A Rollover from Paychex 401 (K) leads to a theft of six digits at Chase Bank

Question: Last year I lost my entire 401 (K) – $ 114,000 – after Paychex emailed me physical Roll -Cheques instead of making a safe transfer. The checks were intercepted and fraudulent cashed.

I am now in the federal court that Paychex is trying to hold responsible, but this experience has made it painfully clear how little protection is for consumers in situations such as mine. For some reason, this outdated and uncertain method remains the standard practice in the pension industry.

– Dylan Handy, New York City

This is a story about fraud, responsibility and process. Let’s put them in order.

First fraud comes. The Interceeptor and Casher to which Mr. Handy refers, is a thief that is still loose.

In 2023 Mr. Handy van Baan and tried to move his 401 (K) money from his old workplace plan to his new one. Paychex, who helped in managing his old plan, ensured that he received two checks in the post – one for 401 (K) and one for a Roth version. He was then supposed to send the checks to his new plan manager with a Rollover form. He did that, he thought.

In fact, a thief took the checks in one way or another. That thief (or those thieves) brought one check to Citizens Bank and another to chase them and successfully cash in or deposit.

That was the fraud. Who has taken responsibility? No Paychex, at least not yet.

According to Mr Handy, Paychex needed months to conduct an investigation that did not lead anywhere. He eventually went to the citizens, who made sure that a refund of the $ 14,000 or so in his Roth 401 (K) had been. Chase, however, did not help him and sent him to Paychex’s couch. PNC did not help either, what Mr Handy understood Paychex’s bank.

Last year Mr. Handy Paychex charged. Why Paychex?

“Paychex is the entity that wrote the check, so Paychex must be the one who gets the money back,” said Jonathan Corbett, Mr Handy’s lawyer.

It is not clear whether Paychex tried to do that and, if so, how difficult. None of the company would comment.

In a judicial application it tried to wipe his hands off the case and claimed that it had no fiduciary responsibility towards Mr Handy and that he had taken possession of the checks before the thief stole them.

But here is the thing about his general process: what did Paychex do in a world that is absolutely flooded with check -fraud, in the first place pushing paper checks?

If “Chex” is in your name and you are not breakfast cereals, paper checks can be a matter of brand consistency. But there are other considerations and Paychex is not the only one who has to weigh different options. A pension company called Capitalize Reported last year That 43 percent of people who responded to the survey had to use paper checks during their rollover processes.

Yes, electronic transmission from an old 401 (K) provider to a new one is possible. But in some cases zapping of money makes no important information about the money to tag.

The Internal Revenue Service has an interest in every rollover. It does not want people to sneak money from pension accounts without paying taxes or fines that are due, and it wants the new company that holds the money, knows what kind of pension account it is. Without knowing the type, no one can later tell the IRS what taxes he, if present, tells the participant what he or she owes.

And guess something. With paper checks you can simply put words on it that help explain or indicate what kind of account the money came and where it should end. So 401 (K) companies can offer both options – electronically (with a kind of extra function or process to ensure that the correct tax information travels with the money) and paper checks.

But come on! It is 2025. Would it be so complicated to write some software to link the relevant information to any electronic transfer of someone’s pension accounts?

Maybe not. But without the guidance of the Treasury Department, few companies (and especially their lawyers) want to have a chance to do it wrong and end up in hot water. The IRS is supposed to offer more clarity soon, and the most important players in the 401 (K) industry cannot wait. I imagine that Paychex cannot wait either; Stories such as these are a turn for companies that consider his offer.

That said, Mr Handy, who was 33 when he asked the Rollover two years ago, believes that Paychex could have done much more to prevent this situation. He said that nobody at Paychex once told him that an electronic transfer was possible, although he later found out that he could have moved his money in this way.

He had never done a rollover either. And although the idea arose that the use of paper controls was a bit risky, he thought he had to do what he was told: wait for the checks to come in the post and then transfer them to the new provider.

And one more thing: Why does Paychex not send six digits by Fedex or certified e-mail? Mr Handy now wishes that he had sent the money to his new 401 (K) provider in this way.

Again, he followed instructions, or at least offered the experts. He dealt with the checks he sent to his new pension fund company in the same way as Paychex by placing them in the normal post.

So what should we learn here? It may seem intuitive to avoid paper and become electronic as at all, but there seem to be no data in the industry that shows that roller overfraud is more common with paper controls.

Perhaps checks are actually safer, and Mr.’s bad luck. Handy is a coincidence. After all, thieves can find ways to occur or manipulate yourself And steal your pension funds on paperless fashion.

Yet everyone who does a rollover – of any nature whatsoever – must be hypervigilant. View your accounts for electronic transactions that you initiate every day and see if they do not happen on schedule.

If you use paper controls, you request the most safe possible mailing process. And if you manage pension plans for your colleagues – even earlier – make sure they are aware of all their rollover options and are aware of the paper control of Mr. Handy Nightmare.

Not all of our “How did this happen?” Stories will have a happy ending. Paychex has Mr. Handy not reunited with his money. Nor has Chase, although citizens have arranged for reimbursement. A Chase spokesperson said that PNC should have come to IT Bank-to-Bancy to request the money and that Chase did not have a record that PNC had done that.

Paychex could probably order PNC to make the approach, but it doesn’t seem to have tried. Mr. Handy went to PNC at one point, but he told him he had to record it with Paychex.

Mr. Handy now has a problem: he can owe the IRS money because a thief has his pension money early in cash.

If that comes, he does not intend to send the agency a check.