A just-released report by the Government Accountability Office on rollovers foreshadows what one of the more controversial aspects of the Department of Labor’s revised fiduciary rule may look like, industry officials say.
In its 76-page report, “401(k) Plans: Labor and IRS Could Improve the Rollover Process for Participants,” GAO urges the DOL and the Internal Revenue Service to take steps to ensure that plan-to-plan rollovers are more efficient, and to provide more information to plan participants about their distribution options when leaving an employer’s plan, as GAO says the current rollover process favors distributions to individual retirement accounts.
GAO said in its report that DOL and IRS should reduce the waiting period to roll over into a 401(k) plan and improve the asset verification process, as such actions could help make staying in a 401(k) plan “a more viable option, allowing participants to make distribution decisions based on their financial circumstances rather than on convenience.”
Arguing that little attention has been paid to the distribution process, GAO said it went about identifying challenges separating plan participants may face in (1) implementing rollovers; (2) obtaining clear information about which option to choose; and (3) understanding distribution options.
Said GAO: “Labor regulations do not ensure that 401(k) plans provide complete and timely information to participants on all their distribution options.”
In its report, GAO urged both agencies to reduce the “obstacles and disincentives” that exist for rolling into another plan, and told DOL to ensure that participants receive “complete and timely information, including enhanced disclosures, about the distribution options” for their 401(k) plan savings when separating from an employer.
Phyllis Borzi, assistant secretary for DOL’s Employee Benefits Security Administration, told AdvisorOne Wednesday that the GAO report “highlights that ending conflicts of interest among advisors in the retirement marketplace is an important part of helping workers save for a secure retirement, particularly when they are faced with the decision about making a rollover or taking some other form of distribution.”