In this segment of Two Minutes with Tom, Tom discusses Fidelity Bonds. Fidelity bonds are often what people are told they need to buy when they are either starting a 401K plan or have an existing 401K plan. Tom goes over the two different ways that you can satisfy the ERISA requirement for the protection of your planned assets. Watch the video below for a simple explanation that will help you understand Fidelity bonds.
Hey Everyone, Tom Gaumond, owner of G2 Insurance Services, with today’s Two Minutes with Tom. So today we’re going to talk about Fidelity Bonds. Fidelity bonds are often what people are told they need to buy when they are either starting a 401K plan or have an existing 401K plan. And they need to satisfy the ERISA requirement for the protection of their plan assets. So, there are two different ways that we can satisfy this requirement. The first one is an actual bond. Now, it’s important to note bonds themselves are not insurance policies. Bonds are there to satisfy the requirement that the federal government has set forth. And what we can do is go and buy that bond and depending on the size, it might cost you one hundred two hundred dollars a year. But it’s not an insurance policy. It simply satisfies the requirement for the ERISA in order to keep the 401k plan. The preferred method for a lot of small business owners to satisfy that requirement is to actually have your employee dishonesty coverage endorsed to cover your 401k plan. So, what do we mean? Well, a lot of business owners policies will automatically include employee dishonesty coverage, 10 or 20 or 50 thousand dollars, and then employee dishonesty coverage can be changed or endorsed to also satisfy the requirement and to protect the 401K just the same as it protects your bank account in case an employee decides to steal from you. So, by doing that, we’re actually getting insurance coverage and it’s serving not only the ERISA requirement protection, but it’s providing you with insurance coverage against theft from employees. So those are the two different ways of satisfying the fidelity bond requirement or the ERISA requirement. Hopefully, that is a simple explanation that helps you understand it. Thank you very much for watching, I’m Tom Gaumond, your friend in insurance.