans almost always need one. Health plans need a closer look.

The DOL calls a plan "unfunded," and exempt, when it pays benefits only from the employer's general assets. A plan is not unfunded if benefits are insured, a trust holds contributions or pays benefits, employees contribute, or the plan keeps a separate bank account. But the bond attaches to people who handle plan money, not to the plan label. FAB 2008-04 says that when an employer pays insurance premiums from its general assets, that generally does not trigger bonding even though the plan is insured.

| Health plan arrangement | Bond usually needed? |
|---|---|
| Fully insured, premiums paid from the employer's general assets | Usually no, because no one handles plan funds |
| Self-insured, claims paid directly from the employer's general assets | Usually no, the plan is unfunded |
| Employee contributions run through a section 125 cafeteria plan that meets DOL Technical Release 92-01 | Usually no, under a DOL enforcement policy that treats these plans as unfunded for bonding |
| Contributions held in a trust, such as a VEBA | Yes |
| Employee contributions kept in a separate plan bank account | Yes |
| A TPA or other provider with authority to move plan money | Yes, for that provider, unless it is exempt |

If you are not sure how your plan is funded, start with whether it is subject to ERISA at all. See [who is subject to ERISA](https://ethosbenefits.com/benefits-101/who-is-subject-to-erisa).

## Which plans are exempt?

Some plans and some institutions are outside the bonding rule entirely.

- **Unfunded plans,** meaning plans that pay benefits only from the general assets of the employer or union.
- **Plans not covered by Title I of ERISA,** such as governmental plans and most church plans.
- **Certain regulated financial institutions.** Banks and insurance companies that are supervised by federal or state regulators and meet ERISA's capital requirements do not need an ERISA bond for themselves or their employees. Insurance carriers are exempt when they provide plan benefits under state supervision, though not for plans covering their own employees.
- **Registered broker-dealers** that are subject to the fidelity bond rules of a self-regulatory organization.

An exemption covers only the institution that qualifies. Your own employees who handle plan funds still need a bond.

## How much coverage does the bond need?

Each bonded person must be covered for at least 10% of the plan funds they handled in the prior plan year. The bond cannot be less than $1,000 and is not required to exceed $500,000 per plan. The cap rises to $1,000,000 for plans that hold employer securities and for pooled employer plans.

- **The amount is set at the start of each plan year,** based on the most funds handled in the year before. A new plan uses an estimate for its first year.
- **The limits apply per plan.** A bond covering a 401(k) and a funded health plan must let each plan recover what it would under its own bond, so the total may need to exceed $500,000.
- **Holding a mutual fund is not holding employer securities.** A plan is not treated as holding employer securities just because it invests in a broadly diversified fund that happens to own the employer's stock.
- **You may buy more.** Nothing stops a plan from buying a higher amount. Whether to spend plan assets on it is a fiduciary decision.

The DOL's own example: if a plan has $1,000,000 and three employees each can transfer funds, approve distributions and sign checks, each must be bonded for at least $100,000.

Small retirement plans that use the small plan audit waiver have an extra rule. If more than 5% of plan assets are "non-qualifying" assets, the bond must cover at least the full value of those assets, or the plan must get an independent audit.

For what a bond of a given size costs, see [ERISA bond cost](https://ethosbenefits.com/benefits-101/erisa-bond-cost).

## What must an ERISA bond include?

An ERISA bond must come from an approved surety, name the plan as an insured, carry no deductible on the required amount, and give the plan a one-year discovery period. A bond meets section 412 only if it checks every one of these boxes.

| Requirement | What it means |
|---|---|
| Approved surety | Issued by a surety or reinsurer on Treasury Department Circular 570, or under certain conditions by Underwriters at Lloyd's of London |
| No conflicts | Neither the plan nor any party in interest may control or hold a significant financial interest in the surety, reinsurer, agent or broker |
| Plan named as insured | The plan must be named, or clearly identified, as an insured so it can claim directly |
| No deductible | Coverage starts at the first dollar of loss, up to the required amount. A deductible is allowed only on coverage above that amount |
| Discovery period | The plan must have one year after the bond ends to discover losses that happened while it was in force |
| Approved form | Individual, name schedule, position schedule or blanket bonds, or a combination |
| Term | Bonds can run longer than one year, as long as coverage meets the required amount at the start of each plan year |

The plan may pay for a compliant bond out of plan assets. A service provider can also buy its own bond.

## What does an ERISA bond cover?

An ERISA bond covers losses to the plan caused by fraud or dishonesty by a bonded person, acting alone or with others. It does not cover honest mistakes, bad judgment or market losses.

| Covered | Not covered |
|---|---|
| Larceny and theft | Investment losses and market downturns |
| Embezzlement | Imprudent decisions made in good faith |
| Forgery | Administrative errors, such as missed deadlines or calculation mistakes |
| Misappropriation and willful misapplication | Breach of fiduciary duty claims and legal defense costs |
| Wrongful abstraction and wrongful conversion | Losses caused by people the bond doesn't cover |

Losses from fraud are reported on the Form 5500 even when the bond pays them back.

## ERISA bond vs. fidelity bond vs. fiduciary insurance.

An ERISA bond is one kind of fidelity bond, built to meet ERISA's rules for protecting plan assets. A general fidelity or crime bond protects the company's own assets. Fiduciary liability insurance protects the fiduciaries themselves. They are three different things, and only one satisfies section 412.

| | ERISA bond | General fidelity (crime) bond | Fiduciary liability insurance |
|---|---|---|---|
| **Protects** | The plan's assets | The company's own assets | Fiduciaries, and sometimes the plan |
| **Against** | Fraud and dishonesty by people who handle plan funds | Employee theft and dishonesty | Claims of breach of fiduciary duty, such as errors and mismanagement |
| **Required by law?** | Yes, under ERISA section 412 | No | No |
| **Who collects** | The plan | The company | The insured fiduciaries |
| **Amount** | At least 10% of funds handled, $1,000 minimum, $500,000 or $1,000,000 required maximum | Set by the company | Set by the buyer |
| **Issuer** | A Circular 570 surety | Any insurer | Any insurer |
| **Satisfies section 412?** | Yes | Only if it names the plan and meets every section 412 rule | No |

Many employers handle this with an ERISA rider on their commercial crime policy. That works only if the rider names the plan as an insured, carries the right amount with no deductible, and is issued by an approved surety. To understand the separate protection for fiduciaries, see our [fiduciary insurance](https://ethosbenefits.com/services/fiduciary-insurance) page.

## What happens if a plan has no bond?

Handling plan funds without a required bond is an unlawful act under ERISA, and so is letting someone else do it. ERISA does not set a separate dollar penalty for a missing bond, but the gap carries real exposure.

- **Form 5500 asks.** Schedule H and Schedule I ask on line 4e whether the plan was covered by a fidelity bond and for the amount, and Form 5500-SF asks on line 9d. A "No" invites questions from the DOL.
- **Personal liability.** If a plan loses money to theft that a bond would have covered, the fiduciaries who failed to get the bond can be held personally liable to restore the loss under ERISA's fiduciary duty rules.
- **Audits and investigations.** Plan auditors and DOL investigators check bonding as a routine item. See [employee benefit plan audits](https://ethosbenefits.com/benefits-101/employee-benefit-plan-audit) and the [Form 5500 deadline](https://ethosbenefits.com/benefits-101/form-5500-deadline).
- **No one unbonded may handle funds.** If a person can't get bonded, the plan must keep them away from plan money.

## How do you stay compliant?

1. **Decide whether a bond applies.** Map how each plan is funded and who can move its money. For health plans, check whether contributions sit in a trust or separate account.
2. **List everyone who handles funds.** Include employees, trustees, committee members with final authority, and any TPA or provider that is not exempt.
3. **Calculate the amount for each plan** at the start of the plan year: 10% of the prior year's funds handled, at least $1,000, and up to $500,000 or $1,000,000.
4. **Buy from an approved surety.** Confirm the issuer is on Circular 570 and that the plan is named as the insured.
5. **Review the bond itself.** Check the amount, the covered persons, the absence of a deductible, and the term.
6. **Report it correctly** on the Form 5500, and keep the bond and your calculation with the plan records.
7. **Recheck every year** before renewal, and whenever assets grow, people change roles, or you hire a new provider.

The bond is one item on a longer list. The [ERISA compliance checklist](https://ethosbenefits.com/benefits-101/erisa-compliance-checklist) covers the rest, and our [ERISA compliance](https://ethosbenefits.com/services/erisa-compliance) work includes checking that the right people are bonded for the right amount.

## On the podcast

- [Fiduciary Liability Insurance for Your Benefits Committee: Paul Hacker of Axis Insurance Services](https://ethosbenefits.com/podcast/fiduciary-liability-insurance-paul-hacker), The Business of Benefits, Episode 46

## Frequently asked questions

### Is an ERISA bond required by law?

Yes. ERISA section 412 makes it unlawful for anyone to handle the funds or other property of an ERISA plan without being bonded, unless an exemption applies. It is also unlawful for a plan official to let an unbonded person handle plan funds.

### Does a fully insured health plan need an ERISA bond?

Often not. A bond is needed only when someone handles plan funds or property, and the DOL says paying insurance premiums from the employer's general assets generally does not count as handling. If employee contributions are held in a trust or a separate account, the people who handle them do need to be bonded.

### Is an ERISA bond the same as a fidelity bond?

An ERISA bond is a specific kind of fidelity bond. A general commercial fidelity or crime bond protects the company's own assets and usually does not meet ERISA's rules unless it names the plan as an insured and satisfies the section 412 requirements.

### Does fiduciary liability insurance satisfy the ERISA bonding requirement?

No. Fiduciary liability insurance protects fiduciaries against claims that they breached their duties, while the ERISA bond protects the plan against theft and fraud. The two cover different risks, and the Form 5500 instructions say fiduciary liability policies cannot be reported as fidelity bonds. An employer that needs a bond must buy one that meets section 412.

### Can one ERISA bond cover more than one plan?

Yes. One bond can cover several plans, but each plan must be able to recover at least the amount it would get under its own separate bond. Because the limits apply per plan, a bond covering several plans may need to exceed $500,000.

### Does a section 125 cafeteria plan need an ERISA bond?

Usually not. Under a DOL enforcement policy tied to Technical Release 92-01, a health plan that takes employee contributions through a qualifying section 125 cafeteria plan is treated as unfunded for bonding purposes. That changes if the employer moves those contributions into a trust or a separate plan bank account. The people who handle that money then need to be bonded.

## Sources

1. [29 U.S. Code § 1112, Bonding (ERISA section 412)](https://www.law.cornell.edu/uscode/text/29/1112), Legal Information Institute, Cornell Law School
2. [29 CFR Part 2580, Temporary bonding rules](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-I/part-2580), Electronic Code of Federal Regulations
3. [Field Assistance Bulletin No. 2008-04, Guidance Regarding ERISA Fidelity Bonding Requirements](https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2008-04), U.S. Department of Labor, Employee Benefits Security Administration
4. [Protect Your Employee Benefit Plan With an ERISA Fidelity Bond](https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/erisa-fidelity-bond.pdf), U.S. Department of Labor, Employee Benefits Security Administration
5. [Department Circular 570, Listing of Approved Sureties](https://www.fiscal.treasury.gov/surety-bonds/circular-570.html), U.S. Department of the Treasury, Bureau of the Fiscal Service
6. [Instructions for Form 5500 (2025)](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf), U.S. Department of Labor, IRS and PBGC