Overall, Labor generally agreed with our recommendations and will explore ways to implement them. Specifically, regarding our
recommendation to develop a concise summary document explaining separating participants’ distribution options and require plan sponsors to disseminate the document to plan participants, Labor noted it will address the recommendation by evaluating its regulatory approaches within the constraints of its existing statutory authority. While ERISA does not grant Labor specific authority to require plan sponsors to provide such
information, it does grant Labor broad authority regarding protection of participant benefits and the duties of plan fiduciaries. In response to Labor’s comment on this specific recommendation, we have added language indicating that should Labor conclude that additional statutory authority is needed, it should seek that authority from the Congress. Regarding our recommendation to require service providers to disclose any financial interests they may have in a participant’s decisions and whether their assistance is subject to any standards as part of revising the interpretive bulletin on investment education, Labor commented that such activities should be part of the department’s efforts to amend the regulatory definition of fiduciary. Labor noted that because the current regulation addresses the circumstances under which a person becomes a fiduciary by reason of rendering investment advice for a fee, any
proposed changes to that regulation could affect the types of information treated as non-fiduciary investment education under the interpretive bulletin. We concur with Labor’s assessment and revised our recommendations accordingly.
With regard to our recommendation that the department review the lack of standardization among plans regarding plan-to-plan rollovers and
participants leaving their savings in former employers’ plans, Labor noted that such plan design features historically have not been viewed as subject to Labor’s regulatory authority under Title I of ERISA, but have been subject to IRS oversight. As a result of Labor’s comments, we revised the recommendation to include the Commissioner of Internal Revenue. However, Labor noted that it would evaluate whether it has available regulatory approaches to address the recommendation. Given Labor’s broad oversight authority of plans and plan sponsors, we continue to believe that Labor is essential to addressing this recommendation in coordination with IRS.
Regarding our recommendation that Labor and IRS work together to ensure that plan sponsors are fully informed about IRS’ rules regarding
from a non-qualified plan, Labor questioned the appropriateness of being included in the recommendation inasmuch as the interpretation of the IRC’s tax-qualification provisions related to acceptance of rollovers is not within Labor’s jurisdiction. Our recommendation focuses on IRS rules and guidance. However, given Labor’s broad oversight authority with respect to employer-sponsored plans, it is important that Labor help ensure that plan sponsors are aware of and understand IRS’ guidance. Therefore, we agree with Labor that it should assist IRS in its outreach efforts and suggest ways that newly issued guidance could be more clearly communicated to plan sponsors. To better clarify our intent for Labor’s role, we revised the recommendation to clearly convey that Labor’s role should be more centered on communication and outreach to plan sponsors.
Treasury generally agreed with our recommendations and in its letter noted that the department and IRS can take steps to improve the rollover process so that more plan participants will be able to more easily roll over retirement assets to the their current employer’s retirement plan.
Specifically, with regard to our recommendation that IRS and Labor work together to disseminate guidance for plan sponsors on the relief from disqualification when plans accept rollovers later determined to have come from a plan that is not qualified, Treasury noted that it will work to include our recommendation in its ongoing work to provide guidance facilitating rollovers into retirement plans.
Regarding our recommendation that IRS and Labor review the lack of standardization of plan-to-plan rollovers and participants leaving their savings in former employers’ plans, Treasury agreed that it is important that former employees be allowed to retain their savings in a former employer’s plan and described related actions the department has already taken. However, Treasury commented that it is not aware of any statutory basis for imposing a requirement that plans accept rollovers. Our recommendation makes clear that Treasury and Labor should review the lack of standardization of plan policies and practices related to plan- to-plan rollovers and leaving savings in a former employer’s plan with the aim of taking action within each agency’s purview. Doing so will help to reduce the obstacles and disincentives that plan sponsors may have and participants face related to plan-to-plan rollovers or leaving savings in a participant’s current plan. Policies and practices that may create
obstacles and disincentives are not limited to a sponsor’s refusal to accept rollovers from other plans.