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April 4, 2013 /PRNewswire/ -- A report just released by the U.S. Government Accountability Office (GAO), "401(k) Plans: Labor and IRS Could Improve the Rollover Process for Participants," showed that the current 401(k) rollover system is complex, confusing, lacks consistency and favors moving money into individual retirement accounts (IRAs).
Aon Hewitt, the global human resource solutions business of
Aon plc (NYSE:AON), agrees with the GAO's findings and recommendations and urges companies to help workers reach their retirement savings goals by encouraging them to keep retirement dollars in the employer-provided retirement system. According to Aon Hewitt, employees who roll plan balances into retail accounts without fully understanding their options significantly increase their risk of not meeting their financial needs in retirement.
"The GAO's report brings to light very real problems with the current rollover system," said
Alison Borland, vice president Retirement Solutions and Strategies at Aon Hewitt. "Keeping retirement dollars in the employer-provided system is paramount to helping workers ensure that they are adequately prepared for retirement, and we have long been concerned about the difficult process workers face when trying to roll one employer 401(k) plan into another. Aon Hewitt believes the GAO recommendations for improving the rollover process would go a long way to ensure that workers' best-interest and financial security is a top priority for employers and plan providers."
According to Aon Hewitt, many workers do not intuitively understand the advantages of keeping retirement savings dollars in the employer-provided system and do not have a trusted source of clear, understandable, unbiased education about their options. Consequently, it is crucial for employers to educate and communicate with employees about the benefit of participating in a qualified plan—and to ensure the information being provided to employees by third parties with whom they have a relationship is fair, unbiased and in the best interest of plan participants.