Frequent and collective trading among 401(k) plan participants is “uncommon and not a significant concern for plan participants, sponsors and mutual funds,” said a report by the Government Accountability Office.
In fact, some retirement industry experts interviewed by the GAO “expressed greater concern that 401(k) plan participants often fail to regularly rebalance their investments and trade too infrequently,” said the report published Monday in response to a request by legislators.
Participants in 401(k) plans “often face trading policies that restrict frequent or collective trading in mutual funds,” said the report based on a request by Sen. Patty Murray, D-Wash., Sen. Elizabeth Warren, D-Mass., and Rep. Ron Wyden, D-Ore. They asked the GAO to determine whether 401(k) plans were subject to short-term trading abuses and undisclosed market timing practices similar to those identified by federal regulators in the early 2000s affecting taxable accounts.
“There was general agreement among industry representatives, participant advocates and other stakeholders we interviewed that current regulation strikes an appropriate balance between a participant’s ability to manage … retirement investments and the duty of plan fiduciaries to operate and manage their plans prudently,” the report said.
The GAO report was based on a review of regulations, plus interviews with retirement industry trade organizations, record keepers, mutual fund companies, academics and federal officials, the report said. The GAO also interviewed representatives of participant-advocacy groups and executives at five 401(k) plans.