So you think your 401(k) money is safe? Companies stealing from employees 401k plans

[Herman Munster]

http://ktla.trb.com/news/la-fi-retire10dec10,0,2327905.story?coll=ktla-news-1

MUSKEGON, MICH. — Jim Elliott, 55, spends his days clambering onto the tops of houses, taking measurements for the wooden trusses his company sells to support roofs through long, snowy winters. Not long ago, Elliott thought his ladder-climbing days would soon be over. With a few more years of work, his 401(k) account would be large enough to let him retire at 60 and spend his days with his three grandchildren. Then Elliott learned that his former employer had looted the company's 401(k) plan. The $230,000 he had saved over three decades was gone. A government-appointed trustee is trying to recover the money, but workers have been told they can expect to get back perhaps half what they lost.

"I'm going to be up measuring roofs when I'm 75 years old," said Elliott, a husky man with steel-gray hair. "I didn't do a lot of things over the years because I was trying to save for retirement. Now I see I was paying for somebody else's vacations." If Elliott had a traditional pension, his retirement checks would be guaranteed under a federally backed insurance plan. But no comparable protection exists for 401(k)s, even though they are rapidly replacing pensions as the financial backbone of retirement for most Americans.

By law, all assets in 401(k) plans must be covered by private insurance policies known as fidelity bonds. But the bonds are required to cover just 10% of the retirement plan's assets or $1 million, whichever is less. At companies with fewer than 100 employees — such as Elliott's company — the plans are not subject to annual independent audits that could deter embezzlement.

An estimated 9 million Americans have their savings in 401(k) and profit-sharing plans small enough to be exempt from the annual audit requirement. That's about 20% of the people in defined-contribution retirement plans. Thefts from 401(k)s at large companies are practically unheard of. These plans generally are run by big investment firms whose reputations could be ruined by pilferage. Employees typically choose their investments from a menu of mutual funds and can monitor their account balances around the clock.

It's a much different picture at many smaller companies. The plans may be overseen by the firm's owner or business manager. Employees often have no say in how their money is invested and no way to monitor their accounts. When theft occurs, it tends to happen at companies on the edge of bankruptcy. As the firms collapse, there may not be enough assets left to repay workers or enough insurance to cover their losses.

[ComerPerro]

1. and they can completely get away with it, too

[Webster Green]

2. If that happened to me, I would go postal on the mutherfuckers..

My retirement plan would revert to a prison cell, cuz I would fuck somebody up!

[katsy]

3. "401(k) & profit-sharing plans small enough to be exempt from the annual audit requirement"

Exempt?

Yeah well, maybe our stupid lawmakers should be held liable for these atrocities since their judgment is impaired.

It's like the bankruptcy bill hurting people who have had catastrophic illnesses. I'm tired of not holding these bastards responsible for bad legislation.

[Golden Raisin]

4. I'll bet the Congress made sure

THEY all have ironclad, no-fail, super generous pensions.

[KT2000]

5. Would love to see the political contributions

that made this possible
also the list of those who voted this thing in.

Bonds to cover 10% or less???
Small businesses exempt???

This is a license to steal pure and simple.

[Herman Munster]

6. buyer beware

If you work for an employer with less than 100 employees, I would think twice before investing in their 401k plan without doing the proper due diligence.

If something sounds fishy, better to invest elsewhere in a Roth IRA or other retirement account through very large mutual fund companies like vanguard and fidelity. I prefer vanguard as they are owned by their investors and charge among the lowest fees in the industry but fidelity is pretty good too.

[leftofthedial]

7. capitalism is legalized theft

no wonder capitalists think they can steal with impunity

[enid602]

8. so?

What makes anyone believe that this small, privately-held company would have treated a pension plan any different than it did the roofer's 401K?

[Gold Metal Flake]

13. From the text...

"If Elliott had a traditional pension, his retirement checks would be guaranteed under a federally backed insurance plan."

[enid602]

16. no to pensions

Just like those of American Airlines, Enron, Lucent, etc. I worked for Honeywell for 23 yrs(considered a pretty solid corp), which had to reimburse its pension plan to the tune of about $2B in '02. Glad i took the lump-sum, and rolled that over (together with my 401(k)) into in IRA, of which 50% is invested in non-dollar denominated equity and bond mutual funds.

[SoCalDem]

9. Every generation this happens

In the 80's, "Savings & Loans" were raided (there was Bush involved in that one) and people lost their retirement saving, but at least people who were old enough to be retiring then still had defined BENEFIT pension (lots of them did back then)..

The money guys had to have a new "vehicle" when they started shit-canning pensions and turned them into defined CONTRIBUTION pensions. Along came the 401-k..

Couple that with the fact that health care hit people upside the head at the same time, and it was easy to see that the employers would turn cartwheels over the "new" plan..

They only have to "match" a small percentage and the majority comes right from the employee's paycheck.. What a dream plan for the boss.

That's one reason people don't get raises anymore, and why their wages have been flat for decades.

Say you get a $40 a week raise..your percentage you put away for your 401-k goes up too, and of course with every raise, there's a huge increase usually handed down for the employee share of health care.
Lots of people cannot afford to part with money each week, so they don't even participate in the 401-k..and the boss's share of zero...is ....well... zero..

And for the ones who do participate, it's a relatively "new" vehicle, and lots of people who should be using it to retire on NOW, are finding that they don;t have enough..and for the ones coming up behind them..they will meet the same fate..even if their employers don;t steal their 401-k money.


American workers are the ultimate sucker.. They forego wage increases for "promises" of future benefits..only to be told when there's no more time to start over..."Hey Dude, sorry..it's gone..Here's an application for Walmart/...have a nice day ".

[Selatius]

10. Under defined benefits pension plans, you are safer than under defined contribution pension plans

By defined contributions, I mean 401(k)s.

In the past, if your company went belly up, you at least had a guarantee Uncle Sam would save your pension, but with 401s, there's no guarantee. This is why they don't call them "defined benefits" anymore because the only thing you are guaranteed is the amount you wish to tuck away into your 401 at the end of the month or per paycheck. The payout? Well, that depends on the market's performance over the decades. Again, not "defined benefits."

If your employer and not a shitty market ruins you, as they say, "Tough shit." The message? It was your fault for signing the employment contract with that employer.

[The Sushi Bandit]

11. No! Convert all your money into maze!

...corn lasts 10's of years and when the big weather change hits in 3 years you will be eating corn while everyone else eats crow!

[conscious evolution]

12. Pension theft is widespread

even in large companies.
here is a site with a search feature to check who has their fingers in the pie.
http://www.freeerisa.com/
If you see an outfit called State Street Bank involved be very afraid.
For more info check out CorpGovActivist and IdesofOctobers Journals here on DU.They are fascinating reading and well worth the time it takes to go through them.
http://journals.democraticunderground.com/CorpGovActivist
http://journals.democraticunderground.com/IdesOfOctober
Corps is currently involved in lawsuits against StateStreet and pension theft is one of the issues in the suits.

[dysfunctional press]

14. a company that i worked for stole my Social Security money.

they deducted the FICA money from my paycheck for the two years i worked for them, 20-some years ago- but NEVER paid it into the fund. i only found out about it when i became disabled, and i had a conference with an SS agent to determine the amount of my disability payment.

the company is long gone and bankrupted, so i am completely SOL in regards to the stolen money- and my disability payments are almost 15% less than they should be, for the rest of my life.

[JHB]

15. Aren't you glad Republicans got "government" off the backs of the people?

All those do-nothing, fat-assed bureaucrats, interfering with innovative entrepreneurs. All hail Deregulation! All Hail St. Ron!

:sarcasm: (for those who couldn't tell).

[Norquist Nemesis]

17. Shhhh!!! The economy's in great shape!

As the stock market makes gains, all the investors are gaining wealth and people who have 401Ks are investors too!!! :eyes:

[Javaman]

18. The enron-isation of america. nt

[NashVegas]

19. The 401(k) Took My Money Away

We went with a small, but highly recommended company. 1 Point Solutions.

The good news is I'd only been investing for a year and a half, but it's still money I'll most likely never see again. Maybe 5% if I'm lucky. One of the other companies that used them, not so lucky.

The thing is, last spring, I started seeing what I thought were red flags - lack of online tools, not getting regular summaries, lack of variety in funds to choose from, dividends not accounted for - and went to our comptroller and said I wanted out and would take the tax penalties. He talked me into keeping put.

Other people lost as much as $400k to the motherfuckers.

My advice to newbie 401(k)ers - if the plan you've signed up for doesn't put in your hands the features that the average, well-known "we want your IRA business," business does, or even Yahoo! Finance, stop putting in, immediately.

[sarcasmo]

21. Isn't that a Ramones song?

OH, it's the KKK took my baby away.

[NashVegas]

22. It Had a Nice Ring To It

I've been singing that song since September :(

[judaspriestess]

20. call me crazy but I do not have a 401k

I can't get my money till I'm in my sixties?? I don't even know if I will live that long.
I just don't get it with 401k's. To each their own :)

[Jimbo S]

23. A no-brainer

Most employers match 50%, so that's an immediate 50% R.O.R.
Plus, it's tax exempt until you take it out.

What happens if you make it to 62? Gonna rely on S.S. to support you? Think again.

[judaspriestess]

24. no I have other ideas as far as investments

like two rental properties I own. don't make assumptions buddy

[Jimbo S]

25. Fair enough!

Rental proprty is the route my dad took.

[judaspriestess]

26. fair enough

like I said 401k is not for everyone. Wish everyone the best who does.

[rpgamerd00d]

27. ~~~*** RollOver your 401K Every Year !!! ***~~~

You can roll your 401k Over to an IRA every single year. When you do, it ceases to be in the control of the company and becomes your property.

Plus, you get the added benefit of being able to then choose whatever fund or funds you want, as opposed to the limited few choices you get from your company's 401k Plan.

It is only prudent to do this "religiously". (Zinger intended)

:D