GAO urges consideration of spousal consent for 401(k) withdrawals

The U.S. Government Accountability Office found married participants in some 401(k) plans removed funds without their spouses’ knowledge, causing financial and personal hardships, and recommended Congress consider aligning spousal-consent rules for withdrawals with protections that apply to many pensions and the federal Thrift Savings Plan. The report was released last month.

GAO staff opened the review at the request of bipartisan lawmakers. Researchers interviewed plan sponsors, industry representatives and three current or former spouses who experienced unauthorized withdrawals. The agency noted most defined-contribution plans require a spouse’s signature to change a beneficiary, while the majority of 401(k) plans do not require spousal consent for participant-initiated withdrawals, loans or distributions.

The review cited 2021 survey data showing 11% of married couples with at least one defined-contribution account removed assets from those accounts, and 22% of couples with either a 401(k)-type plan or an IRA reported a withdrawal from such an account. The GAO report said the overall share of withdrawals that occurred without spouse knowledge is unclear.

Stakeholders and the GAO included examples of large and damaging transactions. Two industry sources described withdrawals of $500,000 or more. One spouse told investigators her husband “had taken the whole amount out of the 401(k) account without informing me or telling me anything,” a fact she discovered only after he began overspending. The report also cited a case in which a spouse reported becoming homeless after a partner drained a retirement account.

The agency framed the issue as part of broader concerns about financial secrecy and potential financial abuse. Preston Cherry, founder of Concurrent Wealth Management in Houston, described financial infidelity as one partner keeping money secrets or not being transparent. Financial behaviorist Jacquette Timmons recounted a newlywed who was surprised to learn her husband had removed retirement assets after courting her lavishly.

The report presented options for policymakers and outlined trade-offs. Requiring spousal consent for withdrawals could strengthen legal protections for spouses during divorce and might reduce secretive behavior. Stakeholders warned that added consent rules would increase administrative costs for recordkeepers and plan sponsors, slow transaction processing and could alert an abusive partner to a withdrawal. The GAO suggested alternatives including mandatory notifications to spouses or a dollar threshold that would trigger consent requirements.

The report noted recent legal changes that provide some protections. The Secure 2.0 Act and related regulations expanded emergency distribution options for victims of domestic abuse, creating exceptions to standard consent rules in qualifying cases. The American Academy of Actuaries recommended requiring spousal consent for any distribution, loan or rollover and improving spouses’ access to retirement-plan information to help ensure benefits are available during divorce.

Tranchau “Kris” Nguyen, director of the GAO unit that produced the report, highlighted the emotional and legal consequences the agency documented, including feelings of betrayal and effects on household wealth. The GAO did not make a single recommendation; it presented options for Congress and regulators to consider.

The report also cited academic research on couples’ financial conversations. A study of 1,900 married U.S. adults found many couples underestimated how useful and agreeable money talks would be, and that such conversations often improve understanding and agreement, a finding the study’s lead author, Ximena Garcia-Rada of Texas A&M, emphasized as encouraging earlier financial discussions between partners.