Securing and maintaining a Fidelity Bond is a DOL requirement for a 401k plan, yet many people are confused as to its purpose. The purpose of a Fidelity Bond is to protect the assets in a retirement plan from misappropriation (i.e., fraud or malfeasance) by plan fiduciaries that have access (or decision-making authority with regard) to plan assets.
The Fidelity Bond should be 10% of plan assets – minimum $1,000; maximum $500,000.
Exceptions exist for plans with employer stock (maximum $1 million bond) and plans with non-qualifying assets.
If a plan does not maintain a Fidelity Bond, as is reflected on the annual Form 5500, it may signal a DOL audit.
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