A Simple Solution to Protect 401k Plan Participant Assets

A recent suit sheds light

401k, protection, assets, theftThis should never be the scene outside your office.

Vantage Benefits Administrators, a Dallas-based “TPA, recordkeeper and professional fiduciary” and subject of an FBI raid in October amid fraud and theft allegations, was recently hit with a civil suit from MBA Engineering, a Blaine, Minnesota-based plan sponsor, earlier this year.

Specifically, the “MBA Engineering, Inc. Employees 401(k) Plan” names Vantage, as well as chief executive Jeff Richie and Wendy Richie, and alleges nefarious intent and actions related to the approximately $2,269,653.43 in retirement benefits missing from the plan.

“Defendants disguised their fraud for nearly a year by falsifying [p]lan participant account statements and participant accessible website information to make it appear that participant account balances were whole and accurate,” according to the filing. “All the while, [d]efendants systematically transferred millions of dollars in retirement benefits from the [p]lans to their own bank account, and for their own gain.”

Claiming Vantage and the Richies were plan fiduciaries, and therefore “owed the highest duties known in the law to the [p]lans and the [p]lans’ participants,” they instead carried out “a series of self-dealing, fraudulent acts designed to line their own pockets with the hard-earned retirement assets of MBA Engineering employees.”

The suit sheds light on the FBI’s actions, who at the time would not say what it was looking for. The Dallas Morning News reported that search warrants were executed at the offices “amid concerns that money may be missing from retirement accounts the company manages.”

“Defendants must repay the assets they stole from the Plans, with lost earnings or interest,” the MBA Engineering complaint states. “And in light of the depravity of Defendants’ fraudulent scheme, Plaintiff seeks exemplary damages based on Defendants’ outright fraud.”

When it comes to plan theft, plan sponsors can’t guard plan assets as one would by installing an alarm or posting a guard to stand outside a bank. To prevent awful (and still alleged) occurrences like this from happening, there is one proactive step advisors should recommend plan sponsors take, and it’s simple.

Review the plan’s trust statements and identify any unusually large plan withdrawals that can’t be attributed to participant payouts.

As long as the plan assets are held by a reputable custodian like Fidelity, Schwab, Empower, MassMutual, Vanguard, or really any other well-known investment institution, the statements will be accurate when it comes to mass distributions. One of my past clients, who custodied their assets with Bernie Madoff, was of course out of luck.

Advisor and plan sponsors can’t eliminate the threat of theft, but they can make certain moves to minimize the risk. Ensure they review trust statements when they’re received and ensure their ERISA bond and fiduciary liability insurance is up to date. If they, or you, see any suspicious activity, say something—immediately.

Ary Rosenbaum is an author and  ERISA/retirement plan attorney for his firm, The Rosenbaum Law Firm P.C. He is also the host of That 401(k) Conference, a fun and informative retirement plan conference at Citi Field, June 7, 2018. Rosenbaum’s latest book, humbly titled “The Greatest 401(k) Book Sequel Ever,” is available in Kindle and paperback at Amazon.com.

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