ERISA fraud: Why you need to Protect Yourself

New York, NYAs more and more companies and executives are being charged with Employee Retirement Income Security Act (ERISA) stock fraud violations, it is becoming increasingly important that employees keep track of their 401(k) plans and their health insurance plans.

One thing that protects contributions to retirement plans and some health plans is a federal law known as ERISA which sets standards for private-industry pension and health plans.

However, despite the existence of ERISA, companies can mismanage their employees' 401(k) plans, stocks, and health plans. In fact, when businesses experience financial problems, one of the first things that often happens is that they fail to make employee benefit contributions.

If you have a 401(k) plan through your employment, make sure you check on it regularly. You can do so by checking it online and examining the balance and contributions, or by reviewing your paper statements.

When you check on the 401(k), make sure your company is forwarding your contributions in a timely manner. Failure to do so can result in criminal sanctions for your employer for mishandling deductions from employee paychecks.

Unfortunately, some employers who face financial problems use worker retirement funds or health care contributions to make up for the company's lack of money. That can leave employees out in the cold when it comes to their retirement plan or health care plan.

If you think that you don't need to be worried about your company mismanaging your funds, consider that it can happen to anyone.

At the beginning of November a union employee benefit administrator in California pleaded guilty to embezzling $179,000 that was meant to go toward employee benefits plans. Rather than putting the money into the benefit plans, the $179,000 went into accounts in the administrator's name. The benefit administrator pleaded guilty to two counts of embezzlement related to a health care benefit program, one count of embezzlement related to an employee benefit plan, and two counts of false statements related to documents required by ERISA.

Employers can also be liable if they are careless in how they invest employees' 401(k) money or if they fail to appoint a trustee to oversee the investment of employee money.

On November 16, the U.S Department of Labor announced a settlement with former Enron executive Jeffrey K. Skilling related to mismanagement of the employee benefit plan. Back in June, 2003, Skilling was sued for failing to properly oversee the fiduciaries appointed to run Enron employee benefit plans, failing to correct misstatements about Enron's financial condition, and failing to properly appoint and monitor a trustee to oversee the employee stock ownership plan. In addition to other penalties, Skilling is required to pay $2.5 million to participants and beneficiaries with the company's savings and employee stock ownership plans.

No matter how large or small the company you work for, you are trusting your money and retirement plans to someone else. A good way to protect yourself is to keep careful records of all contributions to your health plan and 401(k) plan to ensure that your money is going where your employer says it is going.