Ten 401(k) Warning Signs

It used to be that employers' pension plans were based on set contributions made by employees (sometimes matched by the employer), which were then invested on behalf of the employees. While this is often still the case, more and more employers are now asking their employees to make voluntary or mandatory contributions to pension and other benefit plans. This is particularly true for 401(k) savings plans. These plans allow you to deduct from your paycheck a portion of pretax income every year, invest it and pay no taxes on those contributions until you withdraw the money at retirement.

But just because your company manages your 401(k) savings doesn't mean you shouldn't be wary. In fact, an anti-fraud campaign by the Department of Labor uncovered a number of employers who abused employee contributions by either using the money for corporate purposes or failing to forward it to the company's 401(k) plan on time. Here are 10 warning signs that your pension contributions are being mishandled.

1. Your 401(k) or individual account statement is consistently late or comes at irregular intervals.
2. Your account balance does not appear to be accurate.
3. Your employer failed to transmit your contribution to the plan on a timely basis. According to the Department of Labor's Pension and Welfare Benefits Administration, employers must transmit contributions no later than the 15th business day of the month immediately following the month in which the contributions were withheld or received by the employer. Your account statement should reflect your latest contribution.
4. There is a significant drop in account balance that cannot be explained by normal market ups and downs.
5. Your 401(k) or individual account statement shows your contribution from your paycheck was not made.
6. Investments listed on your statement are not what you authorized.
7. Former employees are having trouble getting their benefits paid on time or in the correct amounts.
8. You find unusual transactions, such as a loan to the employer, a corporate officer, or one of the plan trustees. You won't see this on your individual statement, but check the Summary Annual Report, which you should get automatically every year from your plan administrator.
9. There are frequent and unexplained changes in investment managers or consultants.
10. Your employer has recently experienced severe financial difficulty. If your company is having cash-flow problems, it is tempting for your employer not to make the required contributions to 401(k)s, or worse yet, to use those employee-contributed funds to stay afloat.

If you suspect that the people responsible for investing your pension money are violating the rules, call or write the nearest field office of the Department of Labor's Employee Benefits Security Administration. More information can be found at www.dol.gov/ebsa/.

-- Additional reporting by Jennifer Hoche

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• U.S. Department of Labor
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