The ERISA Advisory Council, a group established to advise the Secretary of Labor on matters related to welfare and pension benefit plans, issued recommendations that the Department of Labor (DOL) provide more clarity on fidelity bond rules. The Council’s recommendations are intended to help reduce noncompliance with the fidelity bond requirements among small plans.
To address this, the Council’s report recommended the DOL issue a new Interpretive Bulletin. The Interpretive Bulletin would cover much of the same content as Field Assistance Bulletin (FAB) 2008-04. The FAB currently provides guidance to plan sponsors on the circumstances under which fidelity bonds are required. However, the Council found that the FAB is less effective than an Interpretive Bulletin because it is not widely viewed by small plan sponsors or service providers.
Additionally, the Council recommended that the DOL issue a “Fidelity Bond Summary” as part of its sub-regulatory guidance. The summary would help clarify the purpose, basic requirements, and the distinct features of fidelity bonds.
The Interpretive Bulletin and summary would be focused on reaching small plan sponsors and commercial service providers who offer services to those sponsors. This is because the Council found that instances of noncompliance were concentrated among small plans.
The Council did not recommend any changes to existing statutes or regulations to increase coverage requirements because losses due to fraud or dishonesty that exceed existing coverage requirements were not reported in a significant number.