So you think your 401(k) money is safe

Not long ago, Elliott thought his ladder-climbing days would soon be over. With a few more years of work, his 401(k) account would be large enough to let him retire at 60 and spend his days with his three grandchildren.

Then Elliott learned that his former employer had looted the company's 401(k) plan. The $230,000 he had saved over three decades was gone.

A government-appointed trustee is trying to recover the money, but workers have been told they can expect to get back perhaps half what they lost.

"I'm going to be up measuring roofs when I'm 75 years old," said Elliott, a husky man with steel-gray hair. "I didn't do a lot of things over the years because I was trying to save for retirement. Now I see I was paying for somebody else's vacations."

If Elliott had a traditional pension, his retirement checks would be guaranteed under a federally backed insurance plan. But no comparable protection exists for 401(k)s, even though they are rapidly replacing pensions as the financial backbone of retirement for most Americans.

By law, all assets in 401(k) plans must be covered by private insurance policies known as fidelity bonds. But the bonds are required to cover just 10% of the retirement plan's assets or $1 million, whichever is less.

At companies with fewer than 100 employees -- such as Elliott's company -- the plans are not subject to annual independent audits that could deter embezzlement.

An estimated 9 million Americans have their savings in 401(k) and profit-sharing plans small enough to be exempt from the annual audit requirement. That's about 20% of the people in defined-contribution retirement plans.

Thefts from 401(k)s at large companies are practically unheard of. These plans generally are run by big investment firms whose reputations could be ruined by pilferage. Employees typically choose their investments from a menu of mutual funds and can monitor their account balances around the clock.

It's a much different picture at many smaller companies. The plans may be overseen by the firm's owner or business manager. Employees often have no say in how their money is invested and no way to monitor their accounts.