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Open Recommendations

Retirement Investments: Agencies Can Better Oversee Conflicts of Interest Between Fiduciaries and Investors
GAO-24-104632
Aug 28, 2024
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2 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of the IRS should develop and implement a process independent of DOL referrals for identifying non-exempt prohibited transactions involving firms or financial professionals who are fiduciaries to IRAs and assessing applicable excise taxes. For example, IRS could check Form 5330 filing compliance during income tax audits of financial services firms. (Recommendation 1)
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IRS agreed with this recommendation and stated that it would examine the processes and consider implementing additional measures to identify prohibited transactions as appropriate. We await progress on these efforts.
Internal Revenue Service The Commissioner of the IRS should coordinate with DOL through a formal means, such as a memorandum of understanding, on non-exempt prohibited transactions involving firms and financial professionals who are IRA fiduciaries and owe excise tax. (Recommendation 2)
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IRS agreed with this recommendation. IRS stated it will explore opportunities to develop more formal means for coordination between IRS and DOL for prohibited transactions related to investment advice provided to IRA owners from financial services firms. We await progress on these efforts.

Thrift Savings Plan: Investment Board Needs to Greatly Improve Acquisition Management and Contractor Oversight
GAO-24-106319
Aug 01, 2024
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7 Open Recommendations
Agency Affected Recommendation Status
Federal Retirement Thrift Investment Board The FRTIB Executive Director should develop a process to ensure that any future requirements developed for the new TSP recordkeeping system are consistent with the board's objectives, including applicable federal requirements, defined for the system. (Recommendation 1)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Federal Retirement Thrift Investment Board The FRTIB Executive Director should develop a process that requires FRTIB to review testing documentation to ensure planned testing is complete, the evidence for testing outcomes is clear, and that the solution meets the desired outcome for participants for any new system enhancements or upgrades. (Recommendation 2)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Federal Retirement Thrift Investment Board The FRTIB Executive Director should develop a process that requires FRTIB to review milestone-related documentation to ensure that it fully addresses the milestone requirement. (Recommendation 3)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Federal Retirement Thrift Investment Board The Executive Director of FRTIB should expedite negotiations with its contractor to modify, where feasible, the TSP services contract to ensure that all pertinent data necessary for performance oversight is provided by the contractor. (Recommendation 4)
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When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Federal Retirement Thrift Investment Board The FRTIB Executive Director should negotiate with its contractor to modify, where feasible, the TSP services contract to include a requirement that FRTIB is notified of any new staff assigned to the contract, including the name and title of the staff, to help ensure appropriate background investigations are conducted. (Recommendation 5)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Federal Retirement Thrift Investment Board The Executive Director of FRTIB should establish a documented procedure to ensure any future third parties providing services for the TSP are able to provide transactional data needed for oversight prior to performing these services. (Recommendation 6)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

401(k) Retirement Plans: Department of Labor Should Update Guidance on Target Date Funds
GAO-24-105364
Apr 29, 2024
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2 Open Recommendations
Agency Affected Recommendation Status
Department of Labor The Secretary of Labor should ensure that the Assistant Secretary of the Employee Benefits Security Administration updates the 2013 guidance for plan sponsors, "Target Date Retirement Funds—Tips for ERISA Plan Fiduciaries," to provide information that reflects recent TDF developments. This should include the use of collective investment trusts and differences between "to" and "through" TDF glide paths. (Recommendation 1)
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DOL officials disagreed with this recommendation, stating that they believe the guidance document is balanced and provides basic information that plan fiduciaries can use to improve retirement outcomes, regardless of whether the TDF is structured as a mutual fund or collective investment trust. Our recommendation is also aimed at improving retirement outcomes and we believe that providing updated information on fundamental features of TDFs, which are the most widely used investment option in 401(k) plans, would help DOL meet this goal. For example, DOL could add targeted references to collective investment trust disclosures and include links to OCC resources to complement the specific references to mutual funds and mutual fund disclosures and help ensure that plan fiduciaries understand the applicable disclosures to inform their TDF selection and monitoring process. DOL officials also stated that this guidance notes the issue of investment risk when discussing the significance of differences between "to" and "through" TDF glide paths based on substantial evidence that many plan sponsors and participants had not understood the extent to which TDFs were exposed to this risk, including during market turbulence in 2008. While we understand DOL's focus on investment risk at the time it published this guidance document, we believe that a targeted update to add inflation risk to the discussion of the differences of "to" and "through" TDF glide paths would help plan sponsors improve retirement outcomes for their participants.
Department of Labor The Secretary of Labor should ensure that the Assistant Secretary of the Employee Benefits Security Administration, in consultation with the SEC and OCC as appropriate, updates the 2010 guidance for plan participants, "Investor Bulletin: Target Date Retirement Funds," to provide information that reflects recent TDF developments. This should include the use of collective investment trusts. (Recommendation 2)
Open
DOL officials disagreed with this recommendation, stating that they believe the guidance document is balanced and provides basic information that plan participants can use to improve their retirement outcomes, regardless of whether the TDF is structured as a mutual fund or collective investment trust. Our recommendation is also aimed at improving retirement outcomes, and we believe that providing updated information on fundamental features of TDFs, which are the most widely used investment option in 401(k) plans, would help DOL meet this goal. For example, DOL could add targeted references to collective investment trust disclosures and include links to OCC resources to complement the specific references to mutual funds and mutual fund disclosures and help ensure that participants are able to identify and understand disclosures for collective investment trust TDFs in which their retirement savings are invested, particularly since even seemingly small fees can significantly reduce 401(k) plan retirement savings.

401(k) Plans: Additional Federal Actions Would Help Participants Track and Consolidate Their Retirement Savings
GAO-24-103577
Feb 20, 2024
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6 Open Recommendations
Agency Affected Recommendation Status
Pension Benefit Guaranty Corporation The Director of the PBGC should assess and report to Congress on the feasibility of amending current law to allow active 401(k) plans to transfer small inactive account balances subject to forced-transfers to the PBGC's program, currently known as the Missing Participants Program for terminated defined contribution plans. (Recommendation 1)
Open
PBGC agreed with this recommendation and anticipates completing a study before 2025 and would consult with other agencies-including DOL, Treasury, and IRS-specifically on their ongoing work to implement related provisions enacted as a part of the SECURE 2.0 Act. We will monitor the agency's progress on these efforts.
Department of Labor The Secretary of Labor should take action to implement the ERISA Advisory Council's 2016 recommendation by issuing a Request for Information to explore how the agency can encourage and support the adoption of secure electronic data standards to facilitate the processing of plan-to-plan rollovers. (Recommendation 2)
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DOL stated that it may be premature to assess whether or how it should act on this recommendation before Treasury issues its guidance on rollovers by January 1, 2025, as required under the SECURE 2.0 Act. We note in our report that Treasury's upcoming guidance can help standardize rollovers. However, if Treasury's guidance does not address the development of a system based on secure electronic data standards to facilitate efficient plan-to-plan rollovers, DOL should take action. DOL also stated that as part of its current work to implement a statutory prohibited transaction exemption for "automatic portability providers" under the SECURE 2.0 Act, it is considering proposing possible standards for such providers of IRA-to-plan rollovers to safeguard portability data and remedy potential security breaches. We commend this approach and believe that an initiative to develop secure standards to safeguard data for automatic IRA-to-plan rollovers would be enhanced if conducted alongside a Request for Information for secure electronic data standards for plan-to-plan rollovers. Without continued progress towards developing secure electronic standards to facilitate efficient plan-to-plan rollovers, participants will likely continue to find the process challenging and may avoid consolidating their savings altogether. We will monitor the agency's progress on this recommendation.
Department of the Treasury The Secretary of the Treasury should take action, such as amending the 402(f) Notice requirements and Model Notice, or providing clarifying information to the Notice to: (1) include clear information about participants' option to leave their savings in their old plan; (2) provide clearer and more concise information on each of the four distribution options and their associated tax consequences; and (3) address the timing requirements for plans to provide the 402(f) Notice, to ensure the Notice is provided to participants when they leave their job and become eligible to take a distribution. (Recommendation 3)
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Treasury stated that an update to the 402(f) Notice is currently in process and will reflect legislation and guidance issued since the last update. However, regarding the part of the recommendation that address the timing requirements for plans to provide the 402(f) Notice, Treasury stated that there is no statutory authority to require a notice to a participant upon separation from service. Our recommendation states that Treasury should take action to address the timing issue; and Treasury can seek any venue it deems appropriate, including seeking statutory authority from Congress to address the timing. Without such action, Treasury will continue to miss an opportunity to ensure that participants are receiving easily-understandable information about all distribution options-at the point in time when a participant is facing an important decision about their retirement savings. We will monitor the agency's action.
Department of Labor The Secretary of Labor should ensure that plan participants, at the time they leave their job and become eligible to take a retirement plan distribution, receive easily-understandable information about all four distribution options and their associated tax consequences. Actions that could be taken include implementing the ERISA Advisory Council's 2015 recommendation, exploring a joint-agency effort with Treasury to update the 402(f) Notice, or other steps that would help plans develop clear and concise communications to inform participants. (Recommendation 4)
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DOL stated that it would consider two actions to address this recommendation. DOL stated that it is engaged in joint agency efforts and that it would be appropriate for them to consider our recommendation as part of such efforts with Treasury, IRS, and PBGC, as required under the SECURE 2.0 Act. Under the act, the agencies are to study, analyze, and report to Congress on the effectiveness of their reporting and disclosure requirements before the end of 2025. We agree that the forthcoming joint-agency study can lead to improvements in reporting and disclosure requirements for plans and participants across a range of retirement issues and encourage DOL to continue these efforts. In addition, DOL noted that the SECURE 2.0 Act directs them to issue regulations requiring plans to provide advanced notice to participants who are permitted to take lump sum distributions with specified information to help them compare other distribution options and the potential consequences of taking a lump sum. DOL stated that it will consider our recommendation to ensure participants receive easily understandable, timely, and comprehensive information as part of that work. By doing so, DOL can help ensure participants understand all their distribution options and make more informed decisions about their retirement savings after separating from their employer. We will monitor the agency's efforts.
Congress Congress should consider enacting legislation to assign and grant authority to a federal agency to establish and oversee a secure website, commonly known as a pension dashboard, that allows plan participants to view in one place information about all of their employer-sponsored retirement savings plans. (Matter for Consideration 1)
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As of February 2024, Congress has taken no action on this matter.
Congress Congress should consider legislative amendments to assign and grant authority to DOL and IRS to establish an electronic plan-to-plan rollover system that, when an individual changes jobs, automatically transfers the savings from their old employer-sponsored retirement account plan to their new employer's plan (provided that their new plan accepts rollovers and that individuals can opt-out). (Matter for Consideration 2)
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As of February 2024, Congress has taken no action on this matter.
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