Does Your Virginia Business Need an ERISA Bond? Everything You Need to Know
If your Virginia-based business offers a 401(k), pension, or profit-sharing plan, you’ve likely heard the term ERISA Bond. But is it just another administrative hurdle, or a legal necessity?
Under Section 412 of the Employee Retirement Income Security Act (ERISA), most employee benefit plans are federally required to have a fidelity bond. At Ariana Insurance, we help business owners from Fairfax to Virginia Beach navigate these compliance requirements.
Here is your definitive guide to understanding, calculating, and securing an ERISA Bond.
What is an ERISA Bond?
An ERISA Bond (also known as an ERISA Fidelity Bond) is a type of insurance that protects an employee benefit plan against losses caused by acts of fraud or dishonesty. This includes theft, embezzlement, forgery, and misappropriation of funds by those who “handle” the plan’s assets.
Unlike traditional insurance that protects the business owner, the ERISA Bond protects the plan participants and their beneficiaries.
Who is Required to Have an ERISA Fidelity Bond?
Federal law requires every person who “handles” plan funds or property to be bonded. According to the Department of Labor, “handling” includes anyone with:
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Physical contact with cash or checks.
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Power to transfer funds from the plan to themselves or a third party.
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Disbursement authority or check-signing power.
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Supervisory power over these activities.
How Much ERISA Bond Coverage Do You Need?
Calculating your coverage is a critical step for your annual Form 5500 filing. Per ERISA guidelines, the bond must generally cover at least 10% of the funds handled in the preceding year.
| Plan Assets | Minimum Required Bond Amount |
| Up to $10,000 | $1,000 |
| $10,000 to $5,000,000 | 10% of total plan assets |
| Over $5,000,000 | $500,000 (Maximum for most plans) |
| Plans with Employer Securities | Up to $1,000,000 |
Note: The bond must be issued by a surety company named on the Department of the Treasury’s Circular 570 list.
ERISA Bond vs. Fiduciary Liability Insurance: What’s the Difference?
One of the most common mistakes we see at Ariana Insurance is confusing these two coverages.
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ERISA Fidelity Bond (Required): Protects the plan from the “bad actor” (theft/dishonesty). It is a legal requirement.
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Fiduciary Liability Insurance (Optional but Recommended): Protects the fiduciaries (you and your company) from legal claims regarding mismanagement, errors in plan administration, or breaches of duty.
Think of it this way: The bond covers the “crook,” while the liability insurance covers the “mistake.”
Why Compliance Matters for Virginia Business Owners
The Department of Labor (DOL) and the IRS track ERISA bond compliance through Form 5500. Failing to have a bond—or having an insufficient bond amount—is a major “red flag” that can trigger a plan audit.
Furthermore, Virginia business owners should ensure their bond does not have a deductible. ERISA regulations generally prohibit deductibles on these bonds because the plan must be reimbursed for the “first dollar” lost to dishonesty.
Get a Quote for an ERISA Bond in Virginia
Securing an ERISA bond is often one of the most affordable parts of your insurance portfolio, but it is one of the most vital for compliance. At Ariana Insurance, we specialize in providing Virginia businesses with bonds that meet all DOL requirements from Treasury-listed carriers like Travelers, Propeller, and RLI.
Is your plan fully protected? [Contact Ariana Insurance today for a quick ERISA bond assessment and quote.]
