GAO Releases Report on Fees and Fee Disclosure in Non-401(k) Defined Contribution Plans

November 23, 2009

The Government Accountability Office (GAO) recently released a new report that evaluates fee levels and fee disclosure practices in IRAs and defined contribution plans other than 401(k)s.

The report, "Retirement Savings: Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants" addresses a range of fee-related questions pertaining to 401(a), 403(b), 457 and IRA plans.

Specifically, House Ways and Means Committee Chairman Charles Rangel requested that GAO discuss 1) how the types of fees across those plans differ, 2) how plan sponsors' actions affect participant fees, 3) how fee disclosure requirements vary, and 4) the effectiveness of the oversight of those plans.

In response, the GAO urges Congress to consider amending the Employee Retirement Income Security Act (ERISA) to expand required disclosures to plan participants regarding fees in all ERISA-covered defined contribution plans, including a chart that provides easy comparison of fees across plan investment options.

GAO also recommended that the Internal Revenue Service (IRS) and the Department of Labor work collaboratively to provide guidance for all types of defined contribution plan sponsors about ways they can help to decrease participant fees. They also recommended that the IRS collect information to allow it to differentiate between 457(b) government and 457(b) tax-exempt plans in order to ensure proper compliance with catch-up contribution rules. Catch-up contributions are allowed in 457(b) governmental plans but not 457(b) tax-exempt plans.

The information provided in the report may be helpful to lawmakers in determining whether fee disclosure legislation should be applied only to ERISA-covered defined contribution plans or to all tax-deferred defined contribution arrangements.