When you make contributions to your 401(k), the funds that you put into your account are vested immediately and are yours to keep, even if you leave your job the next day. While companies can have different rules for when you get to keep employer contributions, all money you put into the account is 100% your own.
But what happens if you make a contribution and see some of the money disappearing days after? Is this a sign of fraud or something that you should be worried about?
Let’s take a look at a hypothetical example. Say that John contributes $200 to his 401(k) account every pay period. The money is taken out of his check and invested automatically in a target date fund based on his chosen retirement date.
But one day, John logs into his account and sees that contributions were made and the fund purchased, and then sees the shares of the fund sold a few days later and the money withdrawn — but the money he contributed isn’t put back into his account.
John is worried that his employer isn’t telling him anything about this. Is his employer responsible for the missing money, and is this a sign of fraud?
First things first. It’s important to understand that there are strict rules for how 401(k) plans are managed under the Employee Retirement Income Security Act (ERISA). ERISA sets minimum standards that cover most private-sector retirement plans.
Under ERISA, employers owe workers the highest duty under the law when it comes to managing 401(k)s.
These plans typically allow for salary reductions from worker pay, so employees can contribute to their accounts automatically. When they do, employers must deposit contributions from worker paychecks in a timely manner — within no more than 15 business days into the month following the payday. However, if they can reasonably deposit funds sooner, they must.
Employers are not allowed to misuse 401(k) funds, and companies must take steps to protect your money, including from cyberattacks. Employers cannot withdraw money from your 401(k) that belongs to you, and doing so would likely be an ERISA violation.
While employers aren’t allowed to take funds from your 401(k), that doesn’t mean it doesn’t happen illegally. As a result, the Department of Labor has identified some key red flags you should be aware of, including (1):
401(k) statements that come late or irregularly
An inaccurate balance
Your contribution not being transmitted on a timely basis
A drop in your 401(k) balance that can’t be explained by investment fluctuations
401(k) statements that don’t show your contributions being made
Different investments being listed on your statement than ones you authorized
Former employees having a hard time getting benefits paid correctly and on time
Unusual transactions such as loans to the company, trustees, or corporate officers
Frequent and unexplained changes in 401(k) plan managers
Signs of financial difficulty within your company
If you spot any of these warning signs, you should reach out to your employer and see if there is an explanation.
If your employer doesn’t provide a satisfactory explanation for what’s going on, then you should make a complaint with ERISA and potentially reach out to an attorney who can help you.
Since John has spotted several of these signs, including money disappearing and investments being sold without an explanation, he needs to take action — these are major red flags.
Read More: Young millionaires are rethinking stocks in 2026 and banking on these assets instead — here’s why older Americans should take note
In a best-case scenario, John would find out that his money disappeared from the 401(k) because of a simple mistake. While companies have strong obligations when it comes to managing 401(k) accounts, mistakes can still happen. These might include:
Contributing the wrong amount
Making an accidental double contribution
Not calculating an employer match correctly
Allowing employees to accidentally contribute more than the IRS allows
Transferring employee contributions to the wrong 401(k) account
If this happens, the company may take back money to correct errors. This isn’t illegal or a sign of fraud, but the company should be more than willing to let you know what is happening when these kinds of corrections become necessary.
If your 401(k) contributions disappear like John’s did, it’s important to document everything, including keeping account statements or screenshots from online accounts, requesting a written explanation from an employer (and keeping copies), and also keeping all correspondence with the company. He may also want to check in with other trusted colleagues about their own accounts.
John and others who suspect mistakes should reach out to their HR department and/or the plan administrator right away. They should detail the problem, explain the concerns, and ask for a prompt answer, following up regularly if needed.
If the company doesn’t provide a satisfactory answer, like providing proof of an over contribution or contribution to the wrong plan, then they should consider getting legal help and to contacting the Department of Labor about an ERISA violation.
Employees are protected against retaliation for reporting 401(k) fraud, so don’t hesitate to address the issue because you are afraid for your job.
Unfortunately, there’s not a lot that employees can do to prevent their companies from making mistakes.
The key is for workers like John to regularly check their statements and accounts, making sure that errors are corrected and don’t cost them money — and making sure the mistakes aren’t a sign of a bigger problem.
In addition to checking your account regularly, you should consider:
Learning how much your contributions should be, and when they should be deposited
Asking questions if there are any concerns
Getting legal help if you think you’re being scammed
Your retirement security depends on the money in your 401(k), so take care to monitor and protect it.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
U.S. Department of Labor (1).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
