Understanding Fidelity Bonds for Retirement Plans

Securing and maintaining a Fidelity Bond is a DOL requirement for a 401k plan, yet many people are confused as to its purpose. The purpose of a Fidelity Bond is to protect the assets in a retirement plan from misappropriation (i.e., fraud or malfeasance) by plan fiduciaries that have access (or decision-making authority with regard) to plan assets.

401k fidelity bond

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The Fidelity Bond should be 10% of plan assets – minimum $1,000; maximum $500,000.

Exceptions exist for plans with employer stock (maximum $1 million bond) and plans with non-qualifying assets.

If a plan does not maintain a Fidelity Bond, as is reflected on the annual Form 5500, it may signal a DOL audit.

 

 

 

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About Peter Philipp, CFA, CFP®

Peter Philipp specializes in employee benefits and investment management for businesses and individuals. In 1993, he helped launch the world’s first target-date funds, a concept which has become the cornerstone of today’s 401(k) plans. Peter holds both the Chartered Financial Analyst designation and the CERTIFIED FINANCIAL PLANNER™ certification, an elite distinction since less than half of 1% of all financial advisors are “dually‐certified.”


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