ERISA requires that every fiduciary of an employee benefit plan and every person who handles plan funds be bonded. These bonds cover the plan from loss of assets due to fraud or dishonesty. Unlike fiduciary liability insurance, fidelity bond coverage is triggered by the discovery of the fraud or dishonesty, rather than a third party demand or lawsuit.
Segal Select Insurance recommends that plans either require that plan vendors (defined as outside agents in the fidelity bond) who handle plan assets provide evidence that they have a current, ERISA-compliant bond or else purchase this broader coverage themselves.
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