GAO Report Says Labor and IRS Could Improve the Rollover Process for Participants

The Government Accountability Office ("GAO") released a report as to the processes in place when 401(k) plan participants separate from their employers and must decide what to do with their plan savings. The report expressed concern that participants may be encouraged to choose rollovers to IRAs in lieu of options that could be more in their interests. The GAO found that waiting periods to roll into a new employer plan, complex verification procedures to ensure savings are tax-qualified, wide divergences in plans' paperwork, and inefficient practices for processing rollovers are some factors that cause the current rollover process to favor distributions to IRAs.

Specifically, the GAO recommends, among other things, that Labor and IRS should take certain steps to reduce obstacles and disincentives to plan-to-plan rollovers. Labor should also ensure that participants receive complete and timely information about the distribution options for their 401(k) plan savings when separating from an employer.

View Report in full here (links externally to GAO website).