[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: 29CFR2580.412-19]

[Page 565]
 
                             TITLE 29--LABOR
 
CHAPTER XXV--PENSION AND WELFARE BENEFITS ADMINISTRATION, DEPARTMENT OF 
                                  LABOR
 
PART 2580--TEMPORARY BONDING RULES--Table of Contents
 
                      Subpart D--General Bond Rules
 
Sec. 2580.412-19  Term of the bond, discovery period, other bond clauses.

    (a) Term of the bond. The amount of any required bond must in each 
instance be based on the amount of funds ``handled'' and must be fixed 
or estimated at the beginning of the plan's reporting year, that is, as 
soon after the date when such year begins as the necessary information 
from the preceding reporting year can practicably be ascertained. This 
does not mean, however, that a new bond must be obtained each year. 
There is nothing in the Act that prohibits a bond for a term longer than 
one year, with whatever advantages such a bond might offer by way of a 
lower premium. However, at the beginning of each reporting year the bond 
shall be in at least the requisite amount. If, for any reason, the bond 
is below the required level at that time, the existing bond shall either 
be increased to the proper amount, or a supplemental bond shall be 
obtained.
    (b) Discovery period. A discovery period of no less than one year 
after the termination or cancellation of the bond is required. Any 
standard form written on a ``discovery'' basis, i.e., providing that a 
loss must be discovered within the bond period as a prerequisite to 
recovery of such loss, however, will not be required to have a discovery 
period if it contains a provision giving the insured the right to 
purchase a discovery period of one year in the event of termination or 
cancellation and the insured has already given the surety notice that it 
desires such discovery period.
    (c) Other bond clauses. A bond shall not be adequate to meet the 
requirements of section 13, if, with respect to bonding coverage 
required under section 13, it contains a clause, or is otherwise, in 
contravention of the law of the State in which it is executed.

[[Page 566]]