Illiquid assets and Fidelity Bond

[Guest turkeyhunter]

If a plan holds an illiquid asset and does not have a Fidelity Bond for at least the "value" of the illiquid asset what do they have to do?

[WDIK]

IF you are talking about non-qualifying assets and IF you are talking about a small plan, an audit of the plan is required if the bonding requirement is not met.

[Guest turkeyhunter]

Your IF's are correct. I was hoping for some way around the audit requirement but I'm not seeing one. Any additional insights (if there are any) would be appreciated.

[Belgarath]

You already said it. Have them increase the fidelity bond - almost certainly cheaper than an audit. Or perhaps I'm misunderstanding your question?

[Guest turkeyhunter]

I just found out about the non-qualified asset and they bought it in 2009 so they are going to be stuck having to do the audit for 2009 and I was hoping for some way around that. Obviously for 2010 we'll tell them to increase the bond to cover the offending investment.

[WDIK]

From the DOL website:

How do I calculate the percentage of “qualifying plan assets” for my plan?

All plan assets that must be reported on the Form 5500 Schedule I line 1a, column (b) for the end of the prior plan year must be included in the calculation of “qualifying” and “non-qualifying” plan assets. The calculation must be made as soon as the information regarding the plan’s assets at the close of the preceding plan year practically can be ascertained. This generally will be much sooner than the due date for filing the Form 5500 for that preceding plan year.

[Bird]

You can usually get a fidelity bond issued retroactively.

[Guest turkeyhunter]

I didn't know that it was possible to get a retroactive Fidelity Bond. We will most certainly give that a try. Thanks for the idea!