December 2006 Fidelity Bond Update, "ERISA Bonding Provisions in the Pension Protection Act of 2006"

Abstract

The Employee Retirement Income Security Act (ERISA) requires a plan fiduciary and any person handling plan assets to be bonded, in an amount between $1,000 and $500,000. An exception to the bonding requirement generally applies for a fiduciary that is a corporation authorized to exercise trust powers (e.g., a bank) or conduct an insurance business — or a director, officer or employee of the fiduciary — if the corporation is subject to supervision or examination by federal or state regulators and meets certain financial requirements.

The Pension Protection Act of 2006 (PPA’06) extended that exemptive relief to an entity registered as a broker or a dealer under the Securities Exchange Act of 1934 (hereafter referred to as “the 1934 Act”) if the broker or dealer is subject to the fidelity bond requirements of a self-regulatory organization (within the meaning of the 1934 Act.) This provision of PPA’06 raises several questions that are addressed in this issue of Fidelity Bond Update.

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