IRS notice re: Fidelity Bond

[Earl]

Client told me that they received:

IRS Notice of Insufficient ERISA Bond for 401k Profit Sharing Plan

Ever heard of such a thing? I don't have the notice yet.

Maybe its a marketing piece since if was the first year and the 5500 showed no bond in place?

[Belgarath]

I've heard of this issue being raised on audit, but I'm not familiar with any notice such as you describe. In the audit situations, I've not heard of a penalty being imposed - they just tell the fiduciary to get bonded. That may change at some point.

As an aside, a plan isn't exempt from the bonding requirements just because it is the first year. In that case, it needs to be estimated. See Dol Reg 2580.412-15(b), and FAB 2008-4.

[Earl]

if anyone is interested, cleint forwarded letter from DOL (with a real signature):

Based upon our review of the Plan's recently filed From 5500 Annual Return/Report, it appears that the Plan's fiduciaries and other persons who handle plan assets may have failed to obtain a fidelity bond that meets the minimum requirements of the statute.....

................

In our experience, many plan administrators who indicate on their Plan's 5500 that no bond has been obtained have done so in error. if the bonding question on your plan's From 5500 was incorrectly answered, you should review your 5500 and file a corrected form. if a bond is required, but has not been obtained, you should take immediate steps to bring the plans fiduciaries and those handling plan assets into compliance with ERISA 412.

[masteff]

Some people overlook that employee theft and crime coverage under their commercial insurance may cover them without any extra paperwork. In such a case, it can take a year or three for plan assets to get large enough to require a separate rider or policy.