The bond your plan is required to carry.
ERISA section 412 requires the people who handle a retirement plan’s money to be bonded. I size the bond to your plan’s assets each year and place it with a surety on the Treasury’s approved list.
By Sam Alishahi · CA Insurance License #4348151 · Reviewed November 2026 · How this page is researched
It protects the plan, not the people running it
Section 412 of ERISA requires every fiduciary of an employee benefit plan, and every person who handles its funds or other property, to be bonded. The bond insures the plan against losses from fraud or dishonesty by those people. It has to cover from the first dollar of loss, with no deductible, and the plan must be named or identified on the bond so the plan itself can make a claim.
It isn’t fiduciary liability insurance. The Department of Labor explains that the bond insures the plan against fraud or dishonesty, while fiduciary liability insurance generally covers fiduciaries for breaches of their duties. A plan sponsor can need both. The bond amount is fixed at the start of each plan year, so I recheck it against the plan’s assets at every renewal.
- 10% of funds handledFixed at the start of each plan year, based on the prior year’s amount handled.
- $1,000 minimumPer plan, however small the plan is.
- $500,000 maximum$1,000,000 for plans holding employer securities and for pooled employer plans.
- No deductibleThe bond must insure the plan from the first dollar of loss.
What underwriters will ask
Having these ready means I can go to market on the first call. The quote form asks for the same things, and anything you don’t know yet can wait.
- Plan: name, type and plan year.
- Assets: plan assets at the start of the plan year.
- People: trustees, officers, staff and service providers who handle plan money.
- Employer securities: whether the plan holds company stock.
- Unusual assets: real estate or anything held outside a bank, insurance company or brokerage.
- Current bond: the bond form, amount and named plans.
Who in your company is handling plan money
Under 29 CFR 2580.412-6, a person is handling plan funds when their duties create a risk that the money could be lost through their fraud or dishonesty, acting alone or with others. The regulation has no exemption based on how much money is involved. I walk through its tests for each person and firm:
- Physical contact with cash or checks. Clerical work is not handling when close supervision makes the risk of loss negligible.
- Power to secure possession, such as access to a safe deposit box or power to withdraw from a bank account, even if the power is never used.
- Power to transfer or negotiate securities, mortgages or title papers.
- Disbursing funds or signing checks, including anyone who can sign or endorse checks alone or as a co-signer.
- Supervisory or decision-making duties, to the extent they involve these tests and create a risk of loss through that person's dishonesty.
DOL Field Assistance Bulletin 2008-04 applies this to committees. If a committee's decisions to pay benefits or make investments are final and not subject to someone else's approval, the bulletin says its members must be bonded. One that only recommends investments, with final approval elsewhere, is not. An adviser without discretionary authority does not need a bond just for giving advice. Paying insurance premiums from the employer's general assets does not require bonding.
A service provider needs a bond only if it handles plan assets. It can buy its own separate bond insuring the plan, and the plan fiduciaries who retain and monitor that provider must make sure it is bonded before it handles plan funds. Under 29 U.S.C. 1112(b), it is unlawful for a plan official to handle plan funds without the required bond, or for anyone with authority over those functions to let an unbonded official perform them.
The bond must come from a Treasury-listed surety
29 U.S.C. 1112(a) requires the bond's surety to be a corporate surety company that is an acceptable surety on federal bonds under authority granted by the Secretary of the Treasury. FAB 2008-04 says bonds must be placed with a surety or reinsurer named on the Treasury Department's listing of approved sureties, Department Circular 570. The Bureau of the Fiscal Service describes it as a complete list of companies that write or reinsure federal bonds. The bulletin also says that, under certain conditions, bonds may be placed with the Underwriters at Lloyd's of London. The Fiscal Service shows Circular 570 was updated August 1, 2026, and I check the current list.
- No conflicted placement. Section 1112(c) makes it unlawful to procure the bond from any surety or other company, or through any agent or broker, in whose business the plan or a party in interest in the plan has any control or significant financial interest, direct or indirect.
- If the surety fails. Under 29 CFR 2580.412-21(b), if a surety becomes insolvent, is placed in receivership or loses its authority as an acceptable surety, the plan administrator must obtain a new bond from an acceptable surety upon learning of it.
- Bond form. The statute allows individual, schedule or blanket forms. The bulletin explains that a blanket bond's aggregate penalty applies per occurrence, while a schedule bond gives separate coverage for each plan official covered.
- More than one surety. The bulletin says nothing in ERISA prohibits using more than one surety, as long as each is approved.
For other bonds, see surety bonds.
ERISA bonds, answered
How big does my plan’s bond need to be?
At least 10% of the funds handled, fixed at the beginning of the plan year, with a $1,000 minimum. The required amount tops out at $500,000 per plan, or $1,000,000 for plans holding employer securities and for pooled employer plans. A plan with $800,000 in assets, for example, needs at least $80,000.
Is an ERISA bond the same as fiduciary liability insurance?
No. The bond protects the plan against fraud or dishonesty by people who handle its money. Fiduciary liability insurance generally protects the fiduciaries when they’re accused of breaching their duties. One doesn’t replace the other.
Who has to be bonded?
Anyone who handles plan funds or other property. Fiduciaries and service providers need to be bonded only if they handle plan assets. Completely unfunded plans paid from an employer’s general assets are exempt, but insured plan arrangements aren’t treated as unfunded, and certain banks, insurance companies and registered broker-dealers have their own exemptions.
Can the bond have a deductible?
No. ERISA requires the bond to insure the plan from the first dollar of loss. The plan must also have one year after a bond ends to discover losses that happened while it was in force.
What does the bond have to do with the small plan audit waiver?
A pension plan with fewer than 100 participants can skip the independent audit if, among other conditions, at least 95% of its assets are qualifying plan assets, or anyone who handles the non-qualifying assets is bonded for at least their full value. That enhanced bond is in addition to the usual 10% rule.
Do church plans and government plans need an ERISA bond?
29 U.S.C. 1003(b) says ERISA's Subchapter I, which contains the bonding rule in 29 U.S.C. 1112, does not apply to governmental plans or to church plans that have not made an election under Internal Revenue Code section 410(d).
Can the 401(k) plan pay for its own ERISA bond?
Yes. DOL Field Assistance Bulletin 2008-04 says a plan may pay for a bond that meets section 412 out of plan assets, because the bonding rules exist to protect the plan.
Do you offer ERISA fidelity bond outside California?
Yes. Clients across the country send the same quote form. Sam Alishahi is licensed in all 50 states and Washington, DC and places policies there directly. The shopping across carriers works the same way. Rules, minimums and markets differ by state — see insurance requirements by state.
Official sources
- U.S. Department of Labor: Field Assistance Bulletin 2008-04, ERISA bonding requirements
- 29 U.S.C. 1112: Bonding (ERISA §412)
- 29 CFR 2520.104-46: Waiver of examination and report of an independent qualified public accountant for small plans
- 29 CFR 2580.412-6, When funds or property are handled - Cornell LII
- 29 U.S.C. 1003, Coverage - Cornell LII
- Bureau of the Fiscal Service, Treasury Circular 570
- DOL, 2024 Instructions for Form 5500 (Schedules H and I, audit waiver)
Tell me about the plan. I’ll size the bond.
The plan’s name, its assets and who handles the money are enough to start.
Alishahi Insurance · Saman Alishahi, independent insurance broker, California License #4348151. General information, not a quote or a promise of coverage; coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.
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