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Content Last Revised: 12/27/63 |
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Code of Federal Regulations Pertaining to U.S. Department of Labor |
| Labor |
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| Pension and Welfare Benefits Administration, Department of Labor |
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| Temporary Bonding Rules |
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| Amount of the Bond |
29 CFR 2580.412-14 - Determining the amount of funds ``handled'' during the preceding reporting year.
- Section Number: 2580.412-14
- Section Name: Determining the amount of funds ``handled'' during the preceding reporting year.
(a) The amount of funds ``handled'' by each person falling within
the definition of administrator, officer, or employee (or his
predecessors) during the preceding reporting year shall be the total of
funds subject to risk of loss, within the meaning of the definition of
``handling'' (see Sec. 2580.412-6), through acts of fraud or dishonesty,
directly or in connivance with others, by such person or his
predecessors during the preceding reporting year. The relationship of
the determination of the amount of funds ``handled'' to the
determination of who is ``handling'' can best be illustrated by a
situation that commonly arises with respect to executive personnel of a
plan, where a bank or corporate trustee has the responsibility for the
receipt, safekeeping, physical handling and investment of a plan's
assets and the basic function of the executive personnel is to authorize
payments to beneficiaries and payments for services to the corporate
trustee, the actuary and the employees of the plan itself. Normally, in
any given year, only a small portion of the plan's total assets is
disbursed, and the question arises as to whether an administrator or
executive personnel are ``handling'' only the amounts actually disbursed
each year or whether they are ``handling'' the total amounts of the
assets. The answer to this question depends on the same basic criterion
that governs all questions of ``handling'', namely, the possibility of
loss. If the authorized duties of the persons in question are strictly
limited to disbursements of benefits and payments for services, and the
fiscal controls and practical realities of the situation are such that
these persons cannot gain access to funds which they are not
legitimately allowed to disburse, the amount on which the bond is based
may be limited to the amount actually disbursed in the reporting year.
This would depend, in part, on the extent to which the bank or corporate
trustee which has physical possession of the funds also has final
responsibility for questioning and limiting disbursements from the plan,
and on whether this responsibility is embodied in the original plan
instruments. On the other hand, where insufficient fiscal controls exist
so that the persons involved have free access to, or can obtain control
of, the total amount of the fund, the bond shall reflect this fact and
the amount ``handled'' shall be based on the total amount of the fund.
This would generally occur with respect to persons such as the
``administrator'', regardless of what functions are performed by a bank
or corporate trustee, since the ``administrator'' by definition retains
ultimate power to revoke any arrangement with a bank or corporate
trustee. In such case, the ``administrator'' would have the power to
commit the total amount of funds involved to his control, unless the
plan itself or other specific agreement (1) prevents the
``administrator'' from so doing or (2) requires that revocation cannot
be had unless a new agreement providing for similar controls and
limitations on the ``handling'' of funds is simultaneously entered into.
(b) Where the circumstances of ``handling'' are such that the total
amount of a given account or fund is subject to ``handling'', the amount
``handled'' shall include the total of all such funds
on hand at the beginning of the reporting year, plus any items received
during the year for any reason, such as contributions or income, or
items received as a result of sales, investments, reinvestment, interest
or otherwise. It would not, however, be necessary to count the same item
twice in arriving at the total funds ``handled'' by a given person
during a reporting year. For example, a given person may have various
duties or powers involving receipt, safekeeping or disbursement of funds
which would place him in contact with the same funds at several times
during the same year. Different duties, however, would not make it
necessary to count the same item twice in arriving at the total
``handled'' by him. Similarly, where a person has several different
positions with respect to a plan, it would not be necessary to count the
same funds each time that they are ``handled'' by him in these different
positions, so long as the amount of the bond is sufficient to meet the
10 percent requirement with respect to the total funds ``handled'' by
him subject to risk or loss through fraud or dishonesty, whether acting
alone or in collusion with others. In general, once an item properly
within the category of ``funds,'' has been counted as ``handled'' by a
given person, it need not be counted again even though it should
subsequently be ``handled'' by the same person during the same year.
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