• Tony Munter

On National 401(k) Day, Remember the Role of Whistleblowers

By Tony Munter of Price Benowitz, LLP

Officially, today is National 401(k) day, but for approximately 60 million Americans who have such a plan and are relying on it for retirement, every day is 401(k) day. That’s 60 Million Americans with a reason to check the markets today.

The 401(k) has played a big part in creating a generation of Americans who rely on investments through retirement plans to supplement Social Security. Therefore, they are more heavily invested in and connected to financial markets through retirement plans. It may seem like these plans have been around forever, but the 401(k) is a bit older than 40. Congress first put in a provision that could be used to create such plans in the Revenue Act of 1978 and the first plan based on it, started in 1980. A person born when it was invented would not be old enough to collect Social Security today.

401(k) plans are a big reason Americans own stock. According to the Federal Reserve’s most recent Survey of Consumer Finances 53% of Americans owned publicly traded stock in some form in 2019, but the Federal Reserve put direct ownership of stock at only 15% of U.S. families. Most stock ownership comes from investment in mutual funds, and IRA’s and 401(k) plans.

The amount held in 401(k) plans alone is staggering. As of March 31, 2021, the Investment Company Institute estimates $6.9 trillion in assets were held in 600,000 such plans.

It may be easy to forget as money gets deducted automatically and invested and matched, that for all the benefits of a 401(k) plan, investments fluctuate, are not insured and as a prospectus will say “past performance is no guarantee...” What can happen to investors if fraud threatens their retirement? What can happen to the market as a whole when investor confidence is undermined?

We all got a tough lesson when the 2008 financial crisis hit 13 years ago. It wiped out trillions of dollars of financial wealth, in fact, Business Insider says more than $10 trillion in home equity and stock market losses. The federal government responded by enacting the Dodd-Frank Act, which included a new role for whistleblowers. Now, whistleblowers are part of the effort to protect investors and the markets.

Today the SEC touts whistleblowers for exactly this reason and says:


“Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission... whistleblowers can help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible. That allows the Commission to minimize the harm to investors, [and] better preserve the integrity of the United States' capital markets,,,”

Whistleblowers not only help find fraud and help the SEC protect investors, perhaps just as importantly they provide reason to have more confidence in the markets as a whole. Later this month, we will provide more detail on the successes and importance of the SEC whistleblower program. For today, when you check your 401(k) remember the role of the whistleblower in protecting your retirement.