ERisa Bond Requirement - ER STock

[PFranckowiak]

I posted on the 5500 site and got no reponse. Maybe someone here has the solution. Do we need a bond that exceeds the ER Stock?

Question realates to Small Plan Audit and Bonding. I have a plan that has employer stock as an OPTION. We are filing a 5500 and Schedule I. I am wondering about the required bonding. The employe stock is over 5% of the plan assets. Employer stock is not traded. (small company) I don't understand the Qualifying Employer Securities below. I looked up the sight and I still am confused. Do they need a bond covering the entire amount of the Employer Stock to get out of the Small Plan Audit Requirements?

Thanks

Pat

I"n the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution referred to above describing the assets held or issued by the institution and the amount of such assets;

Qualifying employer securities, as defined in ERISA section 407(d)(5); "

[Nate X]

Just to be clear, these two are separate:

*In the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution referred to above describing the assets held or issued by the institution and the amount of such assets;

*Qualifying employer securities, as defined in ERISA section 407(d)(5);

If you meet either one of these, the assets are considered qualified plan assets.

Since your employer security is stock, it meets the definition of 407(d)(5). In addition, no more than 25 percent of the stock of the same class can be held in the plan, and at least 50% of the employer stock in the plan must be held by persons independent of the issuer.

If the stock is not considered qualified plan assets, then the bond amount needs to be 100% of those assets and cover the persons handling those assets. However, if the persons handling non-qualifying plan assets are covered on the bond’s other assets, that bond can be used again to meet the 100% bond requirement on the non-qualified plan assets. For example, a plan with $1M in plan assets with $75K in non-qualified plan assets (7.5%) and a 100K bond would not need an additional bond if the same persons were handing the qualified and non-qualified plan assets because $100K => $75K.