New GAO Report Says Government Agencies Could Improve Rollover Process

The Government Accountability Office (GAO) has issued a report to Congress about the rollover process for 401(k) plans. The GAO states that around 95% of money contributed to individual retirement accounts (IRAs) in 2008 came from rollovers and were primarily from employer-sponsored retirement plans.

The GAO reported that the current rollover process discourages participants from rolling their funds into other retirement plans – and instead favors rollovers into IRAs. They stated that this may result from:
Plans including waiting periods before processing employees’ requests for rollovers.
The processing time for a rollover to a plan frequently takes longer than for an IRA. The procedures used by plans to verify the tax-qualified status of the funds to be rolled over can be long and complex.
Employees often receive less help when rolling their assets to another plan than to an IRA. Furthermore, they may not receive unbiased information about rolling their funds into another plan compared to an IRA.
The wide variety of distribution forms used by plans may be confusing for participants. Additionally, information regarding distribution options may be complex.

For more information, click here. (ERIC Members and Trial Members only)

A copy of the GAO report is available here.