Audit. The word alone is enough to give most Americans chest pain. And while most equate the term with their personal income taxes, business owners and senior managers are also aware that the US Department or Labor can inflict an adverse reaction to their health with the word as well. As such, it only makes sense to run your business in a manner that keeps you in the good graces of the DOL, and doesn’t raise any red flags. Right?
Most would likely agree with that, and yet every year as we meet with our clients or new prospects we are surprised to see just how many companies are unknowingly leaving themselves at risk of triggering a DOL audit. And it’s especially frustrating given how cost effective and simple the fix is.
As a company that provides a 401(k) plan to its employees, you are a Fiduciary and while that duty covers various aspects, none is more fundamental than protecting your employees’ assets against Fraud, Theft, or other acts of dishonesty. This is such a fundamental tenet that the Employee Retirement Income Security Act of 1974 (ERISA) mandates that certain individuals who are responsible for the day-to-day administration of your 401(k) plan must be covered by Fidelity Bond. Some basics:
- All 401(k) plans require a Fidelity Bond, with the notable exception of Solo 401(k) Plans
- A Plan’s Fidelity Bond is designed to bond each official tied to the Plan, and must be sufficient in size to bond each official for an amount of no less than 10% of the funds that they handle as of the first day of the Plan year (subject to a $1,000 minimum)
- Generally no plan is required to bond an amount higher than $500,000, however that cap increases if a plan holds Employer Stock
- Special rules also apply for plans that hold “non-qualifying assets” such as real estate or Limited Partnerships
Do you know if your plan is sufficiently bonded, or are your running the risk of facing a plan audit by the Department of Labor? If you are uncertain, there is good news. As your trusted partner in risk protection, R&R Insurance has the in-house resources and talent to help you to determine whether or not you are at risk for an insufficient 401(k) Plan Fidelity Bond, and the ability to help you correct it in a timely manner. While this should be a primary discussion point at every single plan review meeting that you have with your 401(k) Plan Advisor, it too often is missed. Don’t let a complacent plan advisor put you, your Plan Trustees, or your company at risk.
If your plan provider is NOT being proactive in helping you to make your 401(k) offering the most effective plan for your employees that it can be, contact your R&R Insurance Agent and let them know. We have Professionals in the Insurance and Wealth Management areas who look forward to meeting with you to review your plan and provide specific guidance as to how to improve your plan and safeguard it against risk.
You made the commitment to provide the tools that your employees need to be successful, now let us put you in contact with the team that will provide the value that you should expect.