Fidelity Bond Question

[doombuggy]

I have someone who is "arguing" with me about whether or not he needs a bond on his plan. The plan is a profit sharing plan and he has not made contributions for at least two years. The plan has two eligibles in it - the doctor (who is the sole prop.) and another employee. Only the owner has money in the plan. He feels he doesn't need a bond to cover himself.

I was under the impression that he would need a bond - we file a regular 5500 and not an EZ, as the other employee is not his spouse, etc. Am I wrong? Should he forgo the bond until he decides to make a contribuiton to the plan? He currently does not have one, and I have told him to get one.

Thoughts, anyone? Thanks!

[Bird]

I agree that he needs a bond. How serious it is not to have one may depend...

There's the general requirement to have a bond, and the requirement that the plan be audited if the bond is inadequate.

The general requirement isn't a big concern to me; I think the typical response to not having a bond if uncovered on IRS audit is "you'd better get one." That is, I don't have a problem truthfully answering Sch I 4e "No" (the plan isn't covered). (I should say I wouldn't have a problem because I honestly can't think of anyone who doesn't have a bond at all.)

But 4k asks if you are claiming a waiver of the CPA audit. I'm not willing to answer "yes" if we haven't satisfied the conditions, and I'm not willing to answer "no" and not attach the audit as required.

But, he might meet the conditions for a waiver if the plan is self-directed. If it's not self-directed by documentation, you might argue that it is effectively so since no one else has an account. But I wouldn't stick my neck out too far for some chump who doesn't take my word for it and spend a few hundred bucks, at most, for a 3 year bond.