(MONEY Magazine) – Apart from the dangers of cuts in benefits and poor investments, there is a more sinister threat to your retirement savings. It's the possibility that someone will steal -- or grossly mishandle -- hard-earned money that you thought you had safely stashed in your tax-deferred company plans. The people most vulnerable to being victimized, usually by an unscrupulous or negligent boss or plan trustee, are the 7 million workers covered by some 675,000 plans with fewer than 100 participants. The government claims it's on the case. Last summer, the U.S. Department of Labor's Pension and Welfare Benefits Administration proudly announced that it had obtained 13 criminal indictments of employers for embezzling pension assets and defrauding plan participants in the first six months of 1991, up from 12 for all of 1990. The regulators also reached financial settlements in 253 civil cases involving misuse by employers, trustees and administrators of retirement savings, vs. 417 last year. However, pension experts say that regulators' efforts have scarcely put a dent in the problem. ''When you consider the vast size of the pension system -- $2 trillion in 730,000 plans covering 56 million people -- these numbers are not very impressive,'' says W. Waldran Lloyd, a lawyer specializing in pension and tax law at Callister Duncan & Nebeker in Salt Lake City. No one knows how much of the money in retirement plans is actually at risk. But Lloyd estimates that thousands of violations, ranging from technical errors to serious abuse, go undetected by regulators each year. In the most extreme cases, employers embezzle workers' retirement money outright. More frequently, experts say, business owners borrow from a plan's assets illegally during tight times -- intending, of course, to pay the money back eventually -- or make inappropriate investments with money that federal regulations say should be invested prudently. One reason small plans are most at risk is that they are not a priority for regulators. In fact, a federal field investigator told MONEY that agents are instructed to spend no more than 10% of their time on plans with fewer than 50 participants. ''It often takes months, if not years, before the regulators look into complaints about small plans and by then there are significant losses,'' says Jeffrey Clayton, an attorney in Salt Lake City who headed the federal pension watchdog agency in 1981-83. The biggest losers: people who depend on plans, such as profit-sharing accounts and 401(k)s, that are not protected by the Pension Benefit Guaranty Corporation. Some examples of how devastating abuses can be: -- In Dallas, 65 former employees of Flexible Computer Corp. have lost 75% of the $110,000 invested in their 401(k) accounts over two years. Last February, a jury convicted the firm's president, Mathew Nicholas Matelan, of embezzling $26,612 of the money (Matelan is appealing the verdict). Says ex-employee Mark Davis, 31, who is out $7,300 of the $9,300 he had in the plan: ''From what I see, it's incredibly easy for an employer to get into one of these accounts.''

-- Former co-workers of Professional Staffing Services California, a San Francisco company that provides professional workers to other businesses, have spent three years trying to find out why their retirement plan has about $400,000 less than it should. Part of the problem: owner John Schmelzer used some of the money intended for the plan to expand his business. ''I was in a growth mode,'' says Schmelzer. ''I didn't do anything deliberately wrong.'' But after business turned down, Schmelzer couldn't fund the plan. He has put a Texas real estate investment, appraised at $170,000 in 1985, into a trust for the 237 plan participants. Still, says Glenn Kaprielian, 42, an optometrist who is out about $16,000: ''I don't know if I'll ever see my money.'' -- In Irving, Texas, the former owner of Waldrum Sign Co., Gene Waldrum, pleaded guilty in August to embezzling $103,000 from the firm's profit-sharing and 401(k) plans. The judge sentenced him to five years' probation and 200 hours of community service and ordered him to pay back the money plus interest. Since Waldrum claimed he was broke, however, the judge said he has to pay only $100 a month. At that rate, it would take him 86 years to pay off the principal, and he would never catch up with the interest. ''All that man got was a slap on the wrist,'' says James Reynolds, a shop foreman who had retired from the company after 20 years there and lost $33,000 -- most of his life's savings. ''Now, at age 69, I have had to go back to work.'' According to pension experts, a major cause of problems is that the law allows employers to act as plan administrators and trustees, which means that they often have complete control of a plan. Unlike larger companies, which typically hire outside administrators and investment managers -- and establish internal checks and balances -- employers with smaller plans sometimes act as if the money were their own. What's more, plans with fewer than 100 participants don't have to be audited by independent accountants and have to file full financial reports to the Labor Department only every three years. As a result, says James Standen, special agent with the U.S. Office of Labor Racketeering in Kansas City, Mo., ''it could take three years before a problem shows up.'' Faced with this enforcement vacuum, what can you do? Of course, you can avoid contributing to a 401(k); but since the vast majority of plans are sound, you would be passing up tremendous tax savings for no reason. A more prudent course is simply to show that you are concerned about a plan, which can deter an employer from dipping into its assets. For help in asking the right questions, consult the easy-to-read guide Protecting Your Pension Money (available for $6 from Pension Publications, Dept. M, Suite 704, 918 16th St. N.W., Washington, D.C. 20006). Two key tips: -- Carefully review your plan's documents. By law, an employer must give you a summary plan description, which tells you the plan's rules. In addition, every year you must receive a summary annual report. Your employer also has to provide you with copies of a more detailed plan description and the full annual report within 30 days, if you request them in writing. Employers with 401(k) and profit-sharing plans often provide individual benefit statements, which give account balances. If your company doesn't, request them in writing. -- Hound government agencies if you think you have discovered mismanagement. First, write to one of the 15 regional Pension and Welfare Benefits Administration field offices. (For the address and phone number of the one nearest you, call the national Division of Technical Assistance at 202-523-8784.) You might also get in touch with one of the seven IRS district offices for the Employee Plans/Exempt Organizations Division. (Call your local IRS tax-assistance 800 number for the office closest to you.) Alert your U.S. representative and your senators, who can sometimes jog federal agencies into action. Furthermore, any time you have reason to suspect fraud, call the U.S. Department of Labor, Office of the Inspector General (800-347-3756). Above all, keep in mind these words of Karen Ferguson, director of the Pension Rights Center: ''Pensioners must be their own watchdogs.''