If the committees make decisions to pay benefits or make final investment decisions each committee member should be bonded. This would not include committee members who only make recommendations.
Generally, each person must be bonded in an amount equal to at least 10% of the amount of funds he or she handled in the preceding year. The minimum is $1,000 and the maximum is $500,000 or $1,000,000 for plans holding employer securities. Employers sponsoring two plans such as a 401(k) profit sharing and a cash balance pension plan take note that these amounts apply for each plan named on the bond where the person is considered handling plan funds.
The fidelity bond should be purchased and in effect before any plan assets are handled. Plan sponsors must evaluate their bond coverage at the beginning of each subsequent plan year to ensure that the minimum bonding requirements are met and increase the amount when necessary. The amount and the insurance carrier must be reported annually on the IRS Form 5500.
Fidelity bond coverage is an ERISA compliance requirement and therefore not optional. Insufficient coverage could trigger a Department of Labor audit. The DOL could asses a penalty on a plan that does not comply with ERISA. This penalty is $5,000 and/or up to one year in jail. Obtaining and maintaining proper fidelity bond coverage not only provides security if there is a fraudulent event but removes the risk of some pretty heavy penalties for non-compliance. Reach out to your EBS Retirement Plan Professional if you need assistance with this requirement.