An Employee Retirement Income Securities Act (ERISA) bond protects participants and beneficiaries of a retirement plan from dishonest or negligent acts by the fiduciary who maintains the plan. The bond is required by the ERISA Act of 1974 and protects the assets only.
See also fidelity bond and fiduciary liability.
Why It’s Important
The ERISA Act of 1974 was enacted to regulate employee benefit plans. One provision of this act is if a business offers a retirement plan, federal law requires that 10 percent of plan assets be covered by an ERISA bond, up to a maximum of $500,000. For plans that include employer-issued securities such as company stock, the maximum coverage amount is $1 million.
These bonds are usually inexpensive and easy to obtain.