Individual Retirement Accounts: Government Actions Could	 
Encourage More Employers to Offer IRAs to Employees (26-JUN-08,  
GAO-08-890T).							 
                                                                 
Congress created individual retirement accounts (IRAs) with two  
goals: (1) to provide a retirement savings vehicle for workers	 
without employer-sponsored retirement plans, and (2) to preserve 
individuals' savings in employer-sponsored retirement plans when 
they change jobs or retire. Questions remain about IRAs'	 
effectiveness as a vehicle to facilitate new, or additional,	 
retirement savings. GAO was asked to report on (1) the role of	 
IRAs in retirement savings, (2) the prevalence of		 
employer-sponsored and payroll-deduction IRAs and barriers	 
discouraging employers from offering these IRAs, and (3) changes 
that are needed to improve IRA information and oversight. GAO	 
reviewed published reports from government and financial industry
sources and interviewed retirement and savings experts, small	 
business representatives, IRA providers, and federal agency	 
officials.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-890T					        
    ACCNO:   A82554						        
  TITLE:     Individual Retirement Accounts: Government Actions Could 
Encourage More Employers to Offer IRAs to Employees		 
     DATE:   06/26/2008 
  SUBJECT:   401(k) plans					 
	     Assets						 
	     Cost analysis					 
	     Employee incentives				 
	     Employee retirement plans				 
	     Employees						 
	     Financial management systems			 
	     Government employees				 
	     Government retirement benefits			 
	     Income statistics					 
	     Individual retirement accounts			 
	     Pensions						 
	     Performance appraisal				 
	     Reporting requirements				 
	     Retirement 					 
	     Retirement benefits				 
	     Retirement income					 
	     Government agency oversight			 

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GAO-08-890T

   

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Testimony: 

Before the Subcommittee on Select Revenue Measures, Committee on Ways 
and Means, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Thursday, June 26, 2008: 

Individual Retirement Accounts: 

Government Actions Could Encourage More Employers to Offer IRAs to 
Employees: 

Statement of Barbara D. Bovbjerg, Director: 
Education, Workforce, and Income Security: 

GAO-08-890T: 

GAO Highlights: 

Highlights of GAO-08-890T, a testimony before the Subcommittee on 
Select Revenue Measures, Committee on Ways and Means, House of 
Representatives. 

Why GAO Did This Study: 

Congress created individual retirement accounts (IRAs) with two goals: 
(1) to provide a retirement savings vehicle for workers without 
employer-sponsored retirement plans, and (2) to preserve individualsï¿½ 
savings in employer-sponsored retirement plans when they change jobs or 
retire. Questions remain about IRAsï¿½ effectiveness as a vehicle to 
facilitate new, or additional, retirement savings. GAO was asked to 
report on (1) the role of IRAs in retirement savings, (2) the 
prevalence of employer-sponsored and payroll-deduction IRAs and 
barriers discouraging employers from offering these IRAs, and (3) 
changes that are needed to improve IRA information and oversight. GAO 
reviewed published reports from government and financial industry 
sources and interviewed retirement and savings experts, small business 
representatives, IRA providers, and federal agency officials. 

What GAO Found: 

Although Congress created IRAs to allow individuals to build and 
preserve their retirement savings, IRAs are primarily used to preserve 
savings through rollovers rather than build savings through 
contributions. Over 80 percent of assets that flow into IRAs come from 
assets rolled over, or transferred, from other accounts and not from 
direct contributions. Assets in IRAs now exceed assets in the most 
common employer-sponsored retirement plans: defined contribution plans, 
including 401(k) plans, and defined benefit, or pension plans. 

Payroll-deduction IRA programs, which allow employees to contribute to 
IRAs through deductions from their paychecks, and employer-sponsored 
IRAs, in which an employer establishes and contributes to IRAs for 
employees, were established to provide more options for retirement 
savings in the workplace. Experts GAO interviewed said that several 
factors may discourage employers from offering these IRAs to employees, 
including administrative costs and concerns about employer fiduciary 
responsibilities. Information is lacking on how many employers offer 
employer-sponsored and payroll-deduction IRAs and the actual costs to 
employers for administering payroll-deduction IRAs. 

Earlier this month, GAO reported on the role that federal agencies can 
have in helping employers provide IRAs to employees and in improving 
oversight of these savings vehicles. GAO made several recommendations 
to the Department of Labor (Labor) and the Internal Revenue Service to 
provide better information and oversight, but in the course of the 
review, GAO found that Labor does not have jurisdiction over payroll-
deduction IRAs. Consequently, GAO also suggested that Congress may wish 
to consider whether payroll-deduction IRAs should have some direct 
oversight. A clear oversight structure could be critical if payroll-
deduction IRAs become a more important means to provide a retirement 
savings vehicle for workers who lack an employer-sponsored retirement 
plan. 

Figure: IRA Contributions and Rollovers, 1998 to 2004: 

[See PDF for image] 

This figure is a stacked vertical bar graph depicting the following 
data: 

Year: 1998; 
Contributions: $31.4 billion; 
Rollovers: $160 billion. 

Year: 1999; 
Contributions: $33.5 billion; 
Rollovers: $199.9 billion. 

Year: 2000; 
Contributions: $36.4 billion; 
Rollovers: $225.6 billion. 

Year: 2001; 
Contributions: $35.8 billion; 
Rollovers: $187.7 billion. 

Year: 2002; 
Contributions: $42.2 billion; 
Rollovers: $204.4 billion. 

Year: 2003; 
Contributions: $43.9 billion; 
Rollovers: $205 billion. 

Year: 2004; 
Contributions: $48.4 billion; 
Rollovers: $216.6 billion. 

[End of figure] 

What GAO Recommends: 

GAO is not making recommendations at this time. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-890T]. For more 
information, contact Barbara Bovbjerg at (202) 512-7215 or 
[email protected]. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today as you examine issues related to 
individual retirement accounts (IRAs) and their role in facilitating 
retirement savings for individuals. Congress created IRAs more than 30 
years ago through the Employee Retirement Income Security Act of 1974 
(ERISA) with two distinct purposes: (1) to provide individuals who are 
not covered by an employer-sponsored retirement plan with a tax- 
preferred account in which to save for retirement, and (2) to provide 
individuals who are covered by a plan a means to preserve their savings 
by allowing them to rollover, or transfer, plan balances into IRAs. 
Since that time, IRA assets have grown to an estimated $3.5 trillion in 
2004. 

Over the years, Congress has created different types of IRAs to 
encourage saving for retirement. Traditional and Roth IRAs are designed 
to be set up and used by individuals; two other types are employer- 
sponsored IRAs and are designed for small employers and their 
employees. Under payroll-deduction IRA programs, also known as payroll- 
deduction IRAs, employees may contribute to traditional and Roth IRAs 
through their employer's payroll system. Despite the growth in IRA 
assets and the varied types of IRAs, questions remain about whether 
Congress's initial goal for IRAs has been met: to help workers without 
a workplace retirement plan to save for retirement on their own behalf. 

My comments today are based primarily on findings from our June 2008 
report entitled Individual Retirement Accounts: Government Actions 
Could Encourage More Employers to Offer IRAs to Employees.[Footnote 1] 
My remarks focus on (1) the role of IRAs in retirement savings, (2) the 
prevalence of employer-sponsored and payroll-deduction IRAs and 
barriers discouraging employers from offering these IRAs, and (3) 
changes that are needed to improve IRA information and oversight. 

In conducting our work, we evaluated retirement fund assets using 
published data from federal agencies, including the Federal Reserve's 
Survey of Consumer Finance, and the Internal Revenue Service's (IRS) 
Statistics of Income, and relevant data from financial industry 
associations on retirement funds. We also analyzed demographic data 
from household surveys, including the U.S. Bureau of the Census Current 
Population Reports, and the Investment Company Institute's IRA Owners 
Survey, which focuses on IRA ownership. To determine the prevalence of 
employer-sponsored and payroll-deduction IRAs, we consulted available 
government and financial industry data on the percentage of households 
and workers participating in employer-sponsored IRAs. To corroborate 
available data, we interviewed officials at IRS and the Department of 
Labor (Labor) as well as representatives of small business member 
organizations, financial industry representatives, and other retirement 
and savings experts. To identify barriers that may discourage small 
employers from establishing employer-sponsored IRAs and from offering 
payroll-deduction IRAs to employees, we interviewed federal agency 
officials, industry associations, financial company representatives, 
small business and consumer advocacy groups, and retirement and savings 
experts. To evaluate federal oversight of IRAs, we reviewed laws 
governing agency responsibilities regarding IRAs and interviewed 
officials at IRS and Labor.[Footnote 2] We conducted this performance 
audit from September 2007 to June 2008 in accordance with generally 
accepted government auditing standards, which included an assessment of 
data reliability. Those standards require that we plan and perform the 
audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

In summary, we found that although Congress created IRAs for 
individuals to both build and preserve retirement savings, IRAs are 
primarily used to preserve savings through rollovers rather than to 
build savings through contributions. In fact, the majority of assets 
that flow into IRAs come from other accounts and not from new 
contributions. We also found that employee access to payroll-deduction 
and employer-sponsored IRAs is limited. Although employer-sponsored and 
payroll-deduction IRA programs could help many workers to save, experts 
we interviewed said several factors may discourage employers from 
offering these IRAs, including administrative costs. Data on the actual 
cost to employers for managing payroll-deduction IRAs are not 
available. Earlier this month, we reported on the role that federal 
agencies can have in helping employers provide IRAs to employees and 
improve oversight of these savings vehicles.[Footnote 3] We made 
several recommendations to Labor and IRS to improve IRA information and 
oversight, but during the course of our work, we found that Labor 
provides guidance, but does not have jurisdiction over payroll- 
deduction IRAs. Consequently, we also suggested that Congress may wish 
to consider whether payroll-deduction IRAs should have some direct 
oversight. A clear oversight structure could be critical if payroll- 
deduction IRAs become a more important means to provide a retirement 
savings vehicle for workers who otherwise lack an employer-sponsored 
retirement plan. 

Background: 

Since the early 1980s, roughly half of the private-sector work force 
has participated in either a defined benefit (DB) retirement plan, 
commonly known as a pension, or a defined contribution (DC) plan, such 
as a 401(k) plan.[Footnote 4] In 2006, approximately 79 million--or 
about half of all workers--worked for an employer or union sponsoring 
either a DB or DC plan, and about 62 million workers participated in 
such a plan.[Footnote 5] Congress created IRAs, in part, to help those 
individuals not covered by a DB or DC plan save for retirement. 
Employees of small firms, for example, are unlikely to work for an 
employer that sponsors either a DB or DC retirement plan. Almost half 
of all U.S. private sector workers in 2006 were employed by firms with 
fewer than 100 employees, and only 1 in 4 of these workers worked for 
an employer sponsoring a retirement plan.[Footnote 6] Currently there 
are several types of IRAs for individuals and small employers and their 
employees.[Footnote 7] 

Individual IRAs: 

Traditional and Roth IRAs are geared toward individuals and offer 
different tax preferences to encourage savings: 

* Traditional IRAs. Traditional IRAs allow individuals to defer taxes 
on investment earnings accumulated in these accounts until distribution 
at retirement. Eligible individuals may make tax-deductible 
contributions, and others may make nondeductible contributions. 
[Footnote 8] 

* Roth IRAs. Through Roth IRAs, eligible individuals may make after-tax 
contributions, and after age 59ï¿½, enrollees may take tax-free 
distributions of their investment earnings.[Footnote 9] 

Both traditional and Roth IRAs can also be established through payroll- 
deduction IRA programs (also called payroll-deduction IRAs) which 
require employer involvement. 

* Payroll-deduction IRA Programs. Employees may establish and 
contribute to either traditional or Roth IRAs through voluntary 
deductions from their pay forwarded by their employer to employee IRAs. 
As long as employers follow guidelines set by Labor for managing 
payroll-deduction IRAs, employers are not subject to the fiduciary 
requirements in ERISA Title I that apply to employer-sponsored 
retirement plans.[Footnote 10] 

Employer-Sponsored IRAs: 

Congress created two types of employer-sponsored IRAs with fewer 
regulatory requirements than DB and DC plans to encourage small 
employers to offer IRAs to their employees: 

* Savings Incentive Match Plans for Employees (SIMPLE). SIMPLE IRAs, 
available only to employers with 100 or fewer employees, allow eligible 
employees to direct a portion of their salary, within limits, to a 
SIMPLE IRA.[Footnote 11] Employers sponsoring SIMPLE IRAs must either 
match the employee's contributions up to 3 percent of his or her 
compensation or make 2 percent contributions of each employee's salary 
to the SIMPLE IRAs for all employees making at least $5,000 for the 
year. 

* Simplified Employee Pensions (SEP). SEP IRAs allow employers to make 
tax-deductible contributions to their own and each eligible employee's 
traditional IRA at higher contribution limits than other IRAs.[Footnote 
12] SEP IRAs do not permit employee contributions, and annual employer 
contributions are not mandatory.[Footnote 13] 

IRS and Labor share oversight responsibilities for IRAs. Labor's 
Employee Benefits Security Administration (EBSA) enforces ERISA Title 
I, which specifies the standards for employer-sponsored retirement 
plans, including applicable fiduciary reporting and disclosure 
requirements. EBSA also oversees the fiduciary standards for employer- 
sponsored IRAs, and seeks to ensure that fiduciaries, such as 
employers, operate their plans in the best interest of plan 
participants. While Labor does not have direct oversight of payroll- 
deduction IRA programs, it has provided "safe harbor" guidance to 
employers, which sets the conditions by which employers may offer 
payroll-deduction IRA programs without becoming subject to ERISA Title 
I requirements.[Footnote 14] IRS enforces Title II of ERISA for all 
types of IRAs, which provides tax benefits for retirement plan sponsors 
and participants and details participant eligibility, vesting, and 
funding requirements. IRS also enforces various tax rules for IRAs, 
including rules for eligibility, contributions, distributions, and 
rolling assets into IRAs or converting assets from a traditional IRA 
into a Roth IRA. (See table 1 for annual contribution limits for IRAs.) 

Table 1: Contribution Limits for IRAs, 2008: 

Individual/employee contribution limit[B]: 
Individual IRAs: Traditional IRA[A]: Up to $5,000, or $6,000 for 
eligible participants over age 50; 
Individual IRAs: Roth IRA[A]: Up to $5,000, or $6,000 for eligible 
participants over age 50; 
Employer-Sponsored IRAs: SIMPLE IRA: Up to $10,500, or $13,000 for 
eligible participants over age 50; 
Employer-Sponsored IRAs: SEP IRA: Employees cannot contribute. 

Employer contribution limit: 
Individual IRAs: Traditional IRA[A]: Not applicable; 
Individual IRAs: Roth IRA[A]: Not applicable; 
Employer-Sponsored IRAs: SIMPLE IRA: Contribution equal to 2 percent of 
employee's compensation or matching contributions up to 3 percent of 
employee's compensation[C]; 
Employer-Sponsored IRAs: SEP IRA: 25 percent of an employee's 
compensation, up to maximum of $46,000. 

Source: Internal Revenue Service. 

[A] Employees may choose to contribute to either traditional or Roth 
IRAs through an employer's payroll-deduction IRA program, and employee 
contributions are subject to either traditional or Roth IRA rules. 
Employers may not contribute to employee IRAs through payroll-deduction 
IRA programs. 

[B] Only employees of firms offering SIMPLE or SEP IRAs may contribute 
to these IRAs, while any eligible individual may contribute to 
traditional or Roth IRAs. The annual total IRA contribution limit 
applies across Roth and traditional IRAs and is not an annual limit for 
each IRA type. 

[C] Employers may reduce the 3 percent contribution limit to a lower 
percentage but not lower than 1 percent. Employers may not contribute 
less than 3 percent for more than 2 calendar years in a 5-year period. 

[End of table] 

Labor and IRS work together to oversee IRA prohibited transactions. In 
general, prohibited transactions include any improper use of an IRA by 
the account holder or others.[Footnote 15] Labor generally has 
interpretive jurisdiction over prohibited transactions and IRS has 
certain enforcement authority. Both ERISA and the Internal Revenue Code 
contain various statutory exemptions from the prohibited transaction 
rules, and Labor has authority to grant administrative exemptions and 
establish exemption procedures.[Footnote 16] Labor may grant 
administrative exemptions on a class or individual basis for a wide 
variety of proposed transactions in a plan. IRS has responsibility for 
imposing an excise tax on parties that engage in a prohibited 
transaction.[Footnote 17] (See fig. 1 for a description of IRS and 
Labor responsibilities regarding IRAs.) 

Figure 1: Primary Responsibilities of IRS and Labor for IRAs: 

[See PDF for image] 

This figure is an illustration depicting the primary responsibilities 
of IRS and Labor for IRAs, as follows: 

IRS: 
* Issues guidance for setting up traditional, Roth, employer-sponsored, 
and payroll-deduction IRAs. 

* Responsible for rules governing contributions, including contribution 
limits and eligibility, distribution rules, and rollover and conversion 
rules for all IRAs. 

Department of Labor: 
* Oversees ERISA fiduciary standards for employer-sponsored IRAs. 
* Issues guidance on establishing a payroll-deduction IRA without being 
subject to ERISA fiduciary and reporting requirements. 

Joint responsibility for overseeing IRA prohibited transactions: 
* Labor has interpretive authority over IRA prohibited transactions. 
* IRS has responsibility for imposing the excise tax on prohibited 
transactions. 

Sources: GAO analysis of Employee Retirement Income Security Act of 
1974 and the Internal Revenue Code; Art Explosion (images). 

[End of figure] 

IRAs Are Primarily Used to Preserve Savings through Rollovers: 

Most assets flowing into IRAs come not from direct contributions, but 
from transfers, or rollovers, of retirement assets from other 
retirement plans, including 401(k) plans. These rollovers allow 
individuals to preserve their retirement savings when they change jobs 
or retire. As shown in figure 2, from 1998 to 2004, more than 80 
percent of funds flowing into IRAs came from rollovers, demonstrating 
that IRAs play a significantly smaller role in building retirement 
savings than in preserving them. In addition, IRA accounts with 
rollover assets were larger than those without rollover assets. For 
example the median amount in a traditional IRA with rollover assets in 
2007 was $61,000, while the median amount in a traditional IRA without 
rollover assets was $30,000.[Footnote 18] 

Figure 2: IRA Contributions and Rollovers, 1998 to 2004: 

[See PDF for image] 

This figure is a stacked vertical bar graph depicting the following 
data: 

Year: 1998; 
Contributions: $31.4 billion; 
Rollovers: $160 billion. 

Year: 1999; 
Contributions: $33.5 billion; 
Rollovers: $199.9 billion. 

Year: 2000; 
Contributions: $36.4 billion; 
Rollovers: $225.6 billion. 

Year: 2001; 
Contributions: $35.8 billion; 
Rollovers: $187.7 billion. 

Year: 2002; 
Contributions: $42.2 billion; 
Rollovers: $204.4 billion. 

Year: 2003; 
Contributions: $43.9 billion; 
Rollovers: $205 billion. 

Year: 2004; 
Contributions: $48.4 billion; 
Rollovers: $216.6 billion. 

Source: Investment Company Institute. 

Note: IRA contributions include those made to traditional IRAs, Roth 
IRAs, and employer-sponsored IRAs. Figures for 2003 and 2004 include 
estimates and projections. 

[End of figure] 

Since 1998, IRA assets have comprised the largest portion of the 
retirement market. As shown in figure 3, IRA assets in 2004 totaled 
about $3.5 trillion compared to DC assets of $2.6 trillion and DB 
assets of $1.9 trillion.[Footnote 19] 

Figure 3: Retirement Plan Assets, 1995 to 2004: 

[See PDF for image] 

This figure is a multiple line graph depicting the following data: 

Year: 1995; 
Defined benefit: $1.44 trillion; 
Defined contribution: $1.31 trillion; 
IRAs: $1.29 trillion. 

Year: 1996; 
Defined benefit: $1.54 trillion; 
Defined contribution: $1.52 trillion; 
IRAs: $1.47 trillion. 

Year: 1997; 
Defined benefit: $1.78 trillion; 
Defined contribution: $1.85 trillion; 
IRAs: $1.73trillion. 

Year: 1998; 
Defined benefit: $1.95 trillion; 
Defined contribution: $2.11 trillion; 
IRAs: $2.15 trillion. 

Year: 1999; 
Defined benefit: $2.09 trillion; 
Defined contribution: $2.27 trillion; 
IRAs: $2.65 trillion. 

Year: 2000; 
Defined benefit: $1.95 trillion; 
Defined contribution: $2.3 trillion; 
IRAs: $2.63 trillion. 

Year: 2001; 
Defined benefit: $1.71 trillion; 
Defined contribution: $2.12 trillion; 
IRAs: $2.62 trillion. 

Year: 2002; 
Defined benefit: $1.44 trillion; 
Defined contribution: $1.82 trillion; 
IRAs: $2.53 trillion. 

Year: 2003; 
Defined benefit: $1.72 trillion; 
Defined contribution: $2.25 trillion; 
IRAs: $3.08 trillion. 

Year: 2004"	3.48	2.55	1.87
Defined benefit: $1.87 trillion; 
Defined contribution: $2.55 trillion; 
IRAs: $3.48 trillion. 

Source: Employee Benefit Research Institute. 

[End of figure] 

More households own traditional IRAs, which were the first IRAs 
established, than Roth IRAs or employer-sponsored IRAs. In 2007, nearly 
33 percent of all households owned traditional IRAs, and about 15 
percent owned Roth IRAs. In contrast, about 8 percent of households 
participated in employer-sponsored IRAs.[Footnote 20] 

Ownership of traditional and Roth IRAs is associated with higher 
education and income levels. In 2004, 59 percent of IRA households were 
headed by an individual with a college degree, and only about 3 percent 
were headed by an individual with no high school diploma.[Footnote 21] 
Over one-third of these IRA households earned $100,000 or more; about 2 
percent earned less than $10,000. Households with IRAs also tend to own 
their homes. Research shows that higher levels of education and 
household income correlate with a greater propensity to save.[Footnote 
22] Therefore, it is not surprising that IRA ownership increases as 
education and income levels increase. However, despite the association 
of IRA ownership to individuals with higher incomes, data show that 
lower-and middle-income individuals also own IRAs. A study by the 
Congressional Budget Office (CBO) found that in 2003, 4 percent of 
workers earning $20,000 to $40,000 (in 1997 dollars) contributed to 
traditional IRAs and 3 percent of these workers contributed to Roth 
IRAs. In the same year, 7 percent of workers earning between $120,000 
and $160,000 contributed to a traditional IRA and 8 percent contributed 
to a Roth IRA.[Footnote 23] The study also found that 33 percent of 
individuals earning $20,000 to $40,000 who contributed to a traditional 
IRA contributed the maximum amount allowed, and 35 percent made maximum 
contributions to their Roth IRAs.[Footnote 24] By contrast, 87 percent 
of individuals earning $120,000 to $160,000 who contributed to a 
traditional IRA made the maximum contribution, and 61 percent made the 
maximum contribution to their Roth IRAs. 

A study by the Investment Company Institute (ICI) that included data on 
contributions by IRA owners shows that more households with Roth IRAs 
or employer-sponsored IRAs contribute to their accounts than households 
with traditional IRAs.[Footnote 25] For example more than half of 
households with Roth, SIMPLE, or Salary Reduction Simplified Employee 
Pension IRA (SAR-SEP IRA) contributed to their accounts in 2004, but 
less than one-third of households with traditional IRAs did so. This, 
again, may be partly attributed to the emerging role of traditional 
IRAs as a means to preserve rollover assets rather than build 
retirement savings. The ICI study also stated that the median household 
contribution to traditional IRAs was $2,300 compared to the median 
contribution to Roth IRAs of $3,000. The median contribution to SIMPLE 
and SAR-SEP IRAs was $5,000. The study noted that this difference may 
be related to higher contribution limits for employer-sponsored IRAs 
than for traditional and Roth IRAs. 

Worker Access to Employer-Sponsored and Payroll-Deduction IRAs Appears 
Limited, and Several Barriers May Discourage Employers from Offering 
These IRAs: 

According to experts and available government data, worker access to 
employer-sponsored and payroll-deduction IRAs appears limited. To 
address the issue of low retirement plan sponsorship among small 
employers, Congress created SEP and SIMPLE employer-sponsored IRAs. 
Labor issued a regulation under which an employer could maintain a 
payroll-deduction program for employees to contribute to traditional 
and Roth IRAs without being considered a pension plan under ERISA. 
Although employer-sponsored IRAs have few reporting requirements to 
encourage small employers to offer them, and payroll-deduction IRAs 
have none, worker access to these IRAs appears limited. Increased 
access to payroll-deduction IRAs could help many workers to save for 
retirement, but several barriers, including costs to employers, may 
discourage employers from offering these IRAs to their employees. 
Retirement and savings experts offer several proposals to encourage 
employers to offer and employees to participate in payroll-deduction 
IRAs. 

Worker Access to Employer-Sponsored and Payroll-Deduction IRAs Appears 
Limited: 

The majority of employers with fewer than 100 employees do not offer an 
employer-sponsored retirement plan for their employees. In 2006, almost 
half of all U.S. private sector workers were employed by firms with 
fewer than 100 employees, and only 1 in 4 of these employees worked for 
an employer sponsoring a retirement plan.[Footnote 26] To address the 
issue of low retirement plan sponsorship among small employers, 
Congress created SIMPLE and SEP employer-sponsored IRAs with less 
burdensome reporting requirements than 401(k) plans to encourage their 
adoption by small employers. In addition, under a regulation issued by 
Labor, employers may also provide payroll-deduction IRA programs, which 
allow employees to contribute to traditional or Roth IRAs through 
payroll-deductions by their employer, without employers being 
considered a pension plan sponsor under ERISA and becoming subject to 
various ERISA fiduciary and reporting requirements.[Footnote 27] In 
order to encourage their adoption, employer-sponsored and payroll- 
deduction IRAs offer a variety of features designed to appeal to small 
employers (see table 2). 

Table 2: Features of Employer-Sponsored and Payroll-Deduction IRAs: 

IRA features: Employee contributions allowed; 
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Check]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Empty]; 
Payroll-deduction IRAs: [Check]. 

IRA features: Employer contributions allowed; 
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Check]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Check]; 
Payroll-deduction IRAs: [Empty]. 

IRA features: Mandatory annual employer contributions;
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Check]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Empty]; 
Payroll-deduction IRAs: [Empty]. 

IRA features: No employer financial reporting requirements; 
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Check]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Check]; 
Payroll-deduction IRAs: [Check]. 

IRA features: Employer tax credit available for partial start-up costs; 
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Check]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Check]; 
Payroll-deduction IRAs: [Empty]. 

IRA features: Available to all employers; 
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Empty]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Check]; 
Payroll-deduction IRAs: [Check]. 

IRA features: Available to all employer's workers; 
Employer-sponsored IRAs: SIMPLE IRAs[A]: [Empty]; 
Employer-sponsored IRAs: SEP IRAs[B]: [Empty]; 
Payroll-deduction IRAs: [Check]. 

Source: GAO analysis of Labor and IRS Publication 3998. 

[A] SIMPLE IRAs are limited to employers with fewer than 100 employees. 
Employers sponsoring SIMPLE IRAs must offer the IRAs to all employees 
who have earned income of at least $5,000 in any prior 2 years and are 
reasonably expected to earn at least $5,000 in the current year. 

[B] Employers sponsoring SEP IRAs must offer the IRAs to all employees 
who are at least 21 years of age, employed by the employer for 3 of the 
last 5 years, and had compensation of $500 for 2007. 

[End of table] 

Data on the number of employers offering employees employer-sponsored 
IRAs and payroll-deduction IRAs is limited. However, based on available 
data, employee access to SIMPLE and SEP IRAs appears limited. Under 
ERISA Title I, there is no reporting requirement for SIMPLE IRAs, and 
there is an alternative method available for reporting of employer- 
sponsored SEP IRAs.[Footnote 28] Payroll-deduction IRA programs are not 
subject to ERISA requirements for employer-sponsored retirement plans 
and have no reporting requirements. Because there are very limited 
reporting requirements for employer-sponsored IRAs and none for payroll-
deduction IRAs, information on employers who offer these IRAs is 
limited and we were unable to determine how many employers actually do 
so. For example, the Bureau of Labor Statistics provides some data on 
the percentage of employees participating in employer-sponsored IRAs, 
but no data on the percentage of employers sponsoring them. The Bureau 
of Labor Statistics reported that 8 percent of private sector workers 
in firms with fewer than 100 employees participated in a SIMPLE IRA in 
2005, and 2 percent of these workers participated in a SEP IRA. 
[Footnote 29] An IRS evaluation of employer-filed W-2 forms estimated 
that 190,000 employers sponsored SIMPLE IRAs in 2004.[Footnote 30] IRS 
did not provide an estimate of the number of employers sponsoring SEP 
IRAs, and we were unable to determine how many employers make these 
IRAs available to employees. 

Few employers appear to offer their employees the opportunity to 
contribute to IRAs through payroll deductions, but data are 
insufficient to make this determination. Through payroll-deduction IRA 
programs, employees may contribute to traditional or Roth IRAs by 
having their employer withhold an amount determined by the employee and 
forwarded directly to the employee's IRA. Although any employer can 
provide payroll-deduction IRAs to their employees, regardless of 
whether or not they offer another retirement plan, retirement and 
savings experts told us that very few employers do so. Because 
employers are not required to report this activity to the federal 
government, neither Labor nor IRS is able to determine how many 
employers offer payroll-deduction IRAs.[Footnote 31] 

Employer-Sponsored and Payroll-Deduction IRAs Could Help Workers to 
Save, but Several Barriers May Discourage Employers from Offering These 
IRAs: 

According to experts and economics literature that we reviewed, 
individuals are more likely to save for retirement through payroll 
deductions than they are without payroll deductions. Both SIMPLE IRAs 
and payroll-deduction IRA programs allow workers to contribute to their 
retirement through payroll deductions.[Footnote 32] Payroll deductions 
are a key feature in 401(k) and other DC plans. Economics literature 
that we reviewed identifies payroll deduction as a key factor in the 
success of 401(k) plans, and participation in these plans is much 
higher than in IRAs, which do not typically use payroll deduction. The 
Congressional Budget Office reported that 29 percent of all workers 
contributed to a DC plan in 2003--where payroll deductions are the 
norm--while only 7 percent of all workers contributed to an IRA. 
[Footnote 33] 

Saving for retirement in the workplace through payroll deductions helps 
workers save by providing a "commitment device" to make automatic 
contributions to retirement savings before wages are spent.[Footnote 
34] Such a commitment device helps some workers overcome a common 
tendency to procrastinate or not take action to save based on the 
choices associated with investing or selecting a retirement savings 
vehicle. Payroll deductions allow workers to contribute to retirement 
savings automatically before wages are spent, relieving them of making 
ongoing decisions to save. According to Labor's guidance on payroll- 
deduction IRAs and several experts we interviewed, individuals are more 
likely to save in IRAs through payroll deductions than they are without 
these automatic deposits. 

Payroll-deduction IRA programs could provide a retirement savings 
opportunity at work for the millions of workers without an employer- 
sponsored retirement plan. In theory, all workers under age 70ï¿½ who 
lack an employer-sponsored retirement plan could be eligible to 
contribute to a traditional IRA through payroll deduction, should their 
employer offer such a program.[Footnote 35] Further, based on the 
contribution rules for traditional and Roth IRAs, many of these 
individuals would be eligible to claim a tax deduction for their 
traditional IRA contributions,[Footnote 36] and most low-and middle- 
income workers would be eligible to contribute to Roth IRAs.[Footnote 
37] Experts told us payroll-deduction IRAs are the easiest way for 
small employers to offer their employees a retirement savings vehicle. 
Payroll-deduction IRAs have fewer requirements for employee 
communication than SIMPLE and SEP IRAs,[Footnote 38] and employers are 
not subject to ERISA fiduciary responsibilities as long as they meet 
the conditions in Labor's regulation and guidance for managing these 
plans.[Footnote 39] 

Employer-sponsored IRAs may also help employees of small firms save for 
their retirement. For example, the higher contribution limits for 
SIMPLE and SEP IRAs offer greater savings benefits than payroll- 
deduction IRAs.[Footnote 40] In 2007, individuals under age 50 were 
able to contribute up to $10,500 to SIMPLE IRAs--more than twice the 
amount allowed in 2007 for payroll-deduction IRAs.[Footnote 41] Since 
SIMPLE IRAs require employers to either match the contributions of 
participating employees or make nonelective contributions to all 
employee accounts, employees are able to save significantly more per 
year in SIMPLE IRAs than they are in payroll-deduction IRAs. 

As we previously reported, we found that several factors may discourage 
employers from establishing employer-sponsored SIMPLE and SEP IRAs. For 
example, small business groups told us that the costs of managing 
SIMPLE and SEP IRAs may be prohibitive for small employers. Experts 
also pointed out that certain contribution requirements for these plans 
may, in some cases, limit employer sponsorship of these plans. For 
example, because SIMPLE IRAs require employers to make contributions to 
employee accounts, some small firms may be unable to commit to these 
IRAs. Small business groups and IRA providers told us that small 
business revenues are inconsistent and may fluctuate greatly from year 
to year, making required contributions difficult for some firms. In 
addition, employers offering SIMPLE IRAs must determine before the 
beginning of the calendar year whether they will match employee 
contributions or make nonelective contributions to all employees' 
accounts. According to IRA providers, this requirement may discourage 
some small employers from offering these IRAs, and if employers had the 
flexibility to make additional contributions to employee accounts at 
the end of the year, employers may be encouraged to contribute more to 
employee accounts. 

With regard to SEP IRAs, two experts said small firms may be 
discouraged from offering these plans because of the requirement that 
employers must set up a SEP IRA for all employees performing service 
for the company in 3 of the past 5 years and with more than $500 in 
compensation for 2007. These experts stated that small firms are likely 
to hire either seasonal employees or interns who may earn more than 
$500, and these employers may have difficulty finding an IRA provider 
willing to open an IRA small enough for these temporary or low-earning 
participants. 

We also found that several barriers may discourage small employers even 
from offering payroll-deduction IRAs, including: (1) costs to employers 
for managing payroll deductions, (2) a perceived lack of flexibility to 
promote payroll-deduction IRAs to employees, (3) lack of incentives to 
employers, and (4) lack of awareness about how these IRAs work. 

* Costs to employers. Additional administrative costs associated with 
setting up and managing payroll-deduction IRAs may be a barrier for 
small employers, particularly those without electronic payroll 
processing. Small business groups told us that costs are influenced by 
the number of employees participating in the program and whether an 
employer has a payroll processing system in place for automatic 
deductions and direct deposits to employee accounts. Several experts 
told us many small employers lack electronic, or automatic, payroll 
systems, and these employers would be subject to higher management 
costs for offering payroll-deduction IRAs. According to Labor, costs to 
employers also are significantly influenced by the number of IRA 
providers to which an employer must remit contributions on behalf of 
employees.[Footnote 42] 

Although experts reported that payroll-deduction IRAs represent costs 
to employers, we found varied opinions on the significance of those 
costs. Experts advocating for expanded payroll-deduction IRAs reported 
that most employers would incur little or no costs since they already 
make payroll deductions for Social Security and Medicare, as well as 
federal, state, and local taxes. According to these experts, payroll- 
deduction IRAs function like existing payroll tax withholdings, and 
adding another deduction would not be substantial. However, other 
experts and one report we reviewed indicated that employer costs may be 
significant, particularly for employers without electronic payrolls. 
The report did not estimate actual costs to employers on a per account 
basis.[Footnote 43] In our review, we were unable to identify reliable 
government data on actual costs to small employers. 

* Flexibility to promote payroll-deduction IRAs. According to IRA 
providers, some employers are hesitant to offer a payroll-deduction IRA 
program because they find Labor's guidance limits their ability to 
effectively publicize the program to employees for fear of being 
subject to ERISA requirements.[Footnote 44] IRA providers told us 
employers need greater flexibility in Labor's guidance on payroll- 
deduction IRAs if they are to encourage employees to save for 
retirement. However, Labor told us that it has received no input from 
IRA providers as to what that flexibility would be, and Labor officials 
note that Interpretive Bulletin 99-1 specifically provides for 
flexibility. 

* Lack of savings incentives for small employers. Small business member 
organizations and IRA providers said contribution limits for payroll- 
deduction IRAs do not offer adequate savings incentives to justify the 
effort in offering these IRAs.[Footnote 45] Because the contribution 
limits for these IRAs are significantly lower than those that apply to 
SIMPLE and SEP IRAs, employers seeking to provide a retirement plan to 
their employees would be more likely to choose other options. Those 
options also allow business owners to contribute significantly more to 
their own retirement account than payroll-deduction IRAs. 

* Lack of awareness. Representatives from small business groups said 
many small employers are unaware that payroll-deduction IRAs are 
available or that employer contributions are not required. However, 
Labor has produced educational materials describing the payroll- 
deduction and employer-sponsored IRA options available to employers and 
employees. 

Some Proposals Encourage Employers to Offer and Employees to 
Participate in IRAs: 

Retirement and savings experts told us that several legislative 
proposals could encourage employers to offer and employees to 
participate in IRAs. Several bills have been introduced in Congress to 
expand worker access to payroll-deduction IRAs. 

* Employer incentives to offer IRAs. Several retirement and savings 
experts said additional incentives should be in place to increase 
employer sponsorship of IRAs. For example, experts suggested tax 
credits should be made available to defray start-up costs for small 
employers of payroll-deduction IRAs, particularly for those without 
electronic or automatic payroll systems. These credits should be lower 
than the credits available to employers for starting SIMPLE, SEP, and 
401(k) plans to avoid competition with those plans, these experts said. 
[Footnote 46] IRA providers and small business groups said increasing 
contribution limits for SIMPLE IRAs to levels closer to those for 
401(k) plans would encourage more employers to offer these plans. Other 
experts said doing so could provide incentives to employers already 
offering 401(k) plans to switch to SIMPLE IRAs, which have fewer 
reporting requirements. 

* Employee incentives to participate in IRAs. Experts offered several 
proposals to encourage workers to participate in IRAs, including: (1) 
expanding existing tax credits for moderate-and low-income workers, (2) 
offering automatic enrollment in payroll-deduction IRAs, and (3) 
increasing public awareness about the importance of saving for 
retirement and how to do so. Several experts said expanding the scope 
of the Retirement Savings Contribution Credit, commonly known as the 
"saver's credit," could encourage IRA participation among workers who 
are not covered by an employer-sponsored retirement plan.[Footnote 47] 
They said expanding the saver's credit to include more middle-income 
earners and making the credit refundable--available to tax filers even 
if they do not owe income tax--could encourage more moderate-and low- 
income individuals to participate in IRAs. However, an expanded and 
refundable tax credit would have revenue implications for the federal 
government. Other experts told us that automatically enrolling workers 
into payroll-deduction and SIMPLE IRAs could increase employee 
participation; however, small business groups and IRA providers said 
that mandatory automatic enrollment could be burdensome to small 
employers.[Footnote 48] In addition, given the lack of available income 
for some, several experts told us that low-income workers may opt out 
of automatic enrollment programs or be more inclined to make early 
withdrawals. Experts also said increasing public awareness of the 
importance of saving for retirement and educating individuals about how 
to do so could increase IRA participation. 

Changes at Labor and IRS Could Help Encourage Employers to Offer IRAs 
and Improve IRA Information and Oversight: 

Earlier this month, we reported that changes at IRS and Labor could 
encourage employers to offer IRAs and improve IRA information and 
oversight.[Footnote 49] We found that regulators lack information about 
employer-sponsored and payroll-deduction IRAs that could help determine 
whether these vehicles help workers without employer-sponsored pension 
plans build retirement savings. For example, IRS collects information 
on employer-sponsored IRAs but does not share the information collected 
with Labor, which has oversight responsibility for employer-sponsored 
IRAs. We also found that certain oversight vulnerabilities need to be 
improved. Currently, Labor has no process in place to monitor employer- 
sponsored IRAs, and has no jurisdiction over payroll-deduction IRAs. As 
a result of our findings, we made recommendations to Labor and IRS to 
improve IRA information and oversight and suggested that Congress may 
wish to consider whether payroll-deduction IRAs should have some direct 
oversight. 

Regulators Lack Information and Consistent Reporting on Employer- 
Sponsored and Payroll-Deduction IRAs: 

Because employer-sponsored IRAs have few employer reporting 
requirements and payroll-deduction IRAs have none, regulators lack 
information on these IRAs. Under Title I of ERISA, there is no 
reporting requirement for SIMPLE IRAs, and there is an alternative 
method available for reporting employer-sponsored SEP IRAs. Employers 
who offer payroll-deduction IRAs have no reporting requirements, and 
consequently, there is no reporting mechanism that captures how many 
employers offer payroll-deduction IRAs. Although IRS receives 
information reports for all traditional and Roth IRAs, those data do 
not show how many were for employees using payroll-deductions. In our 
discussions with Labor and IRS officials, they explained that the 
limited reporting requirements for employer-sponsored IRAs were put in 
place to try to encourage small employers to offer their employees 
retirement plan coverage by reducing their administrative and financial 
burdens. 

Although the reporting requirements for employer-sponsored IRAs are 
limited, IRS does collect some information on these IRAs through 
several "information" forms provided by financial institutions and 
employers. These forms provide information on salary-reduction 
contributions to employer-sponsored IRAs, as well as information on IRA 
contributions, fair market value, and distributions. For example, 
information on retirement plans are reported annually by employers and 
others to IRS on its Form W-2. The Form W-2 contains details on the 
type of plan offered by the employer, including employer-sponsored 
IRAs, and the amounts deducted from wages for contributions to these 
plans.[Footnote 50] 

According to agency officials, IRS cannot share the information it 
receives on employer-sponsored IRAs with Labor because it is 
confidential tax information. Labor also does not receive relevant 
information from employers, such as annual financial reports, as it 
does from private pension plan sponsors. For example, pension plan 
sponsors must file Form 5500 reports with Labor on an annual basis, 
which provide Labor with valuable information about the financial 
health and operation of private pension plans.[Footnote 51] Although 
Labor's Bureau of Labor Statistics National Compensation Survey surveys 
employee benefit plans in private establishments, receiving information 
on access, participation, and take-up rates for DB and DC plans, the 
survey does not collect information on the number of employers 
sponsoring employer-sponsored IRAs. Consequently, Labor does not 
receive important information on employers who have established 
employer-sponsored IRAs, over which it has oversight responsibilities. 

Ensuring that regulators obtain information about employer-sponsored 
and payroll-deduction IRAs is one way to help them and others determine 
the status of these IRAs and whether those individuals who lack 
employer-sponsored pension plans are able to build retirement savings 
through employer-sponsored and payroll-deduction IRAs. However, key 
information on IRAs is currently not reported, such as information that 
identifies employers offering payroll-deduction IRAs and the 
distribution by employer of the number of employees that contribute to 
payroll-deduction IRAs. Experts that we interviewed said that, without 
such information, they are unable to determine how many employers and 
employees participate in payroll-deduction IRAs and the extent to which 
these IRAs have contributed to the retirement savings of participants. 
In addition, the limited reporting requirements prevent information 
from being obtained about the universe of employers that offer employer-
sponsored and payroll-deduction IRAs, which affects Labor's ability to 
monitor employer-sponsored IRAs. This information also can be useful 
when determining policy options to increase IRA participation among 
uncovered workers because it provides a strong foundation to assess the 
extent to which these IRAs are being utilized. 

Although IRS does publish some of the information it receives on IRAs 
through its Statistics of Income program, IRS does not produce IRA 
reports on a consistent basis. IRS officials told us that they are 
currently facing several challenges that affect their ability to 
publish IRA information more regularly. First, IRS relies, in part, on 
information returns to collect data on IRAs: such returns are not due 
until the following year after the filing of the tax return. IRS 
officials said that these returns have numerous errors, making it 
difficult and time-consuming for IRS to edit them for statistical 
analysis. They also said that the IRA rules, and changes to those 
rules, are difficult for some taxpayers, employers, and trustees to 
understand, which contributes to filing errors. Also, in the past, one 
particular IRS employee, who has recently retired, took the lead in 
developing a statistical analysis on IRAs. Since IRS does not have a 
process in place to train another employee to take over this role, a 
knowledge gap was created that IRS is trying to fill. IRS officials 
told us that they recognize this problem and are in the early stages of 
determining ways to correct it. In addition, IRS officials told us they 
had problems with the IRA data for tax year 2003, which prevented them 
from issuing a report for that year. The result has been that IRS has 
published IRA data for tax years 2000, 2001, 2002 and 2004, but none 
for tax year 2003. 

Labor officials and retirement and savings experts told us that without 
the consistent reporting of IRA information by IRS, they use studies by 
financial institutions and industry associations for research purposes, 
which include assessing the current state of IRAs and future trends. 
These experts said that although these studies are helpful, some may 
double-count individuals because one person may have more than one IRA 
at different financial institutions. They also said that more 
consistent reporting of IRA information could help them ensure that 
their analyses reflect current and accurate information about 
retirement assets, such as the fair market value of IRAs. Since IRS is 
the only agency that has data on all IRA participants, consistent 
reporting of these data could give policymakers and others a more 
comprehensive view of the IRA landscape. 

Labor Has No Process in Place to Monitor Employer-Sponsored IRAs: 

Given the limited reporting requirements for employer-sponsored IRAs 
and the absence of requirements for payroll-deduction IRAs, as well as 
Labor's role in overseeing employer-sponsored IRAs, a minimum level of 
oversight is important to ensure that employers are acting in 
accordance with the law and within Labor's guidance on payroll- 
deduction IRAs. Yet, Labor officials said that they are unable to 
monitor (1) whether all employers are in compliance with the prohibited 
transaction rules and fiduciary standards, such as by making timely and 
complete employer-sponsored IRA contributions or by not engaging in 
self-dealing;[Footnote 52] and (2) whether all employers who offer a 
payroll-deduction IRA are meeting the conditions of Labor's guidance. 

* Employer-sponsored IRAs. Labor officials said that they do not have a 
process for actively seeking out and determining whether employer- 
sponsored IRAs are engaging in prohibited transactions or not abiding 
by their fiduciary responsibilities, such as by having delinquent or 
unremitted employer-sponsored IRA contributions. Instead, as in the 
case of Labor's oversight of pension plans, Labor primarily relies on 
participant complaints as sources of investigative leads to detect 
employers that are not making the required contributions to their 
employer-sponsored IRA. 

* Payroll-deduction IRAs. Payroll-deduction IRAs are not under Labor's 
jurisdiction; however, Labor does provide guidance regarding the 
circumstances under which an employer may provide a payroll-deduction 
IRA program without being subject to the Title I requirements of ERISA. 
As long as employers meet the conditions in Labor's regulation and 
guidance, employers are not subject to the fiduciary requirements in 
ERISA Title I that apply to employer-sponsored retirement plans, such 
as 401(k) plans.[Footnote 53] IRS, also, does not have direct oversight 
over payroll-deduction IRA programs. IRS oversees the rules associated 
with the traditional and Roth IRAs that payroll-deduction programs may 
fund through employee contributions. However, IRS does not have 
oversight over employer management of these programs. 

Labor officials told us that they are not aware of employers improperly 
relying on the safe harbor regarding payroll-deduction IRAs. However, 
without a process to monitor payroll-deduction IRAs, Labor cannot be 
certain of the extent or nature of certain employer activities that may 
fall outside of the guidance provided by Labor. 

Recent Recommendations Regarding IRAs: 

In order to improve oversight and information available on IRAs, we 
recently made several recommendations to Congress, Labor, and IRS, 
which are summarized in table 3. 

Table 3: Recent GAO Recommendations Regarding IRAs: 

Target: Congress; 
Recommendations: Given the absence of direct oversight of payroll-
deduction IRAs, we suggested that Congress may wish to consider whether 
payroll-deduction IRAs should have some direct oversight. 

Target: Labor; 
Recommendations: Examine ways to better encourage employers to offer 
and employees to participate in payroll-deduction IRA programs that 
could include: 
* determining the costs to employers for establishing such programs; 
* developing policy options to help employers defray these costs, and; 
* evaluating whether modifications to its guidance are needed to 
encourage employers to offer payroll-deduction IRA programs. 

Target: Labor; 
Recommendations: Evaluate ways to determine whether employers who 
establish employer-sponsored IRAs and offer payroll-deduction IRAs are 
in compliance with the law and the safe harbor provided under Labor's 
regulations and Interpretive Bulletin 99-1, while taking employer 
burden into account. 

Target: Labor; 
Recommendations: Evaluate ways to collect additional information on 
employer-sponsored and payroll-deduction IRAs, such as adding questions 
to the Bureau of Labor Statistics National Compensation Survey that 
provide: 
* information sufficient to identify employers that offer payroll-
deduction and employer-sponsored IRAs, and; 
* the distribution by employer of the number of employees that 
contribute to payroll-deduction and employer-sponsored IRAs. 

Target: IRS; 
Recommendations: Provide Labor with summary information on IRAs and 
information collected on employers that sponsor IRAs. 

Target: IRS; 
Recommendations: Release its reports on IRA contributions, 
accumulations, and distributions on a consistent basis, such as 
annually. 

Source: GAO. 

[End of table] 

We reported that neither IRS nor Labor have direct oversight of payroll-
deduction IRAs and that Congress may wish to consider whether payroll-
deduction IRAs should have some direct oversight. Although Labor 
provides guidance regarding the circumstances under which employers may 
offer payroll-deduction programs without being subject to the Title I 
requirements of ERISA, Labor does not have jurisdiction to monitor 
whether employers are managing such programs within the bounds of 
Labor's safe harbor. Similarly, IRS has responsibility over tax rules 
for establishing and maintaining traditional and Roth IRAs that may be 
funded through employee contributions from payroll-deduction programs; 
however, IRS also does not have authority to monitor employers offering 
these programs. We have reported that without direct oversight of 
payroll-deduction IRAs, employees may lack confidence that payroll-
deduction IRAs will provide them with adequate protections to 
participate in such programs, which is particularly important given the 
increasing role that IRAs have in retirement savings. As such, we have 
suggested that Congress consider whether payroll-deduction IRAs should 
have some direct oversight. 

We have also reported that it is important for Labor to have an 
accurate accounting of the costs to employers for managing payroll- 
deduction IRAs. In our review, we were unable to determine the actual 
costs to employers for managing a payroll-deduction IRA program. Some 
experts reported that such costs were significant, while others 
reported that they were minimal. Further, under Labor's guidance on 
payroll-deduction IRAs, employers may receive reasonable compensation 
for the cost of operating payroll-deduction IRA programs as long as 
such compensation does not represent a profit to employers. However, 
because the information on costs of managing such programs is lacking, 
Labor may be unable to readily determine if employers are receiving 
excessive compensation and if such programs fall outside the safe 
harbor and may be considered to have become ERISA Title I programs. 
Furthermore, without accurate cost estimates and a determination of 
what constitutes "reasonable compensation" to employers, employers may 
be reluctant to seek compensation from IRA service providers to defray 
the costs of operating a payroll-deduction IRA program. 

Conclusions: 

Currently, IRAs play a major role in preserving retirement assets but a 
very small role in creating them. Although studies show that 
individuals find it difficult to save for retirement on their own, 
millions of U.S. workers have no retirement savings plan through their 
employer. Employer-sponsored and payroll-deduction IRAs afford an 
easier way for workers, particularly those who work for small 
employers, to save for retirement. They also offer employers less 
burdensome reporting and legal responsibilities than defined benefit 
pension plans and defined contribution plans, such as 401(k) plans. 
Yet, barriers exist, such as administrative costs, that may discourage 
employers from offering payroll-deduction IRAs. As federal agencies 
begin to determine the true cost of establishing payroll-deduction 
IRAs, employers will have a better understanding of the costs and will 
be in a better position to evaluate whether they will be able to offer 
payroll-deduction IRAs to their employees. 

Encouraging employers to offer IRAs to their employees can be much more 
productive if Congress and regulators ensure that there is adequate 
information on employer-sponsored IRAs and payroll-deduction IRAs. 
Although the limited reporting requirements for employer-sponsored IRAs 
and the absence of reporting requirements for payroll-deduction IRAs 
were meant to encourage small employers to offer retirement savings 
vehicles to employees, there is also a need for agencies that are 
responsible for overseeing retirement savings vehicles to have the 
information necessary to do so. Providing complete and consistent data 
on IRAs would help ensure that regulators have the information they 
need to make informed decisions about how to increase coverage and 
facilitate retirement savings. In addition, ensuring that Labor has a 
process in place to monitor employer-sponsored IRAs will help ensure 
that there is a structure in place to help protect individuals' 
retirement savings if they choose employer-sponsored IRAs. If current 
oversight vulnerabilities are not addressed, future problems could 
emerge as more employers and workers participate in employer-sponsored 
IRAs. 

Steps must also be taken to improve oversight of payroll-deduction IRAs 
and determine whether direct oversight is needed. Without direct 
oversight, employees may lack confidence that payroll-deduction IRAs 
will provide them with adequate protections to participate in these 
programs, which is particularly important given the current focus in 
Congress on expanding payroll-deduction IRAs. However, any direct 
oversight of payroll-deduction IRAs should be done in a way that does 
not pose an undue burden on employers or their employees. 

We are continuing our work on IRAs, and are beginning to examine the 
fees that are charged IRA participants. We are pleased that the 
Committee on Ways and Means and this subcommittee are interested in 
retirement savings, particularly IRAs, and look forward to continuing 
our work with you. 

Mr. Chairman and Members of the subcommittee, this completes my 
prepared statement and I would be happy to respond to any questions the 
subcommittee may have at this time. 

Contacts and Acknowledgments: 

For further information regarding this testimony, please contact 
Barbara D. Bovbjerg, Director, Education, Workforce, and Income 
Security Issues at (202) 512-7215 or [email protected]. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this statement. Individuals making key 
contributions to this testimony include Tamara Cross (Assistant 
Director), Matt Barranca, Susan Pachikara, Raun Lazier, Joseph 
Applebaum, Susan Aschoff, Doreen Feldman, Edward Nannenhorn, MaryLynn 
Sergent, Roger Thomas, Walter Vance, and Jennifer Wong. 

[End of section] 

Footnotes: 

[1] GAO, Individual Retirement Accounts: Government Actions Could 
Encourage More Employers to Offer IRAs to Employees, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-590] (Washington, D.C.: June 
4, 2008). 

[2] A more detailed discussion of our methodology is provided in app. I 
to [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-590]. 

[3] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-590]. 

[4] Private sector pension plans are classified either as DB or DC 
plans. DB plans promise to provide, generally, a fixed level of monthly 
retirement income that is based on salary, years of service, and age at 
retirement, regardless of how the plan investments perform. In 
contrast, benefits from DC plans are based on the contributions to and 
the performance of the investments in individual accounts, which may 
fluctuate in value. Examples of DC plans include 401(k) plans, employee 
stock ownership plans, and profit-sharing plans. The most dominant and 
fastest growing DC plans are 401(k) plans, which allow workers to 
choose to contribute a portion of their pre-tax compensation to the 
plan under section 401(k) of the Internal Revenue Code. 

[5] Craig Copeland, "Employment-Based Retirement Plan Participation: 
Geographic Differences and Trends, 2006," Issue Brief, no. 311, 
(Washington D.C, Employee Benefit Research Institute, November 2007). 

[6] The Employee Benefit Research Institute, a private, nonprofit 
public policy research organization, estimated that in 2006, over 66 
million workers were employed by private sector employers with fewer 
than 100 employees. Of these workers, 16.7 million had access to an 
employer-sponsored retirement plan. See Craig Copeland, "Employment- 
Based Retirement Plan Participation: Geographic Differences and Trends, 
2006," additional data from the U.S. Bureau of the Census, March 2007 
Current Population Survey provided by the author. 

[7] This is a simplified discussion of the features and rules 
associated with traditional, Roth, and SIMPLE and SEP IRAs and payroll- 
deduction IRA programs. For a more detailed discussion, see [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-590]. 

[8] Other rules for traditional IRAs also apply. For example, yearly 
contribution amounts are subject to limits based on earned income, 
pension coverage, and filing status. Taxpayers over age 70ï¿½ cannot 
contribute and must begin required minimum distributions from these 
accounts. Withdrawals are generally taxable and early distributions 
made before age 59ï¿½ other than for specific exceptions are subject to a 
10 percent additional income tax. Withdrawals for the purchase of a 
first-time residence or payments for higher education are not subject 
to additional tax, as provided under specific tax rules. 

[9] Other rules apply to Roth IRAs. For example, yearly contribution 
amounts are subject to limits based on earned income and filing status. 
Withdrawals of investment earnings before age 59ï¿½ are subject to a 10 
percent additional tax and other taxes. Yearly contribution amounts are 
subject to limits based on income and filing status. There are no age 
limits on contributing, and no distributions are required during the 
owner's lifetime. Withdrawals are generally tax free after age 59ï¿½ as 
long as the taxpayer held the account for 5 years. 

[10] See 29 C.F.R. ï¿½ 2509.99-1 (also known as Interpretive Bulletin 99- 
1). 

[11] Congress created SIMPLE IRAs in the Small Business Job Protection 
Act of 1996. SIMPLE IRAs replaced the Salary Reduction Simplified 
Employee Pension IRA (SAR-SEP IRA)---a tax-deferred retirement plan 
provided by sole proprietors or small businesses with fewer than 25 
employees. SAR-SEP IRAs could not be established after December 31, 
1996, but plans in operation at that time were allowed to continue. For 
those plans still in operation in 2008, SAR-SEP IRAs allow eligible 
employees to contribute up to $15,500 per year, and employers may 
contribute 25 percent of an employee's compensation, up to a maximum 
$46,000. 

[12] Congress established SEP IRAs in the Revenue Act of 1978. As with 
DB plans, SEP IRA contributions must be based on a written allocation 
formula and cannot discriminate in favor of highly compensated 
employees. 

[13] In addition to SEP and SIMPLE IRAs, employers may offer "deemed 
IRAs" to their employees, which allow employees to keep IRA assets in 
their employer's tax-qualified retirement plan as a separate 
traditional or Roth IRA. Employees may make voluntary contributions to 
the deemed IRA, subject to IRA rules. According to the Department of 
the Treasury, few such IRAs exist. 

[14] See Interpretive Bulletin 99-1. Labor's guidance explains that an 
employer who establishes a payroll-deduction IRA program is not 
considered to have established an employee retirement plan subject to 
ERISA if the following are satisfied: (1) the employer maintains 
neutrality with respect to IRA investment options available in 
communications with employees; (2) the employer establishes limitations 
on the number of IRA investment options available, the program 
discloses any costs or limitations on employees' ability to rollover to 
other IRAs; (3) the employer does not pay any administrative, 
investment management, or other fees which the IRA sponsor would 
require an employee to pay for establishing or maintaining the IRA; (4) 
the employer does not receive any consideration beyond "reasonable 
compensation" for operating the program. 

[15] Individuals subject to prohibited transaction rules include the 
individual who established the IRA, members of the individual's family, 
and fiduciaries. Examples of prohibited transactions with an IRA 
include: borrowing money from an IRA, selling property to it, receiving 
unreasonable compensation for managing the account, using the account 
as security for a loan, and buying property for personal use with IRA 
funds. The Department of the Treasury retains authority only with 
respect to transactions that are exempted by subsection 404(c) of ERISA 
from the application of the prohibited transaction provisions of Title 
I of ERISA. 

[16] The statutory exemptions generally include loans to participants, 
the provision of services needed to operate a plan for reasonable 
compensation, loans to employee stock ownership plans, and investment 
with certain financial institutions regulated by other state or federal 
agencies. Reorganization Plan No. 4 of 1978 transferred the Department 
of the Treasury's authority over prohibited transaction exemptions to 
Labor, with certain exceptions. 

[17] A provision of the Internal Revenue Code directly imposes an 
excise tax against disqualified persons, including employee benefit 
plan sponsors and service providers, who engage in prohibited 
transactions with tax-qualified pension and profit-sharing plans. The 
IRS must coordinate with Labor regarding the imposition of the excise 
tax under section 4975 of the Internal Revenue Code. In place of the 
imposition of an excise tax under the Internal Revenue Code, if the 
prohibited transaction involves the IRA owner, the IRA is disqualified 
from favorable tax treatment. 

[18] Sara Holden and Michael Bogdan, "The Role of IRAs in U.S. 
Households' Saving for Retirement," Research Fundamentals, vol. 17, no. 
1 (Washington D.C., Investment Company Institute, January 2008). 

[19] Craig Copeland, "Individual Account Retirement Plans: An Analysis 
of the 2004 Survey of Consumer Finances," Issue Brief, no. 293 
(Washington D.C., Employee Benefit Research Institute, May 2006). 

[20] Sara Holden and Michael Bogdan, "Appendix: Additional Data on IRA 
Ownership in 2007," Research Fundamentals, vol. 17, no. 1A (Washington 
D.C., Investment Company Institute, January 2008). 

[21] Additional analysis of the Federal Reserve's Survey of Consumer 
Finance by the Employee Benefit Research Institute. Craig Copeland, 
"Individual Account Retirement Plans: An Analysis of the 2004 Survey of 
Consumer Finances," Issue Brief, no. 293 (Washington D.C., Employee 
Benefit Research Institute, May 2006). 

[22] Sara Holden, Kathy Ireland, Victoria Leonard-Chambers, and Michael 
Bogdan, "The Individual Retirement Account at Age 30: A Retrospective," 
Perspective, vol. 11, no. 1 (Washington D.C., Investment Company 
Institute, February 2005). 

[23] Congressional Budget Office, Utilization of Tax Incentives for 
Retirement Savings: Update to 2003 (Washington, D.C., March 2007). The 
eligibility rules for Roth IRAs and for tax-deductible contributions to 
traditional IRAs may influence IRA participation rates. For example, an 
individual's eligibility to contribute to Roth IRAs is based on their 
modified adjusted gross income (AGI) and their tax filing status. 
Eligibility for a full or partial deduction for traditional IRA 
contributions depends on whether a taxpayer or spouse is covered by an 
employer-sponsored retirement plan, as well as limits on modified AGI 
and filing status. 

[24] The income categories in the CBO study are reported in 1997 
dollars. Some workers may have both a traditional and Roth IRA. 

[25] Sandra West and Victoria Leonard-Chambers, "The Role of IRAs in 
Americans' Retirement Preparedness," Research Fundamentals, vol. 15, 
no. 1 (Washington D.C., Investment Company Institute, January 2006). 

[26] See Craig Copeland, "Employment-Based Retirement Plan 
Participation: Geographic Differences and Trends, 2006," with 
additional data from the 2007 March Current Population Survey provided 
by the author. 

[27] See 29 C.F.R.ï¿½ 2510.3-2(d). 

[28] Section 101(h)(1) of ERISA Title I provides that no report shall 
be required for qualified salary reduction arrangements under section 
408(p) of the Internal Revenue Code (SIMPLE IRAs). In addition, Labor 
provides an alternative method of compliance for reporting SEP 
arrangements through IRS Form 5305-SEP. 

[29] U.S. Department of Labor, U.S. Bureau of Labor Statistics, 
National Compensation Survey: Employee Benefits in Private Industry in 
the United States, 2005, Bulletin 2589 (May 2007). SIMPLE IRAs are only 
available to firms with 100 employees or fewer who do not already offer 
another retirement plan; SEP IRAs are available to employers of any 
size, including those who may offer either a DC or DB plan. 

[30] However, officials told us that this figure was likely 
understated, as it does not include accounts that may be owned by sole 
proprietors or individuals who own unincorporated businesses by 
themselves, who are not required to file W-2 forms. 

[31] Labor and IRS officials told us data are limited on how many 
employers offer payroll-deduction IRAs; however, Labor and IRS have 
taken steps to promote these plans. For example, in 1975, Labor issued 
a regulation describing the conditions under which payroll-deduction 
IRA programs offered by employers are not considered a pension plan 
under Title I of ERISA. See 29 C.F.R.ï¿½ 2510.3-2(d). In 1999, Labor 
issued Interpretive Bulletin 99-1, which set the conditions under which 
employers could offer payroll-deduction IRAs and remain clear of the 
reporting and disclosure requirements, fiduciary duties, and 
enforcement rights under ERISA Title I that apply to employer-sponsored 
pensions. See 29 C.F.R.ï¿½ 2509.99-1, and 64 Fed. Reg. 33000 (June 18, 
1999). In 1999, IRS issued an announcement providing information to 
employees and employers on payroll-deduction contributions for Roth and 
traditional IRAs. See Internal Revenue Bulletin 1999-2, at 44 (Jan. 11, 
1999). 

[32] SEP IRAs do not offer this feature. Only employers may contribute 
to SEP IRAs and employee contributions to these IRAs are not permitted. 

[33] Congressional Budget Office, "Utilization of Tax Incentives for 
Retirement Saving: Update to 2003," Background Paper (Washington, D.C., 
March 2007). 

[34] Steven F. Venti, "Choice, Behavior, and Retirement Saving," in The 
Oxford Handbook of Pensions and Retirement Income, Eds. Gordon C. 
Clark, Alicia H. Munnell, and J. Michael Orszag (Oxford, Great Britain, 
2006) 603-17; and Olivia Mitchell and Stephen Utkus, "Lessons from 
Behavioral Finance for Retirement Plan Design," Pension Research 
Council Working Paper, PRC WP 2003-6 (Philadelphia, Pa., 2003). 

[35] Individuals who have already established an IRA on their own and 
who currently contribute at the maximum would not be eligible to 
contribute to payroll-deduction IRAs. Others who already have an IRA 
but contribute less than the maximum could contribute additional 
amounts in a payroll-deduction IRA, but could not go over the overall 
limit. 

[36] Any individual under the age of 70ï¿½ with taxable compensation may 
contribute to a traditional IRA, and many individuals could receive a 
tax deduction for their contribution. Eligibility for a full or partial 
deduction for traditional IRA contributions depends on whether a 
taxpayer or spouse is covered by an employer plan, as well as limits on 
modified adjusted gross income (AGI) and filing status. For example, a 
single worker not covered by an employer plan is eligible for the full 
deduction regardless of income, and a married taxpayer filing jointly 
whose spouse is covered by an employer plan can take the full deduction 
if the couple's modified AGI is $159,000 or less for 2008. Other 
individuals may be eligible for partial deductions, and even those 
ineligible for any deduction can still make nondeductible contributions 
to a traditional IRA. 

[37] An individual's eligibility to contribute to Roth IRAs is based on 
their modified AGI and their tax filing status. For example, in 2008, 
single, head-of-household and married individuals filing separately 
with a modified AGI of less than $101,000 could contribute up to $5,000 
($6,000 if age 50 or older). Individuals with an AGI that is more than 
$101,000 but less than $116,000 could contribute at reduced limits. 
Individuals making $116,000 or more could not contribute to Roth IRAs. 
Individuals that are married, filing jointly, or qualified widowers, 
with a modified AGI less than $159,000 could contribute up to the 
$5,000 limit ($6,000 if age 50 or older). Couples with income between 
$159,000 and $169,000 could contribute at reduced limits. Those making 
more than $169,000 cannot contribute. 

[38] For example, SIMPLE IRAs require employers to provide employees 
with a summary plan description and an annual election notice. SEP IRAs 
require employers to provide employees with written statements that 
explain the terms of the pension, how changes are made, and when 
employees will receive information about contributions to their 
accounts. 

[39] Further, employers are not required to determine an employee's 
eligibility status for Roth contributions or tax-deferred contributions 
to traditional IRAs, which vary based on the employee's modified 
adjusted gross income or tax filing status. These responsibilities fall 
on the employee. 

[40] SIMPLE IRAs require that employers contribute to their employee's 
IRAs by making "nonelective" 2 percent contributions to the accounts of 
all employees or by matching the salary-reduction contributions of 
participating employees up to 3 percent of the employee's compensation 
with a limit of $10,500 in 2007. Individuals over age 50 at the end of 
the 2007 calendar year could make an additional "catch-up" contribution 
of up to $2,500 to their SIMPLE IRAs. Under a SEP, employers contribute 
directly to SEP IRAs for all employees, including the employer, with 
contributions up to 25 percent of each employee's pay, but no more than 
$45,000 in 2007. 

[41] In 2008, SEP IRAs allowed employers to contribute the lesser of 25 
percent of an employee's compensation or up to $46,000. Compensation 
generally does not include contributions to the SEP. 

[42] As such, Labor's guidance allows employers to select a single IRA 
provider for all employees. Also, under Labor's guidance, an IRA 
sponsor may reimburse the employer for the actual costs of operating a 
payroll-deduction IRA as long as such costs do not include profit to 
the employer. 

[43] Mary M. Schmitt and Judy Xanthopoulos, "Automatic IRAs: Are They 
Administratively Feasible, What Are the Costs to Employers and the 
Federal Government, and Will They Increase Retirement Savings?" 
Preliminary Report Prepared for AARP, Optimal Benefit Strategies, LLC 
(Mar. 8, 2007.) 

[44] Labor officials told us they issued this guidance to make it 
easier for employers to understand the guidelines to maintain the safe 
harbor that applies to payroll-deduction IRAs. This guidance explains 
the conditions under which employers can offer payroll-deduction IRAs 
and not be subject to ERISA reporting and fiduciary responsibilities, 
which apply to employer retirement plans like 401(k) plans. 

[45] In 2008, eligible individuals were allowed to contribute a total 
of $5,000 to one or more traditional and Roth IRAs, and individuals 
older than age 50 could contribute $6,000. 

[46] The currently available "Tax Credit for Small Employer Pension 
Plan Startup Costs" applies to eligible employers who offer SEP, 
SIMPLE, and qualified plans. This credit is intended to cover costs to 
set up, administer, and educate employees about the plan for up to a 
maximum of $500 per year for each of the first 3 years of the plan. It 
should be noted that providing a similar tax credit for employers 
offering payroll-deduction IRAs would have revenue implications for the 
federal budget. 

[47] Currently, the saver's credit provides a nonrefundable tax credit 
to low-and moderate-income savers of up to 50 percent of their annual 
IRA or 401(k) contributions up to $2,000. In 2007, the credit was 
available to single and married individuals filing separate income tax 
returns who make no more than $26,000 and to married couples filing 
jointly who make no more than $52,000. Depending on income and filing 
status, taxpayers may claim a credit as high as 50 percent or as low as 
10 percent of their contributions. The saver's credit was designed to 
provide a greater savings incentive to low-and moderate-income workers 
who, because of their lower marginal tax rates, receive lower tax 
subsidies by saving in tax-preferred accounts, such as IRAs, than 
higher income individuals. 

[48] Several studies show that 401(k) plans with automatic enrollment 
features have increased participation rates, especially among young and 
lower income workers who are less likely to participate in these plans. 
However, as previously mentioned, 401(k) plans are different from IRAs 
with different incentives. One study of a large firm found that 
automatic enrollment increased participation by eligible employees from 
57 percent to 86 percent in 1 year for new hires. Brigitte C. Madrian 
and Dennis F. Shea, "The Power of Suggestion: Inertia in 401(k) 
Participation and Savings Behavior," The Quarterly Journal of 
Economics, vol. 116, issue 4 (November 2001). 

[49] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-590]. 

[50] In addition to information collected through employer-filed W-2 
forms, the financial institution/trustee handling the employer- 
sponsored IRA provides the IRS and participants with annual statements 
containing contribution and fair market value information on IRS Form 
5498. Distributions from that same plan are reported by the financial 
institution making the distribution to both IRS and the recipients of 
the distributions on IRS Form 1099-R. 

[51] The Form 5500 provides basic information to identify the plan and 
type of plan as well as more detailed information, including data on 
assets, liabilities, insurance, and financial transactions. Form 5500 
contains information on the financial condition of the plan and the 
benefits that the plan expects to pay out. 

[52] Section 406(b) of ERISA and ï¿½4975 of the Internal Revenue Code 
prohibit a plan fiduciary from engaging in self-dealing, which is 
described as conduct by fiduciaries that consists of taking advantage 
of their position in a transaction and acting for their own interests 
rather than for the interests of the beneficiaries of the plan. 

[53] According to Labor officials, if they become aware of an employer 
operating a payroll-deduction IRA that may not be following agency 
guidance, Labor will conduct an investigation to determine if the IRA 
should be treated as an ERISA pension plan. The IRA may become subject 
to the requirements of Title I of ERISA, which includes filing a 
detailed annual report (Form 5500) with Labor. Labor officials said 
this was done in an effort to ensure that plans are being operated and 
maintained in the best interest of plan participants. 

[End of section] 

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