The Department of Labor intensified its crackdown on 401(k) contribution fraud, revealing that its Employee Benefits Security Administration recovered over $2.4 billion in direct payments to plans, participants, and beneficiaries in fiscal year 2021. This announcement, made in November, underscores the agency’s ongoing commitment to protecting retirement assets from fraudulent activities and ensuring the security of employee benefits.
It closed 1,072 civil investigations with 741 of those investigations resulting in monetary results for plans or other corrective actions, significant by any measure.
“Participants fear a small number of dishonest employers might deduct 401k contributions from their paycheck to then put it in their desk drawer.”
It also illustrates a larger and recurring issue; participant fears that a small number of dishonest employers might deduct 401(k) contributions from their paycheck to then, as GRPAA founder Bill Chetney says, “put it in their desk drawer.”
While far from a widespread problem, an anti-fraud campaign by the Department of Labor nonetheless uncovered a small fraction of employers who abused employee contributions by either using the money for corporate purposes or holding on to the money too long.
To help combat the issue and keep participants informed, here are 10 warning signs that 401(k) and other retirement plan contributions are being misused, courtesy of the DOL.
10 Warnings Signs
1. The 401(k) or individual account statement is consistently late or comes at irregular intervals
2. The account balance does not appear to be accurate
3. The employer failed to transmit the contribution to the plan on a timely basis
4. A significant drop in an account balance that normal market movements cannot explain
5. The 401(k) or individual account statement shows contributions from a paycheck were not made
6. Investments listed on a statement are not what was authorized by the participant
7. Former employees are having trouble getting their benefits paid on time or in the correct amounts
8. Unusual transactions, such as a loan to the employer, a corporate officer, or one of the plan trustees
9. Frequent and unexplained changes in investment managers, consultants, or specialist
10. The employer has recently experienced severe financial difficulty
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