Recommendation: EBSA should explore ways to collect information on fees charged to participants or alternate payees by a retirement plan—including plan service provider fees the plan passes on to participants—for review and qualification of domestic relations orders and evaluate the burden of doing so. For example, DOL could consider collecting fee information as part of existing reporting requirements in the Form 5500. (Recommendation 1)

Agency: Department of Labor
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: EBSA should take steps to ensure that information regarding the requirements for QDROs is available and easily accessible for participants and alternate payees. For example, EBSA could develop a checklist of documents and information that parties could use to help draft a domestic relations order that would be more likely to be qualified as a QDRO on a plan administrator's first review. In addition, EBSA could conduct outreach focused on QDROs to practitioners, such as members of the family bar who may draft domestic relations orders. (Recommendation 2)

Agency: Department of Labor
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The IRS Commissioner should develop specific instructions within the Internal Revenue Manual, the Nonqualified Deferred Compensation Audit Techniques Guide, or other IRS training material to aid examiners in obtaining and evaluating information they can use to determine whether there exists a restricted period with respect to a company with a single-employer defined benefit plan and if a company with a single-employer defined benefit plan has, during a restricted period, set aside assets for the purpose of paying deferred compensation under an executive retirement plan. (Recommendation 1)

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

Comments: IRS stated that they would review and consider developing further specific instructions within the Internal Revenue Manual, the Nonqualified Deferred Compensation Audit Techniques Guide or other IRS training material to aid examiners. We believe that implementing this recommendation will help ensure that IRS is aware of when companies with at-risk single-employer defined benefit plans are reporting assets set aside to pay deferred compensation to key executives while in a restricted period as income for those employees

Recommendation: The Secretary of Labor should review and determine whether its reporting requirements for executive retirement plans should be modified to provide additional information DOL could use to oversee whether these plans are meeting eligibility requirements. (Recommendation 2)

Agency: Department of Labor: Office of the Secretary
Status: Open

Comments: DOL stated that it does not have plans to issue guidance or regulations regarding executive retirement plans, citing, among other considerations, existing resource constraints and priority regulatory and guidance projects in development, and that it would not be advisable to shift resources from other projects. GAO continues to maintain that DOL's one-time single page alternative reporting for executive retirement plans lacks important information sufficient to help the agency identify whether companies may be including ineligible employees in its plan and DOL's current data on executive retirement plans has limited usefulness due to the age and limits of the original data submitted.

Recommendation: The Secretary of Labor should explore actions the agency could take to help companies prevent the inclusion of rank-and-file employees in executive retirement plans and determine which, if any, actions should be implemented. (Recommendation 3)

Agency: Department of Labor: Office of the Secretary
Status: Open

Comments: DOL stated that the agency has not encountered evidence of systematic abuses involving executive retirement plans or that ERISA's claims procedure rules and judicial remedies are inadequate to protect participants' benefit rights. However, we reported that industry surveys indicate that some companies may be extending employee eligibility to high percentages of their workforce who are lower-paid and lower-ranked employees who may not be considered a part of a select group. Industry experts also told us that plan eligibility requirements for executive retirement plans are not clearly defined and that companies are unclear on how to establish eligibility, and they identified court cases that contribute to the confusion regarding plan eligibility. Implementing this recommendation will help ensure that only executives who can bear the risks inherent in these plans are participating.

Recommendation: The Secretary of Labor should provide specific instructions for companies to follow to correct eligibility errors that occur when rank-and-file employees are found to be participating in executive retirement plans, and should coordinate with other federal agencies on these instructions, as appropriate. (Recommendation 4)

Agency: Department of Labor: Office of the Secretary
Status: Open

Comments: DOL suggested a remedy in an amicus brief for companies to follow to correct eligibility errors in these plans could have unintended consequences for participants because, according to IRS officials, it could result in violations of federal tax law and additional tax for participants. We urge DOL to develop instructions to correct eligibility errors, in coordination with other federal agencies, as needed, in a way that does not adversely affect rank-and-file employees participating in these plans.

Recommendation: The Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA) should clarify whether an Employee Retirement Income Security Act of 1974 plan may incorporate material ESG factors into the investment management for a qualified default investment alternative (QDIA). (Recommendation 1)

Agency: Department of Labor
Status: Open

Comments: DOL neither agreed nor disagreed with this recommendation. On April 23, 2018, while DOL was reviewing our report, the agency issued Field Assistance Bulletin 2018-01 regarding retirement plans' use of ESG factors. While this new bulletin specifically mentions the use of ESG factors in a QDIA and reiterates the conditions under which an investment option may generally be considered a QDIA, it focuses on the use of ESG factors for collateral benefits rather than on cases where ESG factors are considered in investment decisions because they have been determined by fiduciaries to be material to financial performance. For example, the new field assistance bulletin states that the QDIA regulations do not suggest that fiduciaries should select a QDIA based on collateral public policy goals. ESG factors can be used to address material risks, which might otherwise be ignored, and there is interest in considering such factors within a QDIA. The use of ESG factors in this manner can be distinct from pursuing collateral public policy goals. Additional clarification from DOL that explicitly addresses plans' use of financially material ESG factors in investment options designated as a QDIA could enhance the agency's effectiveness in assisting plan fiduciaries with understanding and fulfilling their obligations under ERISA. In June 2019, DOL stated that it would be appropriate to engage with stakeholders before reaching any conclusions about the necessity or appropriateness of issuing further guidance in this area. Additional information about DOL's efforts to engage with stakeholders, including the outcome of such efforts and rationale for any conclusions reached would help determine the effectiveness of the agency's actions.

Recommendation: The Assistant Secretary of Labor for EBSA should provide further information to assist fiduciaries in investment management involving ESG factors, including how to evaluate available options, such as questions to ask or items to consider. (Recommendation 2)

Agency: Department of Labor
Status: Open

Comments: DOL neither agreed nor disagreed with this recommendation. GAO believes that while DOL's new field assistance bulletin provides information on the limitations of using ESG factors for pursuing collateral benefits, additional clarifying information could help sponsors conduct due diligence in considering whether ESG factors are material to an investment's financial performance and, if so, how to address those material risks. DOL's written comments recognize that additional clarification could be appropriate, depending on responses to the new field assistance bulletin from the public. We appreciate the consideration of the need for additional information, particularly as some have noted the new field assistance bulletin could create a chilling effect that leads fiduciaries to avoid considering ESG factors that could address material risks in their investments, to the detriment of plan participants' best interests. In June 2019, DOL stated that it would be appropriate to engage with stakeholders before reaching any conclusions about the necessity or appropriateness of issuing further guidance in this area. DOL further stated that the agency added a new project to the Spring 2019 regulatory agenda related to proxy voting. Additional information about DOL's new project on proxy voting and efforts to engage with stakeholders, including the outcome of such efforts and rationale for any conclusions reached, would help determine the effectiveness of the agency's actions.

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: On April 25, 2018, the Senate introduced the "Commission on Retirement Security Act of 2018" (S.2753). On May 14, 2019, the Senate re-introduced this legislation (S.1435). This bipartisan legislation would establish a comprehensive retirement Commission that would be responsible for developing findings, conclusions, and recommendations for how to improve or replace existing private retirement programs. Commission members would be appointed using a bipartisan process and would include representatives from government agencies; current or former members of Congress; economic experts; and practitioners with expertise or experience engaging with employers, labor unions, and consumers designing and administering retirement plans. As of July 2020, no additional action has been taken.