Warning: 4 Signs Your 401(k) Is Being Shortchanged
There shouldn’t be anything confusing when it comes to your 401(k). It should be clear to you how much you’re contributing, the rate of return, and any fees that are being charged to your account. There is a chance, however, that you’re being shortchanged by your employer. It’s a scary thought, but also one that sometimes proves to be accurate. According to an AARP article, a report from the Department of Labor showed nearly 73 percent of the plans it audited last year made the wrong employer match or some other error.
Your retirement money isn’t something you want to take lightly, which is why it’s important to know the warning signs that should alert you to a possible problem with your 401(k).
1. You’re either receiving your plan statements and documents late, or not at all
Everything that has to do with your 401(k) should be well-documented and arrive on time. You should also have access to a “Summary Plan Description” that describes your plan’s features, writes Forbes. The Department of Labor suggests reviewing the following documents:
- Your individual benefit statements. These should arrive for your review once a quarter. It should detail how much you’re investing, how your money is invested, as well as your account balance. Take a few minutes each quarter to look at it closely.
- Investment information. The statement should include your investment options, as well as a chart that breaks down any fees associated with your account.
- Underfunding notices. If you are in a defined-benefit or traditional benefit plan, you have a right to know how much your plan is underfunded.
- Plan changes. Your employer must tell you if there are any changes made to the retirement program.
2. Sometimes, you’re not sure where your contributions are
“These days, transfers from your payroll to a retirement account shouldn’t take long. If they are taking a week or more, you should alert your plan administrator,” Forbes writes. Talk to them about how your transfers can be expedited, because there’s no good reason it should be take time for your contributions to appear in your plan.
3. Your employer may not want what’s best for you
First, remember that you have some rights under the Employee Retirement Income Security Act, which is the federal law governing retirement plans. Now, ask yourself this: Has your employer refused to give you a broad selection of passively managed index funds? Is your employer sitting on payroll deductions before depositing them? If your answer to either of those was yes, you have a problem. Or, maybe something else is occurring that is giving you a suspicious feeling about how your 401(k) is being run.
In any event, consider reaching out to the Department of Labor, or even think about running it by an attorney. By agreeing to provide you with a retirement plan, your employer has a set of rules it needs to follow, and you have every right to ensure that they are.
4. You don’t understand the fees
You have every right to fully understand what your 401(k) is costing you — and there is usually a price. There are going to be middlemen expenses, such as administration fees or others labeled as “revenue sharing.” These fees are deducted from your account. Don’t just accept that, though, without knowing exactly what they’re for. It should be easy to look up if your employer is giving you all of the proper documents. According to Forbes, every employer is required to give you a statement explaining your account fees. You also have a right to know how fees compare to other plans that are similar to yours. Some employers will do a comparative study or hire an independent fiduciary to shop for lower cost plans. If they aren’t making an effort to do that, you have the right to request that they do.