You are given two reports by the government agency.  

Report 1:
Over the last 3 decades employers have shifted away from sponsoring defined benefit (DB) plans and toward DC plans. This shift also transfers certain types of risk—such as investment risk—from employers to employee participants. DB plans generally offer a fixed level of monthly annuitized retirement income based upon a formula specified in the plan, which usually takes into account factors such as a participant’s salary, years of service, and age at retirement, regardless of how the plan’s investments perform. In contrast, benefit levels in DC plans—such as 401(k) plans—depend on the contributions made to the plan and the performance of the investments in individual accounts, which may fluctuate in value. As we have previously reported, some experts have suggested that the portability of DC plans make them better-suited for a mobile workforce, and that such portability may lead to early withdrawals of retirement savings. DOL reported there were 656,241 DC and 46,300 DB plans in the United States in 2016. Tax incentives are in place to encourage employers to sponsor retirement plans and employees to participate in plans. Under the Employee Retirement Income Security Act of 1974 (ERISA), employers may sponsor DC retirement plans, including 401(k) plans—the predominant type of DC plan, in which benefits are based on contributions to and the performance of the investments in participants’ individual accounts. To save in 401(k) plans, participants contribute a portion of their income into an investment account, and in traditional 401(k) plans taxes are deferred on these contributions and associated earnings, which can be withdrawn without penalty after age 59½ (if permitted by plan terms). As plan sponsors, employers may decide the amount of employer contributions (if any) and how long participants must work before having a non-forfeitable (i.e., vested) interest in their plan benefit, within limits established by federal law. Plan sponsors often contract with service providers to administer their plans and provide services such as record keeping (e.g., tracking and reporting individual account contributions); investment management (i.e., selecting and managing the securities included in a mutual fund); and custodial or trustee services for plan assets (e.g., holding the plan assets in a bank). Individuals also receive tax incentives to save for retirement outside of an employer-sponsored plan. For example, traditional IRAs provide certain individuals with a way to save pre-tax money for retirement, with withdrawals made in retirement taxed as income. In addition, Roth IRAs allow certain individuals to save after-tax money for retirement with withdrawals in retirement generally tax-free. IRAs were established under ERISA, in part, to (1) provide a way for individuals not covered by a pension plan to save for retirement; and (2) give retiring workers or individuals changing jobs a way to preserve assets from 401(k) plans by transferring their plan balances into IRAs. The Investment Company Institute (ICI) reported that 34.8 percent of households in the United States owned an IRA in 2017, a percentage that has generally remained stable since 2000. In 2017, IRA assets accounted for almost 33 percent (estimated at $9.2 trillion) of total U.S. retirement assets, followed by DC plans, which accounted for 27 percent ($7.7 trillion). Further, according to ICI, over 94 percent of funds flowing into traditional IRAs from 2000 to 2015 came from rollovers—primarily from 401(k) plans. IRS, within the Department of the Treasury, is responsible for enforcing IRA tax laws, while IRS and DOL share responsibility for overseeing prohibited transactions relating to IRAs. IRS also works with DOL’s Employee Benefits Security Administration (EBSA) to enforce laws governing 401(k) plans. IRS is primarily responsible for interpreting and enforcing provisions of the Internal Revenue Code (IRC) that apply to tax- preferred retirement savings. EBSA enforces ERISA’s reporting and disclosure and fiduciary responsibility provisions, which, among other things, include requirements related to the type and extent of information that a plan sponsor must provide to plan participants. Employers sponsoring employee benefit plans subject to ERISA, such as a 401(k) plans, generally must file detailed information about their plan each year. The Form 5500 serves as the primary source of information collected by the federal government regarding the operation, funding, expenses, and investments of employee benefit plans. The Form 5500 includes information about the financial condition and operation of their plans, among other things. EBSA uses the Form 5500 to monitor and enforce plan administrators and other fiduciaries, and service providers’ responsibilities under Title I of ERISA. IRS uses the form to enforce standards that relate to, among other things, how employees become eligible to participate in benefit plans, and how they become eligible to earn rights to benefits. In certain instances, sponsors of 401(k) plans may allow participants to access their tax-preferred retirement savings prior to retirement. Plan sponsors have flexibility under federal law and regulations to choose whether to allow plan participants access to their retirement savings prior to retirement and what forms of access to allow. Typically, plans allow participants to access their savings in one or more of the following forms: Loans: Plans may allow participants to take loans and limit the number of loans allowed. If the plan provides for loans, the maximum amount that the plan can permit as a loan generally cannot exceed the lesser of (1) the greater of 50 percent of the vested account balance, or $10,000 or (2) $50,000 less the excess of the highest outstanding balance of loans during the 1-year period ending on the day before the day on which a new loan is made over the outstanding balance of loans on the day the new loan is made. Plan loans are generally not treated as early withdrawals unless they are not repaid within the terms specified under the plan. Hardship withdrawals: Plans may allow participants facing a hardship to take a withdrawal on account of an immediate and heavy financial need, and if the withdrawal is necessary to satisfy the financial need. Though plan sponsors can decide whether to offer hardship withdrawals and approve applications for hardship withdrawals, IRS regulations provide “safe harbor” criteria regarding circumstances when a withdrawal is deemed to be on account of an immediate heavy financial need. IRS regulations allow certain expenses to qualify under the safe harbor including: (1) certain medical expenses; (2) costs directly relating to the purchase of a principal residence; (3) tuition and related educational fees and expenses for the participant, and their spouse, children, dependents or beneficiary; (4) payments necessary to prevent eviction from, or foreclosure on, a principal residence; (5) certain burial or funeral expenses; and (6) certain expenses for the repair of damage to the employee’s principal residence. Plans that provide for hardship withdrawals generally specify what information participants must provide to the plan sponsor to demonstrate a hardship meets the definition of an immediate and heavy financial need. Early withdrawals of retirement savings may have short-term and long- term impacts on participants’ ability to accumulate retirement savings. In the short term, IRA owners and participants in 401(k) plans who received a withdrawal before reaching age 59½ generally pay an additional 10 percent tax for early distributions in addition to income taxes on the taxable portion of the distribution amount. The IRC exempts certain distributions from the additional tax, but the exceptions vary among 401(k) plans and IRAs. Early withdrawals of any type can result in the permanent removal of assets from retirement accounts thereby reducing the amounts participants can accumulate before retirement, including the loss of compounded interest or other earnings on the amounts over the participant’s career. According to DOL’s Bureau of Labor Statistics (BLS), U.S. workers are likely to have multiple jobs in their careers as average employee tenure has decreased. In 2017, BLS reported that from 1978 to 2014, workers held an average of 12 jobs between the ages of 18 and 50. BLS also reported in 2016 that the median job tenure for a worker was just over 4 years. Employees who separate from a job bear responsibility for deciding what to do with their accumulated assets in their former employer’s plan. Recent research estimated that 10 million people with a retirement plan change jobs each year, many of whom faced a decision on how to treat their account balance at job separation. Plan administrators must provide a tax notice detailing participants’ options for handling the balance of their accounts. When plan participants separate from their employers, they generally have one of three options: 1. They may leave the balance in the plan, 2. They may ask their employer to roll the money directly into a new qualified employer plan or IRA (known as a direct rollover), or 3. They may request a distribution. Once the participant receives the distribution he or she can (1) within 60 days, roll the distribution into a new qualified employer plan or IRA (in which case the money would remain tax-preferred); or (2) keep the distributed amount, and pay any income taxes or additional taxes associated with the distribution (known as a cashout). Sponsors of 401(k) plans may cash out or transfer separating participant accounts if an account balance falls below a certain threshold. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) amended the IRC to provide certain protections for separating participants with account balances between $1,000 and $5,000 by requiring, in the absence of participant direction, plan sponsors to either keep the account in the plan or to transfer the account balance to an IRA to preserve its tax-preferred status. Plan sponsors may not distribute accounts with balances of more than $5,000 without participant direction, but have discretion to distribute account balances of $1,000 or less. The IRC imposes an additional 10 percent tax (in addition to ordinary income tax) on certain early withdrawals from qualified retirement plans, which includes IRAs and 401(k) plans in an effort to discourage the use of plan funds for purposes other than retirement and ensure the favorable tax treatment for plan funds is used to provide retirement income. Employers are required to withhold 20 percent of the amount cashed out to cover anticipated income taxes unless the participant pursues a direct rollover into another qualified plan or IRA. Research has found that many employees are concerned about their level of savings and ability to manage their retirement accounts, and some employers provide educational services to improve employees’ financial wellness and financial literacy and encourage them to save for retirement. A 2017 survey on employee financial wellness in the workplace found more than one-half of workers experienced financial stress and that insufficient emergency savings was a top concern for employees. Research has also found that limited financial literacy is widespread among Americans over age 50, and those who lack financial knowledge are less likely to successfully plan for retirement. In 2018, the Federal Reserve reported that three-fifths of non-retirees with participant-directed retirement accounts had little to no comfort managing their own investments. As we have previously reported, some employers have developed comprehensive programs aimed at overall improvement in employees’ financial health. These programs, often called financial wellness programs, may help employees with budgeting, emergency savings, and credit management, in addition to the traditional information and assistance provided for retirement and health benefits. In 2013, individuals ages 25 to 55 withdrew at least $68.7 billion early from their retirement accounts. Of this amount, IRA owners in this age group withdrew the largest share (about 57 percent) and 401(k) plan participants in this age group withdrew the rest (about 43 percent) However, a total amount withdrawn from 401(k) plans cannot be determined due to data limitations. IRA withdrawals were the largest source of early withdrawals of retirement savings, accounting for an estimated $39.5 billion of the total $68.7 billion in early withdrawals made by individuals ages 25 to 55 in 2013. According to IRS estimates, 12 percent of IRA owners in this age group withdrew money early that year from their IRAs in 2013. The amount they withdrew early comprised a small percentage of their total IRA assets. Specifically, in 2013, the amount of early withdrawals was equivalent to 3 percent of the cohort’s total IRA assets and, according to IRS estimates, the total amount withdrawn by this cohort exceeded their total contributions to IRAs in that year. At least $29.2 billion left 401(k) plans in 2013 in the form of hardship withdrawals, cashouts at job separation, and unrepaid plan loans, according to our analysis of 2013 SIPP data and data from DOL’s Form 5500. Specifically, we found that: Hardship withdrawals were the largest source of early withdrawals from 401(k) plans with an estimated 4 percent (+/- 0.25) of plan participants ages 25 to 55 withdrawing an aggregate $18.5 billion in 2013. The amount of hardship withdrawals was equivalent to 0.5 percent (+/- 0.06) of the cohort’s total plan assets and 8 percent (+/- 0.9) of the cohort’s plan contributions made in 2013. Cashouts of account balances of $1,000 or more at job separation were the second largest source of early withdrawals from 401(k) plans. In 2013, an estimated 1.1 percent (+/- 0.11) of plan participants ages 25 to 55 withdrew an aggregate $9.8 billion from their plans that they did not roll into another qualified plan or IRA. Additionally, 86 percent (+/- 2.9) of these participants taking a cashout of $1,000 or more did not roll over the amount in 2013. The amounts cashed out and not rolled over were equivalent to 0.3 percent (+/- 0.05) of the cohort’s total plan assets and 4 percent (+/- 0.75) of the cohort’s total contributions made in 2013. Loan defaults accounted for at least $800 million withdrawn from 401(k) plans in 2013; however, the amount of distributions of unpaid plan loans is likely larger as DOL data cannot be used to quantify plan loan offsets that are deducted from participants’ account balances after they leave a plan. As a result, the amount of loan offsets among terminating participants ages 25 to 55 cannot be determined with certainty. Specifically, DOL’s Form 5500 instructions require plan sponsors to report unpaid loan balances in two separate places on the Form 5500, depending on whether the loan holder is an active or a terminated participant. For active participants, plan sponsors report loan defaults as a single line item on the Form 5500 (i.e., the $800 million in 2013 listed above). For terminated participants, plan sponsors report unrepaid plan loan balances as benefits paid directly to participants—a category that also includes rollovers to employer plans and IRAs. According to a DOL official, as a result of this commingling of benefits on this line item, isolating the amount of loan offsets for terminated participants using the Form 5500 data is not possible. Without better data of the amount of unrepaid plan loans, the amount of loan offsets and the characteristics of plan participants who did not repay their plan loans at job separation cannot be determined. IRA owners and plan participants taking early withdrawals paid $6.2 billion as a result of the additional 10 percent tax for early distributions in 2013, according to IRS estimates. Although the taxes are generally treated separately from the amounts withdrawn, IRA owners and plan participants are expected to pay any applicable taxes resulting from the additional 10 percent tax when filing their income taxes for the tax year in which the withdrawal occurred. Individuals with certain demographic and economic characteristics that we analyzed had higher incidence of early withdrawals of retirement savings, according to our analysis of SIPP data. The characteristics described below reflect statistically significant differences between comparison groups (a full listing of all demographic groups can be found in appendix III). Age. The incidence of IRA withdrawals was higher among individuals ages 45 to 54 (8 percent) than individuals ages 25 to 34 and 35 to 44. Education. Individuals with a high school education or less had higher incidence of cashouts (97 percent) and hardship withdrawals (7 percent) than individuals with some college or some graduate school education. Family size. Individuals in families of seven or more (8 percent) or in families of five to six (7 percent) had higher incidence of hardship withdrawals than individuals in smaller family groups we analyzed. Individuals living alone had higher incidence of IRA withdrawals than individuals living in the larger family groups. Marital status. Widowed, divorced, or separated individuals had higher incidence of IRA withdrawals (11 percent) and hardship withdrawals (7 percent) than married or never married individuals. Race. The incidence of hardship withdrawals among African American (10 percent) and Hispanic individuals (6 percent) was higher than among individuals who were White, Asian, or Other. Residence. The incidence of IRA withdrawals and hardship withdrawals was higher among individuals living in nonmetropolitan areas (7 percent and 6 percent, respectively) than among individuals living in metropolitan areas. Similarly, individuals with certain economic characteristics that we analyzed had higher incidence of early withdrawals of retirement savings, according to our analysis of SIPP data. The characteristics described below reflect statistically significant differences between comparison groups (a full listing of all demographic groups can be found in appendix III). Employer size. Individuals working for employers with fewer than 25 employees had higher incidence of IRA withdrawals (9 percent) than individuals working for employers with higher number of employees. Employment. Individuals working fewer than 35 hours per week had higher incidence of IRA withdrawals (7 percent) than employees working 35 hours or more. Household debt. Individuals with household debt of $5,000 up to $20,000 had higher incidence of IRA withdrawals (14 percent) than individuals with other debt amounts. Household income. Individuals with household income of less than $25,000 or $25,000 up to $50,000 had higher incidence of IRA withdrawals (12 percent and 9 percent, respectively) and hardship withdrawals (9 percent and 7 percent, respectively) than individuals with higher income amounts. Personal cash reserves. Individuals with personal cash reserves of less than $1,000 had higher incidence of IRA withdrawals (10 percent) and hardship withdrawals (6 percent) than individuals with larger reserves. Retirement assets. Individuals with combined IRA and 401(k) plan assets valued at less than $5,000 had higher incidence of hardship withdrawals (7 percent) than individuals with higher valued assets. Tenure in retirement plan. Individuals with fewer than 3 years in their retirement plan had higher incidence of hardship withdrawals (6 percent) than individuals with longer tenures. Stakeholders we interviewed said that plan rules related to the disposition of account balances at job separation can lead participants to remove more than they need, up to and including their entire balance. We previously reported U.S. workers are likely to change jobs multiple times in a career. Plan sponsors may cash out balances of $1,000 or less at job separation, although they are not required to do so. As a result, plan participants with such balances, including younger employees and others with short job tenures, risk having their account balances distributed in full each time they change jobs. As shown in table 1, a separating employee must take multiple steps to ensure that an account balance remains tax-preferred. Participants who take a distribution from a plan with the intent of rolling it into another qualified plan or IRA must acquire additional funds to complete the rollover and avoid adverse tax consequences. Plan sponsors are required to withhold 20 percent of the account balance to pay anticipated taxes on the distribution. As a result, the sponsor then sends 80 percent of the account balance to the participant, who must acquire outside funds to compensate for the 20 percent withheld or forgo the preferential tax treatment of that portion of their account balance. For example, a participant seeking to roll over a retirement account with a $10,000 balance would receive an $8,000 distribution after tax withholding, requiring them to locate an additional $2,000 to complete the rollover within the 60-day period to avoid a taxable distribution of the withheld amount. If participants can replace the 20 percent withheld and complete the rollover within the 60-day period, they do not owe taxes on the distribution. Stakeholders said that the complexity of rolling a 401(k) account balance from one employer to another may encourage participants to take the relatively simpler route of rolling their balance into an IRA or cashing out altogether. They noted that separating participants had many questions when evaluating their options and had difficulty understanding the notice provided. For example, participants may not fully understand how the decisions made at job separation can have a significant impact on their current tax situation and eventual retirement security. One plan sponsor, describing concerns about giving investment advice, said she watched participants make what she judged to be poor choices with their account balances and felt helpless to intervene. Stakeholders also noted that the lack of a standardized rollover process sometimes bred mistrust among employers and complicated separating participants’ ability to successfully facilitate a rollover between plans. For example, one stakeholder told us that some plans were hesitant to accept funds from other employer plans fearing that the funds might come from plans that have failed to comply with plan qualification requirements and could create problems for the receiving plan later on. Another stakeholder suggested that the requirement for plan sponsors to provide a notice to separating participants likely caused more participants to take the distribution. Stakeholders described loans as a useful source of funds in times of need and a way to avoid more expensive options, such as high-interest credit cards. They also noted that certain plan loan policies could lead to early withdrawals of retirement savings. (See fig. 1.) Loan repayment at job separation: Stakeholders said loan repayment policies can increase the incidence of defaults on outstanding loans. When participants do not repay their loan after separating from a job, the outstanding balance is treated as a distribution, which may subject it to income tax liability and, possibly, an additional 10 percent tax for early distributions. According to stakeholders, the process of changing jobs can inadvertently lead to a distribution of a participant’s outstanding loan balance, when the participant could have otherwise repaid the loan. Extended loan repayment periods: Some plan sponsors allow participants to take loans to purchase a home. Stakeholders told us that the amounts of these home loans tended to be larger than general purpose loans and had longer repayment periods that these extended from 15 to 30 years. A stakeholder further noted that these loans could make it more likely that participants would have larger balances to repay if they lost or changed jobs. Multiple loans: While some plan sponsors noted that their plans limited the number of loans participants can take from their retirement plan, others do not. Some plan sponsors limited participants to between one and three simultaneous loans, and one plan administrator indicated that 92 percent of their plan-sponsor clients allowed no more than two simultaneous loans. Other plan sponsors placed no limit on the number of participant loans or limited loans to one or two per calendar year, in which case a participant could take out a new loan at the start of a calendar year regardless of whether or not outstanding loans had been repaid. Stakeholders described some participants as “serial” borrowers, who take out multiple loans and have less disposable income as a result of ongoing loan payments. One plan administrator stated that repeat borrowing from 401(k) plans was common, and some participants took out new loans to pay off old loans. Other loan restrictions: Allowing no loans or one total outstanding loan can cause participants facing economic shocks to take a hardship withdrawal, resulting in the permanent removal of their savings and subjecting them to income tax liability and, possibly, an additional 10 percent tax for early distributions and a suspension on contributions. Minimum loan amounts: Minimum loan amounts may result in participants borrowing more than they need to cover planned expenses. For example, a participant may have a $500 expense for which they seek a loan, but may have to borrow $1,000 due to plan loan minimums. Stakeholders said that plan participants take plan loans and hardship withdrawals for pressing financial needs. Many plan sponsors we interviewed said they used the IRS safe harbor exclusively as criteria when reviewing a participant’s application for a hardship withdrawal. Stakeholders said the top two reasons participants took hardship withdrawals were to prevent imminent eviction or foreclosure and to cover out-of-pocket medical costs not covered by health insurance. Participants generally took loans to reduce debt, for emergencies, or to purchase a primary residence. Stakeholders also said that participants who experienced economic shocks stemming from job loss made early withdrawals. They said retirement plans often served as a form of insurance for those between jobs or facing a sudden economic shock and participants accessed their retirement accounts because, for many, they were the only source of savings. They cited personal debt, health care costs, and education as significant factors that affected employees across all income levels. Stakeholders said some participants also used their retirement savings to pay for anticipated expenses. Two plan administrators said education expenses were one of the reasons participants took hardship withdrawals. They said that participants accessed their retirement savings to address the cost of higher education, including paying off their own student loan debt or financing the college costs for family members. For example, plan administrators told us that some participants saved with the expectation of taking a hardship withdrawal to pay for college tuition. Other participants utilized hardship withdrawals to purchase a primary residence. IRA owners generally may take withdrawals at any time and IRS does not analyze the limited information it receives on the reasons for IRA withdrawals. IRA owners can withdraw any amount up to their entire account balance at any time. In addition, IRAs have certain exceptions from the additional 10 percent tax for early distributions. For example, IRA withdrawals taken for qualified higher education expenses, certain health insurance premiums, and qualified “first-time” home purchases (up to $10,000) are excepted from the additional 10 percent tax. IRA owners who make an IRA distribution receive a Form1099-R or similar statement from their provider. On the Form 1099-R, IRA providers generally identify whether the withdrawal, among other things, can be categorized as a normal distribution, an early distribution, or a direct distribution to a qualified plan or IRA. For an early distribution, the IRA provider may identify whether a known exception to the additional 10 percent tax applies. For their part, IRA owners are required to report early withdrawals on their income tax returns, as well as the reason for any exception from the additional 10 percent tax for a limited number of items. In written responses to questions, an IRS official indicated that IRS collected data on the exemption reason codes, but did not use them. Some plan sponsors we interviewed had policies in place that may reduce the long-term impact of early withdrawals of retirement savings taken at job separation. Policies suggested by plan sponsors included: Providing a periodic installment distribution option: Although some plan sponsors may require participants wanting a distribution to take their full account balance at job separation, other plan sponsors provided participants with an option of receiving their account balance in periodic installments. For example, one plan sponsor gives separating participants an option to receive periodic installment distributions at intervals determined by the participants. This plan sponsor said separating participants could select distributions on a monthly, quarterly, semi-annual or annual basis. These participants could also elect to stop distributions at any time, preserving the remaining balance in the employer’s plan. The plan sponsor said the plan adopted this option to help separating participants address any current financial needs, while preserving some of the account balance for retirement. Another plan sponsor adopted a similar policy to address the cyclical nature of the employer’s business, which can result in participants being terminated and rehired within one year. Offering partial distributions: One plan sponsor provided separated participants with the option of receiving a one-time, partial distribution. If a participant opted for partial distribution, the plan sponsor issued the distribution for the requested sum and preserved the remainder of the account balance in the plan. The plan sponsor adopted the partial distribution policy to provide separating participants with choices for preserving account balances, while simultaneously providing access to address any immediate financial needs. Providing plan loan repayment options for separated participants: Some plan sponsors allowed former participants to continue making loan repayments after job separation. Loan repayments after job separation reduce the loan default risk and associated tax implications for participants. Some plan sponsors said that separating participants who have the option to continue repaying an outstanding loan balance generally have three options: (1) to continue repaying the outstanding loan, (2) to repay the entire balance of the loan at separation within a set repayment period, or (3) not to repay the loan. Those participants who continue repaying their loans after separation generally have the option to set up automatic debit payments to facilitate the repayment. Those separated participants who do not set up loan repayment terms within established timeframes, or do not make a payment after the loan repayment plan has been established, default on their loan and face the associated tax consequences, including, possibly, an additional 10 percent tax for early distributions. Some plan sponsors we spoke with placed certain limits on participant loan activity, which may reduce the incidence of loan defaults (see fig. 2). Limiting loan amounts to participant contributions: Some plan sponsors said they limited plan loans to participant contributions and any investment earnings from those contributions to reduce early withdrawals of retirement savings. For example, one plan sponsor’s policy limited the amount a participant could borrow from their plan to 50 percent of participant contributions and earnings, compared to 50 percent of the total account balance. Implementing a waiting period after loan repayment before a participant can access a new loan: Some plan sponsors said they had implemented a waiting period between plan loans, in which a participant, having fully paid off the previous loan, was temporarily ineligible to apply for another. Among plan sponsors who implemented a waiting period, the length varied from 21 days to 30 days. Reducing the number of outstanding loans: Some plan sponsors we spoke with limited the number of outstanding plan loans to either one or two loans. One plan sponsor had previously allowed one new loan each calendar year, but subsequently revised plan policy to allow participants to have a total of two outstanding loans. The plan sponsor said the rationale was to balance limiting participant loan behavior with the ability of participants to access their account balance. Some plan sponsors said they had expanded the definition of immediate and heavy financial need beyond the IRS safe harbor to better align with the economic needs of their participants. For example, one plan sponsor approved a hardship withdrawal to help a participant pay expenses related to a divorce settlement. Another plan sponsor developed an expanded list of qualifying hardships, including past-due car, mortgage, or rent payments; and payday loan obligations. Some plan sponsors implemented loan programs outside their plan, contracting with third-party vendors to provide short-term loans to employees. For example, one plan sponsor instituted a loan program that allowed employees to borrow up to $5,000 from a third-party vendor that would be repaid through payroll deduction. This plan sponsor said the loan program featured an 8 to 12 percent interest rate, and approval was not based on a participant’s credit history. The plan sponsor also observed that they had fewer 401(k) loan applications since the third- party loan program was implemented. A second plan sponsor instituted a similar loan program that allowed employees to borrow up to $500 interest free from a third-party vendor. According to this sponsor, to qualify for a loan, an employee must demonstrate financial hardship and have no outstanding plan loans, and is required to attend a financial counseling course if their loans are approved. Some plan sponsors said they have provided workplace-based financial wellness resources for their participants to improve their financial literacy. Some implemented optional financial wellness programs that covered topics such as investment education, how plan loans work, and the importance of saving for emergencies. These plan sponsors told us they offered on-site financial counseling with representatives of the plan administrator to help provide guidance on financial decision-making; however, other plan sponsors said that—despite their investment in participant-specific financial education—participation in these programs was low. Stakeholders suggested strategies that they believed could help mitigate the long-term effects of early withdrawals of retirement savings on IRA owners and plan participants. They noted that any of these proposed strategies, if implemented, could (1) increase the costs of administering IRAs and plans, (2) require changes to federal law or regulations, and (3) involve tradeoffs between providing access to retirement savings and preserving savings for retirement. Stakeholders suggested several strategies that, if implemented, could help reduce early withdrawals from IRAs. These strategies centered on modifying existing rules to reduce early withdrawals from IRAs (and subsequently the amount paid as a result of the additional 10 percent tax for early distributions). Specifically, stakeholders suggested: Raising the age at which the additional 10 percent tax applies: Some stakeholders noted that raising the age at which the additional 10 percent tax for early distributions applies from 59½ to 62 would align it with the earliest age of eligibility to claim Social Security and may encourage individuals to consider a more comprehensive retirement distribution strategy. However, other stakeholders cautioned that it could have drawbacks for employees in certain situations. For example, individuals who lose a job late in their careers could face additional tax consequences for accessing an IRA before reaching the age 62. In addition, one stakeholder said some individuals may shift to a part-time work schedule later in their careers as they transition to retirement and plan on taking IRA withdrawals to compensate for their lower wages. Allowing individuals to roll existing plan loans into an IRA: Some stakeholders said that allowing individuals to include an existing plan loan as part of a rollover into an IRA, although currently not allowed, would likely reduce plan loan defaults by giving individuals a way to continue repaying the loan balance. One stakeholder suggested that rolling an existing plan loan into an IRA could be administratively challenging for IRA providers, but doing so to repay the loan may ultimately preserve retirement savings. Allowing IRA loans: While currently a prohibited transaction that could lead to the cessation of an IRA, some stakeholders suggested that IRA loans could theoretically reduce the amounts being permanently removed from the retirement system through early IRA withdrawals. One stakeholder said an IRA loan would present a good alternative to an early withdrawal from an IRA account because it would give the account holder access to the balance, defer any tax implications, and improve the likelihood the loaned amount would ultimately be repaid. However, another stakeholder said that allowing IRA loans could increase early withdrawals, given the limited oversight of IRAs, as well as additional administrative costs and challenges for IRA providers. Stakeholders suggested several strategies that, if implemented, could reduce the effect of cashouts at job separation from 401(k) plans. Simplifying the rollover process: Stakeholders proposed two modifications to the current rollover process that they believe could make the process more seamless and reduce the incidence of cashouts. First, stakeholders suggested that a third-party entity tasked with facilitating rollovers between employer plans for a separating participant would likely reduce the incidence of cashouts at job separation. Such an entity could automatically route a participant’s account balance from the former plan to a new one. One stakeholder said having a third-party entity facilitate the rollover would eliminate the need for a plan participant to negotiate the process. Such a service, however, would likely come at cost that may likely be passed onto participants. Stakeholders also suggested direct rollovers of account balances between plans could further reduce the incidence of cashouts. One stakeholder, however, cautioned that direct rollovers could have downsides for some participants. For example, participants who prefer to keep their balance in their former employer’s plan but provide no direction to the plan sponsor may inadvertently find their account balance rolled into a new employer’s plan. Restricting cashouts to participant contributions only: Some stakeholders suggested limiting the assets a participant may access at job separation. For example, some stakeholders said that participants should not be allowed to cash out vested plan sponsor contributions, thus preserving those contributions and their earnings for retirement. However, this strategy could result in participants overseeing and monitoring several retirement accounts. Stakeholders suggested several strategies that, if implemented, could limit the adverse effect of hardship withdrawals on retirement savings. Narrowing the IRS safe harbor: Although some plan sponsors are expanding the reasons for a hardship to align with perceived employee needs, some stakeholders said narrowing the IRS safe harbor would likely reduce the incidence of early withdrawals. For example, some stakeholders suggested narrowing the definition of a hardship to exclude the purchase of a primary residence or for postsecondary education costs. In addition, one stakeholder said alternatives exist to finance home purchases (mortgages) and postsecondary education (student loans). Stakeholders noted that eliminating the purchase of a primary residence and postsecondary education costs from the IRS safe harbor would make hardship withdrawals a tool more strictly used to avoid sudden and unforeseen economic shocks. In combination with the two exclusions, one stakeholder suggested consideration be given to either reducing or eliminating the additional 10 percent tax for early distributions that may apply to hardship withdrawals. Replacing hardship withdrawals with hardship loans: Stakeholders said replacing a hardship withdrawal, which permanently removes money from the retirement system, with a no-interest hardship loan, which would be repaid to the account, would reduce early withdrawals. Under this suggestion, if the loan were not repaid within this predetermined time frame, the remaining loan balance could be considered a deemed distribution and treated as income (similar to the way a hardship withdrawal is treated now). Incorporating emergency savings features into 401(k) plans: Stakeholders said incorporating an emergency savings account into the 401(k) plan structure may help participants absorb economic shocks and better prepare for both short-term financial needs and long-term retirement planning. (See fig. 3.) In addition, stakeholders said participants with emergency savings accounts could be better prepared to avoid high interest rate credit options, such as credit cards or payday loans, in the event of an economic shock. Stakeholders had several ideas for implementing emergency savings accounts. For example, one stakeholder suggested that, were it allowed, plan sponsors could revise automatic account features to include automatic contributions to an emergency savings account. Some stakeholders also said emergency savings accounts could be funded with after-tax participant contributions to eliminate the tax implications when withdrawing money from the account. However, another stakeholder said emergency savings contributions could reduce contributions to a 401(k) plan. In the United States, the amount of aggregate savings in retirement accounts continues to grow, with nearly $17 trillion invested in 401(k) plans and IRAs. Early access to retirement savings in these plans may incentivize plan participation, increase participant contributions, and provide participants with a way to address their financial needs. However, billions of dollars continue to leave the retirement system early. Although these withdrawals represent a small percentage of overall assets in these accounts, they can erode or even deplete an individual’s retirement savings, especially if the retirement account represents their sole source of savings. Employers have implemented plan policies that seek to balance the short- term benefits of providing participants early access to their accounts with the long-term need to build retirement savings. However, the way plan sponsors treat outstanding loans after a participant separates from employment has the potential to adversely affect retirement savings. In the event of unexpected job loss or separation, plan loans can leave participants liable for additional taxes. Currently, the incidence and amount of loan offsets in 401(k) plans cannot be determined due to the way DOL collects data from plan sponsors. Additional information on loan offsets would provide insight into how plan loan features might affect long-term retirement savings. Without clear data on the incidence of these loan offsets, which plan sponsors are generally required to include, (but not itemize) on the Form 5500, the overall extent of unrepaid plan loans in 401(k) plans cannot be known. To better identify the incidence and amount of loan offsets in 401(k) plans nationwide, we recommend that the Secretary of Labor direct the Assistant Secretary for EBSA, in coordination with IRS, to revise the Form 5500 to require plan sponsors to report qualified plan loan offsets as a separate line item distinct from other types of distributions. (Recommendation 1) We provided a draft of this product to the Department of Labor, the Department of the Treasury, and the Internal Revenue Service for review and comment. In its written comments, reproduced in appendixes IV and V, respectively, DOL and IRS generally agreed with our findings, but neither agreed nor disagreed with our recommendation. DOL said it would consider our recommendation as part of its overall evaluation of the Form 5500, and IRS said it would work with DOL as it responds to our recommendation. The Department of Treasury provided no formal written comments. In addition, DOL, IRS, Treasury and two third-party subject matter experts provided technical comments, which we incorporated in the report, as appropriate As agreed with your staff, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Labor, Secretary of the Treasury, Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix VI. The objectives of this study were to determine: (1) what are the incidence and amount of retirement savings being withdrawn early; (2) what is known about the factors that might lead individuals to access their retirement savings early; and (3) what strategies or policies, if any, might reduce the incidence and amount of early withdrawals of retirement savings. To examine the incidence and amount of early withdrawals from individual retirement accounts (IRA) and 401(k) plans, we analyzed the most recent nationally representative data available in three relevant federal data sources, focusing our analysis on individuals in their prime working years (ages 25 to 55), when possible. For consistency, we analyzed data from 2013 from each data source because it was the most recent year that data were available for all types of early withdrawals we examined. We adjusted all dollar-value estimates derived from each data source for inflation and reported them in constant 2017 dollars. We determined that the data from these sources were sufficiently reliable for the purposes of our report. First, to examine recent incidence and amount of early withdrawals from IRAs and the associated tax consequences for individuals ages 25 to 55, we analyzed IRS estimates based on tax returns as filed by taxpayers before enforcement activity published by the Internal Revenue Service’s (IRS) Statistics of Income Division for tax year 2013. Specifically, we analyzed the number of taxpayers reporting early withdrawals from their IRAs in 2013 and the aggregate amount of these withdrawals. To provide additional context on the scope of these early withdrawals, we analyzed the age cohort’s total IRA contributions and the end-of-year fair market value of the IRAs, and compared these amounts to the aggregate amount withdrawn. To examine the incidence and amount of taxes paid as a result of the additional 10 percent tax for early distributions, we analyzed estimates on the additional 10 percent tax paid on qualified retirement plans in 2013. Although IRS did not delineate these data by age, we used these data as proxy because IRS assesses the additional 10 percent tax on distributions to taxpayers who have not reached age 59½. Given the delay between a withdrawal date and the date of the tax filing, it is possible that some of the taxes were paid in the year following the withdrawal. We reviewed technical documentation and developed the 95 percent confidence intervals that correspond to these estimates. Second, to examine the incidence and amount of early withdrawals from 401(k) plans, we analyzed data included in the 2014 panel of the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP)—a nationally representative survey of household income, finances, and use of federal social safety net programs—along with retirement account contribution and withdrawal data included in the SIPP’s Social Security Administration (SSA) Supplement on Retirement, Pensions, and Related Content. Specifically, we developed percentage and dollar-value estimates of the incidence and amount of lump sum payments received and hardship withdrawals taken by participants in 401(k) plans in 2013. Because the SIPP is based upon a complex probability sample, we used Balanced Repeated Replication methods with a Fay adjustment to derive all percentage, dollar-total, and dollar-ratio estimates and their 95 percent confidence intervals. To better understand the characteristics of individuals who received a lump sum and/or took a hardship withdrawal in 2013, we analyzed a range of selected individual and household demographic variables and identified characteristics associated with a higher incidence of withdrawals. We applied domain estimation methods to make estimates for these subpopulations. (For a list of variables used and the results of our analysis, please see appendix III.) We attempted to develop a multiple regression model to estimate the unique association between each characteristic and withdrawals, but determined that the SIPP did not measure key variables in enough detail to develop persuasive causal explanations. The sample size of respondents receiving lump sums was too small to precisely estimate the partial correlations of many demographic variables at once. Even with adequate sample sizes, associations between broad demographic variables, such as age and income, likely reflected underlying causes, such as retirement and financial planning strategies, which SIPP did not measure in detail. Third, to examine the incidence and amount of unrepaid plan loans from 401(k) plans, we analyzed the latest filing of annual plan data that plan sponsors reported on the Form 5500 to the Department of Labor (DOL) for the 2013 plan year. We looked at unrepaid plan loans reported by sponsors of large plans (Schedule H) and small plans (Schedule I). For each schedule, we analyzed two variables related to unrepaid plan loans: (1) deemed distributions of participant loans (which captures the amount of loan defaults by active participants) and (2) benefits distributed directly to participants (which includes plan loan offsets for a variety of reasons, including plan loans that remain unpaid after a participant separates from a plan). Because plan sponsors report data in aggregate and do not differentiate by participant age, we calculated and reported the aggregate of loan defaults identified as deemed distributions in both schedules. We could not determine the amount of plan loan offsets based on the way that plan sponsors are required to report them. Specifically, plan sponsors are required to treat unrepaid loans occurring after a participant separates from a plan as reductions or offsets in plan assets, and are required to report them as part of a larger commingled category of offsets that also includes large-dollar items like rollovers of account balances to another qualified plan or IRA. As a result, we were unable to isolate and report the amount of this category of unrepaid plan loans. To identify what is known about the factors that might lead individuals to access their 401(k) plans and IRAs and what strategies or policies might reduce the early withdrawal of retirement savings, we performed a literature search using multiple databases to locate documents regarding early withdrawals of retirement savings published since 2008 and to identify experts for interviews. The search yielded a wide variety of scholarly articles, published articles from various think tank organizations, congressional testimonies, and news reports. We reviewed these studies and identified factors that lead individuals to withdraw retirement savings early, as well as potential strategies or policies that might reduce this behavior. The search also helped us identify additional potential interviewees. To answer our second and third objectives, we visited four metropolitan areas and conducted 51 interviews with a wide range of stakeholders that we identified in the literature. In some cases, to accommodate stakeholder schedules, we conducted phone interviews or accepted written responses. Specifically, we interviewed human resource professionals from 22 private-sector companies (including 4 written responses), representatives from 8 plan administrators, 13 retirement research experts (including 1 written response), representatives from 4 industry associations, representatives from 2 participant advocacy organizations, and representatives from 2 financial technology companies. We conducted in-person interviews at four sites to collect information from three different groups: (1) human resource officials in private-sector companies, (2) top 20 plan administrators or recordkeepers, and (3) retirement research experts. We selected site visit locations in four metropolitan locations that were home to representatives of each group. To select companies for potential interviews, we reached out to a broad sample of Fortune 500 companies that offered a 401(k) plan to employees and varied by geographic location, industry, and number of employees. We selected plan administrators based on Pensions and Investments rankings for assets under management and number of individual accounts. We selected retirement research experts who had published research on early withdrawals from retirement savings, as well as experts that we had interviewed in our prior work. Based on these criteria, we conducted site visits in Boston, Massachusetts; Chicago, Illinois; the San Francisco Bay Area, California; and Seattle, Washington. We held interviews with parties in each category who responded affirmatively to our request. In each interview, we solicited names of additional stakeholders to interview. We also interviewed representatives of organizations, such as financial technology companies, participant advocacy organizations, industry associations, and plan administrators focused on small businesses, whose work we deemed relevant to our study. We developed a common question set for each stakeholder category that we interviewed. We based our interview questions on our literature review, research objectives, and the kind of information we were soliciting from each stakeholder category. In each interview, we asked follow-up questions based on the specific responses provided by interviewees. In our company interviews, we asked how companies administered retirement benefits for employees; company policies and procedures regarding separating employees and the disposition of their retirement accounts; company policies regarding plan loans, hardship withdrawals, and rollovers from other 401(k) plans; and company strategies to reduce early withdrawals from retirement savings. In our interviews with plan administrators, we asked about factors that led individuals to access their retirement savings early, how plan providers interacted with companies and separating employees, available data on loans and hardship withdrawals from client retirement plans, and potential strategies to reduce the incidence and amount of early withdrawals. In our interviews with retirement research experts, financial technology companies, participant advocacy organizations, and industry associations we asked about factors that led individuals to make early withdrawals from their retirement savings and any potential strategies that may reduce the incidence and amount of early withdrawals. In our interviews with plan administrators and retirement research experts, we also provided a supplementary table outlining 37 potential strategies to reduce early withdrawals from retirement savings. We asked interviewees to comment on the strengths and weaknesses of each strategy in terms of its potential to reduce early withdrawals, and gave them opportunity to provide other potential strategies not listed in the tables. We developed the list of strategies based on the results of our literature review. Some interviewees also provided us with additional data and documents to assist our research. For example, some companies and plan administrators we interviewed provided quantitative data on the number of plan participants, the average cashout or rollover amounts, the percentage of participants who took loans or hardship withdrawals from their retirement accounts, and known reasons for these withdrawals. Some research experts also provided us with documentation, including published articles and white papers that supplemented our interviews and literature review. All data collected through these methods are nongeneralizable and reflect the views and experiences of the respondents and not the entire population of their respective constituent groups. To answer our second and third objectives, we analyzed the content of our stakeholder interview responses and corroborated our analysis with information obtained from our literature review and quantitative information provided by our interviewees. To examine what is known about the factors leading individuals to access retirement savings early, we catalogued common factors that stakeholders identified as contributing to early withdrawals from retirement savings. We also collected information on plan rules governing early participant withdrawals of retirement savings. To identify potential strategies or policies that might reduce the incidence and amount of early withdrawals, we analyzed interview responses and catalogued (1) company practices that employers identified as having an effect in reducing early withdrawals and (2) strategies that stakeholders suggested that could achieve a similar outcome. GAO is not endorsing or recommending any strategy in this report, and has not evaluated these strategies for their behavioral or other effects on retirement savings or on tax revenues. Appendix II: Selected Provisions Related to Early Withdrawals from 401(k) Plans and Individual Retirement Accounts (IRAs) Requirements Provides an exception for distributions for qualified higher education expenses and for qualified “first-time” home purchases made before age 59½ from the additional 10 percent tax for early distributions Defines “qualified first-time homebuyer distribution” and “first-time homebuyer,” and prescribes the lifetime dollar limit on such distributions, among other things. Allows eligible individuals to make tax-deductible contributions to individual retirement accounts, subject to limits based, for example, on income and pension coverage. Provides for the loss of exemption for an IRA if the IRA owner engages in a prohibited transaction, which results in the IRA being treated as distributing all of its assets to the IRA owner at the fair market value on the first day of the year in which the transaction occurred. Defines a prohibited transaction to include the lending of money or other extension of credit between a plan and a disqualified person. Requirements Allows eligible individuals to make contributions to a Roth IRA that are not tax- deductible. Distributions from the account can generally be treated as a qualified distribution if a distribution is made on or after the Roth IRA owner reaches age 59½ and the distributions is made after the 5-taxable year period beginning when the account was initially opened. Defines a prohibited transaction to include the lending of money or other extension of credit between a plan and a disqualified person. Appendix III: Estimated Incidence of Certain Early Withdrawals of Retirement Savings 401(k) plans 401(k) plans ($1000 or more) 401(k) plans 401(k) plans ($1000 or more) 401(k) plans 401(k) plans ($1000 or more) Legend: * Sampling error was too large to report an estimate. In addition to the contact named above, Dave Lehrer (Assistant Director); Jonathan S. McMurray (Analyst-in-Charge); Gustavo O. Fernandez; Sean Miskell; Jeff Tessin; and Adam Wendel made key contributions to this report. James Bennett, Holly Dye, Sara Edmondson, Sarah Gilliland, Sheila R. McCoy, Ed Nannenhorn, Katya Rodriguez, MaryLynn Sergent, Linda Siegel, Rachel Stoiko, Frank Todisco, and Sonya Vartivarian also provided support. The Nation’s Fiscal Health: Action Is Needed to Address the Federal Government’s Future. GAO-18-299SP. Washington, D.C.: June 21, 2018. The Nation’s Retirement System: A Comprehensive Re-evaluation is Needed to Better Promote Future Retirement Security. GAO-18-111SP. Washington, D.C.: October 18, 2017. Retirement Security: Improved Guidance Could Help Account Owners Understand the Risks of Investing in Unconventional Assets. GAO-17-102. Washington, D.C.: December 8, 2016. 401K Plans: Effects of Eligibility and Vesting Policies on Workers’ Retirement Savings. GAO-17-69. Washington, D.C.: October 21, 2016. Retirement Security: Low Defined Contribution Savings May Pose Challenges. GAO-16-408. Washington, D.C.: May 5, 2016. Retirement Security: Shorter Life Expectancy Reduces Projected Lifetime Benefits for Lower Earners. GAO-16-354. Washington, D.C.: March 25, 2016. Social Security’s Future: Answers to Key Questions. GAO-16-75SP. Washington, D.C.: October 27, 2015. Retirement Security: Federal Action Could Help State Efforts to Expand Private Sector Coverage. GAO-15-556. Washington, D.C.: September 10, 2015. Highlights of a Forum: Financial Literacy: The Role of the Workplace. GAO-15-639SP. Washington, D.C.: July 7, 2015. 401(K) Plans: Greater Protections Needed for Forced Transfers and Inactive Accounts. GAO-15-73. Washington, D.C.: November 21, 2014. Older Americans: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Retirees. GAO-14-866T. Washington, D.C.: September 10, 2014. Financial Literacy: Overview of Federal Activities, Programs, and Challenges. GAO-14-556T. Washington, D.C.: April 30, 2014. Retirement Security: Trends in Marriage and Work Patterns May Increase Economic Vulnerability for Some Retirees. GAO-14-33. Washington, D.C.: January 15, 2014. 401(K) Plans: Labor and IRS Could Improve the Rollover Process for Participants. GAO-13-30. Washington, D.C.: March 7, 2013. Retirement Security: Women Still Face Challenges. GAO-12-699. Washington, D.C.: July 19, 2012. 401(K) Plans: Policy Changes Could Reduce the Long-term Effects of Leakage on Workers’ Retirement Savings. GAO-09-715. Washington, D.C: August 28, 2009.

 

 Report 2:
Historically located between empires, various Georgian kingdoms and principalities were incorporated into the Russian Empire beginning in the early 19 th century. Georgia enjoyed a brief period of independence from 1918 until its forcible incorporation into the Union of Soviet Socialist Republics (USSR, or Soviet Union) in 1921-1922. Georgia gained independence in 1991 with the collapse of the Soviet Union. Georgia is located in the South Caucasus, a region between the Black and Caspian Seas and separated from Russia by the Greater Caucasus mountain range. The South Caucasus also borders Iran and Turkey (see Figure 1 ). Georgia's South Caucasus neighbors, Armenia and Azerbaijan, have been locked in territorial conflict for almost three decades over the predominantly Armenian-populated region of Nagorno-Karabakh, formally part of Azerbaijan. Georgia has its own unresolved conflicts with two Russian-supported regions, Abkhazia and South Ossetia. These regions, in addition to being settled by ethnic Georgians, are home to ethnic groups that more closely identify with ethnic kin in Russia's North Caucasus, located across the Caucasus mountain range. After a short war with Georgia in 2008, Russia unilaterally recognized the independence of these breakaway regions and stationed military forces on their territory. Georgians speak and write their own distinct Caucasian language, with a written literary form that emerged at least as early as the fifth century. The Georgian Orthodox Church, to which most Georgians belong, is autocephalous (independent), with roots that date back to the fourth century. Today, many observers consider Georgia to be one of the most democratic states among the USSR's successor states. The U.S.-based nongovernmental organization (NGO) Freedom House considers Georgia to be the freest post-Soviet state (not including the Baltic states), followed by Ukraine, Moldova, and Armenia. Georgia has a parliamentary system of governance, resulting from constitutional reforms that came into effect in 2013 and 2018. The prime minister is the country's most powerful executive. Georgia's president is commander in chief of the armed forces and has the power to veto legislation and dissolve parliament under certain circumstances. Georgia's prime minister, Mamuka Bakhtadze (aged 36), assumed office in June 2018. Bakhtadze was Georgia's minister of finance from November 2017 to June 2018; he previously served as the head of Georgian Railways and the Georgian International Energy Corporation. Georgia's president, elected in November 2018, is Salome Zurabishvili (aged 67), a former member of parliament (2016-2018) and minister of foreign affairs (2004-2005) who was previously a French national and diplomat. The parliamentary chairman is Irakli Kobakhidze (aged 40), a former professor of law and politics. Georgia has a unicameral legislature with 150 members elected for four-year terms by two methods: 77 by party list and 73 by majoritarian district. The most recent parliamentary elections in 2016 resulted in a sizeable win for Georgia's center-left ruling party, Georgian Dream-Democratic Georgia (GD), which initially led a ruling coalition after coming to power in 2012 and now governs alone. GD won 49% of the party list vote and nearly all majoritarian races, leading to control of more than 75% of parliamentary seats (116 of 150 deputies). Before losing this supermajority in February 2019 (see " Ruling Party Tensions " below), GD had enough votes to unilaterally enact changes to Georgia's constitution. This led many observers and opposition supporters to express concern that there were insufficient checks and balances against the ruling party. GD's main competitor in 2016 was the center-right United National Movement (UNM), the former ruling party previously led by ex-president Mikheil Saakashvili. The UNM received 27% of the party vote and 27 seats (18%). After months of infighting, the UNM fragmented in 2017, and most of its deputies, including much of the party's senior leadership, formed a new opposition party called European Georgia-Movement for Liberty. A third electoral bloc, the nationalist-conservative Alliance of Patriots of Georgia-United Opposition, cleared the 5% threshold to enter parliament with six seats. Georgia's most recent local elections were in 2017. They provided a similar picture of ruling party dominance across the country. In the party-list portion of the vote to local councils, GD won in all 73 districts, with a total of 56% of the vote. The UNM and European Georgia won 27% of the vote (17% and 10%, respectively). The nationalist-conservative Alliance of Patriots won 7%. GD won more than 92% of majoritarian seats, giving it a total of 77% of seats in local councils nationwide. GD also won mayoral elections in all but two districts. The most recent presidential elections were held in two rounds in October and November 2018. The victor, Salome Zurabishvili, won 60% of the vote in the second round. Zurabishvili ran as an independent candidate, although she was supported by GD. UNM candidate Grigol Vashadze, like Zurabishvili an ex-foreign minister, received 40%. The first round of the election was a closer race (39% to 38%), but Zurabishvili appeared to benefit from greater turnout in the runoff (56%, compared to 46% in the first round). Domestic and international observers considered the election to be competitive but flawed. Observers noted instances of official pressure against state employees to support Zurabishvili, as well as incidents of ballot box stuffing. They also expressed concern about allegations of mass vote-buying, related to Prime Minister Bakhtadze's pre-runoff announcement that a philanthropic foundation associated with GD founder and chairman Bidzina Ivanishvili had agreed to purchase and forgive the small private debts of more than 600,000 individuals. The U.S. Department of State said it shared the concerns of observers and indicated "these actions are not consistent with Georgia's commitment to fully fair and transparent elections." Since 2018, GD has exhibited signs of internal tension. Many observers believe that GD founder Ivanishvili continued to maintain an influential behind-the-scenes role in government after stepping down as prime minister in 2013. Ivanishvili formally returned to politics as GD's party chairman in 2018, reportedly due to frustration with the party's growing internal divides. Then-Prime Minister Giorgi Kvirikashvili resigned less than two months later, citing "disagreements" with Ivanishvili. Kvirikashvili's resignation also followed a series of anti-government demonstrations against what protestors perceived to be heavy-handed police raids and judicial bias. Prime Minister Bakhtadze succeeded Kvirikashvili in June 2018. More recently, GD suffered parliamentary defections in February 2019, as a result of a dispute concerning judicial appointments (see " Dispute over Judicial Reforms " below). By the end of March 2019, eight members of parliament, led by Eka Beselia, former chairwoman of the parliamentary committee on legal affairs, had left GD. Beselia and most of the defecting MPs were expected to establish a new faction, while two MPs joined the Patriots of Georgia faction. The GD government also has had tense relations with the presidency. Ex-President Giorgi Margvelashvili, who was elected in 2013, initially was allied to GD. He subsequently adopted a more independent stance and fell out of favor with then-Prime Minister Ivanishvili. Margvelashvili frequently criticized the government and vetoed legislation several times, although parliament usually overrode his veto. Margvelashvili chose not to run for reelection in 2018. For the 2018 election, GD did not nominate its own presidential candidate. This possibly reflected a belief within the party leadership that the powers of the presidency were too limited to warrant fielding a candidate for the position. After some deliberation, however, GD decided to support Zurabishvili, an independent candidate. Before making this decision, government officials had criticized Zurabishvili for comments she made on the 10 th anniversary of the August 2008 war that appeared to blame Georgia's ex-leadership for the war. One of the government's internal disputes concerns judicial reform. A series of reforms from 2013 to 2017 restructured Georgia's judicial institutions. A High Council of Justice oversees the appointment and dismissal of judges. The council has 15 members, a majority of whom are selected by the Conference of Judges, the judiciary's self-governing body. In December 2018, several GD members of parliament criticized the High Council's decision to nominate several judges to Georgia's 28-seat Supreme Court whom they considered tainted by association with the UNM. The dispute sparked an intensive debate within the ruling party, as well as with some NGOs who sided with the dissenting GD members out of a concern that the nominated judges could be susceptible to corruption. Ultimately, the Supreme Court nominees withdrew their candidacies. GD's leadership agreed to further debate the rules of appointment and blamed the dispute on the opposition. Appointments to a nine-member Constitutional Court are divided between the parliament, president, and the Supreme Court. In recent years, the Constitutional Court has been the focus of various disputes concerning possible bias (sometimes against the government, other times against the opposition). In July 2018, the Constitutional Court received international attention for ruling that marijuana use was not a criminal offense, a decision government officials and church representatives heavily criticized. In response, parliament passed legislation imposing strict limitations on marijuana use. After GD won a supermajority in 2016, Georgia's parliament convened a State Constitutional Commission to draft additional reforms to the constitution intended to consolidate Georgia's transition to a parliamentary system of governance. Parliament passed the reforms in September 2017 by a vote of 117-2. Opposition parties, who opposed certain measures that appeared to strengthen the ruling party, refused to participate in the vote; civil society organizations also registered opposition. Then-President Margvelashvili vetoed the amendments and proposed alternative reforms. Parliament overrode his veto, and the president signed the amendments into law. The constitutional reforms entered into force after the 2018 presidential election. The reforms affect Georgia's parliamentary system in several ways. One of the main changes is the abolition of Georgia's directly elected presidency beginning in 2023. Instead, the president is to be indirectly elected by a college of electors made up of parliamentary deputies and local government representatives. Another major change is that parliamentary elections are to be held entirely on the basis of party lists, eliminating single-member districts. In theory, this change is expected to lead to greater opposition representation in parliament, as in Georgia parties that win the party-list vote tend to overwhelmingly win single-member districts. Although this change was to take effect in 2020, parliament voted to push back its implementation to 2024, a move many observers interpreted as an attempt to prolong the ruling party's dominance. In January 2019, several opposition parties launched a petition to pressure the government to implement the shift to a fully proportional system in advance of the 2020 parliamentary elections. In the course of adopting constitutional reforms, parliament considered several recommendations of the Council of Europe's Venice Commission, a legal and democratic advisory body. In the end, the commission provided a "positive assessment" of the reforms, although it noted "the postponement of the entry into force of the proportional election system to October 2024 is highly regrettable and a major obstacle to reaching consensus." The Venice Commission said the reform "completes the evolution of Georgia's political system towards a parliamentary system and constitutes a positive step towards the consolidation and improvement of the country's constitutional order, based on the principles of democracy, the rule of law and the protection of fundamental rights." For more than two decades, Georgia has been recovering from the severe economic decline it experienced after the Soviet Union collapsed. It remains a relatively poor country. In 2018, Georgia's GDP was around $16.7 billion (approximately 16 times less than that of Connecticut, a U.S. state with a similar population size). Its per capita GDP ($4,506) is midsized in comparison to Russia and other post-Soviet states. In 2017-2018, Georgia's economy appeared to enter a period of relatively strong growth. After average GDP growth of around 3% a year from 2013 to 2016, Georgia's GDP grew at 4.8% a year in 2017 and 2018. Increased economic growth has been based on strengthening domestic consumption and external demand, as well as "generally strong policy efforts," according to the International Monetary Fund (IMF). The IMF forecasts a sustained rate of GDP growth of around 4.9% annually from 2019 to 2021. In February 2019, the IMF commended Georgian authorities "for advancing structural reforms [but] stressed the need for continued efforts to promote inclusive growth and higher economic resilience to external shocks." Poverty has declined in recent years, although it is still relatively high. According to official data, 22% of the population lived in poverty in 2017 (down from 39% a decade before). In recent years, recorded unemployment has been around 14%; some surveys suggest a higher rate of unemployment. More than 40% of Georgian laborers work in agriculture, a sector of the economy that accounts for less than 10% of GDP. Georgia's economy depends in part on remittances from labor migration. From 2013 to 2017, remittances made up around 11% of Georgia's GDP. In 2017, Russia was estimated to be the source of almost 60% of Georgian remittances, followed by Ukraine (8%), Greece (5%), and Armenia (4%). In 2017, the IMF approved a three-year Extended Fund Facility arrangement to provide Georgia with around $285 million in loans to support economic reforms focusing, among other things, on financial stability and infrastructure investment. The IMF noted the need for Georgia to increase its agricultural productivity, improve its business environment, and reform its education system. Georgia has suffered in the past from energy shortages and gas cutoffs, but it has improved its energy security in recent years. Georgia has rehabilitated hydropower plants and constructed new ones. Nearly all its natural gas supplies come from neighboring Azerbaijan. In 2018, Georgia's three largest merchandise trading partners were Turkey ($1.7 billion, or 14% of Georgia's trade), Russia ($1.4 billion, 11%), Azerbaijan ($1.1 billion, 9%), and China ($1.0 billion, 8%). Trade with the European Union (EU), as a whole Georgia's largest trading partner, made up around 27% of total trade ($3.4 billion). More than half of Georgia's merchandise exports (51%) went to five countries: Azerbaijan, Russia, Armenia, Bulgaria, and Turkey. Its main exports were copper ores, beverages (wine, water, and spirits), motor vehicles, and iron and steel. Free trade agreements with the EU (signed in 2014) and China (signed in 2017) may improve Georgia's prospects for export-led growth. Georgia is also exploring a trade agreement with India. However, Georgia's manufacturing sector is small, and its top exports include used foreign cars and scrap metal, which provide low added value. The IMF indicates that Georgia could further diversify its agricultural exports but notes the need to improve quality and standards. Tourism to Georgia has increased in recent years and annual tourism-related income has more than quadrupled since 2010. In 2018, the number of international visitors who stayed in the country overnight was around 4.8 million, a 345% increase since 2010. Most tourists are from neighboring countries: Russia, Azerbaijan, Turkey, and Armenia. In recent years, foreign direct investment (FDI) appears to have exceeded the high levels Georgia enjoyed in 2006 to 2008, before the global financial crisis, when FDI averaged $1.5 billion a year. From 2014 to 2018, FDI averaged $1.64 billion a year. More than 60% of the total amount came from Azerbaijan, the Netherlands, the United Kingdom, and Turkey. During this period, most FDI was in transport and communications (28%); other leading sectors were finance (13%), construction (13%), and energy (10%). In 2017, the IMF noted that attracting FDI to sectors with high export potential, including tourism and agriculture, is "crucial to ensure growth in foreign markets." Georgia aspires to be a key transit hub for the growing East-West overland trade route between China and Europe. In pursuit of this goal, a U.S.-Georgian consortium is constructing a major new deepwater port and free industrial zone in Anaklia, which is located on Georgia's Black Sea coast and abuts the Russian-occupied region of Abkhazia. The port, scheduled to begin operations in 2021, is considered Georgia's largest-ever infrastructure investment and is to be accompanied by major government investments in Georgia's road and rail infrastructure. The Georgian government has long made closer integration with the EU and NATO a priority. According to recent polls, over 80% of the Georgian population supports membership in the EU and over 75% supports membership in NATO. In 2014, Georgia concluded an association agreement with the EU that included a Deep and Comprehensive Free Trade Area (DCFTA) and encouraged harmonization with EU laws and regulations. The EU granted Georgia visa-free travel in 2017. The EU also is a major provider of foreign aid to Georgia, providing on average over €120 million (around $135 million) a year in 2017 and 2018. As of 2018, the benefits of the EU free-trade agreement for Georgia remain unclear. In 2018, the total value of Georgian exports to the EU was 17% greater than in 2014. Exports to the EU as a share of Georgia's total exports, however, were the same in 2018 as they were in 2014 (22%). The EU asserts that Georgia is "reaping the benefits of economic integration" with the EU but notes that "further efforts are needed to stimulate exports and improve the trade balance." Georgia has close relations with NATO, which considers Georgia one of its "closest operational partners." A NATO-Georgia Commission, established in 2008, provides the framework for cooperation. At its 2014 Wales Summit, NATO leaders established a "Substantial NATO-Georgia Package" to help Georgia bolster its defense capabilities, including capacity-building, training, exercises, and enhanced interoperability. In 2015, Georgia joined the NATO Response Force, a rapid reaction force. Georgia is one of the top troop contributors (and the top non-NATO contributor) in the NATO-led Resolute Support Mission in Afghanistan. At its height, Georgia's deployment to NATO's previous International Security Assistance Force (ISAF) reached over 1,500 troops, who served with no operational caveats. As of December 2018, Georgia is the fifth-largest contributor to the Resolute Support Mission, with 870 troops. Georgia also contributed more than 2,250 troops to the NATO-led Kosovo Force, or KFOR, between 1999 and 2008. In 2015, NATO opened a Joint Training and Evaluation Center in Georgia to provide training, evaluation, and certification opportunities to enhance interoperability and operational readiness. The center hosted its second joint NATO-Georgia exercise in March 2019 (the first one was held in 2016). Some NATO member states also participate in two sets of annual U.S.-Georgia military exercises: Agile Spirit and Noble Partner (see " Security Assistance Since the August 2008 War ," below). NATO also has established a Defense Institution Building School for professional development and training. Many observers consider that closer integration with the EU and NATO has not enabled Georgia to improve its near-term prospects for membership in these organizations. The EU is unlikely to consider Georgia a candidate for membership soon, given the EU's internal challenges and a lack of support for enlargement among many members. In 2008, NATO members agreed that Georgia and Ukraine would become members of NATO, but Georgia has not been granted a NATO Membership Action Plan (MAP) or other clear path to membership. Many observers attribute Georgia's lack of a clear path to NATO membership to some members' concerns that Georgia's membership could lead to a heightened risk of war with Russia, which currently occupies around 18% of Georgia's territory. Many believe that NATO will not move forward with membership as long as Russia occupies Georgian territory and the conflict remains unresolved. Georgia's secessionist regions of Abkhazia and South Ossetia broke away from Georgia in the early 1990s, during and after Georgia's pursuit of independence from the USSR. Since then, Georgia's relations with Russia have been difficult, as Tbilisi has blamed Moscow for obstructing Georgia's Western leanings. Many observers believe that Moscow supports Abkhazia and South Ossetia to prevent Georgia from joining NATO. Georgia's relations with Russia worsened after ex-President Saakashvili came to power in 2003 and sought to accelerate Georgia's integration with the West. After clashes increased between Georgian and secessionist forces, Russia invaded Georgia in August 2008 to prevent Georgia from reestablishing control over South Ossetia. Russia subsequently recognized Abkhazia and South Ossetia as independent states. Over the last decade, Russia has tightened control over Abkhazia and South Ossetia. It has constructed border fencing and imposed transit restrictions across the administrative boundary lines dividing the two regions from the rest of Georgia. Russia has established military bases that reportedly house around 3,500 personnel each, and it also stations border guards in the two regions. In 2016, Russia finalized an agreement with the de facto authorities of Abkhazia, establishing a combined group of military forces. In 2017, Russia concluded an agreement with South Ossetia to integrate the breakaway region's military forces with its own. Since coming to power in 2012, the GD government has sought to improve relations with Russia, particularly economic ties. In 2013, Moscow lifted an embargo on popular Georgian exports (including wine and mineral water) that had been in place since 2006. As a result, Russia again became one of Georgia's main trading partners. The share of Georgia's merchandise exports to Russia as a percentage of its total exports rose from 2% in 2012 to 13% in 2018. Improved economic relations with Russia have not led to progress in resolving the conflicts over Abkhazia and South Ossetia. The EU leads an unarmed civilian Monitoring Mission in Georgia (EUMM) that monitors compliance with the cease-fire agreements that ended the August 2008 war. Although the EUMM's mandate covers all of Georgia, local and Russian authorities do not permit it to operate in Abkhazia and South Ossetia; EUMM representatives have been allowed to cross the boundary line on a few occasions to address specific issues. All parties to the conflict, together with the United States, the EU, the United Nations (U.N.), and the Organization for Security and Cooperation in Europe (OSCE), participate in the Geneva International Discussions, convened quarterly to address issues related to the conflict. They also participate in joint Incident Prevention and Response Mechanisms (IPRM), together with the U.N. and OSCE, designed to address local security issues and build confidence. Abkhaz and South Ossetian representatives periodically have suspended their participation in the IPRM, however; the IPRM for Abkhazia did not convene at all from 2012 to 2016. In general, efforts to rebuild ties across conflict lines or return internally displaced persons have made little progress. In 2018, the Georgian government unveiled a peace initiative and enacted related legislative amendments to facilitate greater engagement with Abkhazia and South Ossetia in trade and educational affairs. The United States and the EU have expressed support for this initiative. Whether Russia and the two regions will accept any of the initiative's elements remains to be seen. Improved relations with Russia do not appear to have led to greater public support in Georgia for closer integration with Russia. Several overtly pro-Russian parties performed poorly in the 2016 parliamentary elections. One electoral bloc critical of Georgia's European integration, the nationalist-conservative Alliance of Patriots, cleared the 5% threshold to enter parliament, but even this bloc's leadership did not campaign for membership in the Russia-led Eurasian Union. In a 2018 survey, less than 30% of respondents expressed support for joining the Eurasian Union. Georgia is one of the United States' closest partners among the post-Soviet states. With a history of strong economic aid and security cooperation, the United States and Georgia have deepened their strategic partnership since Russia's 2008 invasion of Georgia and 2014 invasion of Ukraine. A U.S.-Georgia Charter on Strategic Partnership, signed in 2009, provides the framework for much of the two countries' bilateral engagement. A Strategic Partnership Commission convenes annual plenary sessions and working groups to address political, economic, security, and people-to-people issues. Before the 2008 war, the United States supported granting Georgia a NATO Membership Action Plan and backed NATO's April 2008 pledge that Georgia eventually would become a member of NATO. In August 2017, U.S. Vice President Michael Pence said in Tbilisi that the Trump Administration "stand[s] by the 2008 NATO Bucharest statement, which made it clear that Georgia will one day become a member of NATO." At a press conference after the July 2018 NATO summit in Brussels, President Trump said that "at a certain point [Georgia will] have a chance" to join NATO, if "not right now." U.S. policy expressly supports Georgia's sovereignty and territorial integrity. In a visit to Tbilisi in August 2017, Vice President Michael Pence said the United States "strongly condemns Russia's occupation on Georgia's soil." In January 2018, the State Department indicated that "the United States' position on Abkhazia and South Ossetia is unwavering: The United States fully supports Georgia's territorial integrity within its internationally recognized borders." The United States supports a resolution to the conflict within these parameters. The United States calls on Russia to comply with the terms of the 2008 cease-fire agreement, including withdrawal of its forces to prewar positions, and to reverse its recognition of Abkhazia and South Ossetia as independent states. The U.S. government has expressed support for Georgia's "commitment to dialogue and a peaceful resolution to the conflict," and in 2018 the State Department welcomed the new peace initiative that the government of Georgia unveiled. The State Department regularly participates in the Geneva International Discussions. Congress also has expressed firm support for Georgia's sovereignty and territorial integrity. The Countering Russian Influence in Europe and Eurasia Act of 2017 ( P.L. 115-44 , Title II, §253) states that the United States "supports the policy known as the 'Stimson Doctrine' and thus does not recognize territorial changes effected by force, including the illegal invasions and occupations" of Abkhazia and South Ossetia, and other territories occupied by Russia. As with previous appropriations, FY2019 foreign operations appropriations prohibit foreign assistance to governments that recognize Abkhazia or South Ossetia and restrict funds from supporting Russia's occupation of Abkhazia and South Ossetia ( P.L. 116-6 , §7047(c)). The 2014 Ukraine Freedom Support Act ( P.L. 113-272 ) provides for sanctions against Russian entities that transfer weapons to Georgian territory. In February 2019, the Georgia Support Act ( H.R. 598 ) was reintroduced in the House. The act originally passed the House by unanimous consent in December 2018, during the 115 th Congress. The act would express support for Georgia's sovereignty, independence, and territorial integrity, as well as for its democratic development, Euro-Atlantic and European integration, and peaceful conflict resolution. The act would require the Secretary of State to submit to Congress reports on U.S. security assistance to Georgia, U.S.-Georgia cybersecurity cooperation, and a strategy to enhance Georgia's capabilities to combat Russian disinformation and propaganda. The act also would require the President to impose sanctions on those responsible for serious human rights abuses in Abkhazia and South Ossetia. Many Members of Congress have expressed their support for Georgia in House and Senate resolutions. In September 2016, during the 114 th Congress, the House of Representatives passed H.Res. 660, which expressed support for Georgia's territorial integrity, in a 410-6 vote. The resolution condemned Russia's military intervention and occupation, called upon Russia to withdraw its recognition of Abkhazia and South Ossetia as independent states, and urged the U.S. government to declare unequivocally that the United States will not recognize Russia's de jure or de facto sovereignty over any part of Georgia under any circumstances. In January 2019, a resolution (H.Res. 93) was reintroduced in the House supporting Georgia's territorial integrity and condemning a decision by the Syrian government to recognize Abkhazia and South Ossetia as independent states. The Senate and House have passed other resolutions in support of Georgian sovereignty and territorial integrity: in 2011-2012 ( S.Res. 175 , H.Res. 526), in September 2008 ( S.Res. 690 ), and, before the conflict, in May-June 2008 (H.Res. 1166, S.Res. 550 ) and December 2007 ( S.Res. 391 ). Georgia has long been a leading recipient of U.S. foreign and military aid in Europe and Eurasia. In the 1990s (FY1992-FY2000), the U.S. government provided over $860 million in total aid to Georgia ($96 million a year on average). In the later part of the decade, the United States began to provide Georgia with increased amounts of aid to improve border and maritime security and to combat transnational crime, including through the development of Georgia's Coast Guard. In the 2000s, Georgia became the largest per capita recipient of U.S. aid in Europe and Eurasia. From FY2001 to FY2007, total aid to Georgia amounted to over $945 million ($135 million a year, on average). In 2005, Georgia also was awarded an initial five-year (2006-2011) $295 million grant from the U.S. Millennium Challenge Corporation (MCC) for road, pipeline, and municipal infrastructure rehabilitation, as well as for agribusiness development. The United States gave increased amounts of military aid to Georgia after the terrorist attacks of September 11, 2001. At the time, the George W. Bush Administration considered Georgia part of a "second stage" in the "war on terror," together with Yemen and the Philippines, and supported Georgia with a two-year Train and Equip Program. This program was followed by a Sustainment and Stability Operations Program through 2007 that supported a Georgian troop deployment to Operation Iraqi Freedom. After Russia invaded Georgia in August 2008, the United States substantially increased its assistance to Georgia. The U.S. government immediately provided over $38 million in humanitarian aid and emergency relief, using U.S. aircraft and naval and coast guard ships. In September 2008, then-Secretary of State Condoleezza Rice announced a total aid package worth at least $1 billion. Total U.S. assistance to Georgia for FY2008-FY2009 amounted to $1.04 billion, which included $250 million in direct budgetary support and an additional $100 million in MCC funds (taking the total amount of Georgia's initial MCC grant to $395 million). Since the 2008 war, Georgia has continued to be a major recipient of U.S. foreign aid in the Europe and Eurasia region. Nonmilitary aid totaled $60 million a year on average from FY2010 to FY2017. In addition, Georgia was awarded a second five-year (2014-2019) MCC grant of $140 million to support educational infrastructure and training, and to improve the study of science and technology. In FY2018, U.S. nonmilitary aid to Georgia totaled $70.8 million. For FY2019, Congress appropriated $89.8 million in nonmilitary aid. The president's FY2020 nonmilitary aid request for Georgia is $42.4 million. After the 2008 war, Georgia continued to receive U.S. military assistance, including around $144 million in postwar security and stabilization assistance in FY2008-FY2009. Since FY2010, Georgia has received further military assistance, primarily through Foreign Military Financing (FMF) aid, Coalition Support Funds, and Train and Equip and other capacity-building programs. These funds have been used to support Georgia's deployments to Afghanistan in ISAF and the follow-on Resolute Support Mission, as well as for Georgian border security, counterterrorism, and defense readiness. U.S. military assistance to Georgia in FY2010-FY2017 is estimated to have been around $74 million a year on average. For FY2018, military aid to Georgia is estimated to have totaled $40.4 million. This includes $35 million in FMF assistance, $2 million in International Military Education and Training (IMET), and $3.4 million for counter-weapons of mass destruction (WMD) capacity-building assistance. For FY2019, Congress again appropriated $35 million in FMF and $2 million in IMET funds. Additional defense funding includes $4.3 million in maritime capacity-building assistance and $2.5 million in counter-WMD capacity-building assistance. Outside of Afghanistan, the United States has gradually deepened its postwar defense cooperation with Georgia. The Obama Administration refrained from approving defensive (anti-tank and antiaircraft) arms sales to Georgia. Observers considered various reasons for this hesitation, including doubts regarding the deterrent effect of such weapons, concerns about encouraging potential Georgian offensives to retake territory, and a desire to avoid worsening relations with Russia as the Administration embarked on a new "reset" policy with Moscow. In testimony to the Senate Foreign Relations Committee a year after Russia's invasion, then-Assistant Secretary of Defense Alexander Vershbow characterized U.S. defense cooperation with Georgia as "a methodical, yet patient, strategic approach … [focused] on building defense institutions, assisting defense sector reform, and building the strategic and educational foundations" for training and reform. He said the United States was "carefully examining each step [of its military assistance program] to ensure it would not be counterproductive to our goals of promoting peace and stability in the region." U.S.-Georgia defense cooperation deepened over time. In a 2012 visit to Georgia, then-Secretary of State Hillary Clinton said that increased cooperation would help improve Georgia's self-defense capabilities, promote defense reform and modernization, and provide training and equipment to support Georgia's ISAF deployment and NATO interoperability. U.S.-Georgia security cooperation expanded further in 2016. In July 2016, then-U.S. Secretary of State John Kerry and then-Georgian Prime Minister Giorgi Kvirikashvili signed a Memorandum on Deepening the Defense and Security Relationship between the United States and Georgia. In December 2016, the two countries concluded a three-year framework agreement on security cooperation that would focus on "improving Georgia's defense capabilities, establishing [an] effective and sustainable system of defense, enhancing interoperability of the Georgian Armed Forces with NATO, and ensuring effective military management." The framework agreement led to the launching in February 2017 of a three-year, $35 million training initiative, the Georgia Defense Readiness Program. This initiative seeks to build the capacity of Georgia's armed forces "to generate, train and sustain forces in preparation for all national missions." Unlike the Obama Administration, the Trump Administration approved the provision of major defensive lethal weaponry to Georgia. In November 2017, the U.S. State Department approved a Foreign Military Sale of over 400 Javelin portable anti-tank missiles, as well as launchers, associated equipment, and training, at a total estimated cost of $75 million. The Georgian Ministry of Defense confirmed that the "first stage" of two sales was complete as of January 2018. In June 2018, then-U.S. Assistant Secretary of State for European and Eurasian Affairs Wess Mitchell said the United States seeks to "check Russian aggression," including by "building up the means of self-defense for those states most directly threatened by Russia militarily: Ukraine and Georgia." The United States and Georgia have held annual joint military exercises in Georgia since 2011. Initial exercises, dubbed Agile Spirit, began as a counterinsurgency and peacekeeping operations training exercise and shifted to a "conventional warfare focus" in 2015, the year after Russia's invasion of Ukraine. That year, Agile Spirit began to include other NATO partners. A second bilateral exercise, Noble Partner, was launched in 2015; the Department of Defense characterized it as the "most robust" U.S.-Georgia exercise ever, designed to support Georgia's integration into the NATO Response Force. In 2018, the United States was Georgia's seventh-largest source of merchandise imports and eighth-largest destination for exports. The value of Georgia's merchandise imports from the United States—mainly vehicles, industrial machinery, and meat—was $360 million in 2018. The value of merchandise exports to the United States—mainly iron and steel and inorganic chemicals—was $160 million in 2018. Since 2012, the United States and Georgia periodically have discussed the possibility of a free-trade agreement. The two countries have signed a bilateral investment treaty and a Trade and Investment Framework Agreement. They also have established a High-Level Dialogue on Trade and Investment. During Vice President Michael Pence's August 2017 visit to Georgia, he expressed the United States' "keen interest in expanding our trade and investment relationship with Georgia."

Question: Write a one-page summary of the report 1.

Answer: Federal law encourages individuals to save for retirement through tax incentives for 401(k) plans and IRAs—the predominant forms of retirement savings in the United States. In 2017, U.S. plans and IRAs reportedly held investments worth nearly $17 trillion dollars. Federal law also allows individuals to withdraw assets from these accounts under certain circumstances. DOL and IRS oversee 401(k) plans, and collect annual plan data—including financial information—on the Form 5500. For both IRAs and 401(k) plans, GAO was asked to examine: (1) the incidence and amount of early withdrawals; (2) factors that might lead individuals to access retirement savings early; and (3) policies and strategies that might reduce the incidence and amounts of early withdrawals. To answer these questions, GAO analyzed data from IRS, the Census Bureau, and DOL from 2013 (the most recent complete data available); and interviewed a diverse range of stakeholders identified in the literature, including representatives of companies sponsoring 401(k) plans, plan administrators, subject matter experts, industry representatives, and participant advocates. In 2013 individuals in their prime working years (ages 25 to 55) removed at least $69 billion (+/- $3.5 billion) of their retirement savings early, according to GAO's analysis of 2013 Internal Revenue Service (IRS) and Department of Labor (DOL) data. Withdrawals from individual retirement accounts (IRA)—$39.5 billion (+/- $2.1 billion)—accounted for much of the money removed early, were equivalent to 3 percent (+/- 0.15 percent) of the age group's total IRA assets, and exceeded their IRA contributions in 2013. Participants in employer-sponsored plans, like 401(k) plans, withdrew at least $29.2 billion (+/- $2.8 billion) early as hardship withdrawals, lump sum payments made at job separation (known as cashouts), and loan balances that borrowers did not repay. Hardship withdrawals in 2013 were equivalent to about 0.5 percent (+/-0.06 percent) of the age group's total plan assets and about 8 percent (+/- 0.9 percent) of their contributions. However, the incidence and amount of certain unrepaid plan loans cannot be determined because the Form 5500—the federal government's primary source of information on employee benefit plans—does not capture these data. Stakeholders GAO interviewed identified flexibilities in plan rules and individuals' pressing financial needs, such as out-of-pocket medical costs, as factors affecting early withdrawals of retirement savings. Stakeholders said that certain plan rules, such as setting high minimum loan thresholds, may cause individuals to take out more of their savings than they need. Stakeholders also identified several elements of the job separation process affecting early withdrawals, such as difficulties transferring account balances to a new plan and plans requiring the immediate repayment of outstanding loans, as relevant factors. Stakeholders GAO interviewed suggested strategies they believed could balance early access to accounts with the need to build long-term retirement savings. For example, plan sponsors said allowing individuals to continue to repay plan loans after job separation, restricting participant access to plan sponsor contributions, allowing partial distributions at job separation, and building emergency savings features into plan designs, could help preserve retirement savings (see figure). However, they noted, each strategy involves tradeoffs, and the strategies' broader implications require further study. GAO recommends that, as part of revising the Form 5500, DOL and IRS require plan sponsors to report the incidence and amount of all 401(k) plan loans that are not repaid. DOL and IRS neither agreed nor disagreed with our recommendation.