GAO finds clarity of required pension reports and disclosures could be improved

In a study, the Government Accountability Office (GAO) has found that the clarity of reports that pension plan sponsors are required to submit to various federal agencies and disclosures that are required to be made to participants could be improved.

The GAO was asked to examine: (1) the reports and disclosures pension plans are required to make to government agencies and plan participants; (2) the ways, if any, reports to agencies may be inefficient or ineffective, and (3) the ways, if any, disclosures to participants may be inefficient or ineffective.

In conducting this work, the GAO reviewed relevant statutes and regulations, analyzed inquiries to the Department of Labor’s participant help line, assessed certain disclosures for readability when evaluated against criteria based on federal plain language guidelines, and interviewed agency officials, plan sponsor representatives, service providers, and participant advocates.

What GAO found

The GAO identified more than 130 reports and disclosures stemming from provisions of the Code and ERISA, as administered largely by IRS, Labor Department, and Pension Benefit Guaranty Corporation (PBGC). Although each plan sponsor is required to submit only certain of these reports and disclosures, determining which ones can be challenging and the agencies’ online resources to aid plan sponsors with this task are neither comprehensive nor up-to-date, the GAO found.

Plan sponsors’ reports to the various agencies involve minimal duplication, the GAO report found, but the management of data on one report raised concerns. Notices that the Social Security Administration (SSA) sends to retirees listing vested benefits left behind with previous employers can be misleading because management of the data is fragmented across three agencies and none assumes responsibility for ensuring the data are accurate. Beyond issuing the form and instructions, the IRS views its role as merely to pass the data through from sponsors to the SSA, the SSA views its role as merely to provide retirees with whatever data the SSA receives from the IRS, and the Labor Department views its role as merely to respond to retirees’ inquiries. As a result, the report notes, SSA notices can be misleading, listing benefits that have already been paid.

The GAO also found that participant disclosures are numerous and do not always communicate effectively. Various groups the GAO interviewed said that participants often find the content overwhelming and confusing. Although certain disclosures are required by law to be written in a manner calculated to be understood by the average plan participant, the three agencies acknowledged that enforcement of these provisions has not been a priority. Also, the GAO found that several model notices that these agencies had developed as templates for sponsors to use in developing their disclosures fell short when evaluated against federal plain language guidelines.

Recommendations

In the report, the GAO asked Congress to consider shifting responsibility and necessary resources to the Labor Department for managing the pension benefit data that the SSA provides to retirees.

The GAO also recommended that the agencies improve their online tools on reporting requirements and facilitate better readability of disclosures.

In response, the report notes, the agencies generally agreed with the GAO findings and are taking steps to address the issues identified.

Source: GAO-14-92.

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