When you put money into an employer-sponsored retirement savings plan like a 401(k), the last thing you’re probably thinking about is fraud. After all, you’re contributing to a 401(k) to save money for your future. The thought that someone could be scamming you may seem surreal.
But it can happen. “Consumers who have 401(k) accounts are prime targets for cybercriminals looking to steal money. It’s crucial to be on alert and ensure that your accounts are protected,” says Jon Clay, vice president of threat intelligence at Trend Micro, a global cybersecurity firm.
Why could your 401(k) be at risk? Because criminals go where the money is.
“These accounts often have more money than savings and checking accounts,” Clay says. “The greatest risk most people face is an account takeover, where a criminal aims to steal the account login credentials to gain control of the account and drain its funds.”
Here are some warning signs that your 401(k) is at risk or may not be all that it seems.
[Read: Is a 401(k) Worth It in 2023? Pros, Cons and Costs]
5 Warning Signs That Might Trigger Concern About Your 401(k)
If you have an uneasy feeling about your 401(k), you should investigate. Some warning signs that may be triggering your unease can include:
1. Missing paycheck contributions. You’re making the contributions; you just aren’t seeing them on plan statements. Or maybe matching contributions from your employer don’t seem to be on your statement.
2. Late statements. Speaking of statements, maybe you haven’t seen yours lately or it arrives but never on a regular basis.
3. A surprising balance. You don’t have as much money in your 401(k) as you thought — or stranger still, you have more. Sure, the market goes up and down, but if your balance seems to be behaving in abnormal ways, this could be a red flag.
4. Unexplained transactions. For instance, if you see loans on your statement that you’re not aware of, investigate immediately.
5. Frequent investment manager turnover. If your investment manager changes, chances are there is nothing to see here. But if this occurs frequently, you are right to wonder what might be going on.
What Is Happening With Your 401(k)?
There may be perfectly good reasons for what you’re seeing. But if you think something is amiss in your 401(k), a few things could be going on:
Your Employer May Be the Problem
This isn’t likely, however. “Instances of fraud involving employers against their employees’ accounts have been reported but are quite rare,” Clay says.
Still, even some well-known companies have been accused of mismanaging 401(k)s. In 2022, Wells Fargo reached a $145 million settlement with the federal government over claims that it “misused” employees’ retirement assets by overcharging for company stock. Wells Fargo denied any wrongdoing.
Meanwhile, Laboratory Corporation of America Holdings, also known as Labcorp, is fighting a lawsuit that alleges it mismanaged its employees’ 401(k)s, accusing the company of misdeeds including charging excessive recordkeeping fees.
You’re a Victim of Cybercrime
It’s unfortunate, but hackers have accessed 401(k) plans. Techniques include installing ransomware on a company’s network, spoofing, phishing and spyware.
You May Have a Subpar 401(k)
Maybe your company isn’t engaging in criminal activities, but its 401(k) plan levies ridiculously high fees. Fees for a 401(k) tend to range between 0.5% and 2%, with most fees being around 1%. If you think your 401(k) fees are too high, contact your human resources department.
If Something Is Wrong With Your 401(k)
If you don’t feel comfortable confronting your employer, you may want to report your concerns to a higher authority. As noted, it could be that your employer is doing something wrong but making an innocent mistake or something nefarious like a cyberattack may have occurred.
You may consider contacting the following entities:
— Employee Benefits Security Administration. The ESBA may be your best if you think something troubling is going on with your 401(k) but you can’t pinpoint the issue. You can call ESBA directly at 1-866-444-3272 or go to askebsa.dol.gov to communicate with the staff online. The website does a good job of setting expectations. As the ESBA website says, “Please note: The law is not all-encompassing and you may not always be pleased with the remedy or with the explanation you receive. Also, some actions of employers may not always seem fair or honorable yet may be legal. We will be sensitive to your situation but may not always be able to provide you with a solution.”
— Internal Revenue Service. If you suspect tax fraud related to your 401(k) plan, you can file an Information Referral (Form 3949-A) with the IRS or call it 1-800-829-1040.
— An attorney. This route might get expensive, but if you feel you’ve been wronged and have a lot of money to protect, it may be worth it. A securities attorney may be able to examine your 401(k) account and investigate your employer or the 401(k) account administrator to see what’s going on.
[Read: What Is the Average 401(k) Return?]
How to Protect Your 401(k)
According to Eric George, director of solutions engineering at Fortra, a cybersecurity software company based in Eden Prairie, Minnesota, “the same best practices that apply to most scams also apply to protecting your 401(k).”
George adds, “401(k) accounts do not typically require frequent or ongoing interaction, so any request for interaction can be easily scrutinized. Also, account activity is typically consistent in nature, so anomalies are usually easier to detect.”
But if you’re worried about your 401(k), George suggests the following:
— Create a strong password. Use letters, numbers and punctuation marks. “And do not reuse passwords for multiple accounts,” George says.
— Turn on MFA for account access. MFA stands for multifactor authentication. Set up your account so that you type in a password and an additional code to log into your 401(k) account.
— Stay up to date on your 401(k). George advises having your administrator notify you when any changes are made so you stay aware of the account’s activity. And even if notifications are rarely forthcoming, George suggests reviewing it on a regular basis.
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5 Warning Signs Your 401(k) Is Being Scammed originally appeared on usnews.com
