The Government Accountability Office (GAO) is an independent, nonpartisan agency that works for Congress. The GAO investigates how the federal government spends our taxpayer dollars and has often been called the “congressional watchdog,”
I blogged about the GAO just the other day in my post, Getting ready for the first wave of Baby Boomers reaching retirement age: the Social Security Administration’s big challenge. That post discussed the GAO’s report assessing how the Social Security Administration’s reduced workforce will manage the increased number of Social Security recipients as the Baby Boomers retire.
401(k) plans have also been on the GAO’s project list with particular emphasis on the fiduciary aspects of ERISA. Back in December, 2006, I blogged that GAO’s 401(k) fee report, Congressional comments picking up buzz in local papers. The political result of that report was the introduction of legislation in Congress requiring more fee disclosure. That legislature was put on hold when Congress adjourned while the Department of Labor has made significant regulatory initiatives in this area.
All this is background for the most recent GAO report issued last month, Fulfilling Fiduciary Obligations Can Present Challenges for 401(k) Plan Sponsors Highlights of GAO-08-774, a report to the Chairman, Committee on Education and Labor, House of Representatives. While it doesn’t break any new ground, it does provide an excellent overview of where the retirement plan industry is now with respect to:
- Common 401(k) plan features, which typically have important fiduciary implications, and factors affecting these decisions.
- Challenges sponsors face in fulfilling their fiduciary obligations when overseeing plan operations.
- Actions the Department of Labor takes to ensure that sponsors fulfill their fiduciary obligations, and the progress Labor has made on its regulatory initiatives.
The GAO also renews its recommendations to Congress to pass legislation that would help the Department of Labor’s fiduciary oversight. From the report’s conclusion (and note the section I have highlighted in italics):
Since our 2006 report, Labor has made progress on its disclosure initiatives but some important fiduciary issues have yet to be fully addressed. In our previous reports, we asked Congress to consider amending ERISA to (1) explicitly require 401(k) service providers to disclose to plan sponsors the compensation they receive from other service providers and (2) give Labor authority to recover plan losses against certain types of service providers, even if they are not currently considered fiduciaries to that plan under ERISA. While Labor has proposed a regulatory change that could eliminate some of the confusion surrounding certain fiduciary obligations, it is unclear how closely the final regulation will follow the proposed rule. We continue to believe that changes to ERISA would help Labor in its efforts to promote sponsors’ fiduciary oversight and be in the best interest of participants.
Here’s the link to the complete report, Fulfilling Fiduciary Obligations Can Present Challenges for 401(k) Plan Sponsors.