ERISA Bond (Employee Retirement Income Security Act Bond) is a crucial term in the context of employer 401(k) plans, referring to a type of fidelity bond required by the Employee Retirement Income Security Act (ERISA). The purpose of an ERISA Bond is to protect the assets of the retirement plan and the plan participants from fraudulent or dishonest acts committed by plan fiduciaries.
In essence, an ERISA Bond serves as a form of insurance, safeguarding the financial interests of employees who contribute to their employer's 401(k) plan. The bond is specifically designed to provide coverage in the event that a fiduciary, such as plan administrators or trustees, mismanages or misappropriates plan funds, resulting in financial losses.
Examples:
Overall, the ERISA Bond is an essential component of employer-sponsored 401(k) plans, ensuring accountability and providing a safety net against fiduciary malfeasance, thereby enhancing the confidence and security of plan participants.