Fiduciary Bond Insurance –
Are Your Clients Covered?
A recent IRS audit of 5500 filings uncovered that many small plans don't carry enough fiduciary bond insurance for their fiduciaries and administrators. Under the Employee Retirement Income Security Act (ERISA), plans generally are required to carry coverage equal to at least 10 percent of the funds handled, but no less than $1,000 nor in most cases, more than $500,000.
The audit looked at 50 filings of defined contribution plans with less than $250,000 in assets, but more than $100,000. Also uncovered was failure to amend the plan to comply with changes in current law and/or regulatory guidance on a timely basis. According to the IRS, failure to timely amend the plan "affects the qualified status of the plan."
Expertise Available to You and Your Clients
As their advisor, your clients may look to you for guidance on complying with IRS, ERISA and other investment-related guidelines. But you don’t have to be an expert to offer help. Your RMS wholesaler understands many of the rules and regulations that govern qualified plans, and can be a valuable resource to you and your clients. From plan design to conversion and through the life of the plan, your wholesaler will work with both you and the plan sponsor to help with compliance while improving the overall health of the plan. It’s just one more way we help you stay ahead of the competition and succeed in the retirement plans market.
Click here for more information about the IRS audit project.
Source: PLANSPONSOR, “IRS Audit Project Finds Low Bonding Coverage Problem,” December 15, 2009
