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

Jeffrey is originally from Solon, Iowa. He currently resides in Swisher, Iowa with his wife, Prudence, and his three children, Seth, Ian, and Roman. He graduated from the University of Northern Iowa in 1989, where he majored in Finance and Investments. He has 24 years of experience in the investment and estate planning business. He is currently the President of “Premier Investments of Iowa, Inc.” Jeffrey’s main focus is Estate and Investment Planning for Senior Citizens and Pre Retirees. Jeffrey became a Chartered Financial Consultant (ChFC) in 2001. He is the author of many articles on industry related topics and he is a frequent seminar presenter. He is a Board Member TRIAD Linn County Seniors Against Crime, and he is also a past Board Member of the Heritage Area Agency on Aging Task Force. He is a member of CEO Roundtable in Cedar Rapids, a Daybreak Rotary Member, and a member of the Cedar Rapids Estate Planning Council. In March of 2009, Jeffrey became the host of the Premier Investments of Iowa Financial Hour which airs every Tuesday Evening from 6PM -7PM, on WMT 600 AM Radio. In his free time he enjoys golf, fishing, scuba diving, traveling, and coaching son’s basketball teams.