What fidelity coverage is
Fidelity bonds protect the insured against loss of its own money, securities, and property caused by the dishonesty of the people it trusts. Unlike the surety obligations elsewhere on this site, which guarantee the principal's performance to a third-party obligee, fidelity instruments are first-party protection: the entity that buys the bond is the entity the bond protects. The discipline sits at the border of suretyship and insurance, and it is written on forms with a century of drafting history behind them.
The desk places the full fidelity spectrum, from the two-page statutory ERISA bond to negotiated commercial crime programs and the standard form instruments that govern financial institutions. What unites them is the underwriting question: who can touch the money, what controls stand between them and it, and what happens in the gap between a defalcation and its discovery.
ERISA Fidelity Bonds
Section 412 of ERISA, 29 U.S.C. § 1112, requires every fiduciary of an employee benefit plan and every person who handles plan funds or other property to be bonded against loss from fraud or dishonesty. The required amount is not less than ten percent of the funds handled in the preceding plan year, subject to a minimum of one thousand dollars and a general maximum of five hundred thousand dollars per plan, raised to one million dollars where the plan holds employer securities. The statute prohibits deductibles, and the bond must be written by a surety named on the Treasury's Circular 570.
Two details generate most compliance failures. First, plans holding more than five percent of assets in non-qualifying form, assets outside the custody of a regulated institution, must either undergo an annual full-scope audit or carry a bond equal to one hundred percent of the non-qualifying assets. Second, coverage must keep pace with plan growth, and a bond adequate at issuance quietly becomes deficient as assets compound. The desk places standard and enhanced ERISA bonds in every jurisdiction, handles retroactive inception where a Form 5500 deadline demands it, and maintains the scholarly literature on the subject at erisablog.com.
ERISA fidelity bond applications: ERISA-Bonds.com →
Plan sponsors and trustees seeking protection for the fiduciaries themselves, coverage the statutory bond does not provide, will find the companion practice at FiduciaryLiabilityCoverage.com.
Employee Dishonesty & Commercial Crime
The commercial crime program is the fidelity instrument for operating businesses. Its core grant, employee theft, responds to loss of money, securities, and other property caused by dishonest acts of employees. Around that core, modern forms add forgery or alteration, computer fraud, funds transfer fraud, money and securities coverage inside and outside the premises, and, by endorsement, social engineering fraud, the deception-induced payment losses that now outrun classic embezzlement in frequency.
Form architecture matters here more than limit. Discovery forms respond to losses discovered during the policy period regardless of when they occurred; loss sustained forms respond to losses sustained during the period. Transitions between them create gaps that are invisible until claim time. The desk reads the forms, structures the transition, and places limits proportionate to the exposure an honest look at the controls reveals.
Business Services Bonds
Businesses whose employees work inside customers' homes and premises, janitorial companies, home care agencies, moving companies, pet sitters, and trades, carry business services bonds to protect their customers against employee theft of the customer's property. The instrument is as much a marketing credential as a coverage: it lets the business tell its clients, truthfully, that they are protected. Coverage typically responds on conviction of the dishonest employee, and limits are modest and affordable. The desk issues these quickly, because no one should lose a cleaning contract waiting on a bond.
Financial Institution Bonds
Financial institutions are bonded on standard forms maintained by the Surety & Fidelity Association of America: Standard Form 24 for banks and savings institutions, Standard Form 14 for stockbrokers, and companion forms for insurance companies and finance companies. The Form 14 is not optional for broker-dealers: FINRA Rule 4360 requires member firms to maintain the bond with minimum limits keyed to net capital, covering employee dishonesty, forgery, securities losses, and related insuring agreements.
These instruments carry their own body of case law, their own riders, and their own underwriting conventions, and a desk that places them casually does its clients no favors. We place Form 14 obligations for introducing and clearing firms, Form 24 programs for community institutions, and the excess and companion coverages that complete the program.
Service Provider Bonds
Third-party administrators, payroll processors, property managers, and other service providers who handle client funds face contractual and regulatory demands for fidelity protection running in favor of their clients. These placements blend fidelity coverage with the third-party protection of suretyship, and the right structure depends on who bears the loss when funds in the provider's hands disappear. The desk structures and places these obligations for providers of every size.
Frequently asked questions
What size ERISA fidelity bond does my plan need?
ERISA section 412 requires every person who handles plan funds to be bonded for at least ten percent of the funds handled in the preceding year, with a minimum of one thousand dollars and a general maximum of five hundred thousand dollars per plan, raised to one million dollars for plans that hold employer securities. The bond may not carry a deductible.
Is an ERISA bond the same as fiduciary liability insurance?
No. The ERISA fidelity bond is required by statute and protects the plan against loss caused by fraud or dishonesty of persons who handle its funds. Fiduciary liability insurance protects the fiduciaries themselves against claims for breach of fiduciary duty. Prudent plans carry both, but only the bond is mandatory.
What if my plan holds non-qualifying assets?
Where more than five percent of plan assets are non-qualifying, assets not held by a regulated financial institution, the plan must either obtain an annual full-scope audit or increase the bond to one hundred percent of the value of those non-qualifying assets. The desk places both standard and enhanced bonds and can advise which route fits the plan.
What is the difference between a fidelity bond and commercial crime coverage?
Fidelity bonds in their classic form respond to employee dishonesty. Modern commercial crime programs extend the grant to forgery, computer fraud, funds transfer fraud, and money and securities coverage, written on discovery or loss sustained forms. The desk places both the narrow statutory instruments and the broad crime programs.
Do financial institutions need a special form?
Yes. Banks are bonded on Financial Institution Bond Standard Form 24, and broker-dealers on Standard Form 14, which FINRA Rule 4360 requires of member firms with minimum coverage tied to net capital. Insurance companies and finance companies have their own standard forms. These instruments are their own discipline, and the desk treats them that way.
How fast can an ERISA bond be issued?
Standard ERISA placements with clean profiles are routinely handled the same business day, including retroactive inception where a filing deadline requires it, subject to underwriting.