Pension reform act of 1974 requires a qualified retirement plans to save the public from fraud and misappropriation. Therefore this pension reform act imposed an Employee Retirement Income Security Act (ERISA).This bond is a fidelity bond that covers at least 10% of plan property as a loss which occur due to the fraud and misappropriation. These bonds repay the loss covered by the bond. This fidelity bond activates the Department of Labor Sanction and Penalties, in failure of the contract. The financial organization contains 10% of the qualifying plans like insurance company, mutual funds and broker’s dealer. If 5% of the plan asset contain the non qualifying plan asset, and then the fidelity bond of 100% of the total value is to be obtained from the non qualifying asset.
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