Fraud Tip of the Day - July 6

401(k) Plan Misuse Warning Signs

Protect your retirement by looking out for warning signs that your 401(k) plan is being misused by your employer.

Do you worry about your 401(k) plan? Sure, many of us worry that we aren't taking full avantage of them by maxing out contributions or distributing our investments in ways that maximize the growth of our nest eggs. For most of us, that's all we'll ever stress about. Some people, however, have additional worries. The Labor Department regularly receives complaints from 401(k) plan participants describing situations in which their employers either divert retirement fund contributions for their own purposes or delay deposits into employee accounts.

You may be wondering how 401(k) plan misuse and abuse can be detected and stopped. Fortunately, the Labor Department has created 10 warning signs indicating problems with your 401(k) plan. If any of these ring a bell, contact the Labor Department and report your concerns immediately:

10 Warning Signs there's trouble with your 401(k):

• Your 401(k) statement always shows up late. Most plans will issue statements on a monthly or quarterly basis. Often, you can get instant access online. One late statement shouldn't cause much worry. If you see a pattern of irregular or extremely late statements, do a little more investigating.
  
  
• The numbers don't add up. Your account balance does not appear to be accurate. You should have a pretty good idea of what's in your account based on your paycheck stubs. If your reported contributions don't match the amount you've asked to have deferred from your paycheck, there may be trouble.
  
  
• Contributions aren't deposited in a timely manner. Your employer failed to transmit your contribution on a timely basis. Those deposits should be made as soon as feasible, but no later than the 15th business day of the month after your employer withholds the money from your paycheck.
  
  
• The market's up but your balance drops. There's a significant drop in your account balance that cannot be explained by market conditions. Look back at your old statements and check the performance of your investments. If something's still missing, it might be your money.
  
  
• Your statement indicates that paycheck contributions weren't deposited into your account. This could be an honest error. It could be something you should worry about. You'll want to ask questions to find out what happened and make sure your money ends up where it's supposed to.
  
  
• Your money isn't allocated to the investment options you selected. Under normal circumstances, you should be in control of all your investment decisions. If your plan changes its investment options, it should give you plenty of notice. If things change suddenly and without warning, check it out.
  
  
• Former employees report benefit payment problems. Former employees have trouble getting their benefits paid on time or in the correct amount. You're funding this account so you can someday use the money in retirement. If other employees have a hard time accessing their benefits, it may be a sign that the money's not there. Once you retire or leave your job, you can get more control over your money by rolling your balance into an IRA.
  
  
• Unauthorized transactions appear on your 401(k) statements. If you notice unusual transactions, such as a loan to your employer, a corporate officer, or one of the plan trustees. Contact the Labor Department immediately and ask them to investigate.
  
  
• 401(k) administration is like a revolving door. If the people managing your 401(k) change so frequently that you can't help but notice, this could indicate a problem. Your 401(k) administration system should stay relatively stable, so these signs of instability could signal that something's gone wrong.
  
  
• Your employer is in financial trouble. The Labor Department reports that many 401(k) violations occur when a company has money woes. If you know that your company's having trouble making ends meet, pay closer attention to your retirement account. Those retirement accounts are a tempting honey pot just waiting to be exploited by the desperate.
  
  

If you suspect your 401(k) plan is being abused, contact the Labor Department's Employee Benefits Security Administration for help. They enforce laws governing pensions and other retirement accounts.