I was browsing the United States Department of Labor (“DOL”) website the other day and I came across an interesting article that talked about employer abuse of employees’ 401(k) contributions. I haven’t really thought much about this before as I have fortunately always worked for employers that I feel are trustworthy and ethical. However, the article made me realize that we as employees are putting a lot of trust in our employers to manage our 401(k) plans and with this trust comes a risk of abuse or even fraud.
The article that I read talked about the DOL recently undergoing an anti-fraud campaign and discovering that a small fraction of employers actually abuse employee contributions. They found that some employers are holding on to employees’ contributions for too long and are even using employees’ contributions for corporate purposes.
Below are 10 warnings signs that the DOL came up with that might uncover that your 401k contributions are being misused:
- Your 401(k) or individual account statement is consistently late or comes at irregular intervals.
- Your account balance does not appear to be accurate.
- Your employer failed to transmit your contribution to the plan on a timely basis.
- A significant drop in account balance that cannot be explained by normal market ups and downs.
- 401(k) or individual account statement shows your contribution from your paycheck was not made.
- Investments listed on your statement are not what you authorized.
- Former employees are having trouble getting their benefits paid on time or in the correct amounts.
- Unusual transactions, such as a loan to the employer, a corporate officer, or one of the plan trustees.
- Frequent and unexplained changes in investment managers or consultants.
- Your employer has recently experienced severe financial difficulty.
From my experience as a 401(k) auditor, I feel that it is not completely uncommon for one of these warning signs to occur from time to time. However, if you feel that you are consistently experiencing multiple of the signs above or even one of the signs on a consistent basis, it might not be a bad idea to contact the DOL and report your concerns.
By Ryan G. Wojdacz, CPA