Advisory Opinion 1975-19

Dear :

This is in reply to your letter of May 29, 1975, concerning the application of the bonding requirements of section 412 of the Employee Retirement Income Security Act of 1974 (ERISA) to employee benefit plans. We regret that the press of other work has delayed our response.

In your letter, you have inquired (1) whether the trustee of a plan must be bonded if he is the sole participant in the plan, and (2) whether, if there are two participants in the plan and both are permitted to exercise control over the assets in this account although only one is the trustee, either or both participants must be bonded.

Subject to certain exceptions, section 4(12)(a) of ERISA requires that every person who handles funds or other property of an employee benefit plan covered by Part 4 of Title I of the ERISA shall be bonded. The term "handles", as used in this context, is defined in 29 CFR 464.7 adopted under section 12 of the Welfare and Pension Plans Disclosure Act and incorporated by reference in the temporary bonding regulation under section 412 of the ERISA (40 FR 2213, January 10, 1975). The provisions of this regulation must be analyzed in conjunction with the particular facts in each situation to determine whether the bonding requirements are applicable. The information provided in your letter was not sufficient to make this determination.

In addition, you should note that under regulations published in the Federal Register on August 15, 1975 (40 FR 34524) the term "employee benefit plan" does not include any plan, fund or program, other than an apprenticeship or other training program under which no employees are participants covered under the plan (29 CFR 2516.3-3). For purposes of this regulation the sole proprietor and his or her spouse of an unincorporated or incorporated business or trade, of the partnerships of a partnership and their spouses, would be caused not to be "employees" of a plan. Consequently, the provisions of ERISA including those imposing the bonding requirements, may not apply to the plan described in your questions. If, in the first question, the only employee covered under the plan is a sole proprietor of a business or trade, or if, in the second question the two participants are the partners of a partnership.