An ERISA fidelity bond is a bond required by ERISA §412, 29 U.S.C. §1112, in the circumstances the statute covers. It protects an employee benefit plan against loss caused by fraud or dishonesty by a person who handles the plan's funds or other property. It is not the minimum-funding provision sometimes called IRC §412. 29 U.S.C. §1112
What the bond protects—and what it does not
The required protection is for the plan's loss from fraud or dishonesty by a covered plan official, whether acting alone or with others. The regulations describe fraud or dishonesty broadly for this purpose; the bond is not a promise of a direct payment to a participant, a defense to a fiduciary-breach claim, or protection for investment performance, valuation, or prudence decisions. DOL FAB 2008-04, Q1–Q3
Fidelity bonding and fiduciary liability insurance therefore serve different functions. DOL explains that §412 bonding protects the plan against covered fraud or dishonesty, while fiduciary liability insurance generally concerns fiduciary-responsibility losses and is not required by §412. Actual insurance terms remain contract-specific. DOL FAB 2008-04, Q2
The eight questions before calling a bond required
§412 decision sequence
- 1Is there an employee pension or welfare benefit plan under ERISA’s definitions?
- 2Is that plan within Title I coverage?
- 3Does Part 4 apply to this Title I plan?
- 4Does the arrangement have plan “funds or other property”?
- 5Which natural persons have functions that constitute handling?
- 6Is a person or institution exempt—and, if so, who else still handles?
- 7For each nonexempt handler, what amount and compliant form are needed?
- 8Are the surety and filing-year reporting information current?
ERISA defines pension and welfare plans, and Title I identifies coverage and exclusions. A qualifying unfunded top-hat plan illustrates why the sequence matters: it can remain Title I-covered while Part 4, which includes §412, does not apply. 29 U.S.C. §1002 29 U.S.C. §1003 29 U.S.C. §1101
Apply those threshold questions through the retirement-plan guide or the welfare-plan guide, depending on the arrangement being reviewed.
Property and handling are separate questions
“Funds or other property” includes plan contributions and property used or available to pay benefits, including many investments. It can include cash, securities, or real-property investments; property used merely to operate the plan is generally treated differently. DOL FAB 2008-04, Q17
A completely unfunded plan pays benefits only from unsegregated employer or union general assets. That is distinct from an insured arrangement: insurance does not itself make a plan “unfunded,” though direct premiums paid from unsegregated general assets may present no handling. Returned plan-owned dividends, credits, or similar amounts can change the property analysis. DOL FAB 2008-04, Q13–Q14
Handling is functional, not a job title or physical-contact test. The rule looks to risk of loss through fraud or dishonesty, including custody, transfer power, disbursement authority, check-signing, and final supervisory or decision-making authority. Where an entity performs the service, the inquiry reaches the natural people doing those functions for it. 29 C.F.R. §2580.412-6 DOL FAB 2008-04, Q5–Q8 and Q18–Q21
Use the functional handling guide to map each natural person's authority and supervisory role.
When payroll withholding or employee deposits are involved, the participant contributions guide separates remittance timing, plan-property, and handling questions.
Exemptions do not travel to everyone else
Some plans are outside Title I; some Title I plans fall outside Part 4; completely unfunded plans may have no plan property to handle; and §412 or DOL regulations exempt certain qualifying institutions or people. Those are different outcomes. A qualifying bank, insurer, or registered broker-dealer exemption is person- or institution-specific; identify other handlers rather than treating the whole plan as exempt. 29 U.S.C. §1112 29 C.F.R. Part 2580, Subpart F
Where the amount and bond review fit
Only after the threshold questions are answered does §412 set the amount: at least 10% of funds handled by the person, group, or class, subject to the statutory floor and applicable maximum. The amount is person-specific and is not automatically 10% of year-end assets. The form must protect the plan, cannot shift loss to the plan through a deductible, and must use an acceptable surety. 29 U.S.C. §1112 29 C.F.R. §2580.412-11
Next: review the compliance requirements, then use the amount guide for the calculation. Plan-specific facts may also require the exemptions guide.