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What is an ERISA Bond?

If you're a fiduciary in charge of handling money in an employee retirement plan or health plan in the private sector you likely will be required to purchase an ERISA bond or an Employee Retirement Income Security Act surety bond.

An ERISA bond is the only fidelity bond required by Federal law (Employee Retirement Income Security Act section 412).

Limit 3-year
Limit 3-year
Limit 3-year
Limit 3-year
$10,000 $100 $50,000 $179 $90,000 $239 $250,000 $327
$15,000 $108 $55,000 $188 $95,000 $245 $275,000 $347
$20,000 $117 $60,000 $197 $100,000 $250 $300,000 $367
$25,000 $129 $65,000 $206 $125,000 $263 $350,000 $387
$30,000 $140 $70,000 $214 $150,000 $277 $375,000 $397
$35,000 $150 $75,000 $221 $175,000 $290 $400,000 $407
$40,000 $160 $80,000 $228 $200,000 $303 $450,000 $427
$45,000 $170 $85,000 $234 $225,000 $313 $500,000 $450

What is a Surety Bond?

To understand the ERISA bond requirement, you must first understand what a surety bond is.

A surety bond is a type of insurance that acts as a financial guarantee that a promise of performance and ethical behavior will be delivered as required by a contract or agreement.

In simple terms, a surety bond protects customers or employees from purposeful theft or financial damage.

Learn the details of the complete surety bond agreement by reading the following posts:

The US Department of Labor passed the Employment Retirement Investment Securities Act in 1974 requiring individuals who oversee private retirement and health plans to purchase an ERISA bond among other requirements.

What Does The Employment Retirement Investment Securities Act Do?

ERISA does more than just require plan administrators to purchase a surety bond.

The Employment Retirement Investment Securities Act provides:

  • Plan participants with plan features and funding
  • Sets the minimum standards for participation, vesting, benefit accrual, and funding
  • Requires those to manage and control plan assets to purchase a surety bond
  • Requires plan to set a grievance and appeals process for plan participants to get benefits from their plans
  • Allows for the right to sue for benefits and breaches of fiduciary duty
  • Guarantees play of certain benefits through a federally chartered corporation if the plan is terminated

What is an ERISA Bond?

An ERISA bond is a type of surety bond called a fidelity bond. The types of fidelity surety bonds typically include:

ERISA bonds are the only fidelity bond required by Federal law.

Who Is Required To Purchase an ERISA Bond?

Plan administrators or individuals who control and have direct access to plan contributions, funds, and investment decisions must be bonded.

If your responsibilities include:

  • Negotiating or transferring retirement plan funds
  • Signing checks or other negotiable instruments of a retirement plan
  • Working with cash, physical documents, or other physical assets of a retirement plan
  • Disbursing plan funds to beneficiaries
  • Supervising or having control over any of the above

So if a given plan has four different individuals who have access to funds in a manner consistent with the above definition, then each of the individuals must obtain a surety bond for the required bond amount (see below for information on bond amounts).

The Employee Retirement Investment Securities Act does not apply to:

  • Government pensions
  • Plans established by religious organizations such as churches
  • Plans that only cover applicable disability or workers’ compensation laws
  • Plans maintained primarily outside the United States

Who Does an ERISA Bond Protect?

The bond protects retirement and health plan participants (the employees) from a plan administrator or multiple administrators who purposefully commit fraud with employee contributions or the funds in the plan.

Types of purposeful fraud include:

  • Stealing funds
  • Embezzling fund payments or profits
  • Forging checks or authorization
  • Wrongful conversion of money or gains
  • Willful misapplication of funds

An ERISA bond provides for the financial recovery of losses due to these acts, but only up to the amount of the bond coverage.

How To Find The Correct ERISA Bond Amount

The bond amount is the amount of "coverage" available to the plan participants in the event of any purposeful misconduct or fraud. This is often called the bond penalty.

The Department of Labor has specific rules for purchasing the correct bond amount based on the plan being managed.

ERISA Bond Amount Rule 1

The bond amount must be at least 10% of the previous year's funds under management.

While 10% is the minimum required amount, there are no laws or rules prohibiting a business, administering the plan, from requiring a higher amount.

ERISA Bond Amount Rule 2

If you are managing a new plan that has no previous years under management, the minimum bond amount is $1,000 per individual plan.

ERISA Bond Amount Rule 3

The maximum bond amount per individual plan is $500,000.

It is possible for one bond to cover more than one plan. If this is the case, the bond can be more than $500,000, but in most cases ERISA bonds are purchased on a per retirement and/or health plan basis.

ERISA Bond Amount Rule 4

If the retirement and/or health plan have company stock or any employer securities the minimum bond amount increases to $1,000,000.

ERISA Bond Amount Rule 5

If multiple people are in charge of a plan and handle plan funds, each individual must be bonded at the minimum of 10% of previous years funds under management or the $1,000 level.

Example of Determining an ERISA Bond Amount

Brand New Plan

The bond amount must be $1,000 minimum. The company administering the plan can require more.

Previous 12 Months Under Management is $850,000

The minimum bond amount would be ($850,000 x 10%) $85,000.

Previous 12 Months Under Management is $5,500,000

The minimum bond amount would be ($5,500,000 x 10%) $550,000.

But remember the maximum bond amount is $500,000 so in this scenario a plan this large would require a $500,000 bond amount.

How Much Does An ERISA Bond Cost?

The bond amounts in the examples are not the cost of the bond.

And for all ERISA bonds $500,000 and less, Surety Bonds Direct has secured low fixed prices with no credit check required.

Limit 3-year
Limit 3-year
Limit 3-year
Limit 3-year
$10,000 $100 $50,000 $179 $90,000 $239 $250,000 $327
$15,000 $108 $55,000 $188 $95,000 $245 $275,000 $347
$20,000 $117 $60,000 $197 $100,000 $250 $300,000 $367
$25,000 $129 $65,000 $206 $125,000 $263 $350,000 $387
$30,000 $140 $70,000 $214 $150,000 $277 $375,000 $397
$35,000 $150 $75,000 $221 $175,000 $290 $400,000 $407
$40,000 $160 $80,000 $228 $200,000 $303 $450,000 $427
$45,000 $170 $85,000 $234 $225,000 $313 $500,000 $450

A surety, the insurance company that issues the surety bond, typically assess these three factors when determining the price of a surety bond:

  • The personal credit of individual being bonded
  • Industry and business experience
  • Any past claims on previous bonds if applicable

Surety Bonds Direct is a specialized surety agency that works with multiple sureties to find our customers the lowest possible price even if an individual has poor credit.

Retirement And/Or Health Plans With Company Securities

Remember, if the retirement and/or health plan has the managed company's securities in the plan, the minimum bond amount is $1,000,000.

In this case a custom quote needs to be obtained using the three factors mentioned above.

This is where Surety Bonds Direct can help get the lowest price by securing the lowest possible rate from the multiple sureties we work with.

Here are some example pricing from really good rates to average.

Bond Amount Surety Bond Rate Price You Pay
$100,000 1% $1,000
$100,000 1.5% $1,500
$100,000 2% $2,000
$100,000 2.5% $2,500
$100,000 3% $3,000
$100,000 3.5% $3,500

How Long Do ERISA Bonds Last?

Surety Bonds Direct sells all ERISA bonds with a three year bond term.

This means after the bond is purchased it's active for three years before it needs to be renewed for an additional three years.

Renewing an ERISA bond is as easy as paying the renewal premium to keep the bond active.

What Happens If Assets Under Management Increase During The Bond Term

Surety Bonds Direct sells all ERISA bonds with Inflation guard.

Inflation guard ensures the amount of coverage automatically increases during the course of the bond term. When the bond is renewed the amount of the bond can be adjusted to the appropriate level.

Purchase Your ERISA Bond Today

Now you know what the Employee Retirement Income Security Act does and what an ERISA surety bond is.

Getting bonded is a very fast process with ERISA bonds.

Limit 3-year
Limit 3-year
Limit 3-year
Limit 3-year
$10,000 $100 $50,000 $179 $90,000 $239 $250,000 $327
$15,000 $108 $55,000 $188 $95,000 $245 $275,000 $347
$20,000 $117 $60,000 $197 $100,000 $250 $300,000 $367
$25,000 $129 $65,000 $206 $125,000 $263 $350,000 $387
$30,000 $140 $70,000 $214 $150,000 $277 $375,000 $397
$35,000 $150 $75,000 $221 $175,000 $290 $400,000 $407
$40,000 $160 $80,000 $228 $200,000 $303 $450,000 $427
$45,000 $170 $85,000 $234 $225,000 $313 $500,000 $450

If you require the $1,000,000 bond amount, click here and you can start a free online quote. If you would prefer, you can call a bond specialist at 1-800-608-9950 and they can help you get the quote process started, plus answer any questions you may have.

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The 3 Types of Fidelity Bonds

The 3 Types of Fidelity Bonds

Do you need a fidelity bond? What is a fidelity bond? There are 3 types. I'll show you all three and help you know which is the right one for you.

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