If your company offers a 401(k) or similar retirement plan, federal law likely requires an ERISA bond. The rule sounds technical, but the math is simple. Here is how much coverage you need.

What the bond does

An ERISA bond, also called a fidelity bond, protects the retirement plan and its workers from theft. If someone who handles the plan's money steals it, the bond pays the plan back. It protects the plan, not the person handling the money.

The simple math

Take 10 percent of your plan's assets. That is your minimum coverage. There is a floor of 1,000 dollars and a cap of 500,000 dollars. So most plans land somewhere between those two numbers. If your plan holds company stock, the cap rises to 1,000,000 dollars.

A quick example

Say your plan holds 300,000 dollars. Ten percent is 30,000 dollars, so you need at least a 30,000 dollar bond. Say your plan holds 8 million dollars. Ten percent is 800,000 dollars, but the cap is 500,000, so you need 500,000 in coverage.

Do not let it fall behind

The most common mistake is buying a bond once and forgetting it. As your plan grows, 10 percent grows too. Review your coverage at least once a year and raise it if needed. The bond is cheap, so it is better to round up than come up short.

It is affordable

ERISA bonds are one of the lowest-cost bonds for the protection they give. Coverage of 500,000 dollars often starts around 100 dollars. Tell us your plan value and whether it holds company stock, and we will set you up the same day.

Related guide: Read the ERISA Bond guide.