The latest report from the Government Accountability Office (GAO) asks the Department of Labor (DOL) to emphasize 403(b) plans on their website.
The report, which was commissioned at the request of Rep. Robert Scott of the House Education and Workforce Committee, looks at improvements the DOL could make in supporting 403(b) plans on its website.
GAO was asked to review the extent of 403(b) plan oversight by the DOL, SEC, and IRS, actions by selected states that could improve 403(b) participant outcomes, and options stakeholders and experts have identified that could improve outcomes for 403(b) participants.
In its background, GAO notes that SEC’s oversight focuses on compliance with securities laws and regulations, while the IRS’s oversight focuses on compliance with the Internal Revenue Code. DOL, SEC, and IRS also conduct outreach and provide educational materials to 403(b) plan sponsors and participants.
In its report, GAO adds that while the SEC and IRS have taken steps to oversee 403(b) plans, the Labor Department does not currently have targeted educational materials that could help participants comprehend 403(b) plan fees.
Therefore, GAO recommends the DOL update educational materials to help participants understand these fees. “Updated DOL information on 403(b) plans could help participants make more informed decisions,” the GAO said.
GAO reviewed how five states, including California, Connecticut, Delaware, Kansas, and Texas, have worked to improve outcomes with 403(b) plans, assessed SEC and IRS information, and spoke with federal and state agency experts.
According to GAO, officials in Connecticut, Delaware, and Kansas said they had consolidated the number of service providers offering investment options, which strengthened oversight by reducing the number of service providers they had to oversee.
Furthermore, officials in Connecticut told the GAO that consolidating service providers also resulted in lower annual fees for participants. Officials in four of the selected states said they enhanced transparency by providing participants with additional information on plans’ investment options and fees or by making it available elsewhere, and another four of the five selected states reported taking action to improve participant outcomes in non-ERISA 403(b) plans by strengthening the oversight of these investment options.
Stakeholders and experts surveyed suggested ideas that could improve 403(b) participant outcomes, including establishing fiduciary duties for non-ERISA plans in states that are not subject to protections, and promote transparency by requiring distribution of standardized information on investment options’ returns and fees for non-ERISA plan participants.
Other experts added how allowing 403(b) plans to use other investment vehicles could reduce fees.
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