We're trying to help a client obtain an ERISA fidelity bond for their qualified plan and have found a wide disparity in what insurance firms charge. He needs coverage for $2.5 million in non-qualifying assets and received quotes from two companies, one for $5,000 per year and the other for $300 per year. From your experiences, which one is closer to reality?

From my limited experience the $5,000 premium is more realistic.

have they thought about using a corporate trustee to qualify the assets
or maybe incurring the cost of an audit to offset the cost of the bond?

Maybe he should rething the non qualifying asset? What is it? Most non-qual assets are illiquid and not really the best choice for retirement plan asset.

Just a wild thought for a Monday morning (oops, Tuesday) - is your client the only person required to be bonded? If so, and presuming he/she has no intention of absconding with the funds, why not take the 300 bond? (assuming the quote is valid - but I doubt it is...) Without taking the time to really analyze this issue, my off the cuff thought is that if I'm the one purchasing the bond, and I'm the only person being bonded, I'd get the cheapest bond I could find - since I'm not going to steal the money, I'll never collect on the bond, and whether the company is financially unsound, etc. - as long as they are on the list of acceptable companies, then I don't care about the quality of coverage. Very different from purchasing any other type of insurance, where I am generally the one being protected.

Now, if there is another fiduciary that must be bonded as well, then, then it is a whole different ball game.

Just make sure they are listed in Circular 570, as required for all 412 bonds.

http://www.fms.treas.gov/c570/c570.html#certified

Thanks, everyone, for your responses.

We found out that corporate trusteeship would cost significantly more than the $5,000/yr. bond premium.

I wish the trustee would rethink the non-qualifying assets, but he's a real estate guy, so you can guess what his favorite type of investment is.

He'll probably end up doing as Belgarath suggests - the only people currently participating or who will ever participate are family members and they all seem to get along well. The super-low quote came from one of the biggest, well-known names in the business, and, of course, the rep swears up and down that he's totally familiar with the bonding requirements and the distinctions between qualifying and non-qualifying assets. If the bond correctly specifies the coverage being sought, the insurance company would be on the hook. Realistically, though, a claim would be extremely unlikely.

I juat happened to be looking at some older threads for something else, and came upon this one. I think of the top 10, all time nastiest, most horrific cases of malfeasance, litigation, ill will, etc. that I have seen personally in this business, 9 of them have involved closely held family businesses. Your client should make sure to do everything by the book!

"Rhetorically speaking" - I've often wondered of what earthly value is a fidelity bond equal to 10% of the value of a plan's assets, "funds handled", or whatever criterion you want to use?

If my employer "retired" to some unknown island with my (and every other participant's plan $s), recouping 10 cents on the dollar would simply be adding insult to injury.

Just "venting".