Is Your Boss Stealing Your Retirement? 10 Red Flags to Watch For
Automating your 401(k) contributions is a "set it and forget it" win for your future—but that’s exactly what unscrupulous employers are counting on. While you’re focused on your daily grind, some companies are quietly redirecting employee retirement funds to cover their own business expenses, pay off aggressive creditors, or even fund personal luxuries.
The scale of the problem is massive. By late 2025, the U.S. Department of Labor reported recovering nearly $38 million in missing 401(k) funds through civil and criminal suits over the previous decade.
Are you a victim of money mismanagement? Don't wait until you're ready to retire to find out. Here are 10 warning signs that something unethical—and potentially illegal—is happening with your retirement balance.
1. Late or Irregular Statements
If your quarterly statements are constantly "in the mail" or arrive months late, be wary. Employers often delay statements to buy time to "fix" books that show misappropriated funds. In one federal case, a Maryland firm spent five years pocketing employee contributions to use as operating capital, leaving workers with empty accounts and zero matching funds.
2. An Inaccurate Balance
An incorrect balance doesn't always mean your statement shows less than you have. Some fraudsters, like those in a high-profile Pittsburgh embezzlement case, send out "ghost" statements that show the balance you should have, even though the money has already been stolen. If you suspect your balance is a fiction, try to verify it directly with the third-party investment firm, not just your HR department.
3. Delays in Transmitting Contributions
Legally, employers must move your 401(k) contributions into the plan as soon as possible. For small companies (under 100 people), the gold standard is seven days. If your money is consistently sitting in the company’s general account for weeks, they may be using your paycheck as an interest-free loan to stay afloat.
4. Unexplained Balance Drops
Market fluctuations are normal, but a sudden dip that doesn't align with the S&P 500 or your specific portfolio is a major red flag. Employers are strictly forbidden from withdrawing funds from your account. The only exception is correcting a clerical error, and even then, you must be notified.
5. Missing Contribution Records
Check your pay stub against your 401(k) portal. If your stub shows money was taken out for retirement but your investment account doesn't show a corresponding deposit, your employer is likely "holding" the cash. The Department of Labor recently sued a medical group for over $140,000 for this exact behavior.
6. Unauthorized Investment Swaps
Did you sign up for a low-fee index fund only to find your money in a high-fee, underperforming "specialty" fund? This is often a sign of a "kickback" scheme or gross incompetence. Fiduciaries are legally required to act in your best interest—not theirs.
7. Difficulties for Former Employees
When people leave the company, can they get their money out? If former colleagues are complaining about "red tape" or missing funds when trying to roll over their 401(k)s, it’s a sign the "pot" might be empty.
8. Unusual Loans to the Company or Officers
Your 401(k) is not a piggy bank for the CEO. It is illegal for retirement funds to be "loaned" back to the company or its officers. If you see "indirect loans" or uncollateralized transfers on the plan's annual reports, contact the Department of Labor immediately.
9. Constant Shuffling of Plan Managers
Frequent, unexplained changes in recordkeepers often hide a trail of missing money. A Florida automotive group recently faced a lawsuit after a botched manager switch led to accounts being frozen and balances mysteriously dropping by 9% during the transition.
10. Signs of Company Financial Distress
This is the most common "why" behind 401(k) theft. If your company is dealing with:
Bounced payroll checks
Lawsuits from vendors
Defaulted business loans
...they are at high risk of "borrowing" from the 401(k) to keep the lights on. One employee at Information Technology Partners (ITP) discovered this too late; when the company folded in early 2025, she was left hunting for $100,000 in unremitted contributions and lost interest.
What Can You Do?
Don't be a passive investor. Log in to your 401(k) portal at least once a month to ensure your contributions are landing on time. If the numbers don't add up, you don't have to handle it alone.