5 Things People Get Wrong About Fidelity Bonds
One of the most important – and, in my experience, least understood – aspects of plan administration is the requirement that those who handle plan funds and other property be covered by a fidelity bond. While ERISA requires the bond to protect the plan from losses resulting from acts of fraud or dishonesty, fiduciaries often confuse that coverage with insurance that is designed to protect them from liability. Here are five things you (or your client) may not know about ERISA fidelity bonding – and that, as a result, they may be getting wrong. An ERISA fidelity bond is not the same thing as fiduciary liability insurance. The fidelity bond required under ERISA specifically insures a plan against losses due to fraud or dishonesty (e.g., theft) by persons who handle plan funds or property. Fiduciary liability insurance, on the other hand, insures fiduciaries, and in some cases the plan, against losses caused by breaches of fiduciary responsibilities. Although many plan fiduciarie...