Aug 28, 2025
Dylan Handy did everything right — or so he thought.
Two years ago, when he was 33, Handy tried to roll over his $114,000 401(k) after switching jobs. Instead of a secure digital transfer, Paychex sent paper checks.
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Unfortunately for Handy, those checks were intercepted and fraudulently cashed.
“This outdated and insecure method remains standard practice in the retirement industry,” Handy told The New York Times. The kicker? Handy wasn’t even told electronic transfer was an option. And more importantly, he may now owe taxes on a stolen account.
So why are retirement plan administrators still using physical checks? And how can you protect your money and avoid ending up in a situation similar to Handy’s?
The risks of paper-based rollovers
A 2024 survey by Capitalize revealed just how many people still deal with paper checks during rollovers — a whopping 43%.
Americans are running out of patience. More than 80% of savers say rolling over a 401(k) should be as simple as making a bank transfer. But for those stuck with the manual process, it often means phone calls, long wait times and a lot of uncertainty.
So why are plan administrators holding on to this outdated method?
Physical checks persist because of legacy systems, regulatory concerns and a lack of standardized digital options.
In Hardy’s case, he’s now in federal court suing Paychex after months of getting nowhere with banks and no reimbursement for the bulk of his lost savings. His lawyer argues Paychex is responsible.
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Paper checks in 401(k) rollovers expose savers to serious risks, including:
- Fraud and theft: Physical checks are easier to intercept, alter or cash without authorization.
- Delays and inconvenience: Mailing checks, waiting for them to clear and making sure they reach the right hands can take weeks — sometimes months. Capitalize found that 42% of savers experienced rollovers that took two months or more.
- Lack of transparency: Tracking paper checks and resolving problems can be a nightmare. In fraud cases, figuring out who’s responsible and recovering money is often a complex, drawn-out process.
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Limited protections: How to stay safe
While protections like the Employee Retirement Income Security Act (ERISA) exist, they are limited.
There’s only so much liability coverage. If a check is stolen and cashed by someone else, blame may fall on the issuer, the accepting bank or the account holder. Sorting that out can take a long time.
And even when a claim is valid, banks may take up to 90 days to respond. That you could be without your retirement funds for months.
With check fraud and scams on the rise, protecting your money during a 401(k) rollover is more important than ever. Here are a few smart steps to keep your savings safe:
- Work with a qualified advisor: Make sure any financial advisor you consult is a Certified Financial Planner™ who’s legally required to act in your best interest. The right advisor can help you avoid shady products and high-pressure sales tactics.
- Opt for direct transfers: Whenever possible, ask your 401(k) provider to transfer funds directly to your new retirement account. It’s faster and more secure.
- Use secure mail: If a paper check is your only option, request certified mail with tracking. This cuts down the chance of interception.
- Monitor your accounts: Check your accounts regularly for suspicious activity. If something looks off, report it immediately.
- Stay informed: New scams pop up all the time — from fake self-directed IRAs to bogus investment platforms. The more you know, the easier it is to spot red flags.
Check fraud isn’t going away, so it’s up to people saving for retirement to stay alert and take action. Even though some protections are in place, being proactive is your best defense.
Your retirement money deserves better than a risky, outdated process, it deserves your full attention.
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Freelance writer with an economic development and consulting background.
