This is an educational lifecycle review for an existing or proposed ERISA §412 fidelity-bond arrangement. It does not say that a bond must be repurchased every year: the legal question is whether covered nonexempt people remain properly bonded while they handle plan funds or other property. A plan-year review is a prudent operational cadence, not a substitute for checking changes when they occur. 29 U.S.C. §1112 FAB 2008-04, Q35–Q40
Annual review sequence
- 1Confirm the plan still reaches Title I and Part 4 and identify any funds or other property still present.
- 2Map every natural person who now receives, safeguards, transfers, signs for, directs, or supervises property; test exemptions person by person.
- 3For each new or continuing handler, include that handler’s predecessor or predecessors in preceding-reporting-year handled amounts; if the plan has no complete preceding reporting year, use the §2580.412-15 estimation procedure.
- 4Read the bond, declarations, schedules, and endorsements for named plans, covered people, amount, deductible, term, cancellation, and discovery protection.
- 5At purchase or renewal—and at the beginning of each reporting year for a multiyear bond—confirm the surety on Treasury’s current live list and review current-year Form 5500 materials.
Review changed people and changed property, not just a renewal invoice
A new payroll employee, committee delegation, bank signer, trustee, TPA function, account, trust, refund, contribution flow, or transfer authority can change the handling analysis. Conversely, a predecessor who no longer has access should be documented as such, while the successor is tested for actual functions. “Administrator,” “fiduciary,” and vendor labels do not decide the result: §412’s handling rule is applied to natural persons and their real access or authority. 29 C.F.R. §2580.412-6 FAB 2008-04, Q5–Q8 and Q18–Q21
Amount review: use history correctly
Do not replace the statutory calculation with a current asset balance or a carrier tier. For each person, group, or class to be covered, preceding-reporting-year handling includes amounts handled by that person, group, or class and its predecessor or predecessors, if any. Assigning a new handler therefore does not erase predecessor handling. Only if the plan has no complete preceding reporting year must the amount to be handled in the current reporting year be estimated using the procedure in §2580.412-15. Review each handler and shared-bond allocation. 29 U.S.C. §1112 29 C.F.R. §§2580.412-14–.15 FAB 2008-04, Q22–Q25 and Q41–Q42
Frozen, terminated, and merged plans still need facts
A freeze, no current contributions, or a termination filing is not by itself a no-bond conclusion. Identify residual trust assets, uncashed checks, receivables, refunds, distributions, transfer authority, and the people who can act on them. In a merger or transfer, identify the predecessor and successor plans, property movement, handlers, and whether the surviving or new bond names and protects the relevant plan. Apply the ordinary plan, Title I, Part 4, property, handling, and exemption sequence rather than the transaction label. 29 U.S.C. §1112 29 C.F.R. §2580.412-6
Coordinate replacement coverage and the mandatory discovery period
A bond must provide one year after termination to discover a loss that occurred during its term. A replacement bond can end that prior discovery period only if it supplies the coverage that period would have provided. This requires a coordinated review of both bonds; it is not safe to assume that a new bond number preserves prior-loss protection. Loss-sustained and discovery forms, cancellation notices, and any extended-discovery terms are issuer-specific. 29 C.F.R. §2580.412-19 FAB 2008-04, Q26
Check statutory bond terms, then issuer-specific terms
The statutory/regulatory baseline includes protection of the plan from fraud or dishonesty by persons required to be bonded and no deductible that shifts a covered loss to the plan. Verify that the plan is properly named and that the amount and covered people fit the current facts. Separately ask the issuer about the bond period, cancellation, endorsements, aggregate and per-loss limits, scheduled versus blanket treatment, claims notice, and exclusions. Those latter questions do not expand what §412 itself says. 29 C.F.R. §2580.412-11 FAB 2008-04, Q26–Q34
Use live surety and current reporting materials
Treasury’s Circular 570 materials and certified-company list are live resources, not a dated directory. DOL’s regulation requires the plan administrator to ascertain the surety’s eligibility when obtaining or renewing a bond and, for a bond longer than one year, at the beginning of each reporting year. Consult the current published Form 5500 instructions for that filing year. A Form 5500 response is a reporting snapshot, not proof that all §412 eligibility, amount, form, or discovery requirements have been met. U.S. Department of the Treasury 29 C.F.R. §2580.412-21 U.S. Department of Labor, Part VI, line 9d
Facts that change the answer
- Whether the plan remains within Title I and Part 4 and has residual property.
- Added, departed, or reassigned natural-person handlers and their actual authority.
- For every new or continuing handler, preceding-reporting-year handling by that handler and any predecessor; if there is no complete preceding reporting year, the §2580.412-15 estimate.
- New accounts, trusts, payroll flows, refunds, transfers, or a merger/termination distribution process.
- Named plans and people, limits, deductible, term, cancellation, and prior-loss discovery coordination.
- Current Treasury surety status and the filing year’s published Form 5500 instructions.
Worked review: a change without an annual repurchase assumption
A plan has a two-year bond. At the new reporting year, a former signer has left and a payroll manager can now release contribution wires. The administrator documents the predecessor’s removed access and tests the manager’s actual authority, but includes the predecessor’s preceding-reporting-year handling in fixing the new manager’s protection. If this is a new plan without a complete preceding reporting year, the administrator instead follows the §2580.412-15 estimation procedure. It then rechecks the live surety list. No conclusion follows merely from the calendar or the existing bond’s term. If the bond is replaced, both forms must be checked for the required one-year discovery protection. 29 C.F.R. §2580.412-6 29 C.F.R. §§2580.412-14–.15 29 C.F.R. §2580.412-19
For the detailed form checklist, see the ERISA bond requirements guide; for calculation, see the coverage amount guide.