401k fidelity bonds


I was looking up misc. 401k plans on brightscope.com and had a few
questions about interpreting the data.
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That plan has $32 billion in assets and a fidelity bond of $110
million.
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That plan has almost a million in assets and a fidelity bond of half a
million.
My question is... what is a fidelity bond in this context? If the
IBM 401k went completely insolvent would that mean that they'd split
$110 million up among the 220,000 people enrolled in the plan, or does
it mean that individual plans with up to a $110 million account
balance would reimbursed for that full amount? If the latter that
would seem to suggest that that's a good estimation as to the size of
the largest single account balance (probably the CEO or something).
Also,
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That plan has zero enrollees, total assets of $3 million, and a
fidelity bond of $10 million. How is that possible?
Reply to
yawnmoth
Dept of Labor regulations under the law that governs 401k plans (ERISA) require that certain parties involved w/these plans post a fidelity bond. Kind of like a bail bond, it's only paid out if something goes wrong. The amount is based on plan assets, I think it's a minimum of 10%.
I've never seen data on how often these result in any payment to 401k participants but my hunch is it's extremely rare, based on the pricing for getting the bonds. They don't cover investment losses, rather certain abuses of plan assets by the bonded individuals/entities. Think theft of assets, that kind of thing. I'd put it in the same category as say SIPC protection on a brokerage account or the &^* premises liability insurance I have to buy for my office, in case the Fedex guy stubs his toe on my negligently placed desk.
-Tad
Reply to
Tad Borek

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