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Pension investing 101

June 23, 2010

When you invest your employees' pension fund assets, it's best to think of a diversified portfolio with some mix of equities and bonds. A Central Iowa couple took another path:

The investigation of Mr. and Mrs. Van Elsen was initiated in 2006 when a former employee of their business, Van Elsen Consulting, Inc., contacted the Department of Labor to complain that the company had withheld retirement contributions from his paychecks in 2005 and 2006 but not forwarded the money to his Simple IRA retirement account.

Further investigation revealed that two other employees also had retirement contributions withheld from their paychecks during that period but not forwarded to their Simple IRA accounts. Evidence at trial established that Mr. and Mrs. Van Elsen withdrew more than $200,000 from the company’s account during the period in which the employee retirement contributions were not forwarded. Mr. and Mrs. Van Elsen also used the company’s money during that period to purchase a brand-new boat, four cars, and make mortgage payments on an expensive home near the Bos Landen Golf Course in Pella. Even after IRS and Department of Labor investigations had begun, the couple continued using company money to make car and house payments while not forwarding employee contributions to the retirement plans.

As you can tell by the context, this ended badly. The Des Moines Register reports that the couple was sentenced on embezzlement charges yesterday. James Norman Van Elsen got 15 months in prison, while his wife, Beth, received 12 months of home confinement.

The moral? Whether it's 401(k) withholding, Simple IRA withholding, or a profit-sharing contribution, you should put it in the plan as soon as you can. Never pretend that the plan money is your money.