Jessica Wong

Sat, May 31, 2025, 4:44 AM5 min read

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“This outdated and insecure method remains standard practice in the retirement industry,” Handy told The New York Times.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?

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So why are plan administrators holding on to this outdated method?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.

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.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

While protections like the Employee Retirement Income Security Act (ERISA) exist, they are limited.