The Labor Department has published 10 warning signs that the nation's workers can use to detect possible employer misuse of pension contributions in 401 investment programs.
"Most Americans who contribute to 401 pension plans never worry about the safety of their investments, and most . . . probably never have to," Labor Secretary Robert B. Reich told reporters Tuesday.However, he said, investigators in recent months have discovered a growing number of companies misusing their employees' 401 contributions.
More than 300 civil and criminal investigations are under way, Reich said, and more than 100 other cases have been closed, resulting in the recovery of $3.3 million.
While promising continued "vigorous prosecution" and legislative tightening "to eliminate any wiggle-room" in current law, Reich said "it is the workers themselves who will be the first line of defense. That's why we're issuing these warning signs - to help workers ask the right questions."
Reich said the 10 warning signs are:
- Your 401 statement is consistently late or comes at irregular intervals.
- Your account balance doesn't appear to be accurate.
- Your employer held your contribution for more than 90 days without investing it.
- A significant drop in your account balance that can't be explained by normal market volatility.
- A 401 statement that shows your paycheck contribution wasn't made.
- Investments listed in your account balance that you haven't authorized.
- Former employees having trouble getting their benefits.
- Unusual transactions, such as a loan to the employer, a corporate officer or one of the plan trustees.
- Frequent and unexplained changes in investment managers or consultants.
-Your employer has recently experienced severe financial difficulty.
Reich suggested that people unable to resolve questions about their 401 plans with their employer or plan administrator call the Labor Department's Pension and Welfare Benefits Administration.
Reich said there were 22 million workers in nearly 140,000 plans in 1992 with $553 billion in assets.
The plans are replacing traditional pensions as the main source of retirement income and are the only retirement plans at many companies. They let employees put a share of pretax wages and salaries into investments such as mutual funds, delaying income tax payments until retirement.