- didn’t have adequate fidelity bonding, or
- didn’t deposit contributions by the required deadlines.
Under ERISA, plan sponsors are required to secure fidelity bonds to protect the plan against loss because of fraud or dishonesty by any plan fiduciary or someone who handles the plan’s assets.
Everyone who meets the bonding requirement is required to secure a bond for at least 10% of the amount of funds handled during a plan year ($1,000 minimum and $500,000 maximum per plan). The Department of Labor increased the maximum required bond to $1,000,000 for officials of plans that hold employer securities for plan years beginning on or after January 1, 2008. For more guidance on ERISA fidelity bonding requirements, see DOL Field Assistance Bulletin 2008-04.
Plan sponsors are required to keep employee contributions and salary deferral contributions separate from the company’s general funds. The DOL requires that the employer must deposit contributions into the trust as soon as administratively possible.
Rules for when an employer must deposit matching or other contributions are different from those for elective deferrals. To obtain a current tax deduction, the employer must deposit matching contributions by the employer’s income tax return filing deadline, including extensions.
If the employer doesn’t make the contribution deposits by the required deadline the plan may have operational mistakes that may lead to prohibited transactions or plan disqualification. Although an employer can correct certain operational mistakes under the Employee Plans Compliance Resolution System, an employer can’t correct prohibited transactions using this program. Employers may resolve prohibited transactions using the DOL Voluntary Fiduciary Correction Program (VFCP). If the plan document contains language for the timing of salary deferral deposits, an employer may correct failures to follow the plan document terms under EPCRS.
Review your plan’s administrative procedures so these mistakes don’t happen and consult with your benefits professional to ensure that you have administrative procedures in place to prevent these operational errors. If you find errors, take prompt action to correct them.
We have many resources to help you monitor compliance with your retirement plan. If you find a mistake or problem in your retirement plan, learn how to fix plan errors and avoid future errors.
If you have questions about this project, email us and include “Virgin Islands” in the subject line. Make sure to include your telephone number so we can contact you with answers.