How to avoid Fraud in your Retirement Plan

By Jeanine Skowronski

Special to the Financial Independence Hub

Believe it or not, your retirement plan can be at risk for fraud. In fact, in the 2015 fiscal year, the (US) Department of Labor closed 2,441 civil investigations into retirement plans and recovered US$696.3 million for direct payment to plans, participants and beneficiaries. Retirement fraud can occur in several ways: employees with access to your workplace benefits may skim from the top. Or, beyond that, you may be tricked into taking on risky or non-existent investments outside of your day job.

For businesses, avoiding fraud all comes down to implementing solid internal controls — that’s per the Internal Revenue Service, which actually has an Employee Plans Compliance Unit (EPCU). For consumers, it comes down to vigilance. Here are some personal finance insights to help you avoid fraud in your retirement plan:

1.) Check your Retirement accounts regularly

Most employees set up their employer-sponsored 401K account and forget it. Or they give their quarterly statements a passing glance before chucking them aside. (Note: It’s important to shred all sensitive financial documents before discarding.) However, failing to log into your account regularly means you’re missing out on spotting potential red flags.

As Certified Financial Planner Matthew Illian wrote on, the following signs could mean there’s something amiss in your 401K plan:

  • Missing or tardy contributions: Per the IRS, Department of Labor rules stipulate employer deposit deferrals be made as soon as the employer can, but it should be no latter than the 15th business day of the next month. (Employers with fewer than 100 plan participants have a seven day safe harbor.)
  • Contributions don’t reconcile: In one variant of retirement fraud, a payroll servicer may skim money before making the deposit, Illian writes. That’s why it’s important to check your retirement plan statements against your paycheck to make sure everything has added up.
  • Unusual investments. As a general rule of thumb, you spidey-sense should start tingling in you discover your “401K plan invests in assets that are not publicly priced and traded,” Illian wrote.

2.) Report any problems

If you spot something amiss, you can contact your plan administrator or Human Resources representative to ask questions. Remember, too, you can report problems to and file a complaint with the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA). You can do this by phone at 1-866-444-EBSA (3272) or on EBSA’s website.

3.) Beware bogus Investment offers

Remember, retirement plan fraud isn’t limited to employee-sponsored plans. And seniors particularly may find themselves on the receiving end of bogus investment offers. To avoid falling prey to one of these operations, the Securities & Exchange Commission offers the following advice.

  • Research a company before you buy stock. You can do so visiting the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) database.
  • Vet the salesperson as well. You can research a purported broker using BrokerCheck, a database run by the Financial Industry Regulatory Authority (FINRA) that lets you see a prospective broker’s employment history, certification, licenses and, perhaps more importantly, any regulatory actions, violations or complaints.
  • Keep an eye on your accounts. Continue to monitor accounts and review financial statements, even if you’ve put a financial adviser in charge of your investments.
  • File a complaint. In these instances, you’ll want to contact the SEC, FINRA or your state regulator.

Remember, when it comes to investing, a few tried and true tips to avoiding scams also apply: Be wary of unsolicited offers. Refuse requests to wire transfer money or pay any way that doesn’t leave a trace like a secured or unsecured credit cards would. And, of course, if it sounds too good to be true, it probably is.

Jeanine is the managing editor at Her work has been featured by TheStreet, Newsweek, Business Insider, Yahoo Finance, MSN, Fox Business, Forbes, CNBC and various other online publications. Follow her at @JeanineSko.

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