Does ERISA Apply To IRAs?

ERISA was enacted in the 1970s to protect private-sector workers’ retirement income.

Does ERISA apply to simple IRAs?

ERISA does not stand for “Every Ridiculous Idea Since Adam,” contrary to popular belief. Instead, it stands for the Employee Retirement Income Security Act of 1974, which is an acronym. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal legislation that governs employer-sponsored retirement and health plans. (Because IRAs are not sponsored by an employer, they are not covered by ERISA.)

ERISA sets specific restrictions on the sponsoring employer and other plan officials for retirement plans. These prerequisites are as follows:

Providing plan participants with particular information, such as a plan summary (sometimes known as a “summary plan description”);
Managing and investing the plan’s assets purely for the benefit of plan participants; and
Maintaining a system for plan participants to submit claims and appeal claims that have been refused.

Certain plans were excluded from coverage when Congress passed ERISA. If required by the tax code or state law, many non-ERISA plans must nevertheless follow some or all of the ERISA standards (or equivalent rules).

Most retirement programs in the private sector, including most 401(k) and pension plans.
Plans in which the owner and the owner’s spouse are the only employees (such as a solo 401(k) plan).
Section 403(b) plans sponsored by private tax-exempt companies if the company does not contribute to the plan and is only involved in the administration of employee elective deferrals.
Employers in the government or the church fund these plans. The Thrift Savings Plan, a 401(k)-style plan for federal government and military employees, is one of them. 403(b) plans for public school or church employees, as well as section 457(b) plans, are not covered.

Although SEP-IRAs and SIMPLE-IRAs are theoretically covered by ERISA, they are exempt from the majority of its provisions.

If you’re a member of an ERISA plan, you’re generally better protected than if you’re a member of a non-ERISA plan. This is particularly true when it comes to creditor protection.

ERISA-covered plans must totally protect plan assets from creditors, regardless of whether you have filed for bankruptcy. If you have declared bankruptcy and are enrolled in a non-ERISA plan, you have limitless protection. If you haven’t declared bankruptcy, though, your level of protection is determined by state law. Some states provide protection that is comparable to that provided by federal law, while others provide less protection.

ERISA-covered plans must also give some protection to plan participants’ spouses.

Who does ERISA not apply to?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes basic rules for most freely established retirement and health plans in the private sector in order to safeguard employees.

ERISA establishes minimum standards for participation, vesting, benefit accrual, and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to receive benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary responsibilities (PBGC).

ERISA does not apply to plans established or managed by government bodies, churches for their employees, or plans maintained only to comply with applicable workers compensation, unemployment, or disability legislation. ERISA also excludes unfunded excess benefit plans and plans operated outside the United States principally for the benefit of nonresident aliens.

Web Pages on This Topic

Compliance Assistance – Provides publications and other materials to help employers and employee benefit plan practitioners understand and comply with the requirements of the Employee Retirement Income Security Act (ERISA) as they apply to the administration of employee pension and welfare benefit plans.

Consumer Information on Retirement Plans – The Department’s Employee Benefits Security Administration provides fact sheets, pamphlets, and other retirement plan information to the public (EBSA).

Which retirement accounts does ERISA cover?

What Is ERISA and What Does It Cover? Employer-sponsored retirement plans, such as 401(k)s, pensions, deferred compensation plans, and profit-sharing plans, are all protected by ERISA. Defined benefit contribution or defined contribution plans are the two types of plans available.

What plans does ERISA apply to?

“Employee Welfare Benefit Plans” and “Employee Pension Benefit Plans” are the two types of plans covered by ERISA.

Any plan, fund, or program formed or managed by an employer, an employee group, or both, that provides any of the following benefits, whether through insurance or other means.

vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services are all funded; and
any benefit described in the Labor Management Relations Act’s section 302(c) (other than pensions on retirement or death)

“Payroll procedures” (see ER3), as well as certain group or group-type insurance arrangements with little employer or employee organization engagement, are excluded.

Any plan, fund, or program established or managed by an employer, an employee organization, or both, that is intended to benefit employees.

Employees’ income is deferred for periods up to and including the cessation of covered employment.

ER3. Can an unwritten plan, practice, or informal arrangement be subject to ERISA?

Even if it is an unwritten plan, practice, or informal arrangement, if a “plan, fund, or program” delivers the types of benefits listed in E2, it will be covered under ERISA.

A “plan, fund, or program” will be established for ERISA purposes if a reasonable person can ascertain (1) the intended benefits, (2) a class of beneficiaries, (3) the source of financing, and (4) procedures for receiving benefits from the surrounding circumstances, according to the most commonly applied test by the courts.

The courts have ruled that an employer cannot avoid ERISA coverage by retaining an unwritten or informal plan, or simply by failing to comply with the law’s disclosure and reporting obligations. As a result, courts have determined that written rules set forth in internal policy statements or company manuals, as well as descriptions in employee handbooks, might prove the existence of an ERISA plan.

ER5. Are non-qualified and incentive stock option plans and stock purchase plans covered by ERISA?

ERISA does not apply to payments provided by an employer as bonuses for work completed to some or all of its workers, unless such payments are systematically postponed until the termination of covered employment or beyond, or to provide retirement income to employees.

As a result, ERISA does not apply to stock option or stock purchase schemes.

ER6. Are annual bonus and long-term incentive plans covered by ERISA?

As a result, annual bonuses and long-term incentive plans are rarely protected by ERISA. If, on the other hand, a large percentage of an employee’s bonus is deferred until the employee reaches retirement age or until termination of service, the plan may be liable to ERISA.

ER8. Is an arrangement under which executives can defer compensation for a specified period covered by ERISA?

ERISA applies to any plan that either (1) provides employees with retirement income or (2) results in income deferral by employees for periods that extend beyond the cessation of covered employment.

ERISA does not apply to a deferral arrangement that is in the form of a bonus or incentive scheme and does not include retirement or the postponement of income until termination of employment. The Department of Labor, on the other hand, believes that an arrangement that defers compensation for a set length of time may be subject to ERISA if the facts and circumstances show that the arrangement:

What is the difference between ERISA and non ERISA plans?

You may hear the terms ERISA and non-ERISA if you own a business. There are two sorts of retirement plans that you can provide to your employees. An ERISA plan is one to which you will contribute as an employer and which will match the inputs of participants. The requirements of the Employee Retirement Income Security Act, from which the plan gets its name, must be followed by ERISA plans. Non-ERISA plans do not require employer payments and are exempt from the Act’s requirements. Find out which insurance plan your company is required to have under federal law.

Is a 401a an ERISA plan?

I’m sure you’ve heard of a 401(k), which is the most prevalent type of retirement plan used by corporations and employers, but what about a 401(a)? Continue reading to learn more about the differences between a 401(k) and a 401(a) plan, as well as whether one may be most beneficial to you and your company:

Let’s start with the similarities between the 401(k) and the 401(a). Both are 401(k) plans, which fall under the Internal Revenue Code’s Section 401. To be honest, that’s all there is to it. Although they are both based on the same 401 part of the tax code, there are some important distinctions between them.

The main distinction between a 401(k) and a 401(a) is the sort of company that offers them. Employers in the private sector are more likely to offer 401(k) plans. Employees can put pre-tax cash from their paycheck into their retirement accounts through a 401(k). Employees can choose the percentage, and some companies offer a matching program to further incentivize employees. Government agencies, non-profits, and educational institutions are typically connected with 401(a) plans. All employees of a corporation are eligible to participate in 401(k) programs. 401(a) plans allow for more flexibility and are only available to specific employees as an incentive to stay with the company. The employee contribution amount is set by the employer, and the employer is required to contribute to the plan.

There are numerous other differences between a 401(a) and a 401(k) (k). The amount of contributions to a 401(a) plan is determined by the employer, but a 401(k) plan allows the employee to choose how much they want to contribute. Employees can choose from a variety of investment options in 401(k) plans, whereas employers have authority over investment options in 401(a) programs. Participation in 401(a) plans is required, whereas 401(k) programs are not.

There are a number of factors to consider as a federal contractor in addition to selecting a retirement plan for your employees. A competitor is a government contractor. Your private company must compete with other contractors on an equal footing. You want your best crew with you if you want to be in fighting fit. You want to take care of your valuable employees while also lowering your expenditures so that each bid you submit is cost-effective and competitive. A 401(a) plan might be the best option for you.

What’s the point of a 401(a)? 401(a) plans are the qualified retirement plan of choice for government entities, as we’ve already discussed. As a corporation that works so closely with these government bodies, it’s the standard for your industry. Because 401(a) plans are not protected by Title I of ERISA, the rules are set by your state. Employers have a lot of power over 401(a) plans. These plans are more customizable, and one of the best features is that the business can choose which of their employees will benefit. Furthermore, the employer determines the amount of 401(a) contributions, giving the employer more control over the plan. 401(a) plans are appropriate for government contractors who have a fixed and necessary spend to provide benefits to their employees since they have control over the amount of contributions and mandatory participation.

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Does ERISA apply to individual plans?

Simply put, ERISA health insurance refers to the enormous U.S. market of employer-sponsored health plans governed by the federal Employee Retirement Income Security Act (ERISA) of 1974. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal labor and tax law that governs employee retirement and employer-sponsored health insurance. It is administered and enforced by the United States Department of Labor (DOL). ERISA establishes minimal criteria for employer-sponsored health insurance, including paperwork, reporting, and fiduciary obligations, among other things. ERISA applies to health insurance plans formed by private-sector businesses for their employees, with a few exceptions, regardless of the states in which they operate. An ERISA-regulated health plan covers over 136 million individuals nationwide, making ERISA health insurance the largest part of the U.S. health insurance market.

What is an ERISA violation?

The Employee Retirement Income Security Act, or ERISA, is a set of federal rules designed to safeguard employees of private organizations that offer retirement, pension, health insurance, and profit-sharing programs.

In a nutshell, ERISA establishes a minimal set of requirements for these businesses.

Unfortunately, there are situations when an employer breaches the Employee Retirement Income Security Act (ERISA). As a result, at least one employee suffers a setback. Furthermore, the corporation may find itself in hot water with federal authorities as a result of this.

When a firm fails to meet its ERISA duties, it commits a violation. While there are numerous types of violations, the following are some of the most common:

From the perspective of the employer, it is critical that the company fully comprehends ERISA, including their responsibilities. This protects the company from making a mistake that could be disastrous.

Employees should also learn about ERISA to ensure that they are aware of their rights under this set of federal laws. It is easier to identify a violation if you are familiar with the law’s intricacies.

These typical ERISA infractions by employers crop up again and time again. A violation frequently leads to a conflict between the employer and the employee, resulting in future problems.

If an employee believes his or her company has violated ERISA, there are procedures that can be taken to settle the problem and put it behind them as soon as possible.

“ERISA Violations: Penalties and Punishments,” FindLaw, retrieved April 14, 2015.

The recent cases from the Supreme Court are ending a trend in case law. These days, plan language is king. So, how can plaintiff’s attorneys protect their clients’ recoveries and their own fees and costs?

Of course, the first question you should ask is whether the plan is subject to ERISA. Except where the employer is a government or a church entity, ERISA governs employer-employee programs. Individual plans are not governed by ERISA. If it’s an employer-employee plan, the next step is to figure out how to fund it. A self-financed ERISA plan is one that is funded by contributions from both the employer and the employee, and thus preempts state law. The plan is a fully insured ERISA plan and is subject to state law if it is funded by purchased insurance coverage. The plan language in the Summary Plan Description can be used to determine financing status (SPD). Whether the plan is self-funded or fully insured is determined by the funding strategy mentioned in the SPD. The name and title of a plan might also give you a sense of whether it is self-funded or fully insured. The plan is most usually self-funded if it is a named employer group or an ASO (administrative services organization) (federal law applies). If the plan has a specific insurance carrier or is labeled as an HMO, POS, or PPO, it is almost certainly fully insured (state law applies).

The tips above aren’t always conclusive in determining whether or not a plan is subject to ERISA, but they can help you figure it out. Both the SPD and the Master Plan Document are important documents to review (MPD). How do you obtain these crucial documents? You must request them from the plan administrator (not the TPA or the recovery provider (Rawlings, Ingenix, ACS, etc.). On the administrative page of the Summary Plan Description, the plan administrator is normally identified. “Upon written request of any participant or beneficiary, the administrator shall furnish a copy of the most recent updated summary, plan description, and annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated,” according to 29 U.S.C. 1024(b)(4). Ensure that you receive ALL of these materials. Most recovery vendors or plan administrators will try to give you with merely the SPD and a claims summary. Accept those materials, but keep requesting the remainder of your request (the full plan documents). Also, double-check that the MPD and SPD you receive are identical. Administrators frequently update the SPD rather than the MPD. The SPD and the MPD must both state the same thing. Cigna v. Amara, 131 S.Ct. 1866; Cigna v. Amara, 131 S.Ct. 1866; Cigna v. Am (U.S. 2011).

If your request for ALL documentation is ignored, the plan administrator may be subject to fines under the United States Code. According to 29 U.S.C. 1132(c)(1)(b), “any administrator who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary by mailing the material requested to the requesting participant or beneficiary’s last known address within 30 days after such request (unless such failure or refusal results from matters reasonably beyond the control of the administrator) may in the court’s discretion be fined.” To put it another way, if the plan administrator does not respond to your request for the full plan documentation within thirty days, fines begin to accrue at $100.00 per day after that. Under 29 CFR 2575.502(c), these fines can be increased to $110.00 per day (1). See, for example, Leister v. Dovetail, Inc., No. 05-2115 (c. Dis. Oct. 22, 2009), in which the court fined $377,600.00 for 3,776 days of non-compliance, and Huss v. IBM Medical and Dental Plan, No. 07 C 7028 (N.Dis.Ill. Nov. 4, 2009), in which the court fined $11,440.00 for 104 days of non-compliance.

Let’s pretend that you’ve gotten all of the needed plan documentation and that the plan appears to be controlled by ERISA. What can you do to help your client save money while also protecting your fees and costs? Attack the language of the plan! According to the Supreme Court, the plan text must define a specific fund, distinct and apart from the member’s assets, from which the plan may recover, as well as the share of that fund to which the plan is entitled. Mid Atlantic Medical Services, Inc. v. Sereboff, 126 S.Ct. 1869 (2006). A distinction in plan language is required for a plan to recover from a Covered Person, according to the court in Popowski v. Parrott. The court compares the subrogation language of two distinct plans. “The Plan has a lien on any sum obtained by the Covered Person, whether or not specified as reimbursement for medical expenditures,” according to the United Distributors Plan. This lien will stay in place until the Plan is fully paid off. The Covered Person…must refund to the Plan the benefits provided on his or her behalf from the third-party or insurer’s recovery.” 461 F.3d 1367, at 1373 (Popowski v. Parrott) (11th Cir. 2006). “However, if the Covered Person receives a settlement judgment, or other payment relating to the accidental injury or illness from another person, firm, corporation, organization, or business entity paid by, or on behalf of, the person or entity who allegedly caused the injury or illness, the Covered Person agrees to reimburse the Plan in full, and in first priority, for any medical expenses paid by the Plan relating to the injury or illness,” according to the Mohawk Plan. 1374 is the id. The United Distributors Plan claims that their lien is derived from a separate fund, i.e. a third-party or insurer’s recovery. This is appropriate wording that will be followed. The Mohawk Plan, on the other hand, does not name a specific fund, simply that they will be reimbursed if a recovery is made. It is unclear if the money comes from the recovery or the Covered Person’s personal assets.

The Supreme Court’s recent judgment in U.S. Airways v. McCutchen established that the Plan’s language is controlling. U.S. Airways v. McCutchen, 569 U.S. If the Plan recovery extends to first-party coverage, such as uninsured or underinsured motorist coverage, the language should state so. If the Plan is silent, such recoveries may be impossible to achieve. In addition, “where the plan is silent on the allocation of attorney’s fees, the common fund concept provides the appropriate default in certain circumstances.” To put it another way, if US Airways wanted to deviate from the well-established common-fund rule, it had to expressly state so in its contract…” Id at 12 a.m. In short, study the Plan documents carefully to see if the Plan outlines the Plan’s recovery rights in detail. Is it true that recovery takes precedence above attorney’s fees and costs? Is there a fund identified in the Plan that is separate from the Covered Person’s personal assets? Is the Plan’s language sufficient to overturn the “made whole” doctrine?

Ok. The plan is governed by ERISA, the plan administrator has sent you all of the required documents, the plan language is solid in terms of first right of recovery, it establishes a fund separate and distinct from the covered person’s personal assets, it avoids the “made whole” doctrine, and it avoids the common fund doctrine. Is that all there is to it? Have you been your client’s finest advocate for naught? Perhaps not. You are negotiating with a recovery agency, not the plan administrator, when you settle a case and obtain a final lien amount. The recovery agent is a person that looks and acts just like you. They most likely have a huge caseload and are ready to make a deal. Their companies may set monthly or quarterly goals for bringing in recovery and settling liens. Be forthright and truthful. Give them all the numbers, including the total settlement, fees, costs, out-of-pocket expenses, additional liens, and so on. Let them know if you’re lowering or eliminating fees. Threats and resentment are significant roadblocks to resolving these liens. Make an effort to be approachable and reasonable. Furthermore, in your opinion, terrible cases can be advantageous when negotiating ERISA liens. Let them know whether any of the injuries alleged in this case are pre-existing. Let them know if there are any liability issues that could limit a recovery at trial. Most recovery suppliers are willing to accept a 50/50 split of the covered person’s net recovery if there is limited liability and first party coverage. In addition, for recovery suppliers, a three-way split is sometimes the default setting, i.e. one-third for you, one-third for your client, and one-third for the plan.

Helpful tips for navigating ERISA:

Ensure that all of your requests for plan papers are fulfilled. Start tolling the penalty if you haven’t already.

Is the plan language sufficient to overcome equity standards and the common fund doctrine? Is first-party coverage included? Is there a specific fund from which the plan might be able to recover?

If all else fails, communicate with the recovery vendor in a timely and professional manner to ensure the best potential outcome for your client.

For plaintiff lawyers, ERISA isn’t the end of the world. All we have to do is be a little more careful with our language planning and a little more inventive with our negotiation abilities.

Changes for Medicare-Eligible Retirees

Historically, retiree health plans addressed a major gap in traditional Medicare coverage, especially the lack of prescription drug coverage, which existed until 2006. Part D, a voluntary outpatient prescription medication benefit introduced by the Medicare Modernization Act of 2003 (MMA), entered into effect in 2006. The Medicare drug benefit is now available to all 52 million elderly and disabled beneficiaries through private plans approved by the federal government, either stand-alone prescription drug plans (PDPs) or Medicare Advantage prescription drug (MA-PD) plans (primarily HMOs and PPOs) that cover all Medicare benefits, including drugs. Part D sponsors can offer plans with a defined standard benefit8 or an option that is equal in value (“actuarially equivalent”), as well as expanded benefits.

The MMA contains measures encouraging companies to provide retirees with prescription medication coverage in addition to other medical benefits.

The bill provides government subsidies to sponsors of some eligible prescription drug plans, as previously stated (employer plans that offer drug benefits that are at least as good as the standard Medicare benefit).

The federal subsidies amounted to 28 percent of allowed prescription expenditures, resulting in a retiree drug subsidy (RDS) payout of $500 to $600 per retiree for most businesses.

Furthermore, until recently, the law allowed plan sponsors to deduct the full cost of retiree health benefits while excluding the federal RDS payment from income, effectively allowing employers to take a larger tax deduction than under the general tax rule, which prohibits taxpayers from deducting costs that are reimbursed.

The subsidies and preferential tax treatment were created to deter companies from eliminating prescription medication coverage from their retiree health benefits and to prevent any disruption in drug coverage for seniors in employer-sponsored plans.

Initially, the vast majority of firms who offered Medicare-eligible retirees health benefits elected to keep prescription coverage and accept the RDS.

In 2006, the RDS covered claims for 7.2 million Medicare beneficiaries with employer-sponsored retiree health benefits, a statistic that has steadily declined since then and is expected to continue to decline sharply in the future, as shown below.

Although the Affordable Care Act was primarily intended to improve coverage for those under the age of 65 who were not yet eligible for Medicare, it also included changes to Medicare that are projected to influence employer-sponsored coverage for Medicare-eligible retirees.

On the one hand, enhancements in Medicare benefits, notably those that fill the “doughnut hole,” are expected to lower Medicare beneficiaries’ out-of-pocket payments and, as a result, the costs of employer-sponsored retiree health plans that supplement Medicare.

However, certain additional changes, like as the change in the RDS’s tax status, may hasten changes in employer-sponsored coverage for Medicare-eligible retirees.

The Medicare Part D prescription drug benefits are the most significant advances in Medicare from the perspective of retiree health. The Affordable Care Act, in particular, gradually phases in coverage in the Medicare Part D “doughnut hole,” eventually reducing what beneficiaries pay in the gap from 100% of total drug costs in 2010 to 25% in 2020 for both brand and generic drugs, at which point the enrollee would be eligible for catastrophic drug coverage. Pharmaceutical manufacturers were required to provide a 50% reduction off negotiated pricing on brand-name medications and biologics for Part D members with coverage gap spending beginning in 2011. Coinsurance for generic pharmaceuticals began to be phased out in 2011, and coinsurance for brand-name drugs began to be phased in in 2013. Between 2014 and 2019, the ACA lowers the catastrophic coverage level, providing assistance to consumers with high prescription expenditures. Employers who contract with PDP or MA-PD plans will see a significant reduction in the cost of providing prescription coverage to retirees as a result of these advances. Changes in the tax treatment of the RDS, which were also included in the ACA, diminished the financial attractiveness of employer plans incorporating the RDS.

In 2013, the Affordable Care Act (ACA) eliminated a provision that permitted plan sponsors to overlook the RDS payment when evaluating whether a deduction for subsidized costs is allowed.

Plan sponsors will be allowed to deduct RDS payments from their gross income as before, but they will be subject to the regular limitations prohibiting a deduction for costs for which they are repaid, effectively making the RDS payment taxable. Despite the fact that the change in RDS tax status did not take effect until 2013, accounting laws obliged certain businesses to report an accounting charge in their 2010 financial results to reflect the impact of the transition.

RDS claims are ineligible for the 50 percent brand-name drug discount, therefore employers who use it don’t benefit from the advances in Medicare drug coverage. Furthermore, RDS plans do not benefit from the doughnut hole closure in the same way that other Part D plans do. The RDS payment is in lieu of Part D plan coverage, despite the fact that RDS plans are actuarially similar to Medicare drug coverage. Retirees in an RDS plan are exclusively covered by the employer’s drug plan and are not eligible for Part D benefits. The ACA did not affect the formula for determining the RDS payment to the employer plan sponsor. It continues to be based on the percentage of a retiree’s medication expenditures covered by the employer plan, rather than what Part D covers. In 2014, subsidy payments to a plan sponsor for each qualifying covered retiree will generally equal 28 percent of the employer plan’s allowed retiree expenditures, which will range from $310 to $6,350. The cost criteria are adjusted for inflation, but the 28 percent remains constant. As a result, even though the doughnut hole will close for other Part D drug plan participants over time, closing the doughnut hole does not result in a higher RDS subsidy. 12

Even before the ACA was introduced, the number of Medicare members receiving claims reimbursed under the RDS fell from 7.2 million in 2006 to 6.8 million in 2010, and has continued to fall since then, reaching 5.6 million beneficiaries in 2012. (Figure 7).

Starting in 2013, the Medicare Trustees predict just 3.2 million Medicare beneficiaries to have RDS claims, dropping to just 0.8 million by 2016.

What is an ERISA Fiduciary?

Anyone who has discretionary authority or control over a plan or its assets, or who provides investment advice to a plan or its participants, is considered an ERISA fiduciary. If you sponsor a 401(k) plan, you’ll almost certainly have some discretion over it, making you a fiduciary. An ERISA fiduciary is someone who has discretionary control over plan administration and/or picks or oversees the plan’s investment options. This could include some of your coworkers, such as members of the benefits committee, as well as your plan’s financial expert. ERISA regulations must be followed by all fiduciaries, regardless of how limited or extensive their power is.

What does an ERISA Bond do?

An ERISA fidelity bond is a type of insurance that protects an employee benefit plan against losses caused by fraud or dishonesty. The ERISA-mandated fidelity bond protects a plan from losses caused by fraud or dishonesty (e.g., theft) by those who handle plan assets or property.