Individual Retirement Accounts: Formalizing Labor's and IRS's Collaborative Efforts Could Strengthen Oversight of Prohibited Transactions

30 Pages Posted: 17 Jul 2019

See all articles by Jay McTigue

Jay McTigue

Government Accountability Office (GAO)

Charles A. Jeszeck

Government Accountability Office (GAO)

MaryLynn Sergent

Government Accountability Office (GAO)

David Lehrer

Government Accountability Office (GAO); National Academy of Social Insurance (NASI)

Ted Burik

Government Accountability Office (GAO)

Susan Chin

Government Accountability Office (GAO)

Steven Flint

Government Accountability Office (GAO)

Emily Gruenwald

Government Accountability Office (GAO)

Mark Kehoe Mark Kehoe

Government Accountability Office (GAO)

Jungjin Park

Government Accountability Office (GAO)

David Reed

Government Accountability Office (GAO)

James Bennett

Government Accountability Office (GAO)

Amy Bowser

Government Accountability Office (GAO)

Jacqueline Chapin

Government Accountability Office (GAO)

Ed Nannenhorn

Government Accountability Office (GAO)

Andrew J. Stephens

Government Accountability Office (GAO)

Walter Vance

Government Accountability Office (GAO)

Adam Wendel

Government Accountability Office (GAO)

Date Written: July 7, 2019

Abstract

The Department of Labor (DOL) has a process to grant administrative exemptions for individual retirement account (IRA) transactions that would otherwise be prohibited by law, such as an IRA buying investment property from the IRA owner. DOL evaluates applications using statutory criteria and follows administrative procedures codified in regulations. Applications for proposed transactions that are substantially similar to certain other transactions previously granted exemptions may follow an expedited process.

GAO found that roughly half (56) of the IRA prohibited transaction exemption applications it reviewed were withdrawn by the applicant before the review process was completed. In reviewing processed applications, GAO found that most of the prohibited transactions for which an exemption was sought involved the sale of IRA assets. With regard to DOL's application review process, GAO found that DOL has not sufficiently documented internal policies and procedures to help ensure effective internal control of its process. Documenting procedures could increase transparency about how applications are handled, reduce the risk of DOL employees carrying out their duties inconsistently, and provide a means to retain organizational knowledge should key personnel leave unexpectedly.

Although DOL and the Internal Revenue Service (IRS) share some information as part of their oversight responsibility for prohibited IRA transactions, no formal mechanism exists to help guide collaboration between the agencies. Of the 124 IRA applications GAO reviewed, only eight reflected DOL contact with IRS. GAO found that DOL has information about requested exemptions to prohibited IRA transaction rules that could be useful to IRS in carrying out its oversight responsibilities. For example, DOL does not share information on denials — information that could be useful as prohibited transaction examples for IRS examiner training and educational outreach to IRA owners. In prior work on interagency collaboration, GAO has found that formal agreements, such as a memorandum of understanding, can help agencies monitor, evaluate, and update interagency collaboration. Formalizing the sharing of information between DOL and IRS regarding IRA prohibited transaction exemptions could help the agencies better support their current coordination efforts and identify additional opportunities for greater collaboration.

Keywords: retirement, pensions, ira, iras, dol, irs, gao

Suggested Citation

McTigue, James and Jeszeck, Charles A. and Sergent, MaryLynn and Lehrer, David and Burik, Ted and Chin, Susan and Flint, Steven and Gruenwald, Emily and Mark Kehoe, Mark Kehoe and Park, Jungjin and Reed, David and Bennett, James and Bowser, Amy and Chapin, Jacqueline and Nannenhorn, Ed and Stephens, Andrew J. and Vance, Walter and Wendel, Adam, Individual Retirement Accounts: Formalizing Labor's and IRS's Collaborative Efforts Could Strengthen Oversight of Prohibited Transactions (July 7, 2019). Available at SSRN: https://ssrn.com/abstract=3420119 or http://dx.doi.org/10.2139/ssrn.3420119

James McTigue (Contact Author)

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Charles A. Jeszeck

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

MaryLynn Sergent

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

David Lehrer

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

National Academy of Social Insurance (NASI) ( email )

1776 Massachusetts Avenue, NW
Suite 615
Washington, DC 20036-1904
United States

Ted Burik

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Susan Chin

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Steven Flint

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Emily Gruenwald

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Mark Kehoe Mark Kehoe

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Jungjin Park

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

David Reed

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

James Bennett

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Amy Bowser

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Jacqueline Chapin

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Ed Nannenhorn

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Andrew J. Stephens

Government Accountability Office (GAO)

441 G St., NW
Washington, DC 20548
United States

Walter Vance

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Adam Wendel

Government Accountability Office (GAO) ( email )

441 G St., NW
Washington, DC 20548
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
10
Abstract Views
261
PlumX Metrics