A Summer Guide to Protecting Your Retirement Plan
As July starts to heat up, many of us are focused on vacations, beach trips, and enjoying the sunny weather. But while you’re soaking up the sun, it’s important not to let your guard down when it comes to protecting your 401(k) plan.
Just as sunscreen protects you from harmful UV rays, a fidelity bond protects your retirement savings from the potential harm of fraud and dishonesty. At BGA 401k, we know how crucial it is to keep your plan compliant and secure, especially during the carefree days of summer.
What is a Fidelity Bond?
A fidelity bond, also known as an ERISA bond, is an essential form of insurance that protects 401(k) plans from losses caused by fraudulent acts. It’s a mandatory requirement under the Employee Retirement Income Security Act (ERISA) to ensure that those who handle plan assets do so with integrity.
Why is a Fidelity Bond So Important?
- Compliance with Legal Requirements: Just like wearing sunglasses to protect your eyes, having a fidelity bond is non-negotiable. ERISA mandates it and failing to comply can result in hefty penalties.
- Protection Against Misconduct: A fidelity bond acts as a barrier against fraudulent activities. It’s like applying a strong SPF sunscreen to shield your skin from damage.
- Indicator of Plan Health: When a 401(k) plan lacks the required fidelity bond, it’s a red flag, much like a warning sign at the beach indicating dangerous conditions. This absence often signals deeper compliance issues that need immediate attention.
- Enhanced Participant Confidence: Knowing that a fidelity bond is in place can boost participant confidence. It reassures everyone that their retirement savings are safe and sound.
Uncovering Underlying Issues
At BGA 401k, we’ve found that plans without fidelity bonds often have other hidden problems. These can include:
- Late Form 5500 Filings: Late filings indicate disorganization and can result in penalties and compliance issues.
- Late Remittances: Delayed remittances pose significant risks and can lead to financial discrepancies without proper oversight.
- Inadequate Internal Controls: Weak controls offer insufficient protection, leaving the plan vulnerable to errors and fraud.
Partnering with BGA 401k
Ensuring your 401(k) plan has the appropriate fidelity bond is just one step towards sponsoring a healthy retirement program. At BGA 401k, we specialize in helping our clients navigate the waters of plan administration.
Our services include:
- Plan Governance: We help establish robust governance frameworks, providing the sturdy structure needed to appropriately sponsor a retirement program.
- Participant Education: We offer engaging education programs to help plan participants understand their benefits and the importance of saving in the plan.
- Investments: We offer investments designed to secure the financial future of your plan participants, ensuring your retirement plan is successful.
By partnering with BGA 401k, you can enjoy peace of mind knowing that your retirement plan is as protected as a beachgoer slathered in sunscreen. Reach out to us today to learn how we can help you safeguard your retirement plan and ensure its long-term success.
Chris Cristallo, CFP® Qualified Retirement Plan Advisor