Employees at a small auto parts company in Smyrna, Tenn., sensed something was wrong with their 401(k) retirement plan when payouts for retirees began to slow. Company officials soon discovered that the benefits firm they had hired to manage the company's retirement account had lost or stolen all $7 million.

The head of the benefits company is in jail. But that's of little consolation to the employees and retirees, who might be unable to get back more than a small fraction of their savings, according to stories in The (Nashville) Tennessean newspaper. One employee lost about $400,000 in retirement savings. 

The Smyrna case vividly illustrates how laws and regulations haven't kept up with the sweeping changes in American retirement trends. Beyond statutes against fraud and theft, few protections exist for the 401(k) accounts that are largely replacing traditional pensions. Regulations are loose. There's little or none of the sort of insurance that safeguards pensions, bank accounts and even some investments with stockbrokers.

Thefts from 401(k) accounts occur mostly at companies with fewer than 100 employees, where almost a fifth of the 51 million Americans who have 401(k) plans work. There's no requirement for auditing these small plans every year to make sure the money that's supposed to be set aside is actually there. Looting often goes undetected for years.

No one knows how widespread the problem is, but news accounts suggest it's not as rare as it should be. A story in the Los Angeles Times tells of a Michigan worker whose company looted his 401(k) account of the $230,000 he had saved over 30 years. Other newspaper stories describe 401(k) thefts by a New Jersey contracting firm, a Florida home care company, a Pennsylvania metal fabrication company and a Louisiana crane and equipment company.

The U.S. Department of Labor is in charge of enforcing the regulations that govern 401(k) accounts, but it doesn't have enough resources to watch the industry or conduct random audits. Every year it handles roughly 1,500 formal investigations of problems such as theft or delays in depositing employees' withheld money into their accounts. But the department learns of thefts and irregularities only when angry employees complain, and it has no idea how many problems it never hears about. 

Pension reform legislation passed by Congress this year did little to increase 401(k) protections, and members of Congress who will oversee this area next year — Rep. George Miller, D-Calif., and Sen. Edward Kennedy, D-Mass. — have no changes in the works.

They should. Congress needs to consider:

•Mandating regular audits of all 401(k) accounts to make sure the money is there.

•Requiring account trustees to carry meaningful liability insurance.

•Establishing a broad and affordable insurance system similar to the one that covers traditional pensions.

True, these changes would make 401(k) plans more expensive to administer. But that's no excuse for not trying to craft workable protections. When theft or fraud occurs, it's devastating to workers and unconscionable not to restore their looted funds. Americans are increasingly on their own when it comes to retirement savings — but they shouldn't be on their own when it comes to keeping their savings away from crooks.