What is the difference between an ERISA bond and Fiduciary Liability Bond?

Do you need to get a bond for your retirement plan? Read on to find out the big differences between an ERISA bond and a Fiduciary Liability Bond. Give us a call at McClure Wealth if you need either one, this is something we can help provide for our business owner clients and retirement plan trustees.


ERISA stands for Employee Retirement Income Security Act (ERISA) which is legislation that governs the rules and standards of conduct for private company benefit plans and those that manage their assets. Any 401K, Profit Sharing or pension plan that includes non owner employees is subject to ERISA. An ERISA bond is a requirement for any retirement plan subject to ERISA and is administered by the US Department of Labor.

An ERISA bond is a type of insurance that protects the plan against losses caused by acts of fraud or dishonesty. Typically, the retirement plan is the insured party and an insurer provides the bond. The covered persons are anyone who handles funds on the plan. As the insured, the retirement plan can make a claim on a bond if a plan official has a loss due to fraud or dishonesty.

Some things to keep in mind:

  • Each covered person is bonded to at least 10% of the amount of funds they handled in the prior year. For example, if your company’s retirement plans has assets totalling $1,000,000, each trustee, named fiduciary and admin must be bonded for at least 10% of the $1 million, or $100,000.
  • The retirement plan can pay for the ERISA bond using the assets of the plan.
  • All persons who handle plan funds are responsible for ensuring the plan has a sufficient ERISA bond.
  • An ERISA fidelity bond would not be required for a fiduciary who does not handle funds or other property of an employee benefit plan.
  • The max bond amount required under ERISA for any one plan official is $500,000 per plan.

Fiduciary Liability Bond

The Fiduciary Liability Bond, on the other hand, is not a requirement under ERISA but is an extra protection for fiduciaries against losses caused by breaches of fiduciary duties. If you are a trustee on a qualified plan, a fiduciary liability bond can help protect you. The biggest difference with a fiduciary liability bond is that it protects fiduciaries’ liability in terms of legal defense and restoring whatever damages the company officer may be responsible for. ERISA bonds are required to protect employees’ benefits.

Need an ERISA bond? Thinking you might want extra protection in the form of a fiduciary liability bond? Give us a call at McClure Wealth and we can help walk you through different options. As business owners ourselves, we’ve been through the process of selecting our ERISA bond, fiduciary liability insurance for clients, and more. Business 401Ks are our specialty, so let us help you with yours.