The 401(k) salary deferral plan, which allows employees to set aside money each payday on a tax-deferred basis for retirement, has become the major retirement planning vehicle for many employees. Many employers make pre-tax matching contributions to the accounts of employees who join the plan, and most 401(k) plans allow employees to make their own investment decisions from among a variety of choices.
Tax and pension laws generally do a good job of ensuring the protection of your 401(k) plan. However, it’s always wise to monitor your own account and to learn as much as possible about its accounting and how your retirement money is working for you.
How can you keep track of all of the activity in your retirement account and be sure the accounting is accurate? Here are seven suggestions from the U.S. Department of Labor.
- Make certain the amounts withheld from your paycheck match the contributions made to your retirement account. Check by comparing your pay stub against your 401(k) statements. If you have any questions, contact your company’s plan administrator or human resources manager.
- Be sure the plan’s eligibility and vesting formulas have been properly applied to your situation. For example, is the years-of-service figure credited to your plan accurate?
- Analyze your investment returns. Make sure investment earnings are being properly credited to your account. If you need help determining the returns on your investments, talk to a retirement planning professional.
- Learn how often contributions are deposited into the plan. By law, an employer has up to 15 business days following month end to deposit participant contributions into a plan’s trust.
- Make sure any employer-matching contributions are properly allocated to your account. Your company’s plan administrator or human resources manager can provide this information. Employer matching contributions are often made at the end of the fiscal year.
- Check your account balance regularly. Often, you can use a toll-free telephone number available through your plan to obtain up-to-date account balances. You should also receive quarterly statements. Review them carefully.
- Ask about any discrepancies you find. If you find a problem or are confused about any aspect of your plan, contact your company’s plan administrator or talk to a financial professional. IBI
