One of the most lucrative benefits your receive from your job is the employer retirement plan. Whether it is a pension package, a 401(k), or a Roth IRA, these plans help supplement your Social Security benefits to ensure a comfortable post-employment life. Oftentimes, employers match contributions that help you build towards retirement even faster. This “free” money compounds year-over-year to get you closer to your long-term financial goals. 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 like 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, if you believe yours might be among them, here are ways to find out if your pension contributions are being misused.
7 Signs Your Pension Contributions Are Being Misused
When you utilize your employer-sponsored retirement accounts, you put your trust in them to handle your money. However, there are times employers have misused contributions without their employees’ knowledge. Here are some common signs to help you determine if your money is being mismanaged or misused.
1. You Spot Unusual Transactions.
These can take many forms. However, if you spot transactions that you didn’t make or authorize, it could be a sign that your funds are being misused. Indicators of misconduct might include 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.
2. You Notice 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 and follow up when you notice anything out of the ordinary.
3. There Is an 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. It’s better to be safe than sorry, so don’t worry about seeming paranoid by calling if your balance changes drastically at any point. The company will have nothing to hide if they haven’t misused your pension contributions.
4. There Is a Slow/No Transmittal of Contributions.
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. While it can happen, there is rarely an excuse for this not to be the case. Make sure all of your contributions end up in your account and that the deposits are prompt. If they aren’t, then it’s time to start asking questions.
5. Former Employee Have Had Issues with Your Employer.
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. By staying on top of your retirement accounts, you can get ahead of any issues that could arise later down the line.
6. There Are 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 few years may not be all that unusual, but it is worth following up. 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 from your employer. If they can’t provide an adequate reason, you can also contact the United States Department of Labor to initiate an investigation.
7. Your Account Has Unauthorized Investments.
Unauthorized transactions and investments are a major red flag. Whether it is purposeful misconduct or an honest mistake, your investments should only be the ones you authorize. If you come across any investments that you did not authorize, then contact your representative immediately to correct them. Although it isn’t always a sign of abuse, it is a serious mistake that requires action. The longer the mistake stands, the greater impact it will have on your account.
What To Do If You Suspect Misused Pension Contributions
While a single occurrence may not be cause for concern, repeated red flags mean it’s time to look into your accounts and determine if there is evidence of misused pension contributions. Your employer has specific fiduciary duties and obligations to you as outlined in the Employee Retirement Income Security Act (ERISA.)
If you suspect foul play, there are several routes your could take. However, the first step is to educate yourself. Know your rights and know what information your employer must provide. If you uncover a discrepancy, contact your company representative and have them explain. But, if you still feel uneasy, contact your HR Department, and ask to speak with someone responsible for the employee benefits programs.
There are also outside agencies you can contact if you suspect pension fraud. You could seek legal counsel from someone who specializes in corporate law, talk to local law enforcement agencies, or get in touch with the Employee Benefits Security Administration. However, if there is cause for further investigation, the IRS and Department of Labor may need to get involved as well. There is no need to suffer in silence. When you see signs of misconduct, you have a right to know how your funds are going.
- How Often Should a Retirement Plan be Reviewed?
- What To Do When an Employer Terminates Your Pension Plan
- Is $2 Million Enough To Retire at 60?