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    Subject Term: "Defined contribution plans"

    5 publications with a total of 24 open recommendations including 2 priority recommendations
    Director: Jeszeck, Charles A
    Phone: (202) 512-7215

    1 open recommendations
    Recommendation: Congress should consider establishing an independent commission to comprehensively examine the U.S. retirement system and make recommendations to clarify key policy goals for the system and improve how the nation can promote more stable retirement security. We suggest that such a commission include representatives from government agencies, employers, the financial services industry, unions, participant advocates, and researchers, among others, to help inform policymakers on changes needed to improve the current U.S. retirement system.

    Agency: Congress
    Status: Open

    Comments: When we determine what steps the Congress has taken, we will provide updated information.
    Director: Charles Jeszeck
    Phone: (202) 512-7215

    6 open recommendations
    Recommendation: To ensure that current vesting policies appropriately balance plans' needs and interests with the needs of workers to have employment mobility while also saving for retirement, Treasury should evaluate the appropriateness of existing maximum vesting policies for account-based plans, considering today's mobile labor force, and seek legislative action to revise vesting schedules, if deemed necessary. The Department of Labor could provide assistance with such an evaluation.

    Agency: Department of the Treasury
    Status: Open

    Comments: Treasury did not provide formal comments for this recommendation. The Department of Labor's comments noted that Treasury and IRS will consult with them on subjects of joint interest and Labor will provide assistance as requested. We will monitor the agency's progress.
    Recommendation: To help participants better understand eligibility and vesting policies, the Department of Labor (DOL) should develop guidance for plan sponsors that identifies best practices for communicating information about eligibility and vesting policies in a clear manner in summary plan descriptions. For example, DOL could discourage plans from including in documents information about employer contributions or other provisions that are not actually being used by the plan sponsor.

    Agency: Department of Labor
    Status: Open

    Comments: The Department of Labor disagreed with this recommendation stating that it would not be appropriate at this time to reallocate resources from its existing priority projects to a new project to identify "best practices" for communicating information about eligibility and vesting policies in a clear manner in the summary plan descriptions. The agency noted that in FY17, it will review its existing outreach material on plan administration and compliance for opportunities to highlight the issues and recommendations in our report. It will also consider this recommendation in its ongoing development and prioritization of EBSA's agenda for regulations and sub-regulatory guidance.
    Recommendation: To help increase plan participation and individuals' retirement savings, Congress should consider updating ERISA's 401(k) plan eligibility provisions to extend plan eligibility to otherwise eligible workers at an age earlier than 21.

    Agency: Congress
    Status: Open

    Comments: As of August 2017, Congress has not yet taken action on this matter.
    Recommendation: To help increase plan participation and individuals' retirement savings, Congress should consider updating ERISA's 401(k) plan eligibility provisions to amend the definition of "year of service," given the prevalence of part-time workers in today's workforce.

    Agency: Congress
    Status: Open

    Comments: When we obtain information on actions taken by the Congress, we will a update.
    Recommendation: Congress should consider whether ERISA's provisions related to the timing of employer matching contributions need to be adjusted to reflect today's mobile workforce and workplace plans, which are predominantly 401(k) plans offering matching employer contributions.

    Agency: Congress
    Status: Open

    Comments: When we obtain information on actions taken by the Congress, we will a update.
    Recommendation: Congress should consider whether ERISA's provisions related to last day policies need to be adjusted to reflect today's mobile workforce and workplace plans, which are predominantly 401(k) plans offering matching employer contributions.

    Agency: Congress
    Status: Open

    Comments: When we obtain information on actions taken by the Congress, we will a update.
    Director: Jeszeck, Charles A
    Phone: (202) 512-7215

    7 open recommendations
    including 1 priority recommendation
    Recommendation: The Secretary of the Department of Labor (DOL) should help encourage plan sponsors to offer lifetime income options by clarifying the safe harbor from liability for selecting an annuity provider by providing sufficiently detailed criteria to better enable plan sponsors to comply with the safe harbor requirements related to assessing a provider's long-term solvency.

    Agency: Department of Labor
    Status: Open

    Comments: DOL stated that a clarification might erode consumer protections by degrading the oversight of fiduciaries making such selections and suggested that the plan fiduciaries outsource these decisions to a financial institution as an investment manager under Section 3(38) of ERISA. While we recognize the challenging process for plan sponsors prudently offering an in-plan annuity, we believe this strategy relies on a plan having access to something specific: a deferred annuity embedded in a target date fund and very few plans offer deferred annuities. It is not clear whether such a service would be available and affordable to the bulk of 401(k) plan sponsors.
    Recommendation: The Secretary of the DOL should help encourage plan sponsors to offer lifetime income options by considering providing legal relief for plan fiduciaries offering an appropriate mix of annuity and withdrawal options, upon adequately informing participants about the options, before participants choose to direct their investments into them.

    Agency: Department of Labor
    Status: Open
    Priority recommendation

    Comments: DOL stated that it is open to considering alternative regulatory approaches, and will include the recommendations as part of its ongoing development and prioritization of its agenda. DOL commented that the statutory structure explicitly provided by section 404(c) of ERISA pertaining to "investments" may not extend to annuities, although annuities are included as qualified default investment alternatives already. They also expressed concern that it might move the responsibility for the selection of the annuity provider to the participant, although DOL officials told us they believe plan fiduciaries maintain investment selection responsibility currently under 404(c). DOL suggested an alternative outsourcing solution to put the evaluation of the annuity provider in the hands of fiduciaries with financial expertise without the need of a regulation to reduce the obligations fiduciaries have to protect participants' interests. However, we believe this focuses solely on annuities and does not address the need for the same broad array of alternatives and information about them that 404(c) creates in the accumulation phase. We will close this recommendation when DOL either determines internally that it lacks authority to expand 404(c) to the decumulation phase or shows an intent to solicit stakeholder views as to how a prudent mix of options might be incentivized while maintaining sufficient participant protections.
    Recommendation: To guide fiduciaries as they consider how the account balances of their participants will translate into financial security in retirement, DOL should modify its Meeting Your Fiduciary Responsibilities publication or issue new guidance to encourage plan sponsors to use a record keeper that includes annuities from multiple providers on their record keeping platform.

    Agency: Department of Labor
    Status: Open

    Comments: DOL stated that it reviewed its publications to explore ways to encourage use of products and arrangements designed to provide participants and beneficiaries a lifetime income stream after retirement, and it is working on ways to build on them to better educate participants and plan sponsors about the need to think of making retirement savings last throughout retirement.
    Recommendation: To guide fiduciaries as they consider how the account balances of their participants will translate into financial security in retirement, DOL should modify its Meeting Your Fiduciary Responsibilities publication or issue new guidance to encourage plan sponsors to offer participants the option to partially annuitize their account balance by allowing them the ability to purchase the amount of guaranteed lifetime income most appropriate for them.

    Agency: Department of Labor
    Status: Open

    Comments: DOL stated that it reviewed its publications to explore ways to encourage use of products and arrangements designed to provide participants and beneficiaries a lifetime income stream after retirement, and it is working on ways to build on them to better educate participants and plan sponsors about the need to think of making retirement savings last throughout retirement.
    Recommendation: To guide fiduciaries as they consider how the account balances of their participants will translate into financial security in retirement, DOL should modify its Meeting Your Fiduciary Responsibilities publication or issue new guidance to encourage plan sponsors to consider whether a contract with a service provider ensures future service provider changes do not cause participants to lose the value of their lifetime income guarantees.

    Agency: Department of Labor
    Status: Open

    Comments: DOL stated that it reviewed its publications to explore ways to encourage use of products and arrangements designed to provide participants and beneficiaries a lifetime income stream after retirement, and it is working on ways to build on them to better educate participants and plan sponsors about the need to think of making retirement savings last throughout retirement.
    Recommendation: To guide fiduciaries as they consider how the account balances of their participants will translate into financial security in retirement, DOL should modify its Meeting Your Fiduciary Responsibilities publication or issue new guidance to encourage plan sponsors to include participant access to advice on the plan's lifetime income options from an expert in retirement income strategies.

    Agency: Department of Labor
    Status: Open

    Comments: DOL stated that it reviewed its publications to explore ways to encourage use of products and arrangements designed to provide participants and beneficiaries a lifetime income stream after retirement, and it is working on ways to build on them to better educate participants and plan sponsors about the need to think of making retirement savings last throughout retirement.
    Recommendation: To guide fiduciaries as they consider how the account balances of their participants will translate into financial security in retirement, DOL should modify its Meeting Your Fiduciary Responsibilities publication or issue new guidance to encourage plan sponsors to consider providing RMD-based default income-plan distributions as a default stream of lifetime income based on the RMD methodology-beginning, unless they opt-out, when retirement-age participants separate from employment, rather than after age 70½.

    Agency: Department of Labor
    Status: Open

    Comments: DOL stated that it reviewed its publications to explore ways to encourage use of products and arrangements designed to provide participants and beneficiaries a lifetime income stream after retirement, and it is working on ways to build on them to better educate participants and plan sponsors about the need to think of making retirement savings last throughout retirement.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    4 open recommendations
    Recommendation: To promote retirement savings without creating permanent tax-favored accounts for a small segment of the population, Congress should consider revisiting the use of IRAs to accumulate large balances and consider ways to improve the equity of the existing tax expenditure on IRAs. Options could include limits on (1) the types of assets permitted in IRAs, (2) the minimum valuation for an asset purchased by an IRA, or (3) the amount of assets that can be accumulated in IRAs and employersponsored plans that get preferential tax treatment.

    Agency: Congress
    Status: Open

    Comments: In its October 2014 report, GAO found that individuals with limited, occupationally related opportunities could engage in sophisticated investment strategies and accumulate considerable tax-preferred wealth in IRAs and subsequently suggested to Congress legislative options. As of March 2017, legislation had not been introduced on any aspect of this suggestion, although the Senate Finance Committee held a hearing on IRA policy in September 2014 for which GAO provided a statement for the record.
    Recommendation: To improve IRS's ability to detect and pursue noncompliance associated with undervalued assets sheltered in IRAs and prohibited transactions, the Commissioner of Internal Revenue should conduct research using the new Form 5498 data to identify IRAs holding nonpublic asset types, such as profits interests in private equity firms and hedge funds, and use that information for an IRSwide strategy to target enforcement efforts.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had taken some action to develop a research plan using the new information on types of nonpublic IRA assets reported on Form 5498. Previously, IRS searched terms in Form 5498 filings to identify IRAs holding assets with the greatest risk of noncompliance. In January 2016, IRS started a research project to examine a sample of tax returns based on certain nonpublic IRA asset types. IRS plans to use the research results due in June 2018 to develop an IRS-wide strategy to target enforcement efforts to those IRAs where the beneficiary of the IRA has caused his or her IRA to engage in a prohibited transaction. Once IRS completes electronically compiling the new Form 5498 information for tax year 2016 that is filed in 2017, IRS researchers plan to use the asset type data to streamline the process of identifying those IRAs. As of March 2017, IRS examination officials did not have a date on when the new IRA asset type data will be available for further analysis.
    Recommendation: To improve IRS's ability to detect and pursue noncompliance associated with undervalued assets sheltered in IRAs and prohibited transactions, the Commissioner of Internal Revenue should work in consultation with the Department of the Treasury on a legislative proposal to expand the statute of limitations on IRA noncompliance to help IRS pursue valuation-related misreporting and prohibited transactions that may have originated outside the current statute's 3-year window.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with GAO's October 2014 recommendation on IRAs with large balances and said it had discussed the recommendation with Treasury's Office of Tax Policy and Benefits Tax Counsel. Consequently, IRS said Treasury is aware of IRS's willingness to support legislative efforts in this area. However, Treasury and IRS have not drafted a legislative proposal as of March 2017.
    Recommendation: To help taxpayers better understand compliance risks associated with certain IRA choices and improve compliance, the Commissioner of Revenue should, building on research data on IRAs holding nonpublic assets, identify options to provide outreach targeting taxpayers with nonpublic IRA assets and their custodians, such as reminder notices that engaging in prohibited transactions can result in loss of the IRA's tax-favored status.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has taken some action to provide general outreach but has not yet compiled data to target outreach to taxpayers with nonmarketable IRA assets at greater risk of noncompliance, as GAO recommended in October 2014. In June 2016, IRS published information on IRS.gov outlining the new information to be reported for nonmarketable IRA assets and included a general caution that IRAs with nonmarketable investments or assets under direct taxpayer control may be subject to a heightened risk of committing prohibited transactions. This caution, similar to those that IRS added to its publications about IRA contributions and distributions, is a step toward helping taxpayers better understand which investments pose greater risks. IRS said results from an ongoing compliance research project may help in targeting outreach to taxpayers holding certain IRA assets at greater risk of noncompliance. IRS said it could refine its outreach to those taxpayers with nonpublic IRA assets using the new asset type data once compiled electronically. As of March 2017, IRS was compiling the IRA assets data for tax year 2016 that is filed in 2017, but IRS had not provided a date on when the new IRA asset type data will be available for further analysis.
    Director: Charles Jeszeck
    Phone: (202) 512-7215

    6 open recommendations
    including 1 priority recommendation
    Recommendation: To better protect plan sponsors and participants who use managed account services, the Secretary of Labor should direct the Assistant Secretary for the Employee Benefits Security Administration (EBSA) to review provider practices related to additional managed account services offered to participants in or near retirement, with the aim of determining whether conflicts of interest exist and, if it determines it is necessary, taking the appropriate action to remedy the issue.

    Agency: Department of Labor
    Status: Open

    Comments: In 2014, DOL agreed to include these practices in its current review of investment advice conflicts of interest, noting that such conflicts continue to be a concern. In April 2015, a proposed regulation was published in the Federal Register on the definition of a "fiduciary" of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) as a result of giving investment advice to a plan or its participants or beneficiaries. The proposal would widen the array of advice relationships under which someone would be considered a fiduciary under ERISA more broadly than existing regulations. This would increase consumer protection for plan sponsors, fiduciaries, participants, beneficiaries and IRA owners. An initial comment period closed on July 21, 2015. DOL held a public hearing on August 10-13, 2015, and reopened the comment period until September 24. GAO will monitor the progress of this proposed rule.
    Recommendation: To better protect plan sponsors and participants who use managed account services, the Secretary of Labor should direct the Assistant Secretary for the EBSA to consider the fiduciary status of managed account providers when they offer services on an opt-in basis and, if necessary, make regulatory changes or provide guidance to address any issues.

    Agency: Department of Labor
    Status: Open
    Priority recommendation

    Comments: DOL concurred with this recommendation and agreed to review existing guidance and consider whether additional guidance is needed in light of the various business models we described. As of May 2017, DOL is continuing these efforts. To implement this recommendation, DOL should complete its efforts to consider managed account service provider practices and fiduciary roles and take any necessary action to address potential issues to ensure that sponsors and participants receive unconflicted managed account services from qualified managers.
    Recommendation: To help sponsors who offer managed account services or who are considering doing so better protect their 401(k) plan participants, the Secretary of Labor should direct the Assistant Secretary for EBSA to require plan sponsors to request from record keepers more than one managed account provider option, and notify the Department of Labor if record keepers fail to do so.

    Agency: Department of Labor
    Status: Open

    Comments: DOL agreed to consider this recommendation in connection with its current regulatory project on standards for brokerage windows in participant-directed individual account plans. The project has been moved to the long-term action category of DOL's regulatory agenda. DOL will also consider the extent of its legal authority to effectively require that plans have more than one managed account service provider or to require that record keepers offer more than one managed account provider as part of their service agreements. GAO believes requiring plan sponsors to ask for more than one choice of a provider -- which is slightly different than how DOL has characterized it--may be an effective method of broadening plan sponsors' choices of managed account providers. However, GAO also agrees that DOL should examine the scope of its existing authority in considering how it might implement this recommendation.
    Recommendation: To help sponsors and participants more effectively assess the performance of managed accounts, the Secretary of Labor should direct the Assistant Secretary for EBSA to amend participant disclosure regulations to require that sponsors furnish standardized performance and benchmarking information to participants. To accomplish this, EBSA could promulgate regulations that would require sponsors who offer managed account services to provide their participants with standardized performance and benchmarking information on managed accounts. For example, sponsors could periodically furnish each managed account participant with the aggregate performance of participants' managed account portfolios and returns for broad-based securities market indexes and applicable customized benchmarks, based on those benchmarks provided for the plan's designated investment alternatives.

    Agency: Department of Labor
    Status: Open

    Comments: DOL agreed to consider this recommendation in connection with (1) its regulatory project on standards for brokerage windows in participant directed individual account plans and (2) open proposed rulemaking project involving the qualified default investment alternative and participant-level fee disclosure regulations. These projects have been moved to the long-term action category of DOL's regulatory agenda.
    Recommendation: To help sponsors and participants more effectively assess the performance of managed accounts, the Secretary of Labor should direct the Assistant Secretary for EBSA to amend service provider disclosure regulations to require that providers furnish standardized performance and benchmarking information to sponsors. To accomplish this, EBSA could promulgate regulations that would require service providers to disclose to sponsors standardized performance and benchmarking information on managed accounts. For example, providers could, prior to selection and periodically thereafter, as applicable, furnish sponsors with aggregated returns for generalized conservative, moderate, and aggressive portfolios, actual managed account portfolio returns for each of the sponsor's participants, and returns for broad-based securities market indexes and applicable customized benchmarks, based on those benchmarks provided for the plan's designated investment alternatives.

    Agency: Department of Labor
    Status: Open

    Comments: DOL agreed to consider this recommendation in connection with (1) its regulatory project on standards for brokerage windows in participant directed individual account plans and (2) open proposed rulemaking project involving the qualified default investment alternative and participant-level fee disclosure regulations. These projects have been moved to the long-term action category of DOL's regulatory agenda.
    Recommendation: To help sponsors who offer managed account services or who are considering doing so better protect their 401(k) plan participants, the Secretary of Labor should direct the Assistant Secretary for EBSA to provide guidance to plan sponsors for selecting and overseeing managed account providers that addresses: (1) the importance of considering multiple providers when choosing a managed account provider, (2) factors to consider when offering managed accounts as a Qualified Default Investment Alternative or on an opt-in basis, and (3) approaches for evaluating the services of managed account providers.

    Agency: Department of Labor
    Status: Open

    Comments: DOL agreed to consider this recommendation in connection with its current regulatory project on standards for brokerage windows in participant-directed individual account plans. DOL intends for this project to address whether potential regulatory or other guidance for such arrangements may be appropriate. The project has been moved to the long-term action category of DOL's regulatory agenda.