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Question:  I'm a 20-year employee of a company that has a 401(k) plan. I've been told I am fully vested and am thinking about retiring soon. Are my funds insured or guaranteed and what can I do to protect them?

Answer: A 401(k) plan is a kind of defined contribution plan. In a 401(k), you or your employer, or both, pay into a separate account in your name. When you retire with a vested interest, you get whatever funds are in the account. It is much different than a defined benefit pension plan. In a defined benefit plan, you get a specific benefit amount when you retire. Private defined benefit plans are usually partly insured by a federal government agency called the Pension Benefit Guaranty Corporation. Defined contribution plans like your 401(k) are not insured or guaranteed. A 401(k) doesn't promise to pay you a specific amount at retirement. It thus cannot become underfunded in the same way as a defined benefit plan.  This does not mean that nothing can go wrong. The value of your 401(k) plan at retirement depends on the amount of contributions and how your investments perform. If the company does not make the contributions or if investment performance is poor, you could end up with less than you contributed. You could even end up with nothing. For example, Enron employees who invested their 401(k) funds in Enron stock got very little when the company went bankrupt. 
      
The best way to protect your interest in your 401(k) plan is to know the warning signs that your contributions are being misused. You should be concerned, for example, if your employer does not send required contributions to the plan on a timely basis, your account statement doesn't show your contribution were made, former employees are having trouble getting their benefits on time, or your account balance drops for no apparent reason. For additional information, see Warning Signs That Pension Contributions are Being Misused, available from the Department of Labor or on their website at www.dol.gov.

If you have questions or need help with your pension, you should contact the Upper Midwest Pension Rights Project at 800-992-8161. The Upper Midwest Pension Rights Project provides free legal help to Iowans with pension issues. For example, we can:

• answer your pension questions;
• contact pension administrators on your behalf;
• locate pension funds for a company that has gone out of business;
• help you apply for pension benefits;
• help with appeals, survivor benefits and benefit miscalculations; and
• refer clients to pension attorneys and actuaries when litigation may be necessary.

The Upper Midwest Pension Rights Project is a special project of Iowa Legal Aid and is funded by grants from the U. S. Administration on Aging and the Retirement Research Foundation.