401(k) Theft: 7 Signs Your Employer is Stealing Your Savings

Last Updated Nov 16, 2010 6:02 PM EST

Federal officials filed 24 law suits Monday in a sweeping crack-down on employers that rob worker retirement savings accounts. The coordinated bevy of law suits, filed from Kentucky to California, involved largely bankrupt and defunct firms that allegedly raided their employee's retirement savings accounts before going under.

U.S. Department of Labor spokeswoman Gloria Della said the agency, which is charged with protecting money set aside in employee benefit plans, does not know the total amount of 401(k) assets at risk or even whether employer theft of retirement assets is rising. Della also cannot say what percentage of stolen retirement assets are ever returned to the rightful owners.

The Labor Department does know that they're hearing more about 401(k) thefts, possibly as the result of the nation's lackluster economic recovery that has left many small employers struggling. And the agency is urging employees to be vigilant and report any sign that their employer is absconding with their retirement dollars.

"Workers are often the first line of defense in identifying problems with their benefit programs," said Phyllis C. Borzi, assistant secretary for the DOL's employee benefit security arm at a press conference. "We want to equip them with information to help the department protect and preserve their right to plan benefits."

What are the warning signs that your employer is stealing your 401(k)?

1. Financial woes: If you work for a small company that is struggling, watch out. Small companies often lack the internal controls -- such as outside plan trustees and managers -- to stop owners from "borrowing" worker 401(k) contributions when times get tough. How would you know whether the employer's finances are shaky? There are dozens of signs, from late payment notices from utility companies, to suppliers complaining about not getting paid.

2. Manager upheaval. If your company does hire outside managers to administer the 401(k), pay attention when those managers start quitting frequently or without explanation.

3. Retiree woes: Have retired workers had trouble getting money out of the plan? If an employer is fabricating plan statements, the experience of retirees is telling. When they can't get their money easily, it's often a sign that it's not there.

4. Late statements: You should receive plan statements at regular intervals. If your statements start coming late or irregularly the plan could lack the controls to keep your employer's fingers out of your pocket.

5. Missing and tardy contributions: Employers must make your contributions in a "timely" fashion, according to the Department of Labor. What "timely" means is debatable, but if this month's contributions aren't in your account by the end of next month, you have a problem. Call your local Department of Labor immediately.

6. Off-balance: Your contributions are being made, but your balance looks suspicious. If the numbers don't add up -- or if there is a sudden drop in your balance that's inconsistent with market performance -- that can be a sign that your employer is raiding the account.

7. Unauthorized investments: In most plans, you direct the investment decisions. If your money is going into an investment that you didn't authorize, or if you see that the plan is lending money to your employer, a corporate officer or a plan trustee, call the Department of Labor and report it.

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