Theft from 401 (K)

[n2mark]

is on the rise, labor dept says.......

http://www.azcentral.com/business/articles/0302wsj-401k02-ON.html

[amazona]

1. did you know your 401K is not insured?

So your private account, from which you had your salary cut down all these years since 1982 or whenever...the owner of the company can help himself, flee the country, and you're screwed.

And people think Social Security is risky?

This is sick.

All 401Ks should be gov't insured like bank accounts at least up to a reasonable amount like $500K or so. You can't live another life several decades long and replace your retirement if it is stolen!

The conservation movement is a breeding ground of communists
and other subversives. We intend to clean them out,
even if it means rounding up every birdwatcher in the country.
--John Mitchell, US Attorney General 1969-72

[Hugin]

2. Very important...

Kick.

[stray cat]

3. I did not know 401s were not insured.

This is bad.

[demgrrrll]

4. I didn't know either. I don't like the honor system when it comes to

corporations and my money.

[swag]

5. Here's an excerpt from the article (I prefer a little text with my links)

Defined-contribution plans such as 401(k)s - in which employers and employees make contributions but which offer no guaranteed payouts - have skyrocketed in popularity. But worker protections are relatively weak. While the federal government requires a yearly, independent audit for retirement plans with at least 100 workers, that doesn't cover the vast majority of plans. According to the Labor Department's most recent statistics, 627,905 defined-contribution plans covered fewer than 100 workers and had no required audit in 1999. Only 55,195 such plans fell under the rule.

Employees often have little recourse. Traditional pension plans with fixed payments to retirees, known as defined-benefit plans, can be bailed out by the Pension Benefit Guaranty Corp. if they fail. There is no such safety net for defined-contribution plans.

Susana Longo, compliance officer at Atlanta investment-advisory firm Applied Financial Group, was indicted in January on federal charges of stealing $5.4 million in retirement savings from 220 workers at a car dealer, two medical practices and an audio-visual specialist. She acknowledged spending the money on two beach houses, a diamond ring, a 1,600-bottle wine collection and a Porsche 911, according to a lawsuit filed by the advisory firm.

The disappearing assets went undetected for four years. If one of the business owners hadn't read his plan's account statement, where he spotted two suspicious transactions, the fraud could have continued "until it fell under its own weight when people wanted their money out," says Katherine Addleman, the Securities and Exchange Commission's associate enforcement director in Atlanta.

Employees could face greater risks as new types of personal accounts spread. The Medicare prescription-drug law created health-savings accounts in 2003 for workers in high-deductible medical plans. Millions of workers already use flexible-spending accounts for glasses and other health needs typically not covered by insurance, and the percentage is rising, according to Hewitt Associates, a Lincolnshire, Ill., benefits administrator.

[trogdor]

10. The 55,195 plans > 100 cover a lot of people.

We're talking about really big companies like Lockheed-Martin, GM, or Microsoft. If you are one of the people whose plans fall under the 627,905 that are too small, then you have a problem; otherwise, you should be OK.

Some helpful hints from the article (text in bold is mine):
Roll your money into an individual retirement account when you retire or change jobs.. Eight retirees who left their assets in one of the four affected plans were receiving monthly checks from their accounts until the plan was frozen last spring amid the probe, says William Whitmire, the company's director and the plan's trustee. "Some of them are really desperate, but there's nothing that can be done until the insurers come to agreement," he says.

Make sure you are getting all your statements, and force yourself to reconcile them. The amount deducted from your paycheck should match the amount deposited into your 401(k) account.

The trustees of the four Atlanta-area plans were supposed to get regular statements from both the retirement-plan administrator and the custodian of the plans' assets. The trustees of the two hardest-hit plans didn't get their custodial statements regularly, because they were sent to other addresses. When trustees did get custodial statements, they didn't review them.

Don't assume you will receive a heads-up from your employer or plan custodian. As the alleged fraud in Atlanta began to unravel, federal agents showed up at Mr. Whitmire's office with a stack of about 75 forged checks made out to people "I had never heard of," he says. He claims the plan's custodian didn't call to make sure the checks were authentic.

[lonestarnot]

6. NEVER trusted 401 Ks for this very reason! Nope only thing they can't

make off with is real estate that you live on and that is up for grabs with ever increasing taxes...there is no way out! We are doomed!

[AnneD]

7. A Joey Heatherton high kick

this will effect many in the DU and the public. We need to be aware and press for better laws ASAP.

[disillusioned1]

8. If the corporate thieves don't steal your 401k and skip the country

They can do what they did in the 90's. "Downsize". Which will force you to spend your 401k before retirement age, by laying off middle aged middle managers.

[MsUSA]

9. Just another way for them, to never let us get what we're due.

There won't be a middle class anymore, it'll be the haves and the have nots. Rich and poor.........and my mattress is starting to look pretty good. How about gold, or platinum, platinum is worth a lot more. I've been contributing to my 403B since 1985, are 403B's in this situation also??

[n2mark]

11. I had a 403, didn't accumulate much interest

[n2mark]

12. I can't remember is SS money that is now deducted

from your pay before or after taxes?

What is the difference of collecting SS, or just collecting money from 401's or 403's regarding taxes?

I'm not an expert on this. I did take money out of a 403 and paid to the gill with taxes, not once but twice.

[BigBearJohn]

13. I did not know 401`s are not insured

[orpupilofnature57]

14. And that's what "wall street" depends on,unwarranted trust.

[FormerOstrich]

15. I didn't realize the risks either....

until AFTER my money was stolen. The company I worked for stopped making payments into the 401K funds. Eventually they filed bankruptcy. The bonds and insurance didn't cover much and the unsecured creditors committee had to fight the insurance companies just to get the little bit they did. The bankruptcy case was active over five years. Last I checked the CEO still lives in an 8M dollar home and I've had mine go into foreclosure twice since then. I will never see a dime they owe me.

[jbnow]

16. Did you at least get

The money YOU had put into it, your contributions?

I had no idea there were these risks. I am so sorry that happened to you and so many others.

I don't get the role of the CEO in these....should he be held more accountable? What horror to see him living so well.

[FormerOstrich]

18. No, I did not recover my

contributions. The Department of Labor sued the CEO and CFO. Then somehow they cut a deal that allowed them to pay a portion of the money. As punishment, the CEO and CFO were not allowed to recover any of their contributions (go figure). In addition to the 401K I was swindled out of wages, un-reimbursed expenses, and contributions to the employee stock purchase plan. I will always be of the opinion that the company was intentionally driven into bankruptcy.

Thank you for your thoughts. It was a very expensive lesson.

[jbnow]

19. That shocks me

Your contributions...being something you can lose is just stunning. It shouldn't be in "their" hands anymore...it is your wages.

I understand if the stocks invested in fall you can lose money but this is boggling me. How could it be part of their assets to even be at risk in a bankruptcy?

An expensive lesson? In what? Not trusting?

You don't have to answer this, I am just emoting. I am sorry it happened to you...and sorry to know you must be one of so many who learned the same "lesson"

[FormerOstrich]

20. tis true...

I was really taken back. I thought the 401k contributions were subject to some sort of regulations that made them secure. I was wrong. Granted had they actually ever made the payments into the funds then they would have been more secure.

The Department of Labor actually had a press release telling what a success they were with this company. I called the investigator and pointed out I had not recovered the amount I had contributed to the plan (much less any match or earnings). He had me fax him all my information but stated up front it was a done deal. I never heard back from him (I didn't think I would).

I really do appreciate your thoughts. I just don't take anything for granted anymore. But....I'm sure I'll be taken again because I refuse to enter every new business relationship with the thought they are about to steal something from me. I try to minimize my risks but I just won't live my life with that sort of paranoia.

Thanks!!

[lonestarnot]

17. kick

:kick:

[Princess Turandot]

21. The theft they discuss could actually happen to any investment account..

since the custodian of the money was the crook. She probably targeted retirement accounts since many people tend to review these types of account statements less often. They also only show up quarterly usually. I suspect that the crook worked at a smallish firm: in the type of job she had, you would not normally ever be able to have any access to investor funds at all, at least not in a large, well controlled company.

If you have money in an account related to a prior employer, you can usually roll the funds over from whatever investment company the employer used into an 'IRA'. If you rollover funds to a bank, you can always invest the money in FDIC insured instruments like CDs. The earnings rate will likely be lower, but if you're within the $100,000 per depositor limit, it will be insured.
(NB: Many banks also offer investment accounts now such as mutual funds; if you roll your $$ into one of those, it will still NOT be FDIC insured.)