Here’s All You Need to Know about ERISA Fidelity Bond
ERISA, or Employee Retirement Income Security Act, came into being in the year 1974. This act basically protects the rights of employees working in private organizations for pension and other employee benefits. The United States Department of Labor oversees its enforcement in the country.
Employees of different sectors across the country often report fraud and forgery happening to their benefit plans. ERISA fidelity bond was devised to protect their rights in such events. These bonds further ensure that no employee incurs a loss because of a dishonest practice by their employers or those tasked with the handling of such benefits.
How Does This Bond Work?
Under this, any benefit plan under the jurisdiction of ERISA is covered from losses incurred by employees due to a dishonest practice or fraud. Employers are bonded to this plan with at least 10% of the fund value. According to the terms, the maximum amount value of the bond can be $500,000 per plan.
The bond restricts the employers from receiving, handling, or disbursing funds meant for employee benefits without any accountability. This way, employees are assured of receiving their legitimate due from their employers without trying any legal options at all.
Who All are Party to an ERISA Fidelity Bond?
Employers are the ones who need to obtain the bond. Employees are the beneficiaries of the bond. The bonds themselves are issued by certain surety companies that bond the employers to honor their agreement. If the employers do not honor the bond, the surety companies reimburse the employees.
There are very specific surety companies that can issue ERISA bonds. These companies have to adhere to the guidelines issued by the U.S. Department of Labor. These companies must work independently and should have independent insurance brokers to work in between.