When 401(k) Contributions Go MIA

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My employer has stopped making my 401(k) contributions on a regular basis. What can I do?

This is a prime example of why it's a good idea to check in on your retirement account periodically.

Unfortunately for your employer and fortunately for you, this type of violation is the No. 1 enforcement priority at the Department of Labor, says Stuart Lewis, a Washington-D.C. ERISA attorney and head of the pension group at law firm Silverstein and Mullens (a division of Buchanan Ingersoll).

While your employer might argue that you got all your money in the end, it has clearly broken the law here. According to the ERISA rules, your employer is required to deposit employee 401(k) contributions by the 15th business day of the following month, says Ted Benna, president of the 401(k) Association.

There are two ways you can go about remedying the situation. Since reporting this type of thing to the authorities isn't exactly a career-enhancing move, you could merely point out the discrepancy to your human-resources department. After all, since most payroll and benefits systems are computerized, it could have been an honest mistake, says David Wray, president at the 401(k)/Profit Sharing Council of America. If you decide to deal directly with your company's human-resources department, it's important to get assurances that this type of thing won't happen again.

If things go badly with your H.R. department, write a formal complaint letter. It's against the law for your employer to fire you for complaining about this issue, and written documentation like your letter would give you a leg up if you suddenly find yourself out of a job, says Lewis.

If you're fairly certain that these missing contributions aren't a result of honest error (and the fact that your employer "intercepted" your fund statements is certainly suspicious), go directly to the Department of Labor's Pension and Welfare Benefits Administration by contacting the nearest field office. The Department of Labor takes such complaints seriously and will investigate the matter by auditing the company.

What kind of restitution can you expect? Besides fining your employer, the Department of Labor might require it to pay you for missed investment appreciation during the eight-month period. That would recover some or even all of the advantages of dollar-cost averaging that regular investments in a 401(k) program would've given you.

In the meantime, keep your eye on the 401(k) account balance as well as on your company's performance. Your decision to continue contributing to your 401(k) will depend on whether or not the same patterns continue. Sticking with your 401(k) would be ideal since you can't beat the benefits of tax-deferred savings. But if the company never gets back on track and goes bankrupt while the money is in transit between your check and the trust where the 401(k) resides, you could lose your money altogether. See our earlier Ask for more on this. If this sounds like a real possibility, you might want to consider ending your participation in your 401(k) and putting some money in an IRA instead (check the eligibility rules).