If you are a participant in a retirement plan that is covered by the Employee Retirement Income Security Act (“ERISA”) and you discover that the fiduciary in charge of the plan has mismanaged or stolen funds, then you may be wondering how you can get compensated.
In many cases, fiduciaries will have an ERISA fidelity bond to make sure that the plan is protected in the case that there are losses attributed to dishonesty or fraud. This is not the same thing as fiduciary liability insurance, which is what protects the fiduciary themselves.
Every person who handles an employee benefit plan’s funds or assets should be bonded unless they fall under one of the exemption rules. If you discover that the fiduciary is not bonded, this may also be an additional violation of the law.
Why wouldn’t all fiduciaries be bonded?
The simple reason is that some fiduciaries don’t directly handle funds or assets that belong in the employee retirement plan. However, it is possible for someone who isn’t supposed to have access to plan assets to gain access and to commit fraud, embezzlement, or misappropriation of such assets. In that case, you may need to pursue a lawsuit to seek compensation or use other methods to hold those responsible accountable.
If there is a bond, how much will it cover?
When the plan is bonded, each person who handles funds needs to be bonded for at least 10% of the funds that they handled the previous year. Bonding can be a minimum of $1,000 but can go much higher.
If you are a victim of fiduciary mismanagement, you can look into ways to get back at least a portion of the money you’re entitled to. Our website has more information.