Human Resource Blog

Kansas 401k

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What should an HR person do if she thinks that her 401k contributions are being misappropriated in Kansas? Deductions are made from all the employee’s checks, but the 401k statements don’t show any deposits. The company owner won’t respond to questions on the subject.

The first step would be to discuss this with company executives and give them a chance to remedy the problem. If they don’t, report this problem immediately. This situation, unfortunately, is much too common. In 2006 alone, the U.S. Labor Department recovered $25 billion in misappropriated employee benefit funds. According to some estimates, that is only 25% of the total misappropriated. The sooner this is reported, the sooner the funds can be recovered. Sometimes all of an employee’s funds can be returned, but often only a portion is recoverable.

There is a direct line you can use to report the problem. Call the EBSA at 866-444-EBSA, or 866-444-3272. ESBA stands for the Employee Benefits Security Administration.

Your state may require that businesses guarantee promised benefits, including those in 401ks. Most state labor departments have a wage and hour division, operated under that or another name. Consider reporting it to this agency as well.

As the federal watchdog agency in this case, the ESBA is charged with enforcing ERISA, the Employee Retirement Income Security At of 1974, in Kansas and in states nationwide. ERISA, a federal law, establishes the minimum standards for most voluntarily established pension and health plans in the private sector. The goal is to protect people in these plans. That includes 401ks as well as health care funds and pension accounts.

Employers often used the misappropriated money to shore up floundering businesses by depositing the funds in the firm’s operating account. Sometimes company officers used the money to buy racehorses, jewelry, condos, cars, and houses. A California union also misappropriated funds. It used the money to institute renovations to a union owned golf course.

There are some areas in which ERISA does not have jurisdiction. For example, it does not cover any kinds of group health plans set up or run by government entities. Neither does it cover plans run by or set up by churches for their employees. Plans maintained strictly to comply with disability, unemployment, or workers’ compensation laws are outside its purview. It cannot cover unfunded excess benefit plans or those plans operated outside the U.S. for nonresident aliens. JH