Does Our Small Plan Require a Fidelity Bond?

Q: We are a small private tax-exempt organization that recently established a 403(b) plan. The plan has less than $100,000 in assets at present. Will we still be required to purchase a fidelity bond, or is there an asset threshold under which such a bond is not required?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Unfortunately, there are no asset or other plan size exceptions from the requirement to have a fidelity bond. In fact, Form 5500 and Form 5500-SF (a short Form 5500 utilized by certain small plans) specifically inquire about fidelity bond coverage, so failing to report a bond could trigger a plan audit. For a 403(b) plan, the minimum required coverage is the greater of 10% of plan assets ($10,000 here) or $1,000, measured by the amount of assets held during the previous plan year.

We recommend speaking to an insurance broker familiar with your plan to ensure you purchase the correct fidelity bond for your plan.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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