GAO Should Redo Its Recent Retirement Plan Study

The Government Accountability Office recently reported its study “Private Pensions: Some Key Features Lead to an Uneven Distribution of Benefits.” Unfortunately, the study relied heavily on the Federal Reserve System's 2007 Survey of Consumer Finances (SCF) to identify characteristics of individuals participating in DC plans. The GAO could have and should have used data from federal income tax filings which is far more accurate.

A study by Irena Dushi and Howard M. Iams published by the Social Security Administration in 2010 found that surveys of individuals substantially underreport defined contribution plan participation. In their report the authors stated “questions about pension type, participation, and contributions are complex with concepts that the layperson may not use. Consequently, respondents may be inclined to nonresponse and therefore missing data are generated.” I would add that underreporting is exacerbated because defined contribution plan nomenclature is not universally standard. At one company the plan description may include words like “401(k)” or “retirement” while at another the plan description might use words like “profit sharing” or “savings” with no mention of either 401(k) or retirement—and what about 403(b) plans, 457 plans or Simple IRAs?

As we discuss the future of the employer-sponsored defined contribution system it is critical that we use the most accurate information possible. The GAO should redo its study using what really happened and not a projection based on a survey.