Available 24/7You’ve worked hard to put aside money for retirement by investing it in a 401(k) account. Sadly, there are plenty of negligent advisors, thieves, and scammers who will do everything they can to defraud you of your money. 401(k) scams are fairly common but not everyone knows the signs to look for. If you believe you may have been a victim of 401k fraud, the Investor Loss Center of Rikard & Protopapas can help you fight back.
The Importance of Protecting Your Retirement Savings
There are at least three good reasons to be vigilant about your 401(k) and other retirement savings:
- It’s your money: You’ve worked hard to plan for retirement, and you may have done so for years or even decades. You expect your money to be there because you realize that Social Security and regular savings likely will not be enough to cover your expenses when you retire.
- There are more scams than ever: Despite law enforcement and government efforts to crack down on 401(k) fraud, there are more ways than ever to scam people out of their money. It is almost guaranteed that these schemes will grow in number and sophistication, making it critical to safeguard your retirement.
- The government won’t help you: One would think that with all the government regulations and rules about 401(k)s, that these investments are guaranteed to be safe and secure. In reality, the government does very little to protect retirement funds and leaves it up to employees to monitor and take action on their accounts.
How 401(k) Fraud Occurs
Defrauding people of their 401(k) investments can happen in a number of different ways, including:
Missing contributions
When employees enroll in 401(k) plans, their employers are supposed to take contributions from their paychecks and invest them accordingly. But several different actors, including the employer, officials from the 401(k) plan, or plan service providers, can fail to ensure the money makes its way into the account. To avoid having your contributions go missing, take these steps:
- Review your pay stubs to ensure the money was taken out
- Make sure your employer matched your contributions, as required
- Examine your 401(k) account statements regularly
Unauthorized distributions
Only distributions that are authorized by the employee or required by the government should be permitted. Unauthorized distributions can sometimes be made by employers, but they are more likely to occur because of an outside source like cyber criminals. To make your account more secure, do the following:
- Use online access instead of paper statements: Put a stop to paper statements, since thieves can simply steal these documents from your mailbox. Use online access instead, with a strong password, to review your account activity and electronic statements.
- Use two-factor authorization: Many, if not most, 401(k) plans use two-factor authorization that requires two forms of identification before you can access your online account. Although it’s not foolproof, it can be a way to prevent theft.
- Sign up for account notifications: Your plan sponsor can send you text messages and email notifications to alert you to account activity. This can help you take action almost immediately if your 401(k) is fraudulently withdrawn.
Investment fraud
The plan sponsor itself may be guilty of investment fraud. This is becoming more of a problem with the rise of cryptocurrencies. Because these assets are not tangible, many investors caution against funding your retirement with them. Regardless, it’s a good idea to learn more about how your money would be invested, as well as who would be investing and accessing it, before enrolling in a 401(k) plan.
Common Signs of 401(k) Fraud
If you notice any of the following, it’s time to look more closely at your 401(k) and reach out to your plan manager, your employer, and possibly an attorney:
- Poor or inconsistent communication: Whether from your employer or any third party such as a plan servicer, you should expect and receive prompt, consistent, and accurate communications about your 401(k).
- Suspicious activity: This can come in many forms, such as more frequent activity or transactions you didn’t authorize. If it looks unusual, you need to ask questions.
- Frequent account changes: Your investment lineup may change frequently, or you could see new or suddenly higher fees. 401(k) plans should be relatively stable and not prone to constant changes.
- Errors when plan management changes: An example of this is when your company merges or is acquired by another business. The plan management might change, so be on the lookout for mistakes or fraud.
Types of 401(k) Scams to Watch Out For
There are many ways to cheat people out of their retirement. Some of the more common types of 401(k) scams involve:
- Phishing (email) scams
- Promises of unreasonably high returns
- Excessive or unusual fees
- Not being able to access your funds
- Identity theft
- Unprofessional plan management
Best Practices for Protecting Your 401(k)
To keep yourself as safe as possible from 401(k) fraud, our team recommends the following:\
- Review every pay stub: It may be tempting to only check once in a while, but you should examine each pay stub to make sure your employer is withholding the correct amount for your 401(k) contribution. Also check to see whether your employer is matching as promised.
- Review your 401(k) account activity: Examine your account statements as well so you understand all transactions and activities. Note whether the 401(k) items on your pay stub match what is actually being deposited into your account.
- Ask your colleagues: Without discussing how much you earn or contribute, you can also talk to your co-workers to see if they’re happy with the plan or whether they’ve had any issues.
- Stay informed: Read up on the latest retirement scams by checking with Investor.gov and other government sites that alert the public.
What to Do If You Suspect 401(k) Fraud
If something doesn’t seem right with your account, talk to your employer and the plan manager.
You also reach out to the Employee Benefits Security Administration (EBSA) (which enforces the Employee Retirement Income Security Act (ERISA)) and the IRS (which audits and tests plans to make sure that their accounting and administration are done properly).
However, keep in mind that the primary role of these agencies is to investigate and prosecute fraud. If you are missing money, you need to take more aggressive steps to get it back. That’s where our legal team comes in. You can file an ERISA lawsuit to hold fraudsters accountable and demand compensation.
Contact the Investor Loss Center
We’re here to take legal action against employers, plan managers, and others who embezzle and misuse 401(k) funds and engage in 401(k) fraud. However, it’s important to move quickly so the fraud can be tracked down and you have a better chance of recovering your money. To get started, call the Investor Loss Center today.