ERISA section 412 fidelity bonds: who must be bonded, the 10% rule, the $1,000 minimum, $500,000 and $1M caps, Circular 570 sureties and Form 5500 lines.
Education only / verify at source / not legal advice. This guide explains the fidelity bond that section 412 of the Employee Retirement Income Security Act of 1974 (ERISA) requires for most ERISA retirement plans and many funded welfare plans in the United States. It draws on the statute, the Department of Labor's bonding regulations, Field Assistance Bulletin 2008-04 and the current Form 5500 instructions. Global Guarantors publishes industry education. We aren't a surety, broker, insurer or law firm. Your plan documents, the bond actually issued and the advice of your plan's ERISA counsel always control.
Start here: Contract surety guide · Bond wordings and public specimens
The annual Form 5500 report for a US employee benefit plan asks a simple question: is the plan covered by a fidelity bond? Behind that checkbox sits a rule older than ERISA itself; the bonding regulations still in force were first issued in 1963 under the Welfare and Pension Plans Disclosure Act. ERISA section 412, codified at 29 U.S.C. § 1112, says that "every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan" must be bonded, with limited exceptions.
The bond is easy to misunderstand. It can be bought on its own or added to a company crime policy, it is easily confused with fiduciary liability insurance, and its required amount moves every year. This guide sets out what the rules require, where the numbers come from, and what to check. It sits alongside our commercial surety guide, which covers the wider family of bonds that guarantee honesty or compliance rather than construction performance.
The purpose is narrow. As the DOL puts it in Field Assistance Bulletin (FAB) 2008-04, dated November 25, 2008, "ERISA's bonding requirements are intended to protect employee benefit plans from risk of loss due to fraud or dishonesty on the part of persons who handle plan funds or other property."
The statute is just as specific about what the bond covers. It "shall provide protection to the plan against loss by reason of acts of fraud or dishonesty on the part of the plan official, directly or through connivance with others" (29 U.S.C. § 1112(a)). FAB 2008-04, Q1, lists what "fraud or dishonesty" includes: "larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication," and other acts.
The bond does not guarantee investment results or pay for poor decisions made in good faith, and it does not protect the people who are bonded. The DOL's plain-language publication, Protect Your Employee Benefit Plan With an ERISA Fidelity Bond, says such bonds "do not protect the person handling plan funds or other property or relieve them from their obligations to the plan." That is why the plan may pay for the bond from plan assets without breaching ERISA's prohibited-transaction rules (FAB 2008-04, Q11).
Section 412(a) calls the people who must be bonded "plan officials." Section 412(b) makes it unlawful for a plan official to handle plan funds without the required bond, and unlawful for anyone "having authority to direct the performance of such functions" to let an unbonded plan official perform them.
FAB 2008-04 turns that into a working test:
A service provider can buy its own bond naming the plan as insured, or be added to the plan's bond through an "Agents Rider." Either way, the fiduciaries who hire it must make sure it is bonded before it handles plan funds (Q10, Q22).
The DOL's definition is in 29 C.F.R. § 2580.412-6. A person is "handling" plan funds or other property "whenever his duties or activities with respect to given funds or other property are such that there is a risk that such funds or other property could be lost in the event of fraud or dishonesty on the part of such person, acting either alone or in collusion with others."
FAB 2008-04, Q18, says handling "carries a broader meaning than actual physical contact," and lists the general criteria:
Handling does not occur where the risk of loss is "negligible," for example where physical contact is "merely clerical in nature and subject to close supervision and control" (Q18). There is no exemption based on the amount handled (§ 2580.412-6(a)(2)).
For committees, the test is finality. If a committee's benefit or investment decisions are "final and not subject to approval by someone else," each member must be bonded (Q19, Q20); if it only recommends, its members are not handling funds (Q21).
Unfunded plans. Section 412(a)(1) exempts plans whose only source of benefits is "the general assets of a union or of an employer." A plan is not unfunded if any benefits are insured, there is a trust, employees contribute, or the plan has separate accounts or books (FAB 2008-04, Q13). Fully insured plans are not "unfunded," although no bond is needed if no one actually handles plan funds (Q14).
Plans outside Title I. The rules do not apply to plans not subject to Title I of ERISA (Q12), such as church and governmental plans (DOL publication).
Regulated financial institutions. Section 412(a)(3) exempts a supervised corporate fiduciary with trust powers or an insurance business and capital and surplus above a regulatory minimum of at least $1,000,000. Section 412(a)(2) exempts registered brokers and dealers subject to a self-regulatory organization's fidelity bond rules. The regulations add federally regulated banks and trust companies and state-regulated insurance carriers that provide plan benefits (29 C.F.R. §§ 2580.412-27 to -32; FAB 2008-04, Q15). SEPs and SIMPLE IRAs generally fall under these institution exemptions (Q16).
The amount rule is in the statute itself. "The amount of such bond shall be fixed at the beginning of each fiscal year of the plan. Such amount shall be not less than 10 per centum of the amount of funds handled. In no case shall such bond be less than $1,000 nor more than $500,000," unless the Secretary of Labor, after notice and a hearing, prescribes more (29 U.S.C. § 1112(a); 29 C.F.R. § 2580.412-11).
The bond amount "must be based on the highest amount of funds handled by the person in the preceding plan year," and need not be raised mid-year if that amount grows (FAB 2008-04, Q41). A new plan estimates the amount under § 2580.412-15 (Q42).
The $1,000,000 ceilings. Section 622 of the Pension Protection Act of 2006 raised the ceiling to $1,000,000 for plans that hold employer securities, applying to plan years beginning after December 31, 2007. The SECURE Act of 2019 extended the same $1,000,000 ceiling to pooled employer plans, for plan years beginning after December 31, 2020 (statutory notes to 29 U.S.C. § 1112). A plan does not hold employer securities merely because a broadly diversified mutual or index fund it invests in does (FAB 2008-04, Q38).
Per person, per plan. The amounts apply "for each plan named on a bond in which a plan official has handling functions" (Q35). A bond covering several plans must protect each as if separately bonded (Q23, Q24).
Worked examples. These are illustrative arithmetic, not quotes:
Blanket vs schedule bonds. In Q40, nine employees each handle all of a plan's $1,000,000 in funds, so each needs $100,000 of cover. If two of them steal $300,000 together, an aggregate-penalty blanket bond with a $100,000 limit means the plan "could recover only $100,000," while a schedule bond giving each person $100,000 means it "should be able to recover $200,000."
FAB 2008-04 and the regulations set several terms that a compliant bond must have, or must not have.
Small pension plans (fewer than 100 participants) can be excused from the annual audit by an independent qualified public accountant if they meet conditions, and one of them involves the fidelity bond. Under 29 C.F.R. § 2520.104-46, a small pension plan meets the waiver's asset condition if at least 95% of its assets are "qualifying plan assets," or if anyone who handles the non-qualifying assets is bonded under section 412 "except that the amount of the bond shall not be less than the value of such assets."
Qualifying plan assets include assets held by banks, insurers and registered broker-dealers, mutual fund shares, insurance contracts, qualifying employer securities, compliant participant loans, and participant-directed accounts with regulated-institution statements. A real estate limited partnership interest, for example, is non-qualifying.
The regulation's own example shows the trap. A $600,000 plan with $42,000 (7%) in non-qualifying assets needs a bond of at least $42,000, because the bond must cover "the total amount of the non-qualifying plan assets, not just the amount in excess of 5%." The plan's ordinary section 412 bond may already be large enough, as the regulation's example notes; if it is meant to serve both purposes, it must meet the audit-waiver amount (FAB 2008-04, Q36). Where more than 5% of assets are non-qualifying, the summary annual report (or, for plans that must send one, the annual funding notice) must also name the surety and tell participants they can see evidence of the bond.
The annual Form 5500 asks every plan to report its fidelity bond. In the 2025 Form 5500 instructions and 2025 Form 5500-SF instructions:
| Filing | Fidelity bond line | Loss line |
|---|---|---|
| Schedule H (large plans) | Line 4e: check "Yes" and enter the aggregate amount of fidelity bond coverage for all claims | Line 4f: any loss from fraud or dishonesty, even if reimbursed |
| Schedule I (small plans filing Form 5500) | Line 4e | Line 4f |
| Form 5500-SF | Line 10c | Line 10d |
| Schedule DCG (defined contribution groups) | Line 9d | Line 9e |
The instructions say to check "Yes" "only if the plan itself (as opposed to the plan sponsor or administrator) is a named insured under a fidelity bond from an approved surety covering plan officials," and that fiduciary liability policies "are not written specifically to protect the plan from losses due to dishonest acts and cannot be reported as fidelity bonds." Line numbers can change between years, so check the instructions for your filing year.
This is a frequent mix-up, and FAB 2008-04, Q2, answers it directly: "No." The section 412 fidelity bond "specifically insures a plan against losses due to fraud or dishonesty (e.g., theft) on the part of persons (including, but not limited to, plan fiduciaries) who handle plan funds or other property. Fiduciary liability insurance, on the other hand, generally insures the plan against losses caused by breaches of fiduciary responsibilities."
| Question | ERISA fidelity bond (section 412) | Fiduciary liability insurance |
|---|---|---|
| Required by ERISA? | Yes, for plan officials who handle plan funds, unless exempt | No. It is "neither required by nor subject to section 412" (Q2) |
| What it protects against | Loss from fraud or dishonesty, such as theft or embezzlement | Loss from breaches of fiduciary duty, such as imprudent decisions |
| Who is protected | The plan, as named insured | Depends on the policy; it may protect the plan, the fiduciaries or both |
| Amount | At least 10% of funds handled, $1,000 minimum, statutory ceilings | Set by the policy; no ERISA formula |
| Deductible | Not allowed within the required amount | Set by the policy |
| Form 5500 | Reported as the fidelity bond | Cannot be reported as a fidelity bond |
ERISA section 410 allows, but does not require, a plan to buy fiduciary insurance. If the plan pays for it, the policy "must, however, permit recourse by the insurer against the fiduciary in the case of a fiduciary breach" (Q2). So a sponsor with a fiduciary liability policy may still be out of compliance with section 412, and a sponsor with a fidelity bond may have no cover for an honest but costly fiduciary mistake.
A classic surety bond is a three-party credit instrument: the principal (say, a contractor) promises the obligee (an owner or regulator) that it will perform, the surety backs that promise, and the principal signs an indemnity agreement so the surety expects repayment after a claim. Our surety vs insurance guide explains that structure.
An ERISA fidelity bond is closer to first-party crime insurance written by a surety company. FAB 2008-04, Q3: "the plan is the named insured and a surety company is the party that provides the bond. The persons 'covered' by the bond are the persons who 'handle' funds or other property of the plan." The DOL's publication calls it "a type of insurance that protects the plan against losses caused by acts of fraud or dishonesty." The plan claims for its own loss, and the covered people are the risk being insured, not principals applying for credit.
The link to surety is the company itself: section 412 requires "a corporate surety company which is an acceptable surety on Federal bonds," the same Circular 570 system used for federal construction bonds. The steps in our public owner's guide to accepting and verifying bonds for checking that list apply here too.
General education, not legal advice. Use it as a set of questions for your ERISA counsel, plan auditor or bonding professional.
At least once a year, at the start of the plan year
When reviewing the bond itself
For the broker placing an ERISA bond or rider, and the underwriter writing it, the guidance becomes a short file review:
If a loss happens, the plan, as insured, makes the claim under the bond's own notice and proof-of-loss terms; our surety claims basics covers claim handling in the wider market. A Treasury listing confirms a company's authority, not that a particular bond is genuine; see our guide to surety fraud patterns and red flags.
As of October 20, 2026, we found no DOL guidance replacing FAB 2008-04. The most recent bulletins on the DOL's index (2025-01, 2025-02 and 2026-01 to 2026-03) cover missing participants, funding notices, enforcement priorities, benefit statements and mental health parity, not bonding, and the 2025 Form 5500 instructions still point filers to FAB 2008-04. The DOL's Information Letter 09-07-2022 on pooled employer plans applies FAB 2008-04 rather than replacing it.
One curiosity: 29 C.F.R. Part 2580 is still titled "Temporary Bonding Rules," adopted through § 2550.412-1 as interim rules to apply until the Secretary issues permanent regulations. That interim regulation dates from January 1975.
Does every plan fiduciary need an ERISA fidelity bond? No. FAB 2008-04, Q7, says fiduciaries must be bonded only if they "handle" funds or other property of the plan and do not fall within an exemption.
What is the maximum ERISA bond amount? Generally $500,000 per plan for each plan official, or $1,000,000 for plans that hold employer securities and for pooled employer plans, unless the Secretary of Labor sets a higher amount after a hearing. A plan may choose to buy more.
Can an ERISA fidelity bond have a deductible? Not within the required amount. FAB 2008-04, Q30, says the bond must cover the plan from the first dollar of loss.
Retrieved or confirmed October 20, 2026 (PT).
