The Government Accountability Office (GAO)
recommends regulators take certain steps to reduce obstacles and disincentives
to plan-to-plan rollovers.
The agency found the current
rollover process favors distributions to individual retirement accounts (IRAs).
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 make IRA rollovers
an easier and faster choice, especially given that IRA providers often offer
assistance to plan participants when they roll their savings into an
In a report, the GAO said the
Department of Labor (DOL) and the Internal Revenue Service (IRS) provide
oversight and guidance for this process generally and can take steps to make
plan-to-plan rollovers more efficient, such as reducing the waiting period to
roll over into a 401(k) plan and improving the asset verification process.
“Such actions could help make staying in the 401(k) plan environment a more
viable option, allowing participants to make distribution decisions based on
their financial circumstances rather than on convenience,” the agency
Plan participants often receive guidance and marketing
favoring IRAs when seeking assistance regarding what to do with their 401(k)
plan savings when they separate from their employers. The GAO found that
service providers’ call center representatives encouraged rolling 401(k) plan
savings into an IRA even with only minimal knowledge of a caller’s financial
situation. Participants may also interpret information about their plans’
service providers’ retail investment products contained in their plans’
educational materials as suggestions to choose those products.