Washington, D.C. -- The current rollover process for 401(k) plans favors distributions to IRAs, rather than the 401(k) plan that a new employer might offer, and a new government report suggests that the Internal Revenue Service and the Labor Department could be doing more to make the process easier.

Typically, 401(k) plan participants who leave their employers must decide what to do with their plan savings. Many decide to roll over their plan savings to IRAs, and there is concern that participants may be encouraged to choose rollovers to IRAs in lieu of options that could be more in their interest.

Among the factors contributing to the complexity are long waiting periods to roll over a 401(k) into a new employer plan, along with complex verification procedures to ensure that the savings are tax-qualified; wide divergences in the paperwork for the plans; and inefficient practices for processing rollovers. Those factors combine to make IRA rollovers an easier and faster choice, especially since IRA providers often offer assistance to plan participants when they roll their savings into an IRA.

A report released in early April by the Government Accountability Office said that the Labor Department and the IRS, which already provide oversight and guidance for this process, could take steps to make plan-to-plan rollovers more efficient, such as reducing the waiting period to roll over into a 401(k) plan and improving the asset verification process.

Plan participants often receive guidance and marketing favoring IRAs when seeking assistance regarding what to do with their 401(k) plan savings when they separate from their employers, the report noted. In addition, the information that participants currently receive about the plans is either too generic and without detail, leaving plan participants without an understanding of the key factors they need to know to make decisions about their savings. The information also may be too long and technical, leaving plan participants overwhelmed and confused.



Washington, D.C. -- Confidence in the ability to afford a comfortable retirement remains low, according to a new survey, reflecting a growing awareness of the challenges in saving enough money.

The percentage of workers who said that they were confident about having enough money for a comfortable retirement was essentially unchanged from the record lows observed in 2011, according to the Employee Benefit Research Institute's 23rd annual Retirement Confidence Survey. While more than half of the respondents expressed some level of confidence (13 percent are very confident and 38 percent are somewhat confident of being able to afford a comfortable retirement), 21 percent are not too confident, and 28 percent are not at all confident. The latter figure is the highest level of those not at all confident recorded during the 23 years of the survey.

Retiree confidence in having a financially secure retirement is also unchanged, with 18 percent very confident (statistically equivalent to the 21 percent measured in 2012) a record low reading for that group, while 14 percent are not at all confident (statistically equivalent to 19 percent in 2011).

One reason that retirement confidence has remained low despite a brightening economic outlook is that some workers may be realizing just how much they may need to save. Asked how much they believe they will need to save to achieve a secure retirement, a striking number of workers cited large savings targets: 20 percent said they need to save between 20 and 29 percent of their income, and nearly one quarter (23 percent) indicated they need to save 30 percent or more.

"Aggressive as those savings targets appear to be, they may not be based on a careful analysis of their individual circumstances," according to EBRI research director Jack VanDerhei, who co-authored the report. "Only 46 percent reported that they and/or their spouse have tried to calculate how much money they will need to have saved."

However, he noted that workers who have done a retirement-savings-needs calculation tend to have higher savings goals, and are more confident, than workers who have not.

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