One of the most common and lucrative perks of employment we discuss on the site is the employer retirement plan. Whether it is a pension, a 401(k), or a Roth IRA, these plans help set you up for a cushy post-employment life. Often times, employers match contributions, and this leads to lots of “free” money that compounds year-over-year. While it is a very attractive option, it is always good to stay wary about your funds. Even in an account as hard to fiddle with as a 401(k), there are ways for employers to abuse them. The US Department of Labor found that a small fraction of employers committed this abuse, so here are ways to find out if your pension contributions are being misused:
Unusual Transactions: These can take many forms. Red flags would be large sums used as loans to company executives or plan trustees. Any money being taken out, but not invested, should be investigated. Traditionally, the account should be growing, not shrinking.
Inconsistent Account Statements: If your account statements aren’t coming on consistent dates, you should immediately contact your provider. This is especially true if you never get one at all. Missing or inconsistent statements could be an attempt to conceal shady practices. Stay vigilant.
Inaccurate Account Balance: If your balance doesn’t seem right, call and get an explanation. If it is a result of legitimate market fluctuation, your rep can explain it to you in detail. Better safe than sorry, so don’t worry about seeming paranoid by calling if your balance changes drastically at any point.
Slow/No Transmittal: It should not take more than a week for your contribution to show up in your account. If your employer is failing to transmit your contribution to it, you need to find out what the cause is. Your pension contributions should be going straight into the account, and there is rarely an excuse for this not to be the case. Make sure all of your contributions are added, and done so promptly.
Former Employee Issues: A major sign of things to come is how former employees are dealing with their plans. If they are having trouble accessing their benefits, this is a major red flag. If they aren’t getting their benefits, or getting them for the wrong amount, you can bet you will have the same issues.
Frequent Changes in Management: Your account will have designated managers and/or consultants. If these are changing often, you may have an issue. Once every couple/few years may not be all that unusual, but it is worth following up on. Now, if your account management is changing multiple times each year, something is probably amiss. Figure out why, and make sure you get a legitimate explanation, or contact the USDL.
Unauthorized Investments: This one is a red flag no matter what. Whether it is purposeful misconduct, or an honest mistake, your investments should be the ones you authorize. If any investments were not authorized by you, they need to be corrected. This isn’t always a sign of abuse, but it does always need to be fixed.