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Federal 401k

Posted by Tamara

In a recent year, the U.S. Department of Labor recovered over $25 billion in employee benefit funds. These funds had been misappropriated by employers to help solve cash flow problems and for company officers to treat themselves to new cars, houses and even race horses. Unfortunately, the amount recovered is only about 25% of the monies taken. Some employees got all their money back, but many only received a small part of their investment.

These cases were prosecuted as violations of ERISA (Employment Retirement Income Security Act of 1974). This federal law applies to Federal employees and workers across the nation. ERISA sets the minimum standards for most of the health and pension plans voluntarily established by private industry, and protects the individuals in those plans.

The Employee Benefits Security Administration (EBSA) is responsible for enforcing ERISA. If an employee suspects their funds are being misappropriated, they should immediately contact EBSA at 866-444-3272.

For example, suppose Shirley contributes to a 401k offered by her employer. The deductions show up on her paycheck every pay period, but have never shown up as deposits on her 401k statement. It’s possible that Shirley’s employer has misappropriated her 401k funds. She needs to report this problem to EBSA as soon as possible.

In addition to the federal administration, Shirley can also contact her state’s Department of Labor. Several states have laws on their books that force employers to adhere to all promises made regarding employee benefits. These cases are usually handled by the Wage and Hour Division, but the name often varies among states.

ERISA covers the majority of plans, but not all. If a government entity sets up or maintains a health or pension plan, that program is exempt from ERISA. Plans established by churches for their workers, programs maintained outside the United States for the benefit of nonresident aliens, and unfunded excess benefit plans aren’t covered either. ERISA also doesn’t apply to monies set aside for the sole purpose of complying with disability, workers compensation or unemployment laws.





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