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Does anyone know the citation in the code that established the requirement for a Surety Bond to be held by employers offering a 401(k)? I usually tell employers to get one, but I have an employer now (not a client) who is being told by the carrier that they are going to terminate his plan because he did not get one. His current broker has not raised the issue one way or another and when asked did not know anything about it (required or otherwise), which is why he contacted me. Although I did not get his business when he put the plan in two years ago (I never "sugar-coat" a proposal), he realizes now that I was telling it like it is. However, this is the first I was aware that the Surety Bond is required. Or is this just a carrier thing? Any thoughts?

Sent by Thomas Barth,CLU, ChFC
Winston Financial Services, Inc.
1705 Bay Avenue
Point Pleasant, NJ 08742


A Fidelity Bond is required by ERISA (1974). The amount of the bond should equal 10% of Plan assets up to maximum coverage of $500,000 ($5,000,000 in assets). Terminating his Plan by the carrier seems to be extreme. An opportunity to change carriers. Recommend that the Employer obtain a Fidelity Bond. Very inexpensive. Usually less than $100. Also, there is a question on the 5500 asking if the Plan has a Fidelity Bond. You may want to look at the 5500 and see how it was answered.

Have a good day.


Max E. Redlich, CLU, ChFC
Qualified Retirement Plan Consulting, LLC
Qualified Retirement Plan Consultants Since 1962
4378 East Observatory
West Chester Township, Ohio 45011-7415

An ERISA Bond is often an "add on" to a client's existing P&C coverage. A good P&C agent should bring up the fact that they need this at an annual review, but it is sometimes missed. It is absolutely required and needs to be adjusted upwards each year as plan assets grow. As for the code courtesy of "The 401(k) Answer Book": ERISA sctn. 412(a), 29 U.S.C. sctn. 1112(a) (1974). Good luck.



Brett J. Hoffman, CPA
Financial Services
The Insurance Exchange, Inc.

I knew I could count on this esteemed group. Once again, membership pays off. Thank you.

Sent by Tom Barth
Winston Financial Services
1705 Bay Avenue
Point Pleasant, NJ 08742