MarketWatch: Some employers steal from 401(k) plans

[marmar]

By Robert Powell, MarketWatch


BOSTON (MarketWatch) -- Most of the time, the money you contribute to your 401(k) ends up in your account. But there are times when it doesn't, as evidenced by a recent flurry of press releases from the U.S. Labor Department's Employee Benefit Security Administration.

Roughly once a week in July alone, some of the 150 million Americans covered by the more than 700,000 employer-sponsored retirement plans received notice that their hard-earned money ended up in the wrong pocket.

On July 15, the Labor Department sued Savannah attorney Benjamin Eichholz and the Eichholz Law Firm to recover assets belonging to the Eichholz & Associates P.C. Retirement Plan and the Eichholz & Associates P.C. Employees Pension Plan. In its lawsuit, the Labor Department alleged "the defendants violated the Employee Retirement Income Security Act by improperly transferring, lending or using plan assets. The defendants also imprudently lent plan assets, invested in high risk stocks and failed to ensure the plans were covered by a fidelity bond."

On July 8, the Labor Department obtained a consent judgment ordering Eric C. Mitchell & Associates Inc. and Eric C. Mitchell to restore $20,723 in funds to the Bedford, N.H., company's 401(k) retirement plan. The defendants served, respectively, as the plan's sponsor and administrator, and as its trustee.

According to the release, the judgment resolved a Labor Department lawsuit that alleged the defendants had violated the Employee Retirement Income Security Act, or ERISA, since June 2008 by failing to forward contributions withheld from employees' wages to the plan and using the funds for purposes other than plan benefits. ................(more)

The complete piece is at: http://www.marketwatch.com/story/some-employers-steal-from-401k-plans-2010-07-22

[gratuitous]

1. Fear not, the Free Market will set this all right . . . eventually

Let's privatize Social Security; I'm pretty sure nobody would try to swipe that. And if they do, we'll let the Magic of the Marketplace work it out. No need for all those expensive government regulations, just hand the keys to the chicken coop over to your friendly neighborhood fox.

[JustAnotherGen]

2. I may reach out to those people

I'm a Global Crossing Whistle Blower. It doesn't surprise me. I only put in a enough to offset my taxes at my current employer as a result of my Global Double Crossing experience.

Dayum shame that 10 years later . . . here we go again.

Never, ever, ever trust your employer to do right by you. Put in enough for the tax break then commit to putting anything and everything you can away on your own. They are never ever to be trusted. And oh btw - we got only a fraction of what they stole from us back.

[xchrom]

3. Recommend

[Phoebe Loosinhouse]

4. Combine that fact with a recent Supreme Court Decision that says no recourse

if your pension plan administrator screws up. Yes, it's true.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8662153

NOW, who is making IDEAL situations for certain foxes to rob certain hens?

I'm starting to question whether it is sound reasoning to leave your 401K money at the mercy of crooked employers and plan administrators.

Also, NOW employees are automatically enrolled in 401K's - you have to "opt out" whereas before you had to opt in.

Pattern? Anyone seeing a pattern?

[xchrom]

5. +1

[customerserviceguy]

8. The case you cite

is one involving a pension, not a 401K plan that the employee directs as to what investments are held.

Once your 401K contribution (and match, if any) go to a major firm to administer, your employer cannot claw it back without wrongdoing on your part. If you work for a big firm, you probably have nothing to worry about, but if you work for a small one that is always on the edge financially, I can see avoiding your workplace 401K.

I wish someone had automatically enrolled me in a 401K back when I started my working years, I felt invincible in my 20's, and didn't bother saving anything then, or in my 30's. Right now, I've been in a couple of plans (two different employers), and have way less than $10K at the age of 54. I'm going to have to scramble to save like hell in order to be able to retire at 67 on full Social Security benefits, if that is even still possible then.

[Phoebe Loosinhouse]

10. Both defined benefit plans and 401Ks are subject to ERISA laws (I think)

I don't know that 401K's are excluded from the Conkwright decsion. 401K's also have plan administrators who could also make errors.

I would be happy if you were correct that Conkwright doesn't apply to 401Ks, by the way.

I once worked for a smaller company that had a very shady 401K in my opinion. The employer match was never made in a timely fashion and I believed that I saw a few of my own contributions go missing or uncredited. I followed it very closely on a spreadsheet, matching paycheck withholdings to 401K stock purchases. Naturally, I just ended up pulling everything out and putting it into a private IRA because I could clearly see some kind of malfeasance, even if it was just laziness and bad bookeeping, going on.

[customerserviceguy]

11. Plan administrators in 401K's might make errors

but the participant would always be able to check where his/her money is invested, through a quarterly statement, if not on a daily basis on a website. If the plan administrator doesn't have a website, well, that's a red flag. Certainly the rinky-dink nature of the plan that you were offered was much less safe than the big firms that large corporations use. The muckety-mucks have their money there, as well, they sure don't want to be left high and dry.

In a defined benefit pension plan, the plan administrator gets to choose what investments might be needed to provide the expected benefit. In a self-directed 401K, the worker makes the choice, for better or for worse. Stick all your eggs in that risky emerging growth stock fund, and when the dot-com boom goes dot-bomb, then you're stuck with the results.

That's why I use exclusively money market and bond funds for my 401K's. And right now, I'm out of bonds, anticipating an interest rate increase.

[northernlights]

12. and good luck trying to opt out -- be prepared with a good strategy

it can be done, but be prepared for dirty tricks and attempts to stall.

My company sent us the 401K notice which said we could opt out at the number provided below. The area "below" was several inches of blank page. Then, at the very bottom of the page in about 8 point type there were 2 lines of type. As a former collateral manager, I initially assumed that was a copyright disclaimer and inventory control number, which it was. It wasn't until I looked closely that I saw a phone number in there.

So I called to opt out. The rep clearly had been given the goal of trying to wear me down. 6 times I said very clearly, "I do NOT want to be in the 401k plan. I WANT TO OPT OUT."

6 times, he said, "You've been very clear. You want to opt out. Now, do you want to blah blah blah blah blah.

So I baited him. I told him I'd saved a lot for retirement already...and it had been stolen.

Here came the sales pitch, "AAAWWWW, are you worried because the market dropped?"

"NO. I SAID I WAS ROBBED. I WAS DRIVEN FROM MY HOME BY A REGISTERED SEX OFFENDED. I WAS DEFRAUDED WHEN I BOUGHT MY HOME. MY IDENTITY WAS STOLEN BY A FORMER COLLEAGUE AND HIS WIFE -- WHO IS A VP AT YOUR CLIENT XYZ -- AND THE GOT EVERYTHING. EVERYTHING!!!!!"

By the time I was through with him, he was nearly crying and he prayed for me. So take heart. It can be done, but don't think it'll be a quick phone call.

[valerief]

6. What do they think it is--Social Security? I figure the fascists in the

market won't let me get my 401K savings anyway. They'll deplete it. Unfortunately, I'm only a few years from retirement (well, if I can dream of such a thing).

[customerserviceguy]

7. Some employers don't turn payroll taxes in, either

I'd bet this firm was doing that, as well. The only difference is, when it's payroll taxes, and you have check stubs that show the deduction, the IRS will give you credit for it.

Any time a firm is circling the drain, this sort of thing can happen. Usually, the warning sign is that they announce they are suspending the company "match". At that point, you'd be wise to opt out of the 401K, and just try to save the money on your own.

[Recursion]

9. 401(k)s are a scam to prop up the stock market

They're not going to let you keep that money. We're already seeing it start.

[aquart]

13. And the chance of recovering this money is..........what?

Because if we cannot seize the personal assets of these thieves, they have no incentive not to steal.