[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR2580.412-14]

[Page 562-563]
 
                             TITLE 29--LABOR
 
CHAPTER XXV--PENSION AND WELFARE BENEFITS ADMINISTRATION, DEPARTMENT OF 
                                  LABOR
 
PART 2580--TEMPORARY BONDING RULES--Table of Contents
 
                      Subpart C--Amount of the Bond
 
Sec. 2580.412-14  Determining the amount of funds ``handled'' during the preceding reporting year.

    (a) The amount of funds ``handled'' by each person falling within 
the definition of administrator, officer, or employee (or his 
predecessors) during the preceding reporting year shall be the total of 
funds subject to risk of loss, within the meaning of the definition of 
``handling'' (see Sec. 2580.412-6), through acts of fraud or dishonesty, 
directly or in connivance with others, by such person or his 
predecessors during the preceding reporting year. The relationship of 
the determination of the amount of funds ``handled'' to the 
determination of who is ``handling'' can best be illustrated by a 
situation that commonly arises with respect to executive personnel of a 
plan, where a bank or corporate trustee has the responsibility for the 
receipt, safekeeping, physical handling and investment of a plan's 
assets and the basic function of the executive personnel is to authorize 
payments to beneficiaries and payments for services to the corporate 
trustee, the actuary and the employees of the plan itself. Normally, in 
any given year, only a small portion of the plan's total assets is 
disbursed, and the question arises as to whether an administrator or 
executive personnel are ``handling'' only the amounts actually disbursed 
each year or whether they are ``handling'' the total amounts of the 
assets. The answer to this question depends on the same basic criterion 
that governs all questions of ``handling'', namely, the possibility of 
loss. If the authorized duties of the persons in question are strictly 
limited to disbursements of benefits and payments for services, and the 
fiscal controls and practical realities of the situation are such that 
these persons cannot gain access to funds which they are not 
legitimately allowed to disburse, the amount on which the bond is based 
may be limited to the amount actually disbursed in the reporting year. 
This would depend, in part, on the extent to which the bank or corporate 
trustee which has physical possession of the funds also has final 
responsibility for questioning and limiting disbursements from the plan, 
and on whether this responsibility is embodied in the original plan 
instruments. On the other hand, where insufficient fiscal controls exist 
so that the persons involved have free access to, or can obtain control 
of, the total amount of the fund, the bond shall reflect this fact and 
the amount ``handled'' shall be based on the total amount of the fund. 
This would generally occur with respect to persons such as the 
``administrator'', regardless of what functions are performed by a bank 
or corporate trustee, since the ``administrator'' by definition retains 
ultimate power to revoke any arrangement with a bank or corporate 
trustee. In such case, the ``administrator'' would have the power to 
commit the total amount of funds involved to his control, unless the 
plan itself or other specific agreement (1) prevents the 
``administrator'' from so doing or (2) requires that revocation cannot 
be had unless a new agreement providing for similar controls and 
limitations on the ``handling'' of funds is simultaneously entered into.
    (b) Where the circumstances of ``handling'' are such that the total 
amount of a given account or fund is subject to ``handling'', the amount 
``handled'' shall include the total of all such funds on hand at the 
beginning of the reporting year, plus any items received during the year 
for any reason, such as

[[Page 563]]

contributions or income, or items received as a result of sales, 
investments, reinvestment, interest or otherwise. It would not, however, 
be necessary to count the same item twice in arriving at the total funds 
``handled'' by a given person during a reporting year. For example, a 
given person may have various duties or powers involving receipt, 
safekeeping or disbursement of funds which would place him in contact 
with the same funds at several times during the same year. Different 
duties, however, would not make it necessary to count the same item 
twice in arriving at the total ``handled'' by him. Similarly, where a 
person has several different positions with respect to a plan, it would 
not be necessary to count the same funds each time that they are 
``handled'' by him in these different positions, so long as the amount 
of the bond is sufficient to meet the 10 percent requirement with 
respect to the total funds ``handled'' by him subject to risk or loss 
through fraud or dishonesty, whether acting alone or in collusion with 
others. In general, once an item properly within the category of 
``funds,'' has been counted as ``handled'' by a given person, it need 
not be counted again even though it should subsequently be ``handled'' 
by the same person during the same year.