How to Protect Your 401k Investment

Billie Moore believes her 401k plan should be at least $7,000 richer.

When this 52-year-old office manager enrolled in the plan seven years ago, she believes she stipulated that half of her contributions go into a money market account and the other half go into an equity fund. Every time she got her quarterly statement, the only thing she looked at was the bottom line. Was it growing? Yes, she noted.

It wasn't until a co-worker quit her job that Moore started to pay more attention to her statements. As Moore's friend left, she bragged about taking her $35,000 401k balance with her. The two were hired about the same time. Moore, with a higher salary, believes she has contributed more to the plan, so she was puzzled about why her own balance was only $33,000.

Questioned by Moore, the friend replied that most of the money was invested in stocks.

And then the light went on for Moore. She'd been invested in stocks as well, or so she thought. She checked her statement. "Lo and behold, everything was in the money market account," Moore said.

Neither Moore nor her company's human resources department could find a copy of Moore's enrollment form. Currently, both are waiting to see if the plan trustee can find a copy.

If they do and it was filled out as Moore recalls, it's possible her account could be credited for part or all of the missed amount.

She's lucky, some observers say. While 401k-plan experts admit trustees will go out of their way to satisfy clients, Moore's experience may be an extreme example of this generosity.

"It's a 50-50 shot that they might make her whole," said Trisha Brambley, president of Resources for Retirement Plans, Inc.

After all, Moore received 28 statements showing her investment allocation.

Ted Benna, president of the 401k Association, says it's likely the plan might only refund a portion of the lost money. "They might take the position, 'the burden is on you. You've been getting the information. If it wasn't right, you should have come forward,'" he said.

While it's possible for Moore to try to sue, she might have a hard time winning, Benna says.

So, what's the lesson? Keep your paperwork.

"You should have a binder on your plan," suggests David Wray, president of the Plan Sponsor Council of America. "Every piece of paper should be in that binder."

He urges employees to keep a copy of their summary plan description along with all statements and confirmations of investment changes.

Another lesson: Read your statement. If Moore had paid closer attention to her statement, she would have discovered this error years ago.

A final lesson: If you discover an error, notify your plan administrator immediately, Wray said.

This is for educational purposes only. The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

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