Citing evidence of noncompliance with the Employee Retirement Income Security Act (ERISA) requirement that retirement plans to be covered by fidelity bonds, the ERISA Advisory Council is recommending that the Department of Labor relaunch the updated rules it published in Field Assistance Bulletin (FAB) 2008-04, this time focusing directly on plan sponsors and other plan officials and plan service providers as the targeted audience.
In its report to Secretary of Labor R. Alexander Acosta, the Council says the instances of noncompliance are concentrated in the small plan market, and it attributes this to a general underdeveloped awareness and misunderstanding of the fidelity bond rules by sponsors of small plans and the commercial service providers that serve the small plan market.
The Council suggests that the best vehicle for this new publication would be an Interpretive Bulletin because it would be published in the Code of Federal Regulations and not require a full Administrative Procedure Act process that a revision of the current Temporary Regulations would entail.
The Council also recommends that the DOL add a “Fidelity Bond Summary” to its sub-regulatory guidance and include a sample in its report. “Such a summary would serve to demystify fidelity bonds for purchasers, by explaining the basic requirements, and by helping them to distinguish among the various insurance products that are typically sold in conjunction with fidelity bonds, but that are not subject to statutory mandates under ERISA or the Department’s rules and regulations,” the report says.The Council is not recommending any amendments to ERISA or regulations concerning fidelity bonds.