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.

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: As of August 2020, no action had been taken on this recommendation. Treasury did not report an evaluation of existing maximum vesting policies for account-based plans and reiterated its policy of not recommending any legislative change to Congress. Other priorities have delayed the agency's plan to work with IRS on guidance to update the regulations under Code section 411, which concern vesting schedules, as currently in effect. But those updates, even if they should occur in the future, cannot modify permitted vesting schedules because, as Treasury notes in its comments, the vesting rules were determined by Congress. Given that more than 84 million people hold 401(k) plan accounts and that median current tenure in the private-sector is about four years, the potential for these policies to significantly impact Americans' retirement security remains. We will close this recommendation when Treasury evaluates the appropriateness of current maximum vesting policies to help determine whether they unduly reduce the retirement savings of workers, regardless of whether the agency opts to seek legislative action.

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: As of June 2020, the Department of Labor (DOL) was considering delaying regulatory action to improve disclosures, to direct its regulatory resources elsewhere. The agency noted however, that it may reopen for further comment a Request for Information posted in 2019, which sought public input on actions that could make retirement plan disclosures more understandable and useful for participants and beneficiaries, among other things. Such actions may include revising standards for the summary plan description, which our report found can contain obsolete and confusing information concerning eligibility and vesting. We continue to encourage the agency to include eligibility and vesting among topics considered for clarification in its future regulatory work and, in the meantime, to consider using sub-regulatory guidance to help plan sponsors better communicate these critical policies.

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: As of February 2020, Congress has not taken action on this matter.

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: As of March 2020, Congress did not take action on this matter.

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. The agency noted that its Spring 2018 regulatory agenda continues to classify the relevant project as a long-term action and there has been no change or additional action since then.

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: In 2019, 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. In 2020, the agency reviewed "Meeting Your Fiduciary Responsibilities" in light of this recommendation. It is updating this publication to, among other things, implement lifetime income provisions in the Setting Every Community Up for Retirement Enhancement (SECURE) Act. We await further progress by the agency.

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. In 2019, the agency noted that its Spring 2019 regulatory agenda continues to classify the relevant project as a long-term action.

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. In 2019, the agency noted that its Spring 2019 regulatory agenda continues to classify the relevant project as a long-term action.

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: No legislation limiting account owner accumulations enacted as of February 2020. 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. The Senate Finance Committee held a hearing on a range of IRA policy issues in September 2014 for which GAO provided a statement for the record that covered preliminary data on IRA balances. The Setting Every Community Up for Retirement Enhancement Act of 2019, enacted in December 2019 as division O of the Further Consolidated Appropriations Act, 2020, amended a number of requirements related to retirement accounts (Public Law 116-94). For example, section 401 limits inherited beneficiaries' ability to continue tax deferral to 10 years beyond the account owner's death. This provision somewhat reduces the long-term financial benefits of accumulating large balances in IRA accounts. However the Act did not adopt any of the other limits identified in GAO's October 2014 report. Without legislation, the intended broad-based tax benefits of IRAs are likely to continue to be skewed toward a select group of individuals.

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. Ultimately, Treasury reviews all tax legislative proposals and presents the administration's tax proposals for congressional consideration. However, Treasury has not released a legislative proposal as of January 2020. GAO reported in January 2020 that IRS examination said the 3-year statute of limitations for assessing taxes owed remains an obstacle in pursuing noncompliance that may span the many years of an IRA investment.

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 and as of January 2020 has ongoing compliance research that could inform additional opportunities 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 is similar to those that IRS added to its publications about IRA contributions and distributions. It is a step toward helping taxpayers better understand which investments pose greater risks. In February 2018, IRS completed its first analysis of new information about the amounts and types of nonpublic IRA assets from Form 5498 for tax year 2016 that was filed in 2017. In October 2019, IRS also completed an interim compliance research project examining a sample of tax returns to determine whether the beneficiary of the IRA caused his or her IRA to engage in a prohibited transaction. As of January 2020, IRS was conducting a new compliance research project examining IRAs holding certain nonpublic asset types. The compliance research began in February 2019 and is to be completed in January 2021. Unless IRS augments outreach based on reliable data about nonpublicly traded IRA investments, taxpayers at greater risk may not be able to ensure compliance with rules on prohibited transactions.