Bonding for plans with owner-only participants

P/OPINION 75-19




                                                               3(3)


                        October 10, 1975


Dear              :

This is in reply to your letter of May 29, 1975, concerning the
application of the bonding requirements of section 412
of the Employee Retirement Income Security Act of 1974
(ERISA) to employee benefit plans. We regret that the press
of other work has delayed our response.

In your letter, you have inquired (1) whether the trustee
of a plan must be bonded if he is the sole participant
in the plan, and (2) whether, if there are two participants
in the plan and both are permitted to exercise control over
the assets in this account although only one is the trustee,
either or both participants must be bonded.

Subject to certain exceptions, section 4(12)(a) of ERISA
requires that every person who handles funds or other
property of an employee benefit plan covered by Part 4 of
Title I of the ERISA shall be bonded. The term "handles",
as used in this context, is defined in 29 CFR 464.7 adopted
under section 12 of the Welfare and Pension Plans Disclosure
Act and incorporated by reference in the temporary bonding
regulation under section 412 of the ERISA (40 FR 2213,
January 10, 1975). The provisions of this regulation must
be analyzed in conjunction with the particular facts in
each situation to determine whether the bonding requirements
are applicable. The information provided in your letter was
not sufficient to make this determination.
2

P/OPINION 75-19



In addition, you should note that under regulations
published in the Federal Register on August 15, 1975
(40 FR 34524) the term "employee benefit plan"
does not include any plan, fund or program, other than
an apprenticeship or other training program under
which no employees are participants covered under the
plan (29 CFR 2516.3-3). For purposes of this regulation
the sole proprietor and his or her spouse of an unincorporated
or incorporated business or trade, of the partnerships of a
partnership and their spouses, would be caused not to be
"employees" of a plan. Consequently, the provisions of
ERISA including those imposing the bonding requirements,
may not apply to the plan described in your questions.
If, in the first question, the only employee covered under
the plan is a sole proprietor of a business or trade,
or if, in the second question the two participants are the
partners of a partnership.

Sincerely,