Most likely, yes. If your business sponsors a retirement or benefit plan covered by ERISA, anyone who handles the plan’s money has to be covered by a fidelity bond. Handling is read broadly: signing checks, authorizing payments and moving plan money all count. The bond protects the plan, not you, against losses from fraud or dishonesty by the people who handle its money. It has to be at least 10% of the funds handled, with a $1,000 floor and a $500,000 cap, or $1,000,000 for plans that hold employer securities. Plans that pay benefits only from an employer’s or union’s general assets are exempt. Your Form 5500 asks about the bond every year, so it is worth getting right.
Who has to be bonded
The rule is in ERISA section 412, codified at 29 U.S.C. 1112. It covers every fiduciary of an employee benefit plan and every person who handles funds or other property of the plan. The Department of Labor reads that together: a fiduciary has to be bonded only if he or she actually handles plan funds or property and no exemption applies.
Handling is broader than touching cash. In Field Assistance Bulletin 2008-04, the DOL lists things that count:
- Physical contact or control over cash, checks or similar property.
- Power to transfer plan funds or property to yourself or a third party.
- Disbursement authority, or authority to direct disbursements.
- Check-signing authority on plan accounts.
- Supervisory or decision-making responsibility over people doing any of the above.
Purely clerical work under close supervision, where the risk of loss is negligible, is not handling. A service provider such as a recordkeeper or administrator needs a bond only if it handles plan funds; an adviser who only gives investment advice does not. The statute also makes it unlawful for anyone with authority over the plan to let an unbonded person handle its money.
How much the bond has to be
Under 29 U.S.C. 1112, the bond for each person who handles plan funds must be at least 10% of the funds handled, with a minimum of $1,000 and a maximum of $500,000. The cap rises to $1,000,000 for plans that hold employer securities and for pooled employer plans. Per the DOL bulletin, the amount is fixed at the start of each plan year based on the highest amount handled in the prior plan year.
A few other rules from the bulletin that underwriters and plan sponsors trip over:
- No deductible. The bond has to cover the plan from the first dollar of loss up to the required amount.
- The plan is the insured. It must be named or otherwise identified on the bond, and the surety must be on the Treasury Department’s Circular 570 list of approved sureties.
- Existing policies can work. A plan can be added as a named insured to an employer’s existing bond or crime policy if that coverage meets section 412 or is made to meet it by rider, and one bond can cover several plans as long as each can recover its full required amount.
- The plan may pay for it. A proper section 412 bond can be paid from plan assets.
Who is exempt
The bonding rule does not apply to plans that are completely unfunded, meaning benefits are paid only from the general assets of an employer or a union, or to plans not covered by Title I of ERISA. An insured plan arrangement is not treated as unfunded, so that alone doesn’t exempt it.
Certain banks, insurance companies and registered broker-dealers that meet the statute’s conditions are exempt from bonding themselves. For SEPs and SIMPLE IRAs, the DOL says there is no specific exemption, but whoever handles the money in these plans generally falls under one of the financial institution exemptions.
The Form 5500 bond question
On Schedule H and Schedule I of Form 5500, line 4e asks whether the plan was covered by a fidelity bond and, if so, the total amount of coverage. Under the 2025 instructions, a plan answers yes only if the plan itself, not the sponsor or administrator, is a named insured under a bond from an approved surety that protects it against fraud or dishonesty. Line 4f then asks whether the plan suffered or discovered any loss from dishonest or fraudulent acts during the year, even if the loss was reimbursed.
ERISA bond vs. fiduciary liability insurance
They are different products and one doesn’t replace the other. An ERISA fidelity bond protects the plan against losses from fraud or dishonesty. Fiduciary liability insurance is designed for losses caused by breaches of fiduciary duty. Section 412 requires the bond, not fiduciary insurance, and the Form 5500 instructions say fiduciary liability policies cannot be reported as fidelity bonds on line 4e. When I place a bond, I ask for the plan’s name, its assets at the start of the plan year, whether it holds employer securities and who signs or approves payments.
Common questions
Is an ERISA bond the same as fiduciary liability insurance?
No. The bond protects the plan against losses from fraud or dishonesty by people who handle its money. Fiduciary liability insurance is designed for fiduciary breaches, and it cannot be reported as the fidelity bond on Form 5500.
How much ERISA bond coverage do I need?
At least 10% of the plan funds each person handles, with a $1,000 minimum and a $500,000 maximum. The maximum is $1,000,000 for plans that hold employer securities and for pooled employer plans.
Can the bond have a deductible?
Not for the required amount. The DOL says the bond must cover the plan from the first dollar of loss up to the section 412 amount.
Does a one-person or owner-only plan need a bond?
Usually not. Under 29 CFR 2510.3-3, a plan that covers only the owner of a wholly owned business and his or her spouse, or only partners, with no employees, is not covered by Title I, so section 412 doesn’t apply. Once a single common-law employee is in the plan, it is a Title I plan.
Can my business crime policy count as the ERISA bond?
It can, if the plan is added as a named insured and the coverage meets section 412, including the amount and first-dollar rules. If the policy excludes an owner who handles plan funds, the plan needs a rider removing that exclusion or separate coverage for the owner.
Sources
- U.S. Department of Labor, Field Assistance Bulletin 2008-04: bonding requirements under ERISA section 412
- 29 U.S.C. 1112 (ERISA section 412): bonding (Cornell LII)
- U.S. Department of Labor, 2025 Instructions for Form 5500 (Schedule H and Schedule I, lines 4e and 4f)
- 29 CFR 2510.3-3: plans without employees (Cornell LII)
General information about ERISA section 412 bonding as of October 2026, not legal or tax advice; 29 U.S.C. 1112, 29 CFR Part 2580 and current Department of Labor guidance control. Coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.