small ESOPS and fidelity bond coverage

[Guest Dolores Lawrence]

Local private company in Missouri is partially owned by an ESOP. Plan is not currently subject to audit. Their insurance broker is saying that no one wants to write new fidelity bond coverage for non-public ESOPs post-Enron. The only insurance carrier who is showing any interest will only provide coverage if the plan is audited. That seems ridiculous if there is no ERISA audit requirement. Any alternatives? Any else experiencing this?

[BeckyMiller]

I am uncertain which kind of bond you are referring to in your message? Is this the basic ERISA bond? If so, I have not heard anything about a problem getting this bonding and we work with many small ESOPs.

If you mean fiduciary bonding, there may be an issue. I suggest that you check with the ESOP Assocation at www.esopassociation.org. They follow these issues.

If you mean the fidelity bond for corporate officers and directors, I would be surprised if this was true. Again, I have not heard any problems on this matter from my clients.