How To Secure 401(k) Plans from Mistakes and Fraud? Retirement Planning
Question: I am Rochelle, working from last 37 years in a private firm. For my retirement i have saved money in my companies account. Now Just a year left for my retirement, i wanted to know, what precaution do i need to take to avoid any error in the process or even due to fraud. .
The money you from your salary for retirement savings should ideally go to your retirement account. If you are unlucky, this amount may not get into your account and instead find its way into someone else’s account. All this while you are blissfully unaware of it! When can this happen? It can happen due to a error in the process or even due to fraud. You need to know when this can happen and what to do if something like this happens to you.
Missing Contributions: If your deductions don’t get reflected in your 401(k) account within seven days of the deduction then you have reasons to smell a rat.
Incorrect Contribution Figures: You also have reasons to doubt if the money deposited is less than your deduction. This may happen if a payroll servicer siphoned off a part of the 401(k) funds into their own account.
Unusual investments: If a 401(k) trustee invests in assets that are not publicly priced and traded you have yet another reason to get alert. A year back, the government found a 401(k) plan trustee guilty of using millions of dollars in 401(k) assets to purchase a personal asset.
All qualified retirement plans require a fidelity bond (to be purchased from an insurer named on the Department of the Treasury’s listing of approved sureties) to safeguard employees from losing money, As per government rules, Fidelity bonds must be no less than 10% of plan assets. Employers who offer a 401(k) plan should update the fidelity bond company with their latest account value every year. Additionally an employer should also confirm that payroll providers should have their own bonding.
Employers should review their plan’s 5500 annual Department of Labor retirement plan report to check the preceding year’s fidelity bond amount and total account value.
Employers should not lose time in contacting the Department of Labor and request an investigation no sooner than they suspect a fraud in their 401(k) plan. Alternatively, if there is a inadvertent mistake, employers can initiate moves to correct it before litigation is required.