How Safe Is Your 401k?

23 Feb 2015

Without question, 401(k)s have been the main source of retirement planning for investors the last 30 years. In 1980, an addition to Internal Revenue code allowed employers to offer a way for employees to set pre-tax money aside for their retirement, with matching contributions as well. This has been the way mainstream America has set money aside for retirement. As a matter fact, it has been reported that there is approximately $4.4 trillion being held in 401(k) plans today (Investment Company Institute, June 2014). Although that is a great number, it should not go unnoticed that there are concerns with these plans as well:

1) Unlike defined benefit ERISA plans or banking institutions accounts, there is no government insurance for assets held in 401(k) plans. However, current bankruptcy laws give high priority to sponsor funding liabilities.

2) Watch for employers being late on sending in contributions or missing contributions completely. This may be a “red flag” of deeper financial woes for your employer.

3) Look for unusual transactions that you cannot explain….loans to corporate officers or plan trustees. Any unauthorized withdrawals or large fees that normally don’t apply should raise a big red flag.

4) Be aware of any large drop in value that seems out of the ordinary or cannot be explained by market losses.

5) Your 401(k) statement is unusually late or cannot be accessed online as in the past.

Although 401(k) fraud abuse is rare, a recent anti-fraud campaign by the Department of Labor did uncover abuse. Please refer to or call the DOL Employee Benefits Security Administration at 866-444–3272.

Good Luck!

Jeffrey Johnston, ChFC
Investment Advisor Representative

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Premier Investments of Iowa, Inc. are not affiliated. Cambridge does not offer tax advice.


Jeffrey Johnston

Jeff has over 30 years of experience in the investment industry. He currently holds his FINRA Serices 6, 63, 66, 7, 24 & 51 licenses with LPL Financial as well as his health and life insurance licenses.