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FIDELITY BONDS FOR NON-QUALIFYING ASSETS 

AUDIT WAVERS 

What type of fidelity bond is needed to meet the audit waiver conditions if more than five percent of its assets are non-qualifying assets?

            Persons that handle non-qualifying assets must be covered by a fidelity bond or bonds that meet the requirements of Section 412 ERISA, except that the bond amount must be at least equal to 100% of the value of the non-qualifying plan assets the person handles.  Persons handling non-qualifying plan assets can rely on normal rules and exemptions under Section 412 in complying with the audit waiver’s enhanced bonding requirement.  For example, if the only non-qualifying assets that a person handles are not required to be covered under a standard ERISA Section 412 bond (e.g., employers and employee contribution receivables described in 29 CFR 2580.412-5) that person would not need to be covered under and enhanced bond for a plan to be eligible for the audit waiver.

If the plan has more than 5% of its assets in non-qualifying plan assets, does the enhanced bond have to cover all the non-qualifying assets or only those in excess of the 5% threshold?

            All the non-qualifying assets, not just a selection that represents the excess over 5%, are subject to the enhanced bond requirement.

Can the plan satisfy the audit waiver bonding requirement by having persons who handle the non-qualifying plan assets get their own bond?

 Yes.  The person handling the non-qualifying plan assets can obtain his or her own bond.  Also, a company providing services to the plan can obtain a bond covering itself and its employees that handle non-qualifying plan assets.  The bond has to meet the requirements under Section 412, such as the requirements that the plan be named as an insured, that the bond not include a deductible or similar feature, and that the bonding company be on the U.S. Department of the Treasury’s Circular 570 list of approved surety companies. [http://www.fms.treas.gov/c570/c570.html].

 To determine what you should have for coverage and or Purchase your

ERISA Bond go to this link: Colonial Surety Company Direct