DOL emailing clients directly regarding fidelity bond coverage

[Jerry Erisa]

In mid June 2015, the DOL has been emailing certain plan sponsors with regard to their 2013 Form 5500 series, where Schedule I, Part II, line 4(e) shows no fidelity bond coverage for the 2013 PYE. Please see ERISA Section 412.

The instructions to the letter state the plan sponsor should:

a). Submit the fidelity bond coverage documentation via fax or email, within 15 days of the date of the specific letter, or

b). If the fidelity bond answer was incorrect, and there was a fidelity bond, the plan sponsor should amend their Form 5500 Series via EFAST2. A copy of the ERISA rider should be forwarded to the DOL, as well.

While not a sales person for insurance companies, there is at least one entity that may provide for special situation coverage.

[Bird]

Can anyone confirm that their clients received one of these letters? Colonial Surety sent an e-mail with a sample letter, and while they had a recipient name/company on the letter, I think it was dummied up.

[Kevin C]

We received the same Colonial Surety e-mail. According to their e-mail, the DOL reviewed and approved their advertising copy that includes a prominently placed DOL logo. My BS meter broke before I got all the way through the e-mail.

I'm also curious if anyone can confirm an actual DOL e-mail.

[Belgarath]

It seems rather brazen for a company to pull something like that out of the blue. Hard to figure...I've never heard of anything like this.

Can the DOL fine people for falsely advertising DOL review and approval?

[WDIK]

I have read a copy of one such letter from the DOL.

[Kevin C]

The Colonial Surety e-mail included a sample DOL letter addressed to "National Paper Supply Company" and listing an EIN and AckID for the filing. The DOL website shows no 5500 filings under the company name, EIN or AckID listed in the letter.

Is that the letter you saw, or a different one?

[WDIK]

It was a letter for one of our clients, not the sample letter.

[Kevin C]

It will be interesting to see if any of our clients get the DOL letter. We have several without bonds that use a Trust Co as Trustee and have no direct access to the funds in the trust account.

As for the Colonial Surety marketing e-mail we received, I have it on good authority that it was neither reviewed nor approved by the DOL and they did not have permission to use the DOL shield in their advertisement.

[austin3515]

"We have several without bonds that use a Trust Co as Trustee and have no direct access to the funds in the trust account."

Come again? Corporate trustee = no fidelity bond requirement? I haven't ever heard of that exception before.

[Kevin C]

Bonding is only required for those who handle plan assets. The lack of access to plan assets is the important part, not that they have a corporate Trustee. These are daily valued plans and this Trustee does not accept any instructions from the client. We did have a DOL agent on an audit disagree with our interpretation of handling plan assets because she felt the client handled plan assets between the deferral on the pay date and the deposit date. With the bond premium being so low, we decided not to argue and started recommending that these clients get a bond. Some of them have, but some have not, despite annual reminders. It will be interesting to see how many of them without bonds get a letter from the DOL.

[austin3515]

Bingo, that's what I would always do.