Though not a widespread issue, employers who delay or fail to make the appropriate contributions to the retirement plan are a concern for all. Accordingly, the U.S. Department of Labor has issued a list of warning signs in an effort to raise awareness about the potential misuse of retirement funds.
10 Warning Signs
A very small fraction of employers have been found to have abused retirement contributions—an issue which of course the Department of Labor (DOL) takes very seriously. In addition to administering a robust process of civil investigation, corrective action and fund recovery, the DOL encourages everyone associated with retirement plans to be aware of the signs of potential fraud. As 401k Specialist Magazine reports:
While far from a widespread problem, an anti-fraud campaign by the Department of Labor nonetheless uncovered a small fraction of employers who abused employee contributions by either using the money for corporate purposes or holding on to the money too long. To help combat the issue and keep participants informed, here are 10 warning signs that 401k and other retirement plan contributions are being misused, courtesy of the DOL.
1.The 401k or individual account statement is consistently late or comes at irregular intervals
- The account balance does not appear to be accurate
- The employer failed to transmit the contribution to the plan on a timely basis
- A significant drop in an account balance that normal market movements cannot explain
- The 401k or individual account statement shows contributions from a paycheck were not made.
- Investments listed on a statement are not what was authorized by the participant
- Former employees are having trouble getting their benefits paid on time or in the correct amounts
- Unusual transactions, such as a loan to the employer, a corporate officer, or one of the plan trustees
- Frequent and unexplained changes in investment managers, consultants, or specialist
- The employer has recently experienced severe financial difficulty
Fiduciary Duties—and Protection Too
While imperative, it’s of course insufficient for plan sponsors to merely avoid wrong doing. As fiduciaries, they must attend to all of the fiduciary responsibilities as described by the Department of Labor. Periodically setting aside time for the essential “housekeeping” associated with retirement plan administration is a good way to troubleshoot issues that might be on the verge of slipping through the cracks. Unfortunately, despite great diligence, under ERISA law, your personal assets are at risk if you face allegations of a fiduciary breach. That’s why Colonial Surety, offers reasonably priced fiduciary liability insurance for plan sponsors. With annual premiums of less than just one hour with an ERISA lawyer if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, Fiduciary Liability Insurance covers defense costs and penalty limits up to $1,000,000 in the event of a lawsuit. Uniquely, Colonial even locks in multi-year rates and offers installation payments. Fiduciary Liability for Plan Sponsors Here.
Good To Know
To encourage retirement plan fiduciaries to bring plans into compliance with the Employee Retirement Income Security Act (ERISA), the Employee Benefits and Securities Administration(EBSA) administers the Voluntary Fiduciary Correction Program (VFCP). Plan fiduciaries who become aware of ERISA violations can proactively seek to course correct, bringing the plan into compliance. In many instances, using EBSA’s Voluntary Fiduciary Correction Program (VFCP) and/or Delinquent Filer Voluntary Compliance Program (DFVCP) enables fiduciaries to address violations—and curtail the disruption and expense of investigations, penalties and litigation.
Remember, it is a DOL requirement to have a current ERISA Fidelity Bond. Inadequate ERISA bond coverage can trigger investigations, acting as an indicator of the potential for carelessness with the plan. Failure to have a current ERISA fidelity bond that appropriately covers the retirement plan at all times puts plan sponsors at risk. Consequences include increased likelihood of a Department of Labor (DOL) audit, lawsuits—and even being held personally liable for losses. As a national leader in the field, Colonial can help you with the required ERISA Bond for the plan —and much more. We offer comprehensive coverage so that plan sponsors can protect the plan, the company—and themselves. Just select an affordable package and receive:
- The ERISA bond required to protect the assets of the retirement plan from theft. Colonial even includes extended coverage to ensure your ERISA bond remains US Department of Labor compliant.
- Fiduciary Liability coverage to protect you and your assets frompersonal liability.
- Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
Colonial makes it so easy, fast, and affordable to quote and purchase your coverage package that you can do it right now, in minutes: Plan Sponsor Package Here.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.