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February 7, 2018

Yes, You Must Have A Fidelity Bond For Your 401(k) Plan

All employee benefit plans, including 401(k) plans, must be protected by a fidelity bond. But, what is it, and why?


A fidelity bond is essentially a form of business insurance designed to protect assets. In this case, a fidelity bond safeguards employers and employees against loss incurred by dishonest or fraudulent actions. You must have a fidelity bond for your 401(k) to help protect against physical or financial losses that might affect your employee’s ability to cash in on their benefits.

Typically, a fidelity bond will be held by an insurance company, brokerage, or bank. Not a true “bond,” a fidelity bond is actually an insurance product that doesn’t earn interest and can’t be traded.


The Employee Retirement Income Security Act of 1974 (ERISA) mandates that plan sponsors hold a fidelity bond insurance equal to approximately 10% of assets and investments at the beginning of the calendar year, up to $500,000.

A bond of up to $1 million may be required of companies that hold employer securities within the 401(k) plan. Importantly, the fidelity bond must cover the 401(k) for the entire year. Companies that fail to have a fidelity bond in place will lose ERISA compliance.


Businesses that think they can get away without a fidelity bond for their 401(k) should think again. The plan’s trustee/fiduciary may wind up personally responsible for losses due to fraudulent or negative activities on the 401(k) plan. Fortunately, fidelity bonds are not expensive, and they are fairly easy to implement.

For most business owners, hiring a CPA firm with extensive knowledge in 401(k) compliance and auditing, including the acquisition of a fidelity bond, is a smart step. Anders has the knowledge, expertise, and technology to assist businesses with their 401(k) audits each year.

With one flat fee, your company can have your personal accounting concierge service at one click with no interruption to your daily operations. For assistance, contact the team at (314)-886-7913 to get started.

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