BONDS COVERING NONQUALIFYING PLAN ASSETS

By Gerri Wheeler

If you have nonqualifying assets in your plan, you now know that the insurance companies are charging higher premiums to cover those assets. Recently, a client of mine received a quote for $3,000 for a one-year bond that covered $1.75 million of assets. In contrast, if he did not have non-qualifying assets, his bond would have been about $600 for a three-year bond, which is an $8,400 difference.

Creative Workaround

Consider obtaining two or more general ERISA bonds from separate approved bonding companies. The IRS issued Field Assistance Bulletin No. 2008-04 that provides guidance to agents who review plans under audit. In that bulletin, guidance states that a plan can obtain multiple bonds from multiple surety companies as long as the company is on the Department of Treasury’s list of certified surety companies.

Let’s take the client referenced in the first paragraph; he could obtain an ERISA fidelity bond for $1,000,000 from his current certified surety company. Then obtain an additional ERISA fidelity bond for $750,000 from another certified surety company.

Alternatively, the plan fiduciary could cover the qualifying assets and specifically designated non-qualifying assets under one ERISA fidelity bond and obtain an additional ERISA bond for the remaining non-qualifying assets from another certified surety company.

Save some money, do some shopping and get the results you want! If you need the Department of Treasury listing, please contact your Consulting Administrator at ACI and they will be glad to provide you with the listing.

References: 29 C.F.R. § 2580.412-21, 29 C.F.R. § 2580.412-20