The government suspects hundreds of companies are improperly diverting employee contributions intended for an increasingly popular form of retirement-savings plans.

The Labor Department said Wednes-day it is investigating 303 companies for abuses and said 100 companies already have agreed to restore more than $2.6 million in contributions that were never deposited in employee 401 retirement accounts."We have reason to believe these companies are simply taking contributions from employees and using the money for their own purposes," Labor Secretary Robert Reich said.

A private business group, Profit Sharing Council of America in Chicago, said the abuses uncovered by the Labor Department don't represent a broad problem.

"You're always going to have a few bad actors," said David Wray, the group's president. "Companies that find themselves in extreme financial duress are tempted to take advantage of that pool of cash to meet immediate needs. It's a rare exception."

He said that technology makes it easier for workers to police the funds. In many cases, he said, money is transferred immediately from payrolls to retirement accounts and employees can call an 800 number to make sure the funds were deposited.

William Bywater, president of the International Union of Electrical Workers, said the Labor Department probe "gives substance to our worst fears. This is why we are so concerned about legislation advanced by Republicans in Congress to allow corporations to skim money from workers' pensions."

The GOP proposals would let corporations withdraw billions of surplus dollars from their pension funds to invest elsewhere and to pay for other employee and retiree benefits.

The Labor Department said its investigation is intended as a warning to all businesses that the government is watching.

"We intend to send a clear signal to all companies, large and small, that we will increase and intensify our efforts to stop this problem," said Reich.

The agency expressed concern that misuse of 401 contributions may have become as much a problem as has been the underfunding of traditional pension plans.

The Labor Department investigation was first reported by The Wall Street Journal.

Department spokesman Scott Sutherland confirmed that companies could face civil lawsuits and individuals at the firms could be prosecuted for misusing the 401 funds. The Justice Department and state prosecutors are cooperating in the investigation.

There are some 140,000 401 savings plans in operation nationwide, with more than $650 billion in assets. The plans are replacing traditional pensions as the main source of retirement income for millions of workers and are the only retirement plans at many companies.

The system lets employees put a share of pre-tax salary into investments such as stock or bond mutual funds, delaying income tax payments until retirement.

Federal regulations require companies to deposit employee contributions as soon as possible within 90 days. The rules are aimed at preventing companies from using the regularly deducted contributions - and income or capital gains derived from the investments - for the benefit of the firm.