Amount of ERISA Bond

[Dougsbpc]

We have looked for an answer on this but have not found it.

A plan clearly has more than 5% of its assets invested in non-qualifying assets. Therefore, to be exempt from the small plan audit, they will purchase a bond "equal to 100% of the value of non-qualifying assets".

Is the value of non-qualifying assets equal to the net value of non-qualifying assets?

For example, suppose you have a plan with just a real estate investment with a market value of $900,000 but a mortgage payable of $500,000.

Must the bond be for $900,000 of coverage or $400,000 of coverage?

Thanks a million.