The U.S. Government Accountability Office (GAO) asserted in a report released yesterday that the U.S. Department of Labor (DoL) does not collect information on workplace IRAs and, while the Internal Revenue Service (IRS) gathers limited data as part of its tax reporting systems, the workplace IRA information is not routinely shared with the DoL because it is considered confidential. “Without IRS sharing such information, data on IRAs will continue to be collected on an episodic basis, and mapping the universe of IRAs, especially employer-sponsored IRAs, will continue to be difficult,” the GAO warned.
Therefore, neither the DoL nor the IRS can now effectively figure out whether payroll-deducted IRAs are bridging the retirement savings gap for workers without employer pension coverage, or whether regulators should be given workplace IRA oversight similar to what they now have with traditional retirement savings plans, the GAO said .
“Encouraging employers to offer IRAs to their employees will not be productive if Congress and regulators do not make sure that there is also adequate information and improved oversight of employer-sponsored and payroll-deduction IRAs,” GAO investigators wrote in their report. “Given that limited reporting requirements for employer-sponsored IRAs and the absence of reporting requirements for payroll-deduction IRAs were meant to encourage small employers to offer retirement plans to employees, providing more complete and consistent data on IRAs would help ensure that regulators have the information they need to make informed decisions about how to increase coverage and facilitate retirement savings.”
The IRA oversight gaps could hurt eventual workplace participation rates, the GAO suggests. “Without direct oversight, employees may lack confidence that payroll-deduction IRAs will provide them with adequate protections to participate in these programs, which is particularly important given the current focus in Congress on expanding payroll-deduction IRAs,’ the report said. “However, any direct oversight of payroll-deduction IRAs should be done in a way that does not pose an undue burden on employers or their employees.’
GAO noted that lawmakers deliberately limited workplace IRA reporting as a way to encourage more employer participation.“ Although the limited reporting requirements for employer-sponsored IRAs and the absence of reporting requirements for payroll-deduction IRAs were meant to encourage small employers to offer retirement savings vehicles to employees, there is also a need for those responsible for overseeing retirement savings vehicles to have the information necessary to do so,’ the GAO investigators wrote. “This will help ensure that there is a structure in place to help protect individuals’ retirement savings if they choose either employer-sponsored or payroll-deduction IRAs.’
In light of their findings, the GAO researchers recommended lawmakers consider:
- whether to increase retirement plan coverage for the millions of workers not covered by an employer-sponsored pension plan and whether the possibility that payroll-deduction IRAs can help bridge the coverage gap; the effort should include an examination of the financial and administrative costs for employers, particularly for organizations without an automatic payroll system, and a way to help employers defray those costs;
- whether to improve the federal government’s ability to regulate employer-sponsored and payroll-deduction IRAs and evaluate ways to determine whether employers who establish employer-sponsored IRAs and offer payroll-deduction IRAs are in compliance with the law;
- evaluating ways to collect additional information on employer-sponsored and payroll-deduction IRAs, such as adding questions to the Bureau of Labor Statistics National Compensation Survey.
The full report is available here.