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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 2580.412-16 - Amount of bond required in given types of bonds or where more than one plan is insured in the same bond.
- Section Number: 2580.412-16
- Section Name: Amount of bond required in given types of bonds or where more than one plan is insured in the same bond.
(a) As indicated in Sec. 2580.412-10, the Act permits the use of
blanket, schedule and individual forms of bonds so long as the amount of
the bond penalty is sufficient to meet the requirements of the Act for
any person who is an administrator, officer or employee of a plan
handling funds or other property of the plan. Such person must be bonded
for 10 percent of the amount he handles, and the amount of the bond must
be sufficient to indemnify the plan for any losses in which such person
is involved up to that amount.
(b) When individual or schedule bonds are written, the bond amount
for each person must represent not less than 10 percent of the funds
``handled'' by the named individual or by the person in the position.
When a blanket bond is written, the amount of the bond shall be at least
10 percent of the highest amount handled by any administrator, officer
or employee to be covered under the bond. It should also be noted that
if an individual or group or class covered under a blanket bond
``handle'' a large amount of funds or other property, while the
remaining bondable persons ``handle'' only a smaller amount, it is
permissible to obtain a blanket bond in an amount sufficient to meet the
10 percent requirements for all except the individual, group or class
``handling'' the larger amounts, with respect to whom excess indemnity
shall be secured in an amount sufficient to meet the 10 percent
requirement.
(c) The Act does not prohibit more than one plan from being named as
insured under the same bond. However, any such bond must allow for
recovery by each plan in an amount at least equal to that which would be
required if bonded separately. This requirement has application where a
person or persons sought to be bonded pursuant to the requirements of
section 13 have ``handling'' functions in more than one plan covered
under the bond. Where such is the case, the amount of the bond must be
sufficient to cover any such persons having functions in more than one
plan for at least 10 percent of the total amount ``handled'' by them in
all the plans covered under the bond. For example, X is the
administrator of two welfare plans run by the same employer and he
``handled'' $100,000 in the preceding reporting year for Plan A and
$500,000 in the preceding reporting year for Plan B. If both plans are
covered under the same bond, the amount of the bond with respect to X
shall be at least $60,000 or ten percent of the total ``handled'' by X
for both plans covered under the bond in which X has powers and duties
of ``handling'' since Plan B is required to carry bond in at least the
amount of $50,000 and Plan A, $10,000.
(d) Additionally, in order to meet the requirement that each plan be
protected, it shall be necessary that arrangement be made either by the
terms of the bond or rider to the bond or by separate agreement among
the parties concerned, that payment of a loss sustained by one of such
insureds shall not work to the detriment of any other plan covered under
the bond with respect to the amount for which that plan is required to
be covered. For example, if Plan A suffered a loss of $30,000 as
described above and such loss was recompensed in its entirety by the
surety company, it would receive $20,000 more than the $10,000
protection required under section 13, and only $30,000 would be
available for recovery with respect to further losses caused by X. In a
subsequently discovered defalcation of $40,000 by X from Plan B, it
would be necessary that the bond, rider, or separate agreement provide
that such amount of recovery paid to Plan A in excess of the $10,000 for
which it is required to be covered, be made available by such insured
to, or held for the use of, Plan B in such amount as Plan B would
receive if bonded separately. Thus, in the instant case, Plan B would be
able to recover the full $40,000 of its loss. Where the funds or other
property of several plans are commingled (if permitted by law) with each
other or with other funds,
such arrangement shall allow recovery to be attributed proportionately
to the amount for which each plan is required to be protected. Thus, in
the instant case, if funds or other property were commingled, and X
caused a loss of these funds through fraud or dishonesty, one-sixth of
the loss would be attributable to Plan A and five-sixths of the loss
attributable to Plan B.
(e) The maximum amount of any bond with respect to any person in any
one plan in $500,000, but bonds covering more than one plan may be
required to be over $500,000 in order to meet the requirements of the
Act, since persons covered by such a bond may have ``handling''
functions in more than one plan. The $500,000 limitations for such
persons applies only with respect to each separate plan in which they
have such functions. The minimum bond coverage for any administrator,
officer, or employee ``handling'' funds or other property of a plan is
$1,000 as respects each plan in which he has ``handling'' functions.
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