# Recent Reports

Reports News from the GAO

- 401(k) Plans: Additional Federal Actions Would Help Participants Track and Consolidate Their Retirement Savings What GAO FoundThe CARES Act temporarily expanded access to 401(k) retirement savings for plan participants who were impacted by the COVID-19 pandemic. GAO surveyed 14 selected companies that manage participant account data and transactions for 401(k) plans. GAO found that less than one-third of the plans covered by the surveyed companies offered the CARES Act options. Industry stakeholders GAO interviewed said larger plans and plans in industries subject to furloughs at the beginning of the pandemic, such as airlines and hospitality, were more likely to offer the CARES Act options to participants. The CARES Act options generally allowed participants to access their 401(k) plan savings in two ways in 2020:Participants younger than 591⁄2 could withdraw up to $100,000 from their plan savings without facing an additional 10 percent tax for early withdrawals; they could also choose to repay the amount within 3 years.	Between March 27 and September 22, participants could borrow up to $100,000 from their savings as a loan and delay some payments a year.The 401(k) plans covered by the 14 companies GAO surveyed represented about 64 percent of all active 401(k) participants. Of those represented participants, GAO found that about 80 percent of them had access to the CARES Act options through their plan. Of these participants with access, 6 percent took a Coronavirus-Related Distribution and less than 1 percent took a CARES Act loan. Based on GAO's survey, the amounts of withdrawals and loans were higher during the pandemic in 2020 as compared with 2019 (see table). Industry stakeholders pointed out that workers with the greatest need for emergency funds during the pandemic in 2020—such as lower and middle-income workers—likely did not have a 401(k) plan and, thus, could not take advantage of the CARES Act options.Comparison of Average and Median Hardship Withdrawals and Plan Loans in 2019 with CARES Act Options in 2020			&nbsp;									2019 Hardship Withdrawals									2020 Coronavirus-Related Distributions									2019 Plan Loans									2020 CARES Act Loans								Average Amount									$6,913									$18,344									$9,564									$33,793								Median Amount									$3,144									$9,000									$5,097									$11,998					Source: GAO survey of 14 selected 401(k) plan record keepers. | GAO-24-103577GAO also examined how six selected countries—Australia, Belgium, Denmark, the Netherlands, Norway, and Sweden—help retirement plan participants manage their savings. GAO found that all six countries use pension dashboards and other approaches to help plan participants track, manage, and consolidate their plan savings and reduce fees. For example, all six countries established a centralized pension dashboard that allows participants to view their retirement savings securely online and at no charge. According to experts from the countries, the dashboards help participants keep track of their various workplace retirement accounts as they change jobs.Pension Dashboards Allow Participants to Track Their Plan Savings in One Place To increase the likelihood that participants' savings will be consolidated after a job change, three of the six selected countries allow automatic savings transfers, according to experts GAO interviewed. For example, Australia, Norway, and the Netherlands allow a participant's inactive retirement plan savings from older workplace plans, to be transferred to the participant's current, active plan without the participant's consent. In Australia, plan providers must transfer savings from small inactive accounts to a government agency. The agency then holds the savings until the participant claims them, the agency transfers them to an active account, or the participant is eligible to receive the savings. Australian officials said close to 4.7 million accounts valued at $7.11 billion AUD (about $4.61 billion USD) have been reunited with participants between late 2019 and the end of 2022, helping them consolidate savings into their active accounts.In the U.S., 401(k) participants face challenges tracking and consolidating their accounts. However, federal action could mitigate these challenges. Federal data show that more than 92 million Americans participate in and have saved more than $7 trillion in 401(k) plans. Yet, GAO's nationally-representative survey of 401(k) participants found that participants continue to encounter challenges in managing and tracking their accounts as they move from one job to another. According to GAO's survey, two-thirds of 401(k) participants would find a comprehensive pension dashboard, where they can see all of their current and old plan savings in one place, to be a useful resource. However, no federal agency has statutory authority to establish a pension dashboard.GAO's survey also found that 401(k) participants who recently completed a plan-to-plan rollover faced challenges understanding and complying with their plans' requirements. For example, 25 percent of participants indicated that there were too many steps to follow in the process and 22 percent said they were unclear about questions or information in the rollover form. Allowing plans to automatically roll over participants' savings to their new plan after they change jobs can be beneficial for participants—particularly those unengaged with their plan—because they can benefit from account consolidation without navigating a challenging manual process. However, no federal agency has the statutory authority to establish a system to facilitate automatic plan-to-plan rollovers.Why GAO Did This StudyInvesting in employer-sponsored 401(k) plans has become the most common way for American workers to save for retirement. But plan participants can face challenges when they change jobs and with tracking their accounts. 401(k) savings can sometimes be accessed in emergencies. The CARES Act created additional options for participants to temporarily access their plan savings.GAO was asked to review access to 401(k) plan savings during the pandemic in 2020 and challenges participants have rolling over their retirement savings from one plan to another, both abroad and in the U.S. This report examines: (1) access to and use of the CARES Act 401(k) plan options; (2) approaches other countries use to help workers track, manage, and consolidate their plan savings; and (3) challenges with 401(k) plan-to-plan rollovers and federal actions that can improve the process.GAO's review included a non-representative survey of 401(k) companies and interviews with stakeholders representing different roles in the retirement industry about the CARES Act access options; interviews with experts from six selected countries that have: (1) a pension dashboard, (2) portable workplace retirement savings, and (3) other approaches to help workers track and consolidate their retirement savings; and a nationally-representative survey of 401(k) participants about their recent experience with plan-to-plan rollovers.
- Armed Forces Retirement Home: Congress and Agency Management Should Take Actions to Improve Financial Sustainability What GAO FoundThe Armed Forces Retirement Home (AFRH) prepares at least four financial projections yearly for varying purposes. However, GAO found that AFRH's processes for preparing these projections do not conform to actuarial standards and practices. Specifically, AFRH used inaccurate and inconsistent data, did not have sufficient supporting information for its assumptions of future events and values, and did not make trust fund projections based on reasonable assumptions of expected occupancy levels. Without policies and procedures for preparing financial projections to help ensure staff consistently apply relevant standards and consult with appropriate experts, such as actuaries, AFRH increases the risk that its projections will not be useful for decision-making.AFRH has identified several proposals to generate revenue and address potential financial shortfalls. However, challenges affect its plans to implement them, including factors outside of AFRH's control. AFRH's planned proposals include a statutory increase in military withholdings, requiring all military service members who are currently eligible for AFRH residency to contribute, and obtaining health and medical care reimbursements from programs such as TRICARE and Medicare for services it provides. However, these proposals require actions from Congress for AFRH to effectively implement them.GAO developed projections of AFRH's trust fund balance through fiscal year 2042 under two scenarios: AFRH continuing to operate as-is and AFRH operating with all quantifiable proposals implemented. GAO's analysis shows that whether AFRH continues to operate under its current scenario or implements all proposals, the trust fund will likely continue to decline without other significant efforts to bolster it (see figure). Additionally, AFRH is not projected to meet its goal for the trust fund balance.GAO Projection of Armed Forces Retirement Home's Trust Fund BalanceAFRH has not achieved its goals to raise its declining occupancy or to implement its other proposals. Also, AFRH faces further financial risks from costly repairs to deteriorating facilities. AFRH has not developed plans to address these issues. Without further actions, AFRH may continue to face financial shortfalls that in the future could affect its ability to fulfill its mission.Why GAO Did This StudyAFRH is an independent entity within the executive branch designed to provide housing, health care, and well-being assistance to eligible veterans. AFRH is financed through a dedicated trust fund. However, certain revenue sources for its funding have decreased or remained static over time while costs have increased. To address its financial challenges without cutting services to residents, AFRH has worked to identify new revenue sources to help rebuild its trust fund balance.House Report 117-397 includes a provision for GAO to review the financial sustainability of AFRH. GAO examined the extent to which AFRH projected estimated revenues and expenses for its trust fund through 2042, and developed plans to address any potential financing shortfalls, among other objectives.GAO reviewed relevant laws, federal guidance, audit reports, and agency guidance and policies; interviewed agency officials and actuarial experts; conducted site visits; and developed a projection to analyze AFRH's financial position.
- Railroad Retirement Board: Agency Could Strengthen Plans to Address Key Management Challenges What GAO FoundThe Railroad Retirement Board (RRB) has taken some promising steps, in alignment with key practices, towards addressing its management challenges. However, some work remains.Risk management process.  RRB has begun implementing an enterprise risk management (ERM) process, which is a decision-making tool that allows agencies to review and manage program and financial risks. It involves several essential elements and related key practices that fit together in a continuous process. RRB has mostly or partially implemented key practices for the first two essential elements and is beginning to implement key practices for the third (see figure). For example, to help address the second element, identifying risks, RRB trained staff to identify and report on program risks, such as not processing timely and accurate retirement applications. RRB also created tools for staff to use to report risks. However, RRB does not have a written plan for completing its ERM implementation. With such a plan, RRB will be better positioned to measure progress toward completing the process. In addition, a written plan could help RRB better use the risk information it collects to target and address serious program and financial risks.Essential Elements of Enterprise Risk Management (ERM) Implemented by RRBaaShading indicates the essential elements that the Railroad Retirement Board (RRB) mostly or partially implemented.Human capital and planning for post-COVID workplace needs.  RRB's human capital plans and efforts to date have incorporated all key practices for effective strategic workforce planning. For example, RRB analyzed expected employee attrition and used this information to target hiring and training needs. RRB is also revising its telework policies in light of COVID and assessing its space needs to downsize its headquarters, among other things.IT modernization. RRB assessed its IT needs and laid out a broad strategy for improvements that align with its strategic goals. For example, RRB plans to develop online tools for customers to file benefit applications and update information. However, RRB's IT modernization plans do not incorporate some key information management practices. For example, the agency has not developed plans that clearly state when its IT modernization efforts will be complete or the extent to which it will update its IT systems. In addition, RRB has not developed performance metrics and goals for measuring progress of its modernization efforts. In the absence of plans with clear metrics and goals, RRB may be unable to measure the success of its efforts and adjust approaches as needed.Why GAO Did This StudyRRB administers retirement, disability, Medicare, and other benefits to railroad workers and their families. GAO and RRB's Inspector General have identified challenges to RRB's ability to effectively carry out its mission. These include difficulty overseeing financial and program integrity, a looming wave of retirements, and aging IT systems.The explanatory statement accompanying the Further Consolidated Appropriations Act, 2020, includes a provision for GAO to conduct a management review of RRB. This report examines the extent to which RRB has addressed its key operational challenges by (1) implementing a process to oversee and manage program and financial risks, (2) assessing its human capital and post-COVID workplace needs, and (3) modernizing its IT infrastructure.GAO identified key practices from GAO's prior work and OMB guidance and assessed RRB's progress against these key practices. GAO reviewed relevant federal laws and regulations; RRB policies, plans and documents; OMB policies, and related GAO reports. GAO also interviewed officials from RRB.
- Social Security Series Part 2: Criteria for Evaluating Reform Proposals What GAO FoundProposals to reform Social Security often combine several changes to the program in a comprehensive set, and those changes can interact with or offset one another. Four criteria that may help policymakers evaluate proposals for reforming Social Security to address its financial challenges, including the interactions between changes in a proposal, are 1) financing sustainable solvency (how a proposal affects Social Security's finances as well as the national economy and federal budget), 2) considering adequacy and equity (how a proposal addresses the goals of equity and income adequacy), 3) modernizing the program to respond to societal changes (the extent to which a proposal accounts for demographic, economic, and societal changes in recent decades), and 4) implementing and administering proposed changes (how readily a proposal could be implemented, administered, and explained to the public).Why GAO Did This StudySocial Security is considered the bedrock of the U.S. retirement system, and many retirees rely on Social Security benefits for the majority of their income. Nonetheless, Social Security's Old-Age and Survivors Insurance benefit program faces financial challenges and is projected to be unable to pay full scheduled benefits starting in 2033. At that point, if no action is taken, Social Security revenue is projected to be sufficient to pay retirees just 77 percent of their scheduled benefits.This is the second in a series of reports that outline (1) Social Security's financial challenges, (2) criteria for evaluating proposals for reforming Social Security to address its financial challenges, and (3) options for reforming Social Security that have been proposed. This second report focuses on criteria for evaluating proposals for reforming Social Security.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or Nguyentt@gao.gov.
- Employee Benefits Security Administration: Systematic Process Needed to Better Manage Priorities and Increased Responsibilities What GAO FoundThe Employee Benefits Security Administration (EBSA) resources have generally remained unchanged while oversight responsibilities have increased over the last decade. EBSA's Congressional Budget Justifications show that, over the 2013 to 2021 period, EBSA's annual appropriations have generally remained flat in nominal terms, but declined in inflation-adjusted terms. EBSA also experienced a decline in staffing levels (full-time equivalents) over the same period. Since 2020, EBSA's overall budget has increased due to supplemental appropriations. For example, EBSA's discretionary appropriation was $181 million each year from fiscal years 2015 through 2021. However, EBSA received supplemental appropriations in 2020 and later--$1 million in 2020, or $182 million total appropriations, and $19.2 million in 2021 or $200.2 million total appropriations. Officials said that because the agency's base budget has been flat while expenses, including those from rising wages, have continued to increase, the agency increasingly relies on supplemental funds. EBSA officials said that the agency has received many new responsibilities through legislation such as the Patient Protection and Affordable Care Act, the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act, and the No Surprises Act of 2021.EBSA has employed strategies to manage resources, but does not have a systematic process to address reallocations. EBSA's strategic planning documents describe a number of strategies for managing resources that align with the three themes of our framework for managing declining resources. For example, agencies should consider both short- and long-term cost-cutting and cost-avoidance strategies—EBSA has prioritized activities with high monetary recoveries as a key long-term strategy to manage its resources.Additionally, agencies should use data analytics to guide decision-making—EBSA used data on case performance and recoveries to establish quantitative goals to increase its monetary recoveries in fiscal year 2022. Although EBSA officials said they use several strategies to manage declining resources, the agency does not have a clear or systematic decision-making process for doing so. Officials cited attempts to estimate resources for certain priorities, but these resource estimates were not acknowledged or included in planning documentation.Federal internal control standards state that agencies should use quality information and that significant changes to the agencies’ oversight, programs, and other resources should be communicated across the agency through established reporting lines to appropriate personnel. Without a systematic and well-documented decision-making process, EBSA officials may not have adequate information for making informed decisions about how to manage resource reallocations to meet its increased responsibilities.Why GAO Did This StudyEBSA is the agency within the Department of Labor (DOL) primarily responsible for ensuring that, as of fiscal year 2022, about 747,000 employer-sponsored retirement plans and about 2.5 million group health plans comply with requirements in Title I of the Employee Retirement Income Security Act of 1974. EBSA's effective oversight of plan management is critical to protect against mismanagement and fraud and to ensure that promised benefits will be available for the nearly 152 million workers, retirees, and their families covered by these plans. We previously reported on EBSA's strategies for prioritizing investigative staff as well as its enforcement process, but the current state of EBSA's resource planning is unknown.This report examines (1) how EBSA's resources and its oversight responsibilities have changed over time; and (2) the extent to which EBSA has developed a plan to strategically manage resources.GAO examined EBSA's Congressional Budget Justifications from fiscal year 2013 through fiscal year 2024 and interviewed EBSA officials. GAO reviewed relevant EBSA documents, prior GAO reports, federal studies, and federal laws and regulations regarding any new requirements for EBSA's oversight and enforcement of retirement and healthcare plans. GAO compared selected EBSA planning documentation against GAO's framework for managing declining resources. GAO also interviewed five stakeholder groups selected to obtain a range of retirement and health perspectives.
- Retirement Plans: Improved Communication Needed on Church Plan Eligibility for Federal Insurance Coverage What GAO FoundChurch plans are retirement plans sponsored by a church or church-associated organization. Because sponsors of church plans are generally exempt from reporting requirements in the Employee Retirement Income Security Act of 1974 (ERISA), available data are limited. According to an Internal Revenue Service (IRS) analysis of 2019 tax filings, the most current data available at the time of our analysis, nearly 33,000 church employers reported plan contributions from 589,000 participants. These data do not include church-associated entities, such as hospitals or schools. GAO obtained documentation from selected church plan sponsors and administrators for 2018-2022 showing these plans held over $89 billion in assets. Employers in church-associated healthcare and education organizations also offer these plans. Officials representing four denominations said the ERISA church plan exemption provided certain flexibilities, such as using religious doctrines to help guide their investments.Federal involvement with church plans is limited; states can also provide oversight. The IRS, if asked by a sponsor, can determine if a plan qualifies as a church plan. Church plans are generally ineligible for federal insurance from the Pension Benefit Guaranty Corporation (PBGC). However, GAO identified 120 potential church plans that paid PBGC premiums in 2018. PBGC determined the eligibility of 11 of these plans, which it does generally at the plan's request (see fig.). Despite possibly not insuring these plans, PBGC does not communicate with potential church plan sponsors that they may be paying premiums in error. Until PBGC takes steps to preemptively contact potential church plans that pay premiums to the agency, these plans may continue to pay premiums erroneously and remain unaware of their potential ineligibility for PBGC insurance. For church plans that are exempted from ERISA, states can have a potential role in their oversight. GAO found that two of the states in its review reported enacting laws that apply to church plans.Pension Benefit Guaranty Corporation (PBGC) Policy Determining Defined Benefit Plan Insurance CoverageExpected outcomes for church plan participants varied among the selected bankruptcy cases and settlement agreements GAO reviewed. In the bankruptcy cases reviewed, participant benefits were expected to be protected and kept whole at pre-bankruptcy levels to the extent they were funded and vested at the time their employer filed for bankruptcy. In the settlement agreements reviewed, participants who had allegedly lost benefits pursued litigation to compel sponsors to sufficiently fund their church plans. Settlements in these cases awarded money to participants to help protect their benefits and in some cases included agreements to provide participants financial disclosures similar to those required by ERISA.Why GAO Did This StudyChurch plans are generally exempt from most ERISA requirements, including rules to fund plans, disclose information, and insure benefits. Media reports have described retirees losing benefits because their church plan was underfunded and uninsured. GAO was asked to review church plans. This report addresses (1) data available on church plans and plan administration, (2) federal and state roles regarding church plans, and (3) expected outcomes for participant benefits from church plan litigation.GAO analyzed aggregated tax data, federal employer data, and data provided by church plan sponsors and administrators; reviewed relevant federal laws, regulations, and agency guidance; and selected five states for review, based in part on states' oversight activity of church plans. GAO also conducted a non-generalizable review of four cases where employers provided a church plan and filed for bankruptcy between 2005 and 2021; and reviewed three settled civil lawsuits brought by church plan participants who alleged underfunding and benefit cuts by the sponsor and that had settlement agreements approved by the court. GAO interviewed officials from churches and denominations and from federal and state agencies, and industry experts.
- Older Workers: Retirement Account Disparities Have Increased by Income and Persisted by Race Over Time What GAO FoundDisparities between low-income and high-income older workers' retirement accounts were greater in 2019 than in 2007, according to GAO's analysis of Survey of Consumer Finances (SCF) data on households 51 to 64. For example, about one in 10 low-income households had a retirement account balance in 2019 compared to about one in five in 2007, while about nine in 10 high-income households had a balance through the period. For those with a balance, the median balance was higher for high-income households over the period, while any change for the other income groups was not statistically significant. Racial disparities also persisted over the period. A higher share of White households had a balance than those of all other races. Also, White households had about double the median balance as households of all other races.Estimated Retirement Account Balances for Households Age 51-64 with a Balance, by IncomeNote: Brackets represent 95 percent confidence intervals. Overlapping brackets for the lowest and middle income quintiles indicate no statistically significant difference between 2007 and 2019.Income, job-related factors, and race were strongly related to disparities in older worker households' retirement account balances, according to GAO's analysis of 2018 Health and Retirement Study (HRS) data. High-income households contributed a larger percentage of their pay than low-income households (about 8 and 5 percent) and received larger employer contributions. Households with higher income, longer job tenure, and a college education tended to have larger balances. Households of all other races than White and households with children had about 28 and 20 percent smaller balances, respectively.  The effects of selected strategies meant to increase workplace retirement savings vary across workers of different income groups, according to illustrative scenarios using GAO's analysis of SCF and HRS data. For example, automatic enrollment can increase participation of low-income older workers with access up to about one-third. However, only about 23 percent of low-income workers have access to a workplace retirement account. Further, they may choose not to participate, for example, if they have limited disposable income or expect Social Security to provide most of their retirement income. In contrast, increasing contribution limits for workplace retirement accounts almost entirely benefits high-income workers, as about 23 percent of high-income compared with about 3 percent of middle-income older workers contribute the individual limit.Why GAO Did This StudyIn 2022, the tax incentives for workers to save in tax-preferred retirement accounts cost the federal government nearly $200 billion in forgone revenue, according to the Department of the Treasury. Members of Congress and others are concerned these incentives accrue primarily to high-income workers and not low-income workers. Knowing the distribution of retirement account balances can help illuminate the retirement security of households of different incomes.GAO was asked to examine disparities in the distribution of retirement account balances. This report describes, among other issues, (1) how the distribution of retirement account balances among older households by income changed over time; (2) factors associated with the distribution of retirement account balances   among older households by income; and (3) how selected strategies meant to increase retirement savings affect high-, middle-, and low-income workers.GAO examined retirement account balances for older workers' households (age 51 to 64) over time using 2007-2019 SCF data. GAO analyzed 2018 HRS data to identify factors associated with the balance distribution. Both datasets were the most recent data available at the time of GAO's review. GAO crafted illustrative scenarios to show the effects of four strategies meant to increase retirement savings using SCF, HRS, and 2018 Internal Revenue Service Statistics of Income data. GAO selected these strategies with input from agency officials, federal reports, and experts. GAO also reviewed relevant literature and interviewed retirement security experts.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or NguyenTT@gao.gov.
- 403(b) Retirement Plans: Department of Labor Should Update Educational Materials to Better Inform Plan Sponsors and Participants What GAO FoundMillions of teachers and employees of tax-exempt organizations invest in 403(b) retirement plans. The Department of Labor (DOL), Securities and Exchange Commission (SEC), and Internal Revenue Service (IRS) take steps to oversee some 403(b) plans or their investment options, or both. Specifically, DOL oversees 403(b) plans subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and uses a range of strategies to identify plans to investigate for compliance with the law. For example, DOL has investigated instances of self-dealing—when a plan fiduciary uses plan assets for the fiduciary's own interest or own account. The SEC's oversight focuses on compliance with securities laws and regulations, while the IRS's oversight focuses on compliance with the Internal Revenue Code. DOL, SEC, and IRS also conduct outreach and provide educational materials to 403(b) plan sponsors and participants. However, DOL's website does not contain targeted educational materials that could help participants understand 403(b) plan fees. Updated DOL information on 403(b) plans could help participants make more informed decisions.GAO reviewed how five selected states worked to improve outcomes—including in some cases reducing fees participants pay—in 403(b) plans that are not subject to ERISA requirements. Officials in three of the states said they had consolidated the number of service providers offering investment options, which strengthened oversight by reducing the number of service providers they had to oversee. Officials in Connecticut told GAO consolidating service providers also resulted in lower annual fees for participants (see figure). Officials in four of the selected states said they enhanced transparency by providing participants with additional information on plans' investment options and fees or by making it available elsewhere.Connecticut: Average Investment Fees Pre- and Post-2004 Consolidation Stakeholders and experts identified actions they said could improve 403(b) participant outcomes. For example, they suggested establishing fiduciary duties for non-ERISA plans in some states that are not subject to such protections can help protect participants' interests. Also, they said requiring distribution of standardized information on investment options' returns and fees for participants in non-ERISA plans would promote transparency. Multiple experts also suggested that allowing 403(b) plans to use certain other investment vehicles could reduce fees.Why GAO Did This StudyLike 401(k) plans, 403(b) plans are account-based defined contribution plans sponsored by employers. Many 403(b) plans are subject to ERISA requirements and are intended to protect the interests of plan participants. However, some 403(b) plans are not covered by ERISA.GAO was asked to review (1) the extent of federal agencies' 403(b) plan oversight, (2) actions by selected states that could improve 403(b) participant outcomes, and (3) options stakeholders and experts have identified that could improve outcomes for 403(b) participants.GAO analyzed DOL, SEC, and IRS data and documentation; reviewed documentation from five selected states identified as taking actions to improve participant outcomes; interviewed federal and state agency officials and experts; and conducted and analyzed results from surveys of plan sponsors and service providers about options to improve participant outcomes. The analysis of state actions and survey results offer a range of perspectives on improving participant outcomes but are not generalizable.
- Social Security Series Part 1: The Dilemma What GAO FoundSince 2010, the fund that SSA uses to pay benefits to retirees has been paying out more money than it has been receiving in taxes. At the current rate, the fund's trustees estimate that it will exhaust its reserves in 2033 and be unable to pay full scheduled benefits. The sooner actions are taken to address these financial challenges, the more gradually changes can be phased in and workers would have more time to adjust to any changes and factor them into their retirement plans.What Is the Dilemma with Social SecuritySocial Security provides cash benefits to over 66 million retirees, people with disabilities, and others, as of January 2023. For many retirees, these benefits make up a substantial portion of their monthly retirement income, particularly for people with relatively low career earnings.Despite its importance to the retirement income of many Americans, significant financial challenges threaten the Social Security Administration's (SSA) long-term ability to continue to pay retirees and other beneficiaries full benefits.This is the first in a series of reports that outline (1) Social Security's financial challenges, (2) criteria for evaluating options for reforming Social Security, and (3) types of proposed reforms. This first report focuses on Social Security's financial challenges.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or Nguyentt@gao.gov.
- Priority Open Recommendations: Social Security Administration What GAO FoundIn June 2022, GAO identified 6 priority recommendations for the Social Security Administration (SSA). Since then, SSA has implemented 4 of those recommendations by: (1) establishing a process to measure efforts to reduce improper payments, (2) better targeting representative payees for review to ensure they are managing beneficiary funds appropriately, and (3) updating cybersecurity requirements and assessment procedures to protect sensitive information.In May 2023, GAO identified 2 additional priority recommendations for SSA, bringing the total number to 4. These recommendations involve the following areas:ensuring program integrity,	serving vulnerable populations; and	protecting sensitive information.SSA's attention to these issues could lead to significant improvements in government operations.Why GAO Did This StudyPriority open recommendations are the GAO recommendations that warrant priority attention from heads of key departments or agencies because their implementation could save large amounts of money; improve congressional and/or executive branch decision-making on major issues; eliminate mismanagement, fraud, and abuse; or ensure that programs comply with laws and funds are legally spent, among other benefits. Since 2015 GAO has sent letters to selected agencies to highlight the importance of implementing such recommendations.For more information, contact Cindy Brown Barnes (202) 512-7215 or brownbarnesc@gao.gov.
- Social Security Administration: Remote Service Delivery Increased during COVID-19, but More Could Be Done to Assist Vulnerable Populations What GAO FoundCOVID-19 prompted the Social Security Administration (SSA) to make dramatic changes in the way it delivers services and administers its programs. On March 17, 2020, SSA closed its offices to the public—providing limited in-person visits for individuals with certain critical needs—and expanded remote service delivery options. SSA increased its use of telephone, mail, video, and online services. Through 2021, SSA established policies at field offices to increase the use of inoffice appointments. SSA also worked with state agencies that process claims for disability benefits to offer video options for certain medical exams. In April 2022, the agency reopened field offices to walk-in visits from the public.The public filed fewer benefit claims with SSA during the pandemic, on average, compared to the prior 2 years, particularly for certain benefits and among certain vulnerable populations, according to GAO’s analysis of SSA data. For example, compared to the 2 years before the pandemic began, average monthly claims were lower from March 2020 through December 2021 for several SSA benefits. Specifically, they were 18 percent lower for Supplemental Security Income disability benefits, 12 percent lower for Disability Insurance, and 8 percent lower for Supplemental Security Income Old-Age, though Supplemental Security Income claims rebounded in late 2021. Some types of benefits claims declined more for certain populations, such as Spanish speakers.Changes in SSA Benefit Claims (January 2020-December 2021)SSA took steps to address a range of challenges with providing services remotely, but gaps remain in delivering services online and assessing lessons learned. SSA targeted outreach to certain vulnerable populations and expanded the use of third parties to help the underserved access benefits and services. However, not all claimants are able to apply for SSI online and applications in Spanish cannot be submitted online. As a result, SSA cannot fulfill its mission to ensure that its services are equitable and accessible, and some eligible individuals may not apply for benefits. Some SSA offices have assessed specific service delivery changes, but the agency does not have a coordinated process for assessing lessons learned from the COVID-19 pandemic and taking related corrective actions, which could leave SSA vulnerable to other crises in the future.Why GAO Did This StudyIn 2020, SSA provided benefits to nearly 70 million individuals. Under the CARES Act, SSA received $300 million to prevent, prepare for, and respond to COVID-19. The CARES Act includes a provision for GAO to monitor federal efforts to respond to the COVID-19 pandemic. GAO was also asked to review SSA’s response.This report examines (1) changes SSA made to its delivery of key services; (2) the effect of these changes on the public, including certain vulnerable populations; and (3) how SSA addressed challenges it faced and identified lessons learned. GAO analyzed summary and administrative SSA data from March 2018 to December 2021, and reviewed the agency’s plans, policies, and guidance documents. GAO also conducted group interviews with SSA staff at various levels and offices; and interviewed SSA officials and external stakeholders, including disability advocates and employee groups.
- Older Households: Comparison of Income, Wealth, and Survival in the United States with Selected Countries What GAO FoundIncome and wealth disparities among older households were wider in the United States than in selected countries from 1998 through 2019, according to GAO's review of households headed by those 55 and older. For example, in 2007, the median, or “typical,” income of high-income older households in the United States was about 12 times greater than that of low-income households, compared to about 6 times in Germany and about 10 times in the United Kingdom (see figure). GAO's analysis also indicates that income and wealth were more concentrated at the top of high-income and high-wealth older households in the United States, compared to other households in either the United States or selected countries. Further, GAO's analysis shows that high-wealth older households in the United States and United Kingdom held a greater proportion of their wealth in financial assets, relative to middle-wealth households. Still, homes and other non-financial assets made up the majority of total wealth for all older households GAO reviewed.Median Income of Older Households in the U.S. and Selected Countries, by QuintileNote: GAO sorted households into quintiles based on income when the survey respondent, their partner or spouse, or both reported being 55 or older. For each quintile, GAO calculated median income, meaning the income of the “typical” household. GAO converted estimates to 2017 U.S. Dollar purchasing power parities, which were the most recent available at the time. Confidence intervals are reported at either the 99 or 95 percent level based on the availability of Luxembourg Wealth Study data.Although the wealth data GAO reviewed indicate wider disparities in the United States than in selected countries over the period of review, these data did not include the estimated value of retirement benefits that older households expect to receive from public and private sources. GAO and some researchers have demonstrated how incorporating the value of these expected retirement benefits shows wealth disparities that are somewhat smaller than measures that omit these benefits.GAO's analysis indicates that higher income and wealth are associated with living longer among older individuals in the United Kingdom and United States. To compare survival between the United Kingdom and United States, GAO used data from 2002 through 2012, which are the most recent years for which there are reliable mortality data for both countries. The data sets GAO used for this analysis are unique in that they are representative of older individuals in the United Kingdom and United States and follow the same individuals as they age, while tracking their mortality over time, as well as their income, wealth, and other demographic information. As a result, GAO examined survival rates over a 10-year period, as a proxy for longevity.GAO found that individuals from high-income and high-wealth households in the United States and United Kingdom were generally more likely to survive during the 10-year period compared to lower household income and wealth groups. For example, in the United States, the proportion of individuals in their seventies at the beginning of the study period who were alive at the end of the 10-year period ranged from 68 percent for those from the wealthiest households, to 44 percent for those from the least wealthy households. However, these patterns differed for the oldest individuals, who were in their eighties and nineties at the beginning of the study period. For example, survival rates for those in their nineties did not vary significantly based on wealth.Educational attainment and homeownership in selected countries and the United States are associated with higher levels of income and wealth according to GAO's examination of data, review of research, and interviews. For example, in each of the selected countries, older households that have obtained postsecondary education tend to have higher incomes during their working years and subsequently higher levels of wealth during their older years. Homeownership is similarly associated with higher levels of wealth because, in part, a house serves as an asset that can increase in value, as well as a dwelling.Other factors associated with income and wealth disparities include the cost of long-term care, which can quickly deplete the wealth of older households. However, research indicates that Germany mitigates the high costs of long-term care through nationwide long-term care insurance. Additionally, public retirement programs in selected countries and Social Security in the United States are designed in part to reduce disparities by providing a higher rate of payments to households with lower incomes. Similarly, income taxes in all three selected countries and the United States are designed in a way that can reduce income disparities, with marginal rates that increase by income.Why GAO Did This StudySome researchers and policymakers have raised questions about whether differences in income, wealth, and longevity in the United States and other countries may affect older populations' financial security in retirement.GAO was asked to compare income, wealth, and longevity trends in the United States and other countries. This report (1) compares trends in distributions of income and wealth, and disparities in survival rates for older households in the United States with those in Canada, Germany, and the United Kingdom; and (2) describes factors that contribute to any disparities in income and wealth distributions for older households in selected countries.GAO selected countries based on the availability of comparable data and size of their economies. GAO analyzed the countries' distributions of income and wealth from 1998-2019 using the Luxembourg Wealth Study Database. GAO examined associations with 10-year survival rates in the United States and United Kingdom using data that followed older households from 2002-2012 in the English Longitudinal Study of Ageing and the Health and Retirement Study in the United States. GAO reviewed relevant literature, interviewed researchers and government officials in the selected countries, and sought input from the U.S. Census Bureau, Departments of Labor and the Treasury, Internal Revenue Service, and Social Security Administration.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or NguyenTT@gao.
- Retirement Security: Recent Efforts by Other Countries to Expand Plan Coverage and Facilitate Savings What GAO FoundAccording to representatives GAO interviewed about selected international retirement savings plans, most of the plans require eligible employers to automatically enroll some of their workforce, unless workers explicitly opt out (see figure). This automatic enrollment is intended to help increase plan participation. However, those not automatically enrolled, including some self-employed and part-time workers, remain difficult to cover. For example, part-time employees must work for 24 months before becoming eligible for automatic enrollment in one plan GAO reviewed.Automatic Enrollment of Eligible Employees, as Implemented in Selected PlansThe selected retirement savings plans use government and employer incentives to encourage workers to join or stay in a plan, according to the representatives. The plans with automatic enrollment incentivize participation by providing some tax benefits to employees, either when contributing or when withdrawing funds at retirement. Each plan also mandates or otherwise incentivizes employer contributions, which, according to retirement representatives, can encourage employee participation and bolster retirement savings. However, lower-income workers may not realize some tax benefits, and the self-employed do not receive the incentives that come with employer contributions.Selected plans established default contribution rates and investments to facilitate employee participation and remove potential barriers to saving. Nearly   all of the   selected   plans use default contribution rates between 3 and 5 percent of a worker's salary, according to retirement representatives, simplifying a key investment decision of how much to contribute. The plans also offer default investments that combine high- and low-risk funds to balance risk and growth, such as target date funds that adjust based on a worker's expected retirement date. According to the representatives GAO interviewed, default investments can be particularly important for workers with lower levels of financial literacy.The selected plans also offer flexibilities to participants to adjust or access savings based on life circumstances, such as financial hardship. For example, some plans allow early withdrawal of retirement funds. However, representatives noted concerns that participants who withdraw too much of their money too soon can risk running out of funds later in retirement.Why GAO Did This StudyThe United States faces a range of challenges regarding how to ensure retirement income security for our aging workforce. As traditional pensions have become less common, more individuals are responsible for managing their own retirement savings. In doing so, they may face challenges accessing retirement plans through an employer; accumulating sufficient retirement savings; and ensuring that their accrued savings last through retirement. Other countries have begun to address similar challenges with various reforms to their retirement systems.This report describes the views of international retirement representatives on policy options and trade-offs from account-based retirement savings reforms in other countries, intended to improve retirement security. These include (1) automatic enrollment of employees in retirement savings plans; (2) financial incentives for employees to contribute; (3) default plan options; and (4) plan flexibilities. GAO reporting on these reforms does not signify endorsement of any particular reform.GAO interviewed representatives about retirement plans in five selected countries: Canada (the federal level and the province of Quebec), Lithuania, the Netherlands, New Zealand, and the United Kingdom. GAO selected the plans based on the range of strategies used to increase retirement plan coverage, recommendations from knowledgeable stakeholders, and comparability to the United States.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or nguyentt@gao.gov.
- Social Security Disability: SSA Expedited Most Critical Cases at Hearings Level but Lacks Consistent Policy Implementation What GAO FoundThe Social Security Administration (SSA) flags a disability appeals case as critical after determining that the claimant's health or financial condition, such as having a terminal illness or dire financial need, meets criteria in SSA's policy manual. Cases can be flagged as critical before reaching a hearing office or during nearly any stage of the hearing process. SSA policy directs staff to expedite the case once it is flagged as critical. However, staff GAO interviewed from three of the five selected offices said that claimants must provide documentation of their dire financial need, even though SSA policy does not require it.Hearing offices consistently processed critical cases faster than non-critical cases between fiscal years 2010 and 2020, but wait times varied depending on when the case was first flagged. Cases that arrived at a hearing office with a flag took a median 201 days to reach a hearing decision; those first flagged while they were at a hearing office took a median 351 days. This difference exists because hearing offices quickly begin work on flagged cases. In contrast, non-critical cases took a median 469 days (see figure). GAO found that, across the stages of the hearings process, critical cases flagged after reaching a hearing office spent the largest portion of the wait time in the stage before being assigned to a case worker. Once flagged during this waiting period, hearing office staff assigned most cases to a case worker within a week.Median Hearing Wait Times for SSA Critical Cases by When the Flag Was Added, Fiscal Years 2010 to 2020Note: In this figure, we refer to cases as “critical” or “non-critical” based on SSA's flagging of cases. This analysis does not examine whether individual cases varied in complexity, which may affect processing time. The figure excludes the 29 percent of hearings cases that did not follow the typical processing order.SSA can initially designate a claimant's case to indicate the claimant faces homelessness, eviction, or another critical need. At hearing offices, however, these designations do not trigger expedited processing unless the case is also flagged for one of the seven hearing office critical case categories, such as dire need. GAO found that only 28.5 percent of cases that had a homeless designation also had a critical case flag, and thus were selected for expedited processing, despite SSA officials saying that most of these cases should qualify as dire need. This discrepancy could result from the existence of similar categories that are treated differently across multiple data systems, manual error, or changing circumstances. As a result, some claimants who qualify for expedited claim processing due to severe circumstances may not receive it.Why GAO Did This StudyIndividuals who do not agree with an initial decision on a claim for Social Security disability benefits can appeal and eventually receive a hearing before an administrative law judge. SSA prioritizes certain disability appeals as critical for medical or financial reasons in order to resolve them more quickly. From fiscal years 2010 through 2020, SSA identified about 425,000 critical cases out of over 7 million appeals at the hearings level.GAO was asked to review challenges that disability applicants who file appeals face. GAO examined (1) how SSA identifies critical cases at the hearings level and (2) the extent to which SSA expedites these cases.GAO analyzed SSA hearing office case data from fiscal years 2008-2020, focusing on critical cases that followed the typical processing order (e.g., were not dismissed). GAO also reviewed SSA policies and procedures and interviewed agency headquarters officials, managers and staff from five of SSA's 164 hearing offices, disability advocates, and SSA employee unions. GAO selected the five hearing offices to provide variety in the percentage of critical cases, overall case volume, location, and population size.
- Priority Open Recommendations: Social Security Administration What GAO FoundIn June 2021, GAO identified four priority recommendations for the Social Security Administration (SSA).In June 2022, GAO identified two additional priority recommendations for SSA, bringing the total number to six. These recommendations involve the following areas:ensuring program integrity,	protecting vulnerable beneficiaries, and	improving cybersecurity.SSA's attention to these issues could lead to significant improvements in government operations.Why GAO Did This StudyPriority open recommendations are the GAO recommendations that warrant priority attention from heads of key departments or agencies because their implementation could save large amounts of money; improve congressional and/or executive branch decision-making on major issues; eliminate mismanagement, fraud, and abuse; or ensure that programs comply with laws and funds are legally spent, among other benefits. Since 2015 GAO has sent letters to selected agencies to highlight the importance of implementing such recommendations.For more information, contact Cindy Brown Barnes (202) 512-7215 or brownbarnesc@gao.gov.
- Defined Contribution Plans: 403(b) Investment Options, Fees, and Other Characteristics Varied What GAO FoundTotal assets held by 403(b) plans—retirement savings plans for certain public sector and tax-exempt sector employees—amounted to more than $1.1 trillion in 2020, according to industry data, and other characteristics varied. Industry data show that about half of these assets were held in plans covered by the Employee Retirement Income Security Act of 1974, as amended, (ERISA), which are generally required to submit an annual filing known as the Form 5500. ERISA 403(b) assets grew from 2010 to 2019, the most recent year for which 5500 data are available, while the number of plans declined, as shown in the figure.Number of 403(b) ERISA Plans and Value of Plans' Assets, by Sector, 2010-2019 According to industry experts and 5500 data, these trends likely resulted from consolidation of firms in the health care sector, which represents a large portion of plan assets. The vast majority—93 percent—of ERISA 403(b) plans were the employer's sole or primary retirement plan. While less information is available for 403(b) plans not covered by ERISA (non-ERISA plans), which do not file a Form 5500, of the 21 plan sponsor respondents to GAO's survey, most stated their plans were supplemental to another retirement savings plan offered by the employer. Available data also show that the number of investment options, which may be annuities or mutual funds, offered by 403(b) plans varied but were generally higher than the number offered by 401(k) plans in the private sector.Fees for 403(b) plans varied widely according to GAO's survey of ERISA and non-ERISA plan sponsors and service providers, as well as Form 5500 data. For example, plans that GAO surveyed reported record keeping and administrative service fees ranging from 0.0008 percent of plan assets to 2.01 percent of plan assets. In addition, fees for investment options offered by the plan ranged from 0.01 percent to 2.37 percent among plans GAO surveyed. Prior GAO work has shown that even seemingly small fees can significantly reduce participants' retirement savings over time. Available data also show that large 403(b) plans had lower administrative fees than smaller ones. In GAO's survey, university, state-sponsored, and plan sponsors with $1 billion or more in assets reported taking multiple steps to reduce fees, while other sponsors more often reported not having information that would help them monitor fees. For example, five public school district plan sponsors reported that they did not know expense ratios, which are measures of how much of a fund's assets are used for administrative and other operating expenses, for investment options offered by their plan that would also allow them to monitor fees.Why GAO Did This StudyMillions of teachers and other employees of public schools, universities, and tax-exempt organizations rely on savings they accumulate in 403(b) plans to provide income security in retirement. Like 401(k) plans, 403(b) plans are account-based defined contribution plans sponsored by employers, and individuals who participate in the plans make investment decisions and bear the investment risk. Private sector employer-sponsored retirement plans are generally subject to ERISA requirements intended to protect the interests of plan participants. However, some 403(b) plans are not covered by ERISA. This report addresses (1) the number and characteristics of 403(b) plans; and (2) fees charged to 403(b) plan participants.For this report, GAO analyzed plan-level characteristics—including the number of participants, the amount of plan assets, and available information on plan investment offerings from 2010 through 2019—the most recent year for which data are available—from the Department of Labor's (DOL) Form 5500 database as well as available industry data. GAO analyzed individual-level data from the Health and Retirement Study (HRS) of respondents over age 50 who reported participating in 403(b) plans. GAO also analyzed information on plan characteristics and fees from non-generalizable surveys GAO conducted of 403(b) plan sponsors and 403(b) service providers (a total of 45 survey responses), and interviewed DOL and other U.S. agency officials, industry stakeholders, and experts identified as being knowledgeable about 403(b) plans.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or nguyentt@gao.gov.
- Social Security and Medicare: Improving the Timeliness of Trust Fund Reports What GAO FoundTreasury took some steps to improve its management of the schedule for developing the Social Security and Medicare Trustees reports but the boards of trustees did not meet the statutory deadline of April 1 for the reports due in 2020 and 2021. In 2019, GAO issued two recommendations to try to improve the timeliness of the reports. Consistent with GAO's first recommendation in 2019, Treasury developed schedules for preparing the annual reports that included the planned and actual dates for meeting intermediate goals and the statutory deadline of April 1. Other than tracking the planned and actual dates of each reporting cycle, however, Treasury has not told GAO about any other steps it took to better manage the schedule, as GAO recommended. Therefore the recommendation has not been fully implemented.GAO also recommended that Treasury inform Congress of reporting delays. Treasury reported that the working group—agency officials involved in the preparation of the reports— established a policy in December 2020 to notify Congress if the trustees anticipate issuing the reports after the April 1 statutory deadline. The policy states that the chairperson will "assess the need to notify Congress of the reports' timing." The policy does not specify how they would make that assessment, nor does it mention including the reasons for the delay. A Treasury official stated that they did not interpret our recommendation to mean that the policy itself had to address communicating the reasons for delayed reports—only that those reasons be included in the information communicated to Congress. This policy does not fully address GAO's recommendation because it implies that notifying Congress should be discretionary and does not call for any explanation of the delays and updated timeframes. The policy should serve as a prompt for subsequent working groups to provide timely updates and address all of the information we recommended communicating to Congress.There are potential actions Treasury, in consultation with the boards of trustees, could take to help address GAO's prior recommendations. For example, Treasury, in its role as chairperson of the boards, could prioritize meeting the statutory deadline, review progress in developing the reports, obtain buy-in on timeliness goals from key officials, learn from past reporting cycles, and strengthen the policy to inform Congress of delays. In addition, the boards of trustees could amend their bylaws to state explicitly the goal of meeting the April 1 statutory deadline, and require that Congress be informed of report issuance delays, the reasons for delays, and the updated issuance date estimates. Finally, if Congress does not believe sufficient progress has been made to address GAO's recommendations, it could codify GAO's 2019 recommendations to Treasury with explicit requirements for reporting and communication.In commenting on a draft of this report, Treasury emphasized the unique circumstance and challenge that the COVID-19 pandemic presented to completing the modeling underlying the Trustees reports. They explained that the working group made a deliberate decision to take additional time to prepare the reports in order to accurately incorporate the effects of the pandemic and that this was necessary in order to ensure a high-quality report.Why GAO Did This StudyBoards of trustees manage the trust funds that largely provide funding for benefits paid under the Social Security and Medicare programs. The Social Security Act requires the trustees to report on the trust funds' financial status to Congress each year by April 1. In 2019, GAO reported that the trustees issued the reports after this statutory deadline in 17 of the 25 years from 1995 to 2019, and were more than 2 months late in 6 years from 2010 to 2019. GAO's report recommended two actions to the Secretary of the Treasury, in their capacity as the chairperson of the boards.The first recommendation was that Treasury work with the other trustees, in consultation with the chief actuaries of Social Security and the Center for Medicare &amp; Medicaid Services, to improve the management of the report development schedules in order to provide the Trustees reports to Congress by the April 1 statutory deadline. The second recommended that Treasury work with other trustees to establish a policy to inform congressional committees of jurisdiction when the reports are expected to miss this deadline; we recommended that this outreach include the factors contributing to the delay and the updated expected dates. Treasury concurred with these recommendations.GAO was asked about additional actions to better ensure the timely issuance of the Trustees reports, including considering changes to the trustees' bylaws and Congressional action. This report (1) describes Treasury's progress in addressing GAO's 2019 recommendations, and (2) offers potential actions, consistent with GAO's recommendations, that could help ensure timely completion of the Trustees reports. GAO reviewed the 2019 report, relevant documentation from the reporting cycles for the 2020 and 2021 Trustees reports, and information Treasury provided about actions it has taken to implement GAO's recommendations from the 2019 report.For more information, contact Elizabeth Curda at (202) 512-7215 or curdae@gao.gov.
- Supplemental Security Income: SSA Faces Ongoing Challenges with Work Incentives and Improper Payments What GAO FoundThe Social Security Administration (SSA) has undertaken several efforts to encourage employment for individuals with disabilities who receive Supplemental Security Income (SSI) and who would like to work, but few benefit from these supports.Work incentives and supports for transition-age youth.  SSA administers work incentives and other employment supports for transition-age youth (ages 14 to 17) on SSI. These supports encourage work by allowing these youth to keep at least some of their benefits even if they have earnings. In 2017, GAO analysis of SSA data from 2012 to 2015 found that less than 1.5 percent of SSI youth benefitted from these incentives. According to SSA and other officials, this may be because SSI youth and their families are often unaware of or do not understand the incentives, and may fear that work will negatively affect their benefits or eligibility.	Work incentives for working-age adults.  The Ticket to Work and Self-Sufficiency Program (Ticket) is a voluntary program that was established to assist individuals with disabilities in obtaining and retaining employment, and help reduce dependency on benefits. Preliminary GAO analysis of Ticket indicates that SSI recipients participated more often than other disability beneficiaries, and benefited modestly from the program. GAO analysis of SSA data from 2002 to 2015 found, 5 years after participating in Ticket, about 4 percent of SSI participants had left the disability rolls due to earnings from work, compared with 2 percent of nonparticipants who were similar in characteristics such as age, disability type, and education. However, earnings for SSI Ticket participants remained low. GAO's analysis of data from 2002 to 2018 shows that average earnings for SSI Ticket participants, 5 years after participating, were $3,940 per year, including 57 percent who did not report any earnings at all. GAO's preliminary work also indicates that Ticket participants face a number of challenges to returning to work, including their primary disabling condition, which may not improve sufficiently to allow for fulltime employment, and disincentives to work such as the loss of cash and medical benefits.Prior and ongoing GAO work has identified issues with SSA's efforts to reduce improper payments, including overpayments, to SSI beneficiaries in general and beneficiaries who are working in particular. Overpayments can occur when beneficiaries who work do not timely report earnings to SSA or SSA delays in adjusting their benefit amounts. SSA reported that SSI's overpayment rate in fiscal year 2019 was estimated at 8.13 percent, higher than other SSA programs. Further, SSA reported it made approximately $4.6 billion in SSI overpayments in fiscal year 2019. Overpayments may have to be repaid, which may be burdensome for recipients, especially those who were not aware that they were overpaid and already spent the money. While SSA has taken steps to reduce overpayments, SSA's Office of Inspector General found that SSA had not resolved lags in updating information on beneficiaries' earnings. In addition, SSA has not implemented a 2020 GAO priority recommendation that it develop and implement a process to measure the effectiveness of its corrective actions for improper payments, including overpayments.Why GAO Did This StudySSI is a federal assistance program administered by SSA that provides cash benefits to certain individuals who are elderly, blind, or have a disability. SSI acts as a safety net for individuals who have limited resources and little or no other income. As such, SSI is a means-tested program. As of July 2021, approximately 71 percent of SSI beneficiaries were children or working-age individuals with disabilities. SSA faces longstanding challenges related to administering SSI and its other disability programs. GAO has issued multiple reports with recommendations on how SSA might address these challenges.This testimony describes SSA's challenges with (1) incentivizing employment for SSI recipients who wish to work, and (2) preventing improper payments to SSI recipients, including overpayments.This statement is based primarily on prior GAO reports issued between 2010 and 2021, as well as preliminary observations from an ongoing GAO review of the Ticket program. To conduct the work for these reports and the ongoing review, GAO used a variety of methods including analyzing data; reviewing relevant federal laws, regulations, and guidance; reviewing key agency documents, such as SSA's strategic plan and annual SSI stewardship reports; and interviewing experts and SSA officials.For more information, contact Elizabeth H. Curda at (202) 512-7215 or curdae@gao.gov.
- 401(k) Retirement Plans: Many Participants Do Not Understand Fee Information, but DOL Could Take Additional Steps to Help Them What GAO FoundAlmost 40 percent of 401(k) plan participants do not fully understand and have difficulty using the fee information that the Department of Labor (DOL) requires plans to provide to participants in fee disclosures, according to GAO's analysis of its generalizable survey (see figure). GAO assessed participants' understanding of samples from several large plans' fee disclosures and other information about fees, and asked general knowledge questions about fees. For example, GAO found that 45 percent of participants are not able to use the information given in disclosures to determine the cost of their investment fee. Additionally, 41 percent of participants incorrectly believe that they do not pay any 401(k) plan fees. Prior GAO work has shown that even seemingly small fees can significantly reduce participants' retirement savings over time.GAO Estimates of 401(k) Plan Participants' Score Distribution on Survey's Fee-Related Assessment QuestionsGAO's review of selected countries and the European Union (EU) found they have implemented practices to help retirement plan participants understand and use fee information from plan disclosures. For example, stakeholders in those locations said layering data, a technique where information is presented hierarchically, can help participants understand disclosures by providing them key plan information first. Stakeholders also said other tools can help participants understand fee information. In Italy, for example, the government provides a supplemental online tool so participants can compare and calculate fees across plans and investment options, according to stakeholders. This tool also includes a fee benchmark—which is generally an average fee among comparable funds—that helps participants judge the value of an individual investment option.DOL could take additional steps to help 401(k) plan participants improve their understanding and use of fee information, based on GAO survey responses and analysis. DOL regulations require that disclosures present fee information in a format that helps participants compare investment options. However, disclosures are not required to include certain information, such as fee benchmarks and ticker information (unique identifying symbols used for many popular types of investments), that could be helpful for participants. Fee benchmarks can help participants to assess an investment option's value, not only relative to other in-plan options but to options outside the plan. Ticker information can help participants identify many plan investments online to evaluate and compare them to options outside the plan. By requiring such information in disclosures, DOL could help participants better understand and compare their 401(k) plan fees when making investment choices that affect their retirement security.Why GAO Did This StudyDOL regulations require 401(k) plans to provide the more than 87 million plan participants with a comprehensive disclosure of the fees they pay. GAO was asked to examine how well participants can understand and use the fee disclosures.This report (1) assesses the extent to which 401(k) plan participants can understand and use fee information in disclosures; (2) describes disclosure practices used by selected countries to help retirement plan participants; and (3) examines any additional steps that DOL could take to advance participant understanding and use of fee information. GAO conducted a nationally representative survey of 401(k) plan participants to assess their understanding of fee disclosure samples from among 10 large plans and of other fee information. To identify and describe disclosure practices used abroad, GAO interviewed stakeholders and reviewed fee disclosure documents from Australia, Italy, New Zealand, and the European Union, chosen because of their documented practices to improve participants' understanding of fee disclosures. To identify any additional steps DOL could take, GAO also reviewed disclosures from 10 large plans, as well as relevant federal laws and regulations, and interviewed stakeholders in the U.S.
- Retirement Savings: Federal Workers' Portfolios Should Be Evaluated For Possible Financial Risks Related to Climate Change What GAO FoundRetirement plans' investments, including those of the Thrift Savings Plan (TSP) for federal employees, could be exposed to financial risks from climate change, according to GAO's literature review and interviews with stakeholders knowledgeable about climate change and financial markets. Stakeholders said climate-related events, from natural disasters to changes in government policy, are expected to impact much of the economy and thereby investment returns (see figure). Retirement plans can assess their exposure to these risks by analyzing the potential financial performance of holdings in their portfolios under projected climate change scenarios.How Climate Change Could Impact Retirement Plan InvestmentsGAO reviewed retirement plans in the United Kingdom, Japan, and Sweden that had taken steps to incorporate climate change risks into their plan management. Officials from these plans described using engagement—such as outreach to corporate boards—to encourage companies in which they invest to address their financial risks from climate change. Officials had taken other steps as well, such as incorporating climate change as a financial risk into their policies and practices. Officials communicate information on climate-related investment risks through public disclosures and reports.The agency that oversees TSP, the Federal Retirement Thrift Investment Board (FRTIB), has not taken steps to assess the risks to TSP's investments from climate change as part of its process for evaluating investment options. Officials told us that they use a passive investment strategy and do not focus on risks to a specific industry or company. FRTIB is required by statute to invest TSP's funds passively, however, it has previously identified and addressed investment risks. For example, in the 1990s, FRTIB reviewed its investment policies and recommended adding an international equities fund and a small- and medium-capitalization stock fund, both passively managed, to incorporate classes of assets that it determined were missing from TSP's investment mix. Stakeholders in the financial sector, including an advisory panel to a federal financial regulator, have stated that it is important to consider the investment risks from climate change. Evaluating such risks is also consistent with GAO's Disaster Resilience Framework. Taking action to understand the financial risks that climate change poses to the TSP would enhance FRTIB's risk management and help it protect the retirement savings of federal workers.Why GAO Did This StudyClimate change is expected to have widespread economic impacts and pose risks to investments held by retirement plans, including the federal government's TSP. As of November 2020, TSP had 6 million active and retired federal employee participants and nearly $700 billion in assets. GAO was asked to examine how the agency that oversees TSP has addressed its exposure to such risks.This report examines (1) what is known about retirement plans' exposure to climate change-related investment risks, (2) what comparable retirement plans in other countries have done to address risks from climate change and how they communicate this information to the public, and (3) what steps FRTIB has taken to address investment risks from climate change.GAO reviewed relevant literature and interviewed representatives from investment consulting firms and other stakeholders knowledgeable about climate change and its possible financial impacts. GAO reviewed documents and interviewed officials from selected retirement plans for public- and private-sector employees in the United Kingdom, Japan, and Sweden identified as examples of plans that are addressing climate risks. GAO also reviewed TSP documents, and interviewed FRTIB officials.
- Employee Benefits Security Administration: Enforcement Efforts to Protect Participants' Rights in Employer-Sponsored Retirement and Health Benefit Plans What GAO FoundThe Department of Labor's (DOL) Employee Benefits Security Administration's (EBSA) enforcement focuses on encouraging retirement and health plans to comply with the Employee Retirement Income Security Act of 1974, as amended, and restoring benefits that were improperly withheld from plan participants. To identify violations, EBSA investigates benefit plans and their service providers. Over two-thirds of investigation leads are identified by EBSA staff. EBSA prioritizes investigating cases that may result in large recoveries or affect many participants, such as restored retirement plan contributions or payment for incorrectly denied medical claims. When agreement cannot be reached, investigators can refer civil cases to DOL's Office of the Solicitor for civil litigation. Criminal cases are referred to Department of Justice. In fiscal year 2020, almost 84 percent of investigations were civil and more than 16 percent were criminal, resulting in over $3 billion in payments to participants and plans.EBSA uses a range of strategies to improve its investigative processes and seeks to ensure enforcement quality through training and oversight. For example, EBSA makes efforts to target investigations for greater impact, such as a 2013 change to prioritize cases with the potential to affect many participants and recover significant assets. As EBSA pursued more complex and technical investigations, the number of closed cases decreased, while monetary recoveries increased (see figure). To ensure investigation quality, EBSA provides training, documents procedures, and reviews open and closed cases to evaluate whether investigation procedures have been followed.Number of EBSA Investigations Closed and Monetary Recoveries, Fiscal Years 2011-2020The COVID-19 pandemic created a number of immediate and long-term challenges for EBSA and benefit plans. For example, according to stakeholders, plans were initially concerned about how to implement provisions in the Families First Coronavirus Response Act and the CARES Act, but those concerns were addressed as the agency issued FAQs and notices. Similarly, EBSA officials reported that court closures temporarily slowed criminal cases, but as virtual hearings increased, litigation resumed. Stakeholders and EBSA officials also described potential long-term challenges, including difficulties locating the many participants who may have left a job due to the pandemic and may be unaware they left behind retirement funds.Why GAO Did This StudyMillions of Americans rely on employer benefits for their health care and future financial security. Private sector retirement plans are a key source of income for many retirees and employer-sponsored group health plans cover over one-half of all Americans. Consequently, effective oversight and enforcement are critically important to ensure the integrity of the private employee benefit system, especially in light of the economic and health effects of COVID-19 on American workers and their families. EBSA is charged with protecting the rights of participants in employer-sponsored benefit plans. As of fiscal year 2020, this included about 154 million participants in 722,000 retirement plans and 2.5 million health plans with combined assets of over $10.7 trillion.This report examines (1) how EBSA manages its enforcement process, (2) EBSA's strategies to improve investigative processes and ensure enforcement quality, and (3) the immediate and long-term challenges of COVID-19 for EBSA and private sector retirement and health plans. GAO analyzed EBSA data and documents; and federal laws, regulations, and guidance, including the CARES Act and the Families First Coronavirus Response Act. GAO interviewed officials from EBSA's national office and three regional offices, selected for variation in investigations, and locations as well as stakeholders from nine organizations knowledgeable about benefits compliance requirements, the employer-sponsored benefit industry, and participants' benefit plan experiences.For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or nguyentt@gao.gov.
- Retirement Security: Debt Increased for Older Americans over Time, but the Implications Vary by Debt Type What GAO FoundAmericans age 50 or older had significantly more debt in 2016 than in 1989, according to GAO's analysis of Survey of Consumer Finances (SCF) data.Debt.  The share of older households with debt was 71 percent in 2016 compared to 58 percent in 1989 (see figure). The median debt amount for older households with debt was about three times higher in 2016 ($55,300) than in 1989 ($18,900 in real 2016 dollars) and the share of older households with home, credit card, and student loan debt was significantly higher in 2016 than in 1989.Debt stress.  The median ratio of debt to assets—known as the leverage ratio, a measure of debt stress—for older households was twice as high in 2016 than in 1989.Adverse debt outcomes.  Measures of older individuals' adverse debt outcomes, including their share of mortgage and credit card debt that was late by at least 90 days, generally followed economic trends, peaking after the Great Recession of 2007-2009, according to GAO's analysis of Consumer Credit Panel (CCP) data from 2003 to 2019. However, the share of student loan debt that was late was significantly higher for older individuals in 2019 than in 2003.These trends in debt, debt stress, and adverse debt outcomes varied by older Americans' demographic and economic characteristics, including their age, credit score, and state of residence. For example, from 2003 to 2019, individuals in their late 70s often had higher shares of credit card and student loan debt that was late than those aged 50-74. In addition, older individuals with credit scores below 720—including those with subprime, fair, or good credit—had median student loan debt amounts that were more than twice as high in 2019 as in 2003. Further, older individuals in the Southeast and West had much higher median mortgage and student loan debt, as well as student loan delinquency rates, in 2019 than in 2003.Percent of Households Age 50 or Older with Any Debt (Left) and Median Leverage Ratio (Right) for These Households, 1989 to 2016Note: The bars above and below the lines represent the bounds of 95 percent confidence intervals.While older Americans' overall debt and debt stress decreased as they aged, those in low-income households experienced greater debt stress according to GAO's analysis of Health and Retirement Study (HRS) data, a nationally representative survey that follows the same individuals over time. The share of older households in this cohort that had debt continuously decreased as they aged, from about 66 percent of households in 1992 to 38 percent in 2016, and the median leverage ratio declined from about 19 to 13 percent over this period (see figure). However, low-income households in this cohort consistently had greater levels of debt stress than high-income households. This disparity in debt stress increased as these households aged.Estimated Percent of Households with Any Debt for Those Born in 1931-1941 (Left) and Median Leverage Ratio for Those Households from 1992-2016 (Right)Notes: The lines overlapping the bars represent 95 percent confidence intervals.According to experts GAO interviewed, differences in debt type (that is, credit card versus housing debt) and debt stress levels will have varying effects on the retirement security of different groups. For example, experts noted that credit card debt has negative implications for older Americans' retirement security because credit cards often have high, variable interest rates and are not secured by any assets. In contrast, an increase in mortgage debt may have positive effects on retirement security because a home is generally a wealth-building asset. Experts also said that older individuals with lower incomes and unexpected health expenses are likely to experience greater debt stress, which can negatively affect retirement security. Similarly, experts noted that the increased debt stress faced by low-income households is also faced by non-White households. Further, GAO's analysis of data from the Survey of Consumer Finances found that in 2016, debt stress levels were about two times higher for Black, Hispanic/Latino, and Other/multiple-race households than for White households.Experts GAO interviewed noted it is too early to evaluate the retirement security implications of the recession caused by the COVID-19 pandemic, in part because CARES Act provisions suspend or forbear certain debt payments. However, as with past recessions, the COVID-19-related recession may reveal any economic fragility among older Americans who, for example, lost jobs or cannot work because of the pandemic.Why GAO Did This StudyGAO reported in 2019 that an estimated 20 percent of older American households aged 55 or older had less than $22,000 in income in 2016 and GAO reported in 2015 that about 29 percent of older households had neither retirement savings accounts (such as a 401(k) plan) nor a defined benefit plan in 2013. Older Americans held nearly half of the total outstanding debt in 2020—and these debts may affect retirement security. The Census Bureau projects the number of older Americans will increase.GAO was asked to report on debt held by older Americans. This report examines (1) how the types, levels, and outcomes of debt changed for older Americans over time, including for different demographic and economic groups; (2) how the types and levels of debt held by the same older Americans changed as they aged, including for those in different demographic groups; and (3) the implications of these debt trends for the general retirement security of older Americans and their families.GAO analyzed data from two nationally representative surveys–the SCF (1989 through 2016 data) and the HRS (1992 through 2016 longitudinal data)–and nationally representative administrative data from the Federal Reserve Bank of New York's CCP (2003 through 2019). These datasets were the most recent available at the time of GAO's analyses. GAO also reviewed studies and interviewed experts that GAO identified from these studies to further analyze the relationship between debt and retirement security.For more information, contact Kris Nguyen, (202) 512-7215 or NguyenTT@gao.gov.
- Defined Contribution Plans: Federal Guidance Could Help Mitigate Cybersecurity Risks in 401(k)  and Other Retirement Plans What GAO FoundIn their role administering private sector employer-sponsored defined contribution (DC) retirement plans, such as 401(k) plans, plan sponsors and their service providers—record keepers, third party administrators, custodians, and payroll providers—share a variety of personally identifiable information (PII) and plan asset data among them to assist with carrying out their respective functions (see figure). The PII exchanged for DC plans typically include participant name, Social Security number, date of birth, address, username/password; plan asset data typically includes numbers for both retirement and bank accounts. The sharing and storing of this information can lead to significant cybersecurity risks for plan sponsors and their service providers, as well as plan participants.Data Sharing Among Plan Sponsors and Service Providers in Defined Contribution PlansFederal requirements and industry guidance exist that could mitigate cybersecurity risks in DC plans, such as requirements that pertain to entities that directly engage in financial activities involving DC plans. However, not all entities involved in DC plans are considered to have such direct engagement, and other cybersecurity mitigation guidance is voluntary.   Federal law nevertheless   requires plan fiduciaries to act prudently when administering plans. However, the Department of Labor (DOL) has not clarified fiduciary responsibility for mitigating cybersecurity risks, even though 21 of 22 stakeholders GAO interviewed expressed the view that cybersecurity is a fiduciary duty. Further, DOL has not established minimum expectations for protecting PII and plan assets.   DOL officials told GAO that the agency intends to issue guidance addressing cybersecurity-related issues, but they were unsure when it would be issued. Until DOL clarifies responsibilities for fiduciaries and provides minimum cybersecurity expectations, participants' data and assets will remain at risk.Why GAO Did This StudyCyber attacks against information systems (IT) are perpetuated by individuals or groups with malicious intentions, from stealing identities to appropriating money from accounts.   DC plans, which allow individuals to accumulate tax-advantaged retirement savings, increasingly rely on the internet and IT systems for their administration.   Accordingly, the need to secure these systems has become paramount. Ineffective data security controls can result in significant risks to plan data and assets. In 2018, DC plans enrolled 106 million participants and held nearly $6.3 trillion in assets, according to DOL.This report examines (1) the data that sponsors and providers exchange during the administration of DC plans and their associated cybersecurity risks, and (2) efforts to assist sponsors and providers to mitigate cybersecurity risks during the administration of DC plans. GAO interviewed key entities involved with DC plans, such as sponsors and record keepers, DOL officials and industry stakeholders; and reviewed relevant federal laws, regulations, and guidance.
- Elder Justice: HHS Could Do More to Encourage State Reporting on the Costs of Financial Exploitation What GAO FoundMost state Adult Protective Services (APS) agencies have been providing data on reports of abuse to the Department of Health and Human Services (HHS), including data on financial exploitation, although some faced challenges collecting and submitting these data. Since states began providing data to HHS's National Adult Maltreatment Reporting System (NAMRS) in 2017, they have been voluntarily submitting more detailed data on financial exploitation and perpetrators each year (see figure). However, some APS officials GAO interviewed in selected states said collecting data is difficult, in part, because victims are reluctant to implicate others, especially family members or other caregivers. APS officials also said submitting data to NAMRS was challenging initially because their data systems often did not align with NAMRS, and caseworkers may not have entered data in the system correctly. HHS has provided technical assistance and grant funding to help states address some of these challenges and help provide a better picture of the prevalence of the various types of financial exploitation and its perpetrators nationwide.Number of States That Provide Data on Financial Exploitation and Perpetrators to NAMRSStudies estimate some of the costs of financial exploitation to be in the billions, but comprehensive data on total costs do not exist and NAMRS does not currently collect cost data from APS agencies. The Consumer Financial Protection Bureau found actual losses and attempts at elder financial exploitation reported by financial institutions nationwide were $1.7 billion in 2017. Also, studies published from 2016 to 2020 from three states—New York, Pennsylvania, and Virginia—estimated the costs of financial exploitation could be more than $1 billion in each state alone. HHS does not currently ask states to submit cost data from APS casefiles to NAMRS, though officials said they have begun to reevaluate NAMRS with state APS agencies and other interested parties, including researchers, and may consider asking states to submit cost data moving forward. Adding cost data to NAMRS could make a valuable contribution to the national picture of the cost of financial exploitation. Recognizing the importance of these data, some APS officials GAO interviewed said their states have developed new data fields or other tools to help caseworkers collect and track cost data more systematically. HHS officials said they plan to share this information with other states to make them aware of practices that could help them collect cost data, but they have not established a timeframe for doing so.Why GAO Did This StudyElder financial exploitation—the fraudulent or illegal use of an older adult's funds or property—has far-reaching effects on victims and society. Understanding the scope of the problem has thus far been hindered by a lack of nationwide data. In 2013, HHS worked with states to create NAMRS, a voluntary system for collecting APS data on elder abuse, including financial exploitation. GAO was asked to study the extent to which NAMRS provides information on elder financial exploitation.This report examines (1) the status of HHS's efforts to compile nationwide data through NAMRS on the extent of financial exploitation and the challenges involved, and (2) what is known about the costs of financial exploitation to victims and others. GAO analyzed NAMRS data from fiscal year 2016 through 2019 (the most recent available); reviewed relevant federal laws; and interviewed officials from HHS, other federal agencies, elder abuse prevention organizations, and researchers. GAO also reviewed APS documents and spoke with officials in eight states, selected based on their efforts to study, collect, and report cost data; and reviewed studies on financial exploitation.
- Retirement Security: Other Countries' Experiences with Caregiver Policies What GAO FoundFor over a decade, Australia, Germany, and the United Kingdom (UK) have developed and implemented national approaches—including strategies, laws, and policies—to support family caregivers, according to experts GAO interviewed. Specifically, experts noted that these efforts could help caregivers maintain workforce attachment, supplement lost income, and save for retirement. As a result, their retirement security could improve. For example, experts said:Care leave allows employees to take time away from work for caregiving responsibilities. Australia's and Germany's policies allow for paid leave (10 days per year of work or instance of caregiving need, respectively), and all three countries allow for unpaid leave though the duration varies.Caregivers can receive income for time spent caregiving. Australia and the UK provide direct payments to those who qualify. Germany provides indirect payments, whereby the care recipient receives an allowance, which they can pass on to their caregiver.Other Countries' Policies to Support CaregiversExperts in all three countries cited some challenges with caregiver support policies. For example, paid leave is not available to all workers in Germany, such as those who work for small firms. In Australia and the UK, experts said eligibility requirements for direct payments (e.g., limits on hours worked or earnings) can make it difficult for someone to work outside their caregiving role. Experts in all three countries said caregivers may be unaware of available supports. For example, identifying caregivers is a challenge in Australia and the UK.As required under the RAISE Family Caregivers Act, the Department of Health and Human Services (HHS) convened the Family Caregiving Advisory Council (FCAC)—a stakeholder group that is to jointly develop a national family caregiving strategy. As of July 2020, HHS and the FCAC reported limited information on other countries' approaches, and neither entity had concrete plans to collect more. In September 2020, HHS officials provided sources they recently reviewed on selected policies in other countries, and they further noted that HHS staff, FCAC members, and collaborating partners have subject-matter expertise and bring perspectives about other countries' efforts into their discussions.Why GAO Did This StudyFamily caregivers play a critical role in supporting the elderly population, which is growing at a rapid rate worldwide. However, those who provide eldercare may risk their own long-term financial security. Other countries have implemented policies to support caregivers. In recognition of challenges caregivers face in the United States, Congress directed HHS, in consultation with other federal entities, to develop a national family caregiving strategy. GAO was asked to provide information about other countries' efforts that could improve the retirement security of parental and spousal caregivers.This report examines (1) other countries' approaches to support family members who provide eldercare, (2) challenges of these approaches, and (3) the status of HHS' efforts to develop a national family caregiving strategy. GAO conducted case studies of three countries—Australia, Germany, and the United Kingdom—selected based on factors including rates of informal care (i.e., help provided to older family members or friends) and the types of policies they have that could improve caregivers' retirement security. GAO interviewed government officials and experts and reviewed relevant federal laws, research, and documents.GAO's draft report recommended that HHS collect additional information about other countries' experiences. In response, in September 2020, HHS provided an update on its efforts to do so. As a result, GAO removed the recommendation and modified the report accordingly.For more information, contact Tranchau (Kris) T. Nguyen at or nguyentt@gao.gov.
- Retirement Security: Older Women Report Facing a Financially Uncertain Future What GAO FoundIn all 14 focus groups GAO held with older women, women described some level of anxiety about financial security in retirement. Many expressed concerns about the future of Social Security and Medicare benefits, and the costs of health care and housing. Women in the groups also cited a range of experiences that hindered their retirement security, such as divorce or leaving the workforce before they planned to (see fig.). Women in all 14 focus groups said their lack of personal finance education negatively affected their ability to plan for retirement. Many shared ideas about personal finance education including the view that it should be incorporated into school curriculum starting in kindergarten and continuing through college, and should be available through all phases of life.Women Age 70 and Over by Marital StatusNote: Percentages do not add up to 100 percent due to roundingIndividual women's financial security is also linked to their household where resources may be shared among household members. According to the 2016 Survey of Consumer Finances, among households with older women, about 23 percent of those with white respondents and 40 percent of those with African American respondents fell short of a measure of retirement confidence, indicating their income was not sufficient to maintain their standard of living. The likelihood of a household reporting high retirement confidence rose in certain cases. For example among households of similar wealth, those with greater liquidity in their portfolio and those with defined benefit plan income were more likely to report high retirement confidence.Why GAO Did This StudyThis testimony summarizes the information contained in GAO's July 2020 report, entitled Retirement Security: Older Women Report Facing a Financially Uncertain Future (GAO-20-435).For more information, contact Tranchau Nguyen at&nbsp;(202) 512-2660 or&nbsp;NguyenTT@gao.gov.
- Social Security Contracting: Relevant Guidance Should Be Revised to Reflect the Role of Contracting Personnel in Software Development What GAO FoundThe approach followed by the Social Security Administration (SSA) in awarding and overseeing contracts generally aligns with the requirements GAO reviewed. For the 27 contracts and orders GAO reviewed, SSA varied its approach depending on the contract type used and the dollar value. For example, one of SSA's written acquisition plans acknowledged the risks to the government associated with time-and-materials contracts. From fiscal year 2015 through 2019, SSA obligated 22.7 percent of its contract dollars on time-and-material contracts compared with 10.5 percent at other civilian agencies. In addition, from fiscal year 2015 through 2019, the rate at which SSA used competitive award procedures to achieve the best value for the agency increased by nearly 20 percentage points. This increase was the result of the agency's increased use of competition in its contracting for information technology (IT).SSA relies heavily on IT resources to support the administration of its programs and related activities. During fiscal years 2015 through 2019, about 65 percent of the $8.3 billion in contract obligations were for IT goods and services compared with about 16 percent at other civilian agencies. The figure shows the percentage of obligations for IT goods and services at SSA.Percentage of Social Security Administration's Contract Obligations for Goods and Services during Fiscal Years 2015 through 2019SSA adopted an Agile approach to software development for some of its critical IT programs in 2015. An Agile approach to software development involves incremental improvements to software rather than the more traditional single-track approach. Subsequently, SSA developed an IT modernization plan in 2017 that states SSA will use an Agile methodology. GAO's draft Agile Assessment Guide states that an organization's acquisition policies and guidance should support an Agile development approach and identify clear roles for contracting personnel, since this is a different approach than federal agencies previously used. However, GAO found SSA's acquisition handbook does not specifically identify a role for contracting personnel with respect to contracts and task orders involving Agile, which GAO has identified as a leading practice. Identifying a role for contracting personnel in the Agile process should better position SSA to achieve its IT modernization goals and provide appropriate levels of oversight.Why GAO Did This StudySSA is responsible for delivering services that touch the lives of virtually every American. To do so, SSA relies on a variety of products and services, including information technology (IT) systems. SSA obligates approximately $1.5 billion annually to procure goods and services, 65 percent of which are IT-related.GAO was asked to assess how SSA implements its contracting and acquisition processes. This report examines: (1) how SSA awards and oversees contracts for products and services, and (2) the extent to which SSA has updated its guidance regarding the role of contracting personnel in software development efforts.GAO reviewed SSA's acquisition policies, interviewed contracting officials, and reviewed a non-generalizable sample of 27 high- and lower value contracts and orders with dollars obligated in fiscal years 2014 through 2018. GAO also examined data from fiscal years 2015-2019 to determine what SSA contracted for and reviewed IT guidance. GAO compared SSA's practices to leading practices for Agile software development with respect to the roles of contracting personnel.
- Retirement Security: DOL Could Better Inform Divorcing Parties About Dividing Savings What GAO FoundAlthough more than one-third of adults aged 50 or older have experienced divorce, few people seek and obtain a Qualified Domestic Relations Order (QDRO), according to large plan sponsors GAO surveyed. A QDRO establishes the right of an alternate payee, such as a former spouse, to receive all or a portion of the benefits payable to a participant under a retirement plan upon separation or divorce. There are no nationally representative data on the number of QDROs, but plans and record keepers GAO interviewed and surveyed reported that few seek and obtain QDROs. For example, the Pension Benefit Guaranty Corporation administered retirement benefits to about 1.6 million participants, and approved about 16,000 QDROs in the last 10 years. GAO's analysis of other survey data found about one-third of those who experienced a divorce from 2008 to 2016 and reported their former spouse had a retirement plan also reported losing a claim to that spouse's benefits. Many experts stated that some people—especially those with lower incomes—face challenges to successfully navigating the process for obtaining a QDRO, including complexity and cost.Individuals seeking a QDRO may be charged fees for preparation and review of draft orders before they are qualified as QDROs and, according to experts GAO interviewed, these fees vary widely. These experts cited concerns about QDRO review fees that they said in some cases were more than twice the amount of typical fees, and said they may discourage some from pursuing QDROs. Department of Labor (DOL) officials said the agency generally does not collect information on QDRO fees. Exploring ways to collect and analyze information from plans on fees could help DOL ensure costs are reasonable.Divorcing parties who pursue QDROs often had orders not qualified due to lacking basic information, according to plans and record keepers we surveyed (see figure).Plan Administrators and Record Keepers Reported Reasons for Not Qualifying a Domestic Relations Order (DRO) DOL provides some information to help divorcing parties pursue QDROs. However, many experts cited a lack of awareness about QDROs by the public and said DOL could do more to make resources available to divorcing parties. Without additional outreach by DOL, divorcing parties may spend unnecessary time and resources drafting orders that are not likely to be qualified, resulting in unnecessary expenditures of time and money.Why GAO Did This StudyA domestic relations order (DRO) is a court-issued judgment, decree, or order that, when qualified by a retirement plan administrator, can divide certain retirement benefits in connection with separation or divorce and as such provide crucial financial security to a former spouse. DOL has authority to interpret QDRO requirements. GAO was asked to review the process for obtaining QDROs. This report examines what is known about (1) the number of QDRO recipients, (2) the fees and other expenses for processing QDROs, and (3) the reasons plans do not initially qualify DROs and the challenges experts identify regarding the QDRO process.To conduct this work, GAO analyzed available data, and a total of 14 responses from two surveys of large private sector plans and account record keepers, and interviewed 18 experts including practitioners who provide services to divorcing couples.
- Federal Employees' Compensation Act: Comparisons of Benefits in Retirement and Actions Needed to Help Injured Workers Choose Best Option What GAO FoundFactors such as the timing of an injury in a career affect how Federal Employees' Compensation Act (FECA) total disability benefits compare to income security from typical federal retirement. The FECA program compensates federal employees for lost wages from work-related injuries, among other benefits. FECA recipients can receive this compensation for as long as their disability continues. At retirement age, they can remain on FECA or, instead, choose to receive their benefits from the Federal Employees Retirement System (FERS). Thus, FECA benefits represent a significant portion of retirement income for some injured federal employees. Through simulations, GAO found that factors such as the length of retirees' careers absent injury affected how similar their hypothetical FECA benefits packages were to their FERS packages in 2018. FERS benefits increase substantially the longer a federal employee works. As a result, median current and reduced FECA packages were greater than the FERS median for retirees with shorter careers absent injury. However, median FECA packages were similar to or less than FERS for retirees with longer careers (see figure).Median FECA Benefits as a Percentage of FERS Benefits by Career Length Absent an InjuryFor FECA recipients who choose to compare their FECA and FERS benefit options at retirement, estimates for most components of those benefits packages are available. However, the Department of Labor (DOL) does not routinely remind recipients to compare benefits, so they may be unaware of their options or how to consider them. In addition, DOL and the Social Security Administration (SSA) use a manual and highly complex process to calculate one key component of a FECA recipient's compensation in retirement related to Social Security benefits. As a result, estimates of FECA benefits in retirement that include this component are not readily available prior to retirement. These challenges hinder recipients' ability to accurately compare their options and may result in some recipients not choosing their best option at retirement.Why GAO Did This StudyThe President's budgets for fiscal years 2019-2021 have proposed several FECA reforms, including reducing disability compensation at retirement age. In a series of reports published in 2012, GAO analyzed the effects of similar proposed revisions to FECA compensation. GAO was asked to update its FECA and FERS benefit comparisons.This report examines (1) how FERS and total disability FECA benefits at retirement age compare under current and previously proposed reduced FECA compensation rates, and (2) the extent to which FECA recipients have access to information to compare their FECA and FERS benefits options. GAO compared the FERS benefits selected retirees received in 2018 with the hypothetical total disability FECA benefits they would have received from simulated injuries. GAO reviewed agency documents and interviewed officials from DOL, SSA, and other federal agencies.
- Retirement Security: Older Women Report Facing a Financially Uncertain Future What GAO FoundIn all 14 focus groups GAO held with older women, women described some level of anxiety about financial security in retirement. Many expressed concerns about the future of Social Security and Medicare benefits, and the costs of health care and housing. Women in the groups also cited a range of experiences that hindered their retirement security, such as divorce or leaving the workforce before they planned to (see fig.). Women in all 14 focus groups said their lack of personal finance education negatively affected their ability to plan for retirement. Many shared ideas about personal finance education including the view that it should be incorporated into school curriculum starting in kindergarten and continuing through college, and should be available through all phases of life.Women Age 70 and Over by Marital StatusNote: Percentages do not add up to 100 percent due to rounding.Individual women's financial security is also linked to their household where resources may be shared among household members. According to the 2016 Survey of Consumer Finances, among households with older women, about 23 percent of those with white respondents and 40 percent of those with African American respondents fell short of a measure of retirement confidence, indicating their income was not sufficient to maintain their standard of living. The likelihood of a household reporting high retirement confidence rose in certain cases. For example among households of similar wealth, those with greater liquidity in their portfolio and those with defined benefit plan income were more likely to report high retirement confidence.Why GAO Did This StudyOlder adults represent a growing portion of the U.S. population and older women have a longer life expectancy, on average, than older men. Prior GAO work has found that challenges women face during their working years can affect their lifetime earnings and retirement income. For example, we found women were overrepresented in low wage professions, paid less money than their male counterparts during their careers, and were more likely to leave the workforce to care for family members. Taken together, these trends may have significant effects on women's financial security in retirement.GAO was asked to report on the financial security of older women. This report examines (1) women retirees' perspectives on their financial security, and (2) what is known about the financial security of older women in retirement.GAO held 14 non-generalizable focus groups with older women in both urban and rural areas in each of the four census regions. GAO also analyzed data from three nationally representative surveys—the 2019 Current Population Survey, the Health and Retirement Study (2002-2014 longitudinal data), and the 2016 Survey of Consumer Finances.For more information, contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao.gov.