July 31st, is of course, the due date (unless extended) for calendar year ERISA plans required to file Form 5500 for the 2016 plan year. And, as in the past, there will be many plan sponsors who must indicate on the 5500 they have outdated fidelity bonds or none. Here’s a timely reminder why they are necessary in Nevin Adams’ article, Fraud Scheme Taps into 401(k) Account for $40,000.
The fidelity bond requirement is high up on the Department of Labor (“DOL”) compliance priorities, and it’s not a great leap in logic to assume that the DOL monitors this on Form 5500. It could be a red flag for the DOL to take a closer look at the plan.
There is another serious consequence that could result for not purchasing and maintaining a sufficient ERISA Fidelity Bond. A plan’s fiduciaries could be held personally liable for any loss that should have been covered by the fidelity bond.
The takeaway is very basic. Plan sponsors can use the Form 5500 filing process as an opportunity to determine whether they are meeting their fidelity bonding requirement. Here is a link to our FAQs that provide additional information.