Seven out of 30 money management firms encouraged IRA rollovers with misleading statements, according to a GAO report to be released today.
The Washington Post’s Michael Fletcher reported Tuesday on the GAO study, which looked into misleading fee disclosure and marketing practices by money management companies regarding IRA rollovers from 401(k) plans. Undercover personnel from GAO contacted 30 money management firms, posing as workers about to change jobs. Seven of the firms provided incorrect information, including the statement that there would be no cost to roll over the money. The GAO also found that five of 10 websites indicated that there were no fees for opening an IRA.
Their conclusion: Even though it would be better for employees to leave their money in their current plans, the firms encouraged IRA rollovers with misleading statements to harvest bigger fees.
In response, Rep. George Miller (D-CA) and Sens. Bill Nelson (D-FL) and Tom Harkin (D-Iowa) called on the DOL and Treasury to provide uniform disclosure notices, with IRA fees clearly stated, thus encouraging workers to keep the money in their employer sponsored plans. Roughly 90% of new IRA money comes from employer plans.
