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Many workers throughout the United States have their retirement income in 401(K) accounts. As companies have moved away from offering defined benefits programs and paying out guaranteed retirement income, the 401(K) account has grown in popularity. A 401(K) allows workers to put money into retirement accounts set up by employers, with contributions to the account classified as tax-free. Many employers match 401(K) contributions made by employees, up to a certain percentage.

A 401(K) account typically allows an employee some autonomy over where his or her retirement funds are invested. However, while employees have the ability to exercise control over investment dollars, the Employee Retirement Income Security Act (ERISA) still applies to 401(K)s, imposes a fiduciary obligation on plan sponsors and managers and ensures employees get promised benefits and don’t have their investment funds stolen or mismanaged.

ERISA creates a cause of action allowing workers who are the victims of a fiduciary breach to recover compensation for losses in their 401(K). Employees need to know how to report 401(K) fraud as well as what they should do if they suspect wrongdoing so they can protect their job and retirement future while ensuring that 401(K) assets are safe.

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Reporting 401(K) Fraud

Fiduciaries, including plan sponsors and managers, have many duties when it comes to retirement plans, but one of their most important obligations is to be scrupulously honest and never make material misstatements or misuse 401(K) funds for their own purposes.

Unfortunately, 401(K) fraud happens despite the protections of ERISA. Retirement fraud can include a wide range of behaviors, from company leaders embezzling money from employee 401(K) accounts, to plan administrators charging high fees, to businesses providing misleading information about potential for stock growth to entice employees to invest their 401(K) in company shares.

If you suspect that you were the victim of a fraud, you need to take action. Too many employees do not know the necessary steps to take, even though early reporting is essential. Each case varies, but options for reporting fraud include:

  • Reporting fraud internally within your company, to plan administrators, HR professionals, supervisors, or other business leaders.
  • Reporting embezzlement, theft, and specific types of fraud to local law enforcement. Local law enforcement is not the best resource for more complex claims arising under ERISA, but theft of employee’s 401K is a crime and police may be prompted to investigate.
  • Reporting fraud to the Employee Benefits Security Administration (ESBA), which is a division of the Department of Labor. ERISA is a federal law, so the EBSA is often the best agency to report allegations of fraud too.

Whistleblower protections ensure that reports of 401(K) fraud or reports of other ERISA violations do not lead to retaliatory behavior. While several circuit courts have ruled the whistleblower protections do not extend to people who only reporting internally, the protections are there for those who go outside the company to raise the alert of 401(K) fraud.

If your rights have been harmed on by the financial services industry, Call us at (212) 742-1414.

Getting Legal Help for Your Employee 401(k) Plan

Zamansky LLC knows what agencies investigate ERISA violations and can help you to report your claim to appropriate federal agencies who can take action if criminal conduct occurred. Our firm also helps you to decide how best to report 401(K) fraud while protecting your right to receive promised pension benefits. Call now to learn more about how we can help if fraud has affected the value of your 401(K).

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