(MONEY Magazine) – Are the top pension cops at the U.S. Department of Labor the modern-day equivalents of Paul Revere or of Chicken Little? The answer, which is still unclear, could determine whether all the 51 million Americans covered by pensions will actually receive their expected retirement benefits. Brian Hyland, Labor's inspector general, and his deputy Raymond Maria say that problems in the nation's $1.6 trillion private pension system could bear frightening similarities to the savings and loan mess. In his semiannual report, Hyland wrote: ''Unless steps are taken now, today's S&L bailout may become tomorrow's ((pension)) nightmare.'' Hyland and Maria believe that some pension fund operators may be getting away with shenanigans like those employed by many S&L officers: borrowing money they manage; making ridiculously risky loans; and investing deposited money imprudently. Thus far, the evidence is largely anecdotal, like the case of a small Seattle manufacturing company whose pension management firm went bankrupt. According to congressional committee testimony, some $25,000 of the profit-sharing plan's assets were allegedly invested in palm trees. The two Labor inspectors say abuses may go undetected or unpunished because the agency's understaffed 260-person pension investigations division depends too heavily on private auditors who, as noted above, focus on financial and accounting standards rather than violations of pension laws. Similarly, the General Accounting Office believes that S&L auditing has been inadequate. Many pension authorities agree that auditing needs improvement, although they quickly add that the inspectors' S&L analogy is alarmist. ''There are problems out there, but the inspector general's report made it seem as though everyone should be shaking in their boots,'' says Dallas Salisbury, president of the Employee Benefit Research Institute, a not-for-profit group based in Washington, D.C. Even the Labor inspectors concede, when pressed, that the pensions at greatest risk are most likely those of plans with fewer than 100 participants, which are not required to hire independent auditors. It's worth remembering that traditional defined-benefit plans -- those that specify in advance the amount you will get at retirement -- are now insured up to $24,341 a year by the federal Pension Benefit Guaranty Corporation. Employees should be aware, however, that defined-contribution plans, such as 401(k)s, are not insured.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: Auditing the auditors Employees cannot rest easy assuming that independent audi tors are protecting their pensions. In a study of 62 plans whose managers broke pension laws between 1984 and 1986, the La bor Department's inspector general concluded that auditors did not uncover the illegal transactions in 41 plans. Violations were found but not reported in 13; they were spotted but not spelled out in seven; and in the other plan, auditors flagged the viola tion but failed to disclose the assets at stake.