I HAVE A PLAN WITH MORE THAN 5% OF ITS ASSETS IN LAND (5MIL OUT OF 7MIL TOTAL). THIS IS WAY OVER 5% IN NON-QUALIFYING ASSETS. WHAT ARE THE BONDING REQUIREMENTS FOR SOMETHING LIKE THIS? THEIR SURETY BOND IS FOR 500,000 WHICH IS THE MAX THE IRS SAYS. DOES THE TRUSTEE HAVE TO BE BONDED FOR THE AMOUNT OF THE LAND OR DOES THE SURETY BOND COVER THAT ALSO?

THANKS FOR ANY HELP GIVEN

Please don't shout. It actually discourages responses.

You either need a bond for the full 5 million or you need an audit. There is no requirement to have the bond. But if there is not bond, there must be an audit.

what do you mean, please dont shout---i didn't know that i did

sorry

All caps is considered shouting.

All lower case is more difficult to read than using both lower case and upper case letters.

Speaking of bonding. Is a plan that can file a form 5500-EZ subject to the bonding requirement? I seem to recall reading somewhere that a single owner participant plan was exempt from the bonding requirement, but I can't find it now that I really need to know the answer.

Thanks for any advice you can provide.

It is not.

It is not subject to them or it is not exempt from them?

It is not subject to the bonding requirement.

The following are all participants in the corporation's profit sharing plan. There are no employees other than these 4:

Dad - 45% shareholder
Mom - 10% shareholder
Son - 45% shareholder
Son's Wife - 0% shareholder

Is this plan subject to the ERISA bonding/small plan audit requirements?

I think you need a bond.

Thanks for your reply, Lynn. Okay, if they are subject to the bonding requirements, then they would need an audit if they don't get an additional bond covering the non-qualifying assets (well over the 5% cut-off). What bugs me about this, though, is "why" do they need a bond? If the bond is meant to protect participants from losses due to fraud, etc., I'm not sure what additional protection the bond would provide. I guess more detail would be helpful...

The Trustees are Dad, Mom, and Son. Dad and Son are the only two whose account balances include non-qualifying assets (they have directed investments). Son's Wife is the only non-shareholder participant, and she is not a Trustee. Is Son's Wife the reason they need a bond at all?

If this were a partnership (rather than a corporation), they could file a 5500-EZ (for a plan covering partners and their spouses only), and from what I can tell, they wouldn't be subject to the bonding requirements. Is the fact that they're incorporated the reason they need a bond?

Am I missing something?

Judy, the Plan would be exempt from the bond if just the husband and wife were in the Plan. Once you add the son you need the bond. It is not logical, but I think those are the rules. Assuming that the non-qualifying assets are greater than 5% of total assets, You need a bond that covers all the non-qualifying assets, it does not matter in whose account they are held. How much bond do you think is required here?

Hi, Lynn. You're right that it's not logical (then again, what is in this business? ). Thanks for your help!