Defined Contribution Plans (such as 401(k)s) and IRAs

The United States Office of Personnel Management (OPM) analyzed participation in the Thrift Saving Plan (TSP) to identify employee participation rates and determine if the data suggests possible actions to be taken to improve the methods by which we educate Federal employees so they will be better able to plan for retirement.

Low participation rates limit the effectiveness of 401(k) plans as a reliable source of retirement income. About one in five workers eligible to participate in their employer’s 401(k) plans do not enroll (Munnell, Golub-Sass, and Muldoon 2009). Firms can raise participation rates by automatically enrolling employees as soon as they become eligible.

GAO was asked to analyze (1) the incidence, amount, and relative significance of the different forms of 401(k) leakage; (2) how plans inform participants about hardship withdrawal provisions, loan provisions, and options at job separation, including the short- and long-term costs of each; and (3) how various policies may affect the incidence of leakage.

The Survey of Consumer Finances is a triennial survey of a nationally representative sample of U.S. households, which collects detailed information on households’ assets, liabilities, and demographic characteristics.