Confusing information about rolling over 401(k) accounts is causing some plan participants to make improper decisions when they leave a company, according to a Government Accountability Office report released Wednesday by several members of Congress.
The report recommended, among other things, that the Labor and Treasury departments issue uniform standards for rollover advice, and make it easier to keep assets in 401(k) accounts.
“This report is a wake-up call that we need stronger consumer protections in the growing 401(k) rollover market,” said Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, in a statement. “When Americans call up their 401(k) plan provider looking for advice, they shouldn't be inundated with marketing materials masquerading as objective, investor education.”
Along with inefficient rollover processes that discourage keeping assets in 401(k) accounts and heavy marketing of individual retirement accounts, GAO investigators found consumers were being given false and misleading information about their options and fees involved in rolling over their 401(k) assets when leaving an employer.
“As the GAO investigation shows, the financial services industry spends substantial time and effort into marketing IRAs that may not be in the best interests of account holders,” said Rep. George Miller, D-Calif., the ranking member of the House Education and the Workforce Committee.
Messrs. Harkin and Miller, along with Sen. Bill Nelson, D-Fla., ordered the GAO investigation. On Wednesday, they wrote to the secretaries of Labor and Treasury asking them to act on the GAO's recommendations.
We're open to discussing better transparency,” said Brian H. Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries, in an interview, “but we would not support anything that would not allow participants to continue to work with plan advisers and providers that they've grown to trust.”