Certified Plan Sponsor Professional (CPSP) Practice Exam

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What type of bond is a plan required to obtain to cover individuals handling funds or other property?

An ERISA fidelity bond
A corporate surety bond
A performance bond
A credit bond

The correct answer is: An ERISA fidelity bond

The requirement for a plan to obtain a bond that covers individuals handling funds or other property is specifically met by an ERISA fidelity bond. This type of bond is mandated by the Employee Retirement Income Security Act (ERISA) to protect retirement plan participants and beneficiaries from losses due to fraud or dishonesty by employees or others who handle plan assets. The bond acts as a safety net, ensuring that there are financial resources available to cover any losses incurred through misconduct. An ERISA fidelity bond must be for at least 10% of the funds handled by the individual or organization, up to a maximum of $500,000. This ensures a level of financial assurance for the stakeholders involved in the retirement plan, fostering trust and accountability in the management of plan assets. Other types of bonds mentioned, such as corporate surety bonds, performance bonds, and credit bonds, serve different purposes and do not satisfy the specific legal requirements set forth under ERISA for protecting retirement plans from insider fraud or dishonesty.