Some Employers Steal from 401(k) Plans

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Robert Powell

July 22, 2010, 12:01 a.m. EDT · Recommend (5) · Post:

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Retirement may mean a lifestyle downgrade

Rip the Band-Aid off housing and the blood gushes

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.

And on July 1, the Labor Department sued Explore General Inc. and its officers for allegedly failing to forward more than $70,000 in employee contributions and to collect more than $100,000 in employer contributions owed to the company's 401(k) plan in violation of ERISA. The lawsuit alleged that the company, Jaime Gonzalez and Paul Gong failed to timely segregate and remit to the plan employee contributions for the period from January 2002 through about March 2005. Gonzalez, who at the time of the violations was the owner and president of the company, and the company allegedly co-mingled the employee contributions with the general assets of the company and used the money to pay general operating expenses of Explore General. Read more about these cases at this Labor Department site.

To be sure, times are tough for small- and midsized business owners. And now more than ever, these owners, many of whom also serve as the company's retirement plan fiduciary, are caught between a rock and a hard place: Pay the bills or deposit their workers' money into the 401(k) plan. Sometimes, employers make the wrong choice.

But there are things you can do to protect your retirement savings long before your employers end up in a Labor Department press release for the wrong reason.

"Participants need to monitor their account statements to ensure that their contributions are being timely deposited and invested in the right funds," said David Wray, the head of the Profit Sharing/401(k) Council of America.

The experts recommend you monitor on a regular basis and leave no stone unturned. "Most firms provide account balance information via a variety of ways," said Tom Kmak, chief executive officer of Fiduciary Benchmarks.

Usually, you can get your account balance on the internet, via an 800 number, and in hard copy once per quarter. "Check all three to make sure they are in sync," said Kmak, even if it means checking after every paycheck.

You should be even more "conscientious about those reviews if you have reason to believe that your employer has cash-flow or other financial problems," said Fred Reish, a pension attorney with Reish & Reicher.

Your employer is required to deposit your contribution into your account within seven days of the payroll date, according to Mike Alfred of Brightscope. If your employer is taking longer than seven days to deposit your funds, and especially if they are taking more than 15 days, you should call the Labor Department immediately, he said.

Robert Powell writes about retirement issues and produces the "Retirement Weekly" subscription newsletter.

The housing market is like a seriously ill patient who was being given extraordinary treatment in the hope that it would be strong enough after a time to recover on its own, writes Steve Kerch.

10:58 a.m. Today10:58 a.m. July 22, 2010 | Comments: 116

The problem is letting employers get in between employees and their retirement savings. They should instead remove the $5k limit on self-directed IRAs. 401(k)s are a ripoff. They only benefit the employer and Wall Street."

- rklemaster | 1:02 a.m. Today1:02 a.m. July 22, 2010

"#investing - muni bond funds with a costly, risky twist - MarketWatch - http://on.mktw.net/bP2q0L" 6:36 a.m. EDT, July 21, 2010 from RJPIII

"MarketWatch - http://www.marketwatch.com/story/the-weeks-10-best-personal-finance-stories-2010-07-17" 2:40 p.m. EDT, July 17, 2010 from RJPIII

"The cover story in this week's issue of #Retirement Weekly is about the CLASS Act. Learn more at http://store.marketwatch.com" 10:58 a.m. EDT, July 16, 2010 from RJPIII

"Retirement may mean a lifestyle downgrade - MarketWatch - http://on.mktw.net/bEqN0a" 6:47 a.m. EDT, July 15, 2010 from RJPIII

"This week's top Personal Finance stories - MarketWatch - http://on.mktw.net/c5tVPv" 8:59 a.m. EDT, July 10, 2010 from RJPIII

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