EBSA (Formerly PWBA) Federal Register Notice
Proposed Revision of Annual Information Return/Reports [09/03/1997]
Due to the large file size, this PDF has been divided into three parts:
[Pages 46555 - 46605] [Pages
46606 - 46656] [Pages 46656 - 46663]
Volume 62, Number 170, Page 46555-46663
[Federal Register: September 3, 1997 (Volume 62, Number 170)]
[Notices]
[Page 46555-46605]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03se97-137]
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_______________________________________________________________________
Part II
Department of Labor
Pension and Welfare Benefits Administration
Department of the Treasury
Internal Revenue Service
Pension Benefit Guaranty Corporation
_______________________________________________________________________
Proposed Revision of Annual Information Return/Reports; Notice
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
DEPARTMENT OF THE TREASURY
Internal Revenue Service
PENSION BENEFIT GUARANTY CORPORATION
Proposed Revision of Annual Information Return/Reports
AGENCIES: Department of Labor, Department of the Treasury, Pension
Benefit Guaranty Corporation.
ACTION: Notice of proposed forms revisions.
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SUMMARY: This document contains a proposal by the Department of Labor,
the Internal Revenue Service, and the Pension Benefit Guaranty
Corporation (the Agencies) to streamline and simplify the annual
return/report forms (the Form 5500 Series) filed for employee pension,
welfare and fringe benefit plans under the Employee Retirement Income
Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986, as
amended (the Code).
Dates, Written Comments and Public Hearing: The Agencies invite
interested persons to submit written comments regarding the revised
forms. Written comments (preferably 4 copies) should be submitted to:
Office of Regulations and Interpretations, Pension and Welfare Benefits
Administration, U.S. Department of Labor, Room N-5669, 200 Constitution
Ave., NW, Washington, DC 20210, Attention: Proposed Forms Revisions.
Written comments on the revised forms must be received by the
Department of Labor on or before November 3, 1997, and should include a
reference to the relevant form, question, and related instruction.
A joint public hearing on the proposed revised forms will be held
on November 17 and (if necessary) November 18, 1997, beginning at 10:00
a.m., in the Auditorium, Frances Perkins Building, U.S. Department of
Labor, 200 Constitution Ave., NW, Washington, DC. Any interested person
who wishes to present oral testimony at the hearing should submit on or
before November 3, 1997 a written request to be heard, including a
statement of the topics to be discussed. The request should be
submitted to the Office of Regulations and Interpretations at the
address above: Attention: Form 5500 Revisions Hearing. An agenda
indicating the order of presentation of oral comments will be prepared.
In the absence of special circumstances, each commentator will be
allotted 10 minutes for his or her presentation. Information about the
agenda may be obtained on or after November 3, 1997 by contacting
George M. Holmes, Jr., Pension and Welfare Benefits Administration,
U.S. Department of Labor, (202) 219-8515. Individuals not listed in the
agenda will be allowed to make oral comments at the hearing to the
extent time permits. Those individuals who make oral comments at the
hearing should be prepared to answer questions regarding their
comments. The hearing will be transcribed. All submissions will be open
to public inspection in the Public Disclosure Room, Pension and Welfare
Benefits Administration, Room N-5638, 200 Constitution Ave., NW,
Washington, DC 20210.
The Agencies intend that, if adopted, the revised forms will be
effective for plan years beginning on or after January 1, 1998.
FOR FURTHER INFORMATION CONTACT: George M. Holmes, Jr., Pension and
Welfare Benefits Administration, U.S. Department of Labor, (202) 219-
8515, for questions relating to the proposed Form 5500 as well as
Schedules A, C, D, G, FIN and FIN-SP. James Flannery, Internal Revenue
Service, (202) 622-6214, for questions relating to Schedules B, E, F,
P, PEN, Q, and SSA. James J. Bloch, Pension Benefit Guaranty
Corporation, (202) 326-4080 (x3530), for questions relating to line 10
of Schedule PEN as well as questions regarding information requirements
under Title IV of ERISA. For further information on any item not
mentioned above, contact Mr. Holmes. The telephone numbers referenced
above are not toll-free numbers.
SUPPLEMENTARY INFORMATION: Under part 1 of Title I of ERISA, Title IV
of ERISA, and the Code, as amended, administrators of pension and
welfare benefit plans (collectively employee benefit plans) subject to
those provisions are required to file return/reports annually
concerning, among other things, the financial condition and operations
of the plans. Employers sponsoring certain fringe benefit plans and
other plans of deferred compensation that are not subject to Title I of
ERISA are also required under the Code to file certain information
annually with the IRS. These annual reporting requirements are
satisfied generally by filing the Form 5500 Series in accordance with
its instructions and the related regulations.
The existing Form 5500 Series includes the Form 5500 Annual Return/
Report of Employee Benefit Plan (with 100 or more participants), Form
5500-C Return/Report of Employee Benefit Plan (with fewer than 100
participants), Form 5500-R Registration Statement of Employee Benefit
Plan (with fewer than 100 participants), and the statements and
schedules required to accompany the forms. Currently, plans with fewer
than 100 participants file the longer Form 5500-C at least every third
year, and the shorter Form 5500-R registration statement in the two
intervening years. The Form 5500-EZ Annual Return of One-Participant
(Owners and Their Spouses) Retirement Plan is specifically excluded
from consideration in this publication.
In an effort to simplify and streamline the annual return/report
and to reduce the reporting burden on filers, the agencies have
developed one Form 5500 for use by both ``large plan'' filers (plans
that previously filed the Form 5500) and ``small plan'' filers (plans
that previously were eligible to file the Form 5500-C/R). The new form
is intended to:
<bullet> Reduce the total amount of information required to be
reported for many plans by eliminating information that is not useful
to accomplish enforcement, research, or other statutorily mandated
missions;
<bullet> Provide plans using simple tax qualification structures
and financial operations with correspondingly streamlined annual
reporting requirements;
<bullet> Allow large and small pension plan filers to report
information on coverage requirements for qualified plans in accordance
with the three-year testing cycle permitted under Rev. Proc. 93-42,
1993-2 C.B. 540;
<bullet> Target reporting requirements so that welfare plans
generally complete fewer items than pension plans, and small plans
complete fewer items than large plans;
<bullet> Establish the Form 5500 as the standardized reporting
format for all so-called ``direct filing entities''--common/collective
trusts, pooled separate accounts, master trusts, 103-12 investment
entities, and group insurance arrangements;
<bullet> Eliminate redundant items and improve questions that
historically produced frequent technical filing errors; and
<bullet> Reduce government and filer costs associated with filing,
receiving and processing annual reports, speed government processing,
and enable plans and their service providers to establish more
streamlined record keeping and filing support systems.
The proposal eliminates the Form 5500-C/R, but maintains limited
financial reporting similar to the Form
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5500-R for small plans. Further, plans that are currently exempt from
filing a return/report (such as certain small unfunded/insured welfare
plans and certain SEPs) or that are eligible for limited reporting
options (such as certain Code section 403(b) plans) will continue to be
eligible for that annual reporting relief.
The proposal restructures the Form 5500 along the lines of tax
returns familiar to individual and corporate taxpayers--a simple one-
page main form with basic information necessary to identify the plan
for which the report is filed along with a checklist to indicate the
schedules being filed applicable to the filer's specific type of plan.
For most plans, the basic identifying information does not change from
year to year and pre-printing this information should ease reporting
burdens and reduce filing errors. The Agencies are evaluating the
feasibility of pre-printing the basic identifying information on the
Form 5500 after the first full filing-year cycle under the new computer
scannable forms discussed below. The structure of the proposed form
should also aid filers by allowing them to assemble and file a report
that is ``customized'' to their type of plan. The Agencies are also
publishing as part of this proposal revised filing instructions that
are intended to be easier to use, including a quick reference chart
with guidelines on which schedules must be filed for each type of Form
5500 filer (large and small pension plans, large and small welfare
plans, Direct Filing Entities and fringe benefit plans).
Taking into consideration the Agencies' enforcement, research and
policy needs, as well as the Department of Labor's participant/public
disclosure obligations, the Agencies believe this restructuring, and
the other revisions of the Form 5500 discussed below, will reduce the
burdens and costs attributable to compliance with the annual reporting
requirements.
Although this publication concerns proposed revisions of the Form
5500 Series, the Agencies believe meaningful burden hour and cost
reductions can be achieved only through integrated implementation of
changes to the government's system to process the forms. Accordingly,
the Department of Labor is preparing a Request for Proposal (RFP) for a
contractor to develop and implement a new system to simplify and
expedite the receipt and processing of the Form 5500 Series. The new
system is to rely on electronic filing with optical scanning technology
and optical character recognition to computerize the paper forms. Under
the new system, the paper forms will have to be reformatted to be
computer scannable. While the reformatting will affect the appearance
and length of the form, the actual number of data elements will not be
affected. The new system is also to be developed in a way that should
substantially increase the percentage of plans filing their Form 5500
via electronic filing as a more efficient alternative to even scannable
forms. A mock-up of a scannable Form 5500 is being published with the
printed versions of the proposal. The scannable mock-up, however, does
not necessarily reflect the way the final scannable forms will look.
The final appearance will depend on the scanning technology selected
for use in the new form processing system. Details on the processing
system will be available as the RFP is finalized.
Overview of Forms Revisions
To assist interested parties in reviewing the revised forms, an
overview of the Agencies' proposed changes to the Form 5500 Series is
set forth below.
As noted above, by eliminating certain questions and developing new
schedules, the Form 5500 itself has been revised into a short one-page
form that serves both as a simple registration statement and as a
``packing list'' for attaching relevant schedules. The proposed Form
5500 constitutes eight basic questions that identify: (i) The type of
annual report being filed, (ii) the plan on whose behalf it is being
filed, and (iii) what schedules and how many of each are being filed as
attachments to the Form 5500.
Under the proposal, there is a total of thirteen schedules--five
pension schedules, seven financial schedules, and one fringe benefit
schedule:
Pension Schedules: Schedule B (Actuarial Information), Schedule E
(ESOP Information), Schedule PEN (Pension Plan Information), Schedule Q
(Qualified Pension Plan Coverage Information), and Schedule SSA
(Separated Vested Participant Information);
Financial Schedules: Schedule A (Insurance Information); Schedule C
(Service Provider Information); Schedule D (Direct Filing Entity/
Participating Plan Information); Schedule FIN (Financial Information);
Schedule FIN-SP (Financial Information--Small Plan); Schedule G
(Financial Transactions) and Schedule P (Trust Fiduciary Information).
Fringe Benefit Schedule: Schedule F (Fringe Benefit Plan
Information).
Below is a description of the five new schedules being established
as part of this proposal (Schedules D, FIN, FIN-SP, PEN, and Q), the
three existing schedules being revised (Schedules A, C, and G), and a
statement of the reasons why the Agencies are proposing to leave the
remaining five schedules (Schedules B, E, F, P, and SSA) unchanged.
1. Schedule A (Insurance Information)
Schedule A must be attached to the Form 5500 if any pension or
welfare benefits under the plan (whether small or large) are provided
by, or if the plan has any investment contracts with, an insurance
company or other similar organization. Although most of the Schedule A
data collection has been retained substantially unchanged, several
significant revisions are being proposed which are designed to collect
better information about insurance products, including conforming the
Schedule A to recent accounting industry changes on ``current value''
financial reporting of investment-type contracts with insurance
companies, and requiring: (i) Information on a plan year as opposed to
insurance contract year basis; (ii) better identification of the type
of insurance contracts and type of insured benefits being reported; and
(iii) insurer's EIN (employer identification number) and NAIC (National
Association of Insurance Commissioners) code.
2. Schedule C (Service Provider Information)
Schedule C must be attached to the Form 5500 filed by large plans
if any person who rendered services to the plan received directly or
indirectly $5,000 or more in compensation from the plan during the plan
year. The proposal limits the schedule to the 40 top paid service
providers at or above the $5,000 threshold. Further, the proposal also
eliminates the separate requirement to file a Schedule C to identify
annually plan trustees and limits the current requirement to file a
Schedule C to explain service provider terminations to accountants and
enrolled actuaries. Small plans would continue to be exempt from the
Schedule C.
3. Schedule D (Direct Filing Entity/Participating Plan Schedule)
The Schedule D is a new standardized form for filing information on
relationships between plans and master trust investment accounts
(MTIAs), common/collective trusts (CCTs), insurance company pooled
separate accounts (PSAs), investment entities covered under 29 CFR
2520.103-12 (103-12 IEs), and group insurance arrangements (GIAs),
collectively known as ``Direct Filing Entities'' or
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``DFEs.'' Currently, if a group insurance arrangement files a Form 5500
on behalf of the participating plans under the Department of Labor
regulation at 29 CFR 2520.104-43, the individual plans participating in
the GIA are exempt from filing a Form 5500 or 5500-C/R. Plans currently
participating in the other DFEs (MTIAs, 103-12 IEs, CCTs and PSAs)
generally must file a Form 5500 or 5500-C/R; however, if the DFE files
certain financial information directly on behalf of the administrators
of all participating plans, the plans are allowed to limit the
information in their separate Form 5500 or Form 5500-C/R because the
DFE's filing is considered part of each participating plan's annual
report. These DFE reporting rules were developed in an effort to
simplify the annual reporting requirements for the participating plans.
The absence of a standardized reporting format for DFE filings,
however, makes it impossible for the Department to correlate and
effectively use the data regarding approximately $1 trillion in plan
assets reported by plans and DFEs. Accordingly, the proposal
establishes the new Form 5500 as the standardized annual reporting
format for all DFEs.
Under the proposal, MTIAs and 103-12 IEs would be required to
complete: (1) Applicable items on the streamlined Form 5500; (2) a
Schedule A for each insurance contract held by the DFE; (3) a Schedule
C to list DFE service providers receiving compensation from the DFE;
(4) one or more Schedules D to list all participating plans at any time
during the year and all CCTs, PSAs or 103-12 IEs that the MTIA or 103-
12 IE invested in during the year; (5) a Schedule FIN financial
statement; (6) one or more Schedules G listing certain financial
transactions; and (7) for 103-12 investment entities, a report of an
independent qualified public accountant. Large plans that invest in
MTIAs and 103-12 IEs would continue to report the value of their
interests in these entities on one line in the plan's Schedule FIN as
of the beginning and end of the plan year and as a single entry for net
investment gain/loss.
Under the proposal, as under the current Form 5500 Series, CCTs and
PSAs could elect to file information as a DFE. If a CCT or PSA elects
to file, they would be required to complete (1) applicable items on the
streamlined Form 5500; (2) one or more Schedules D to list all
participating plans at any time during the year and all CCTs, PSAs, or
103-12IEs that the CCT or PSA invested in during the year; and (3) a
Schedule FIN financial statement. Large plans investing in a CCT or PSA
that files as a DFE would report the value of their interests in these
entities on one line in the plan's Schedule FIN as of the beginning and
end of the plan year and as a single entry for their net investment
gain/loss during the year. If the CCT or PSA does not file a Form 5500
as a DFE, employee benefit plans would have to break out their
percentage interest in the underlying assets of the CCT or PSA and
report the dollar value in the appropriate categories in the Schedule
FIN statement of assets and liabilities (and would still report the net
investment gain/loss as a single entry on the Schedule FIN income and
expense statement).
Both large and small plans would have to file a Schedule D listing
the MTIAs, 103-12 IEs, CCTs and PSAs in which they participated, and
would be required to list CCTs and PSAs regardless of whether the CCT
or PSA filed as a DFE. Reports of small plans filing the Schedule FIN-
SP are not expected to be otherwise significantly affected by these
changes.
GIAs that file a Form 5500 (including applicable schedules and
attachments) on behalf of their participating plans under the
Department of Labor regulation at 29 CFR 2520.104-43, would be required
to file a Schedule D listing the participating plans.
The Department is specifically soliciting comments from interested
parties on how these DFE changes can be implemented in a manner that
minimizes the impact on plan administrators and DFEs, including
suggestions about the use of electronic filing options and delayed
effective dates. The Department will also be publishing a separate
Notice of Proposed Rulemaking on regulatory amendments needed to
accommodate the DFE changes.
4. Schedules FIN (Financial Information)/ FIN-SP (Financial
Information--Small Plan)
The proposal essentially incorporates the financial statements from
the current Form 5500 (lines 31 and 32) as part of a new Schedule FIN
(``Financial Information''). For small plan filers, the proposal
includes a new Schedule FIN-SP (``Financial Information--Small Plan'')
that maintains simplified financial statements similar to the current
Form 5500-R and adds a limited number of specific investment categories
that must be separately reported. The proposal also incorporates into
the Schedules FIN and FIN-SP ``yes/no and amount'' questions focused on
key compliance issues/enforcement areas involving investments,
financial transactions, and handling of plan assets. The Schedule FIN
also includes revised versions of the current Form 5500 questions on
the accountant's opinion and report. Current regulatory exemptions,
simplified reporting, and alternative methods of compliance for annual
financial reporting by certain welfare and pension plans are expected
to remain unchanged.<SUP>1</SUP> Since the proposal eliminates various
questions from the current Form 5500 Series that dealt with Title I
compliance, the Department of Labor also developed an ERISA compliance
quick checklist to help plan administrators and other fiduciaries
comply with Title I requirements. The checklist is to be in the Form
5500 instruction package, but its use is to be voluntary, and it would
not be filed with the Form 5500.
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\1\ For example, there is no change in the waiver of the
independent qualified public accountant requirements in 29 CFR
2520.104-41 and 2520.104-46, or the small plan exemptions from the
Schedule C (service provider information), the schedules of loans,
leases or fixed income obligations in default and nonexempt
transactions (revised Schedule G).
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5. Schedule G (Financial Transactions)
Use of the Schedule G would be mandatory for the schedules now
required by lines 27b, 27c, 27e, and 27f of the current Form 5500. The
proposed Schedule G would have to be attached to the Form 5500 of a
large plan, MTIA or 103-12 IE to report loans or fixed income
obligations in default or determined to be uncollectible as of the
close of the reporting year (Part I of Schedule G), leases in default
or classified as uncollectible during the plan year (Part II of
Schedule G), and to report nonexempt prohibited transactions (Part III
of Schedule G). Large plans can aggregate participant loans in default
as one item on Part I of the plan's Schedule G when certain
requirements are met, including each loan being fully secured by the
participant's account balance in the plan. Small plans are not required
to file a Schedule G.
The proposal eliminates from the Form 5500 the schedules of assets
held for investment purposes (line 27a of the current Form 5500) and
the schedule of reportable (5%) transactions (line 27d of the current
Form 5500). The requirement to report this information is eliminated,
but the records needed to generate the information on the current
schedule of reportable transactions and schedules of assets would have
to be maintained, and administrators of large plans would have to
prepare and disclose that information, on request, to participants and
other authorized parties under sections 104(b)(2) and
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104(b)(4) of ERISA.<SUP>2</SUP> To satisfy that disclosure obligation,
however, transactions effected at the affirmative direction of
participants in defined contribution plans could be excluded from the
definition of ``transaction'' for the schedule of reportable
transactions, and no ``historical cost'' entry would be needed for such
transactions on the schedules of assets. The disclosure would have to
be presented in an understandable and non-misleading format. Because
the schedules of assets and reportable transactions would not be part
of the plan's annual report, the accountant's opinion required under
ERISA 103(a)(3)(A) would not have to cover that information, but the
underlying books and records of the plan would continue to be subject
to the audit requirement.<SUP>3</SUP> The Department of Labor will
publish a Notice of Proposed Rulemaking on regulatory amendments
necessary to accommodate these changes.
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\2\ Participants and beneficiaries would be entitled to request,
and receive automatically, the schedules of assets and schedule of
reportable transactions that relate to the ``latest'' annual report
of the plan. Other disclosure rights and obligations may arise based
on facts and circumstances, in addition to those specified in ERISA
section 104(b).
\3\ The general statutory provisions and fiduciary duties
regarding maintenance of plan records would also continue to apply
to participant directed transactions.
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6. Schedule PEN (Pension Plan Information)
The Schedule PEN is a new schedule that is required to be filed by
both tax qualified and nonqualified pension benefit plans that are
required to file Form 5500, other than annuity arrangements and
custodial accounts under Code section 403(b)(1) and 403(b)(7), and
individual retirement accounts/annuities under section 408. The purpose
of Schedule PEN is to report certain information on participant
coverage, plan distributions and funding, and the adoption of
amendments increasing the value of benefits in a defined benefit
pension plan. As part of a publication describing various voluntary
compliance programs administered by the Employee Plans function, the
IRS is also developing a compliance checklist to help pension plan
sponsors and administrators comply with the tax qualification
requirements of the Code and Title II of ERISA.
7. Schedule Q (Qualified Pension Plan Coverage Information)
The Schedule Q is a new schedule for reporting qualified plan
coverage information for qualified pension plans, including plans
maintained by employers that operate QSLOBs, and for employers
participating in multiple-employer plans. For a plan that is tested
under the three-year testing cycle rule in Rev. Proc. 93-42, Schedule Q
must be filed for the first year in the plan's testing year cycle.
Schedule Q need not be filed for the subsequent years in the cycle if
the employer is permitted to rely on the earlier year's testing. If the
employer does not or cannot use the three-year testing rule in Rev.
Proc. 93-42, Schedule Q must be filed annually. The adoption of this
new schedule eliminates the separate Form 5500-C/R filing requirement
that now applies to employers participating in plans that currently
file Form 5500 as a ``multiple-employer plan (other).'' This schedule
replaces separate statements currently required regarding the coverage
of plans that must be disaggregated under section 1.410(b)-7 of the
Income Tax Regulations.
8. Other Schedules
The Schedule B (Actuarial Information) and Schedule SSA (Separated
Participants With Deferred Vested Benefits) were not revised because
both were recently revised and it did not appear productive to propose
further revisions at this time. The Schedule F (Fringe Benefit Plan
Information) also was not revised because Code section 6039D mandates
collection of the information reported on that schedule. Lastly, the
Schedule E (ESOP Annual Information) was not revised because it is
filed only by ESOPs and the IRS was not aware of substantial interest
in changing the schedule. The Agencies welcome suggestions for making
these schedules simpler. It is anticipated that the final version of
these schedules will be revised at a minimum to reflect changes in law
and other appropriate updates.
9. Quick Reference Chart
The Agencies developed a quick reference chart for the Form 5500
instructions that indexes the schedules required from each major class
of filer. That chart is reproduced below:
BILLING CODE 4510-29-P
[[Page 46560]]
[GRAPHIC] [TIFF OMITTED] TN03SE97.000
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[GRAPHIC] [TIFF OMITTED] TN03SE97.001
BILLING CODE 4510-29-C
[[Page 46562]]
10. Miscellaneous Changes
Various other changes were made as part of the substantial
restructuring of the Form 5500 Series being proposed. Several of the
more significant miscellaneous changes include: (1) Expanded
utilization of codes to report plan features information on pension and
welfare benefit plans; (2) elimination of the CUSIP (Committee on
Uniform Securities Identification Procedures) issuer number; (3)
simplification of requirements on reporting the total number of plan
participants and participant subgroups; (4) deletion of LM numbers
(file numbers on Labor Organization Annual Report Forms); and (5)
addition of a line for the name, EIN, and classification code of a
``Preparer.''
Other Supplementary Information:
Regulations Relating to the Proposed Forms
For purposes of Title I of ERISA, the filing of a completed Form
5500 (including required statements, schedules, and independent
qualified public accountant report) generally constitutes compliance
with the limited exemption and alternative method of compliance in 29
CFR 2520.103-1(b). The Department intends to propose amendments to
2520.103-1 and other annual reporting regulations to accommodate the
form changes proposed herein. The Department will discuss the findings
required under sections 104(a)(3) and 110 relating to the use of the
Form 5500, as revised, as an alternative method of compliance and
limited exemption from the reporting and disclosure requirements of
part 1 of Title I of ERISA as part of that rulemaking. The forms,
schedules, and instructions proposed in this notice will not become
effective as an alternative method of compliance and limited exemption
from the reporting and disclosure requirements of Part 1 of Title I of
ERISA until such regulations are issued in final form.
Paperwork Reduction Act
The Agencies, as part of their continuing efforts to reduce
paperwork and respondent burden, invite the general public and Federal
agencies to comment on proposed and/or continuing collections of
information in accordance with the Paperwork Reduction Act of 1995 (PRA
95) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested data
are provided in the desired format, reporting burden (time and
financial resources) is minimized, collection instruments are clearly
understood, and the impact of collection requirements on respondents is
properly assessed. Currently, the Agencies are soliciting comments
concerning the proposed revision of the Form 5500 Series, pursuant to
Part 1 of Title 1 and Title IV of ERISA and the Internal Revenue Code.
DATES: Written comments must be submitted on or before November 3, 1997
to be assured of consideration.
ADDRESSES: Interested parties are invited to submit written comments
regarding the Form 5500 Series annual reporting requirements of any or
all of the Agencies. Send comments to Mr. Gerald B. Lindrew, U.S.
Department of Labor, PWBA/OPR, Room N-5647, 200 Constitution Avenue,
N.W., Washington, DC 20210, telephone 202-219-4782 (this is not a toll-
free number). All comments will be shared among the Agencies.
Supplementary Paperwork Reduction Act Information:
I. Background:
The Agencies have undertaken a revision of the Form 5500 Series in
an effort to streamline and simplify this annual report.
II. Current Actions
The Agencies have developed a single streamlined Form 5500 for use
by both large and small plan filers. The Forms 5500-C and 5500-R have
been eliminated; in general, small plans will submit information
similar to the current 5500-C/R data collections.
Type of Review: Revision of a currently approved collection.
Agencies: Pension and Welfare Benefits Administration (OMB No.
1210-0016); Internal Revenue Service (OMB No. 1545-0710); Pension
Benefit Guaranty Corporation (OMB No. 1212-0026).
Title: Form 5500 Series.
Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.
Form Number: DOL/IRS/PBGC Form 5500 and Schedules.
Total Respondents: The total number of annual Form 5500 filers is
approximately 901,400. Of that total, only 801,934 filings are for
employee benefit plans subject to the Department of Labor's
jurisdiction under Title I of ERISA. The remaining 99,466 are made to
comply with IRS requirements for fringe benefit plans under Code
section 6039D, pension plans maintained outside the United States, and
One-Participant (Owners and Their Spouses) Retirement Plans.
Accordingly, the Labor Department's total respondents is 801,934 and
the IRS's is 901,400.
Total Responses: See ``Total Respondents'' Above.
Frequency of Response: Annually.
Estimated Time per Response, Estimated Burden Hours, Total Annual
Burden: See below for each Agency.
Calculation of Burden: PWBA and IRS burden estimates are based on
different estimation methodologies (see below). The total burden
estimate ranges from 1.71 million burden hours (using the PWBA
methodology) to 8.46 million burden hours (using the IRS methodology)
for preparing the Form 5500 Series (including schedules) and sending it
to the government.
Both the IRS and the PWBA methodologies exclude certain activities
from the calculation of ``burden.'' If the activity is performed for
any reason other than compliance with the federal tax administration
system (in the case of the IRS method) or the Title I annual reporting
requirements (in the case of the PWBA method), it was not counted as
part of the paperwork burden. For example, most businesses or financial
entities maintain, in the ordinary course of business, detailed
accounts of assets and liabilities, and income and expenses for the
purposes of operating the business or entity. In addition, the activity
is only counted as a burden once if performed for both tax and Title I
purposes. These recordkeeping activities were not included in the
calculation of burden because prudent business or financial entities
normally have that information available for reasons other than federal
tax or Title I annual reporting. Only time for gathering and processing
information associated with the tax/annual reporting systems, and
learning about the law, was included.
Three major differences exist between the IRS and PWBA
methodologies. First, the IRS uses a methodology developed for
estimating the paperwork burden imposed on individual and business
taxpayers as a result of the federal tax return system to calculate
burdens associated with the Form 5500 information return. The details
and time estimates of PWBA's methodology were developed specifically
for the Form 5500 Series. Second, the IRS includes burden figures for
learning about statutory tax reporting requirements and certain tax-
related recordkeeping (e.g., depreciation accounting) in its estimate.
PWBA has concluded plan administrators' obligations to keep financial
records necessary to complete the Department of Labor portions of the
Form 5500 result from usual and customary management practices for any
financial entity, not as a result of ERISA annual reporting
requirements.
[[Page 46563]]
The Department of Labor solicits comments on whether or not any
recordkeeping beyond that which is usual and customary is necessary to
complete the Department of Labor portions of the Form 5500. PWBA has
also designed the instruction package for the Form 5500 so that filers
generally will be able to complete the Labor Department portions of the
Form 5500 by reading the instructions without needing to refer to the
statute or regulations. The Labor Department solicits comments on
whether the Form 5500 instructions are generally sufficient to enable
filers to complete the Labor Department portions of the Form 5500
without needing to refer to the statute or regulations. PWBA,
therefore, has included a burden for reading the instructions in its
PRA calculations, and finds there is no recordkeeping burden
attributable to the Form 5500 Series. Third, PWBA does not include
burdens for completing the Schedule E (ESOP Annual Information);
Schedule F (Fringe Benefit Plan Annual Information) and Schedule P
(Annual Return of Fiduciary of Employee Benefit Trust) because these
are exclusively IRS schedules. The different methodologies and the IRS
inclusion of burden for learning about the law, tax recordkeeping, and
Schedules E, F and P, result in the Agencies having different total
burden estimates. Presented below is a chart showing the total burden
of the streamlined Form 5500 Series (including schedules) using the
PWBA and IRS methodologies.
DOL and IRS Estimates of Total Annual Burden Hours
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Preparing/
Filing the
Form 5500
Agency Series Learning The Law Necessary To Complete Recordkeeping Necessary to Complete Total Annual
(including The Form 5500 Series the Form 5500 Series Burden Hours
reading
instructions)
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IRS.................................... 8,458,478 6,544,940.............................. 33,682,567............................ \1\ 48,686,004
DOL.................................... \2\ 1,706,550 Legal rules are described in the Form Financial records needed to complete \2\ 1,706,550
5500 instructions so filers do not DOL portions of Form 5500 are kept as
need to refer to statute or usual and customary business practice
regulations to complete DOL portions not solely to complete the Form 5500.
of the Form 5500.
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\1\ This does not equal the total of the other three IRS columns due to rounding.
\2\ This does not include IRS Schedules E, F and P.
There is no separate PBGC entry on the chart because, as explained
below, its share of the paperwork burden is very small relative to that
of IRS and DOL.
Paperwork and Respondent Burden
So that interested parties may better understand the burden
associated with this information collection, the Agencies are
presenting information on how they estimate burden. These burden
estimates vary according to the Agencies' respective statutory
authorities to collect information via questions in the Form 5500
Series, the information collections for which they are responsible, the
methodologies they use, and the categories of burden they measure.
Based on the Agencies' burden estimates, and taking into account
differences in statutory responsibility and methodology, the proposed
revision to the Form 5500 Series is estimated to reduce total burden by
12 to 13.6 percent annually over the 10-year life of the form.
Department of Labor
Burden Estimation Methodology: The DOL uses a matrix involving a
series of mathematical calculations to estimate burdens associated with
preparing, sending and learning about the Form 5500 Series report.
Burden hour calculations are determined by identifying groups of plans
within the universe of filers that have similar reporting requirements
and grouping them into categories based on those annual reporting
requirements. Under the current estimating scheme, the universe is
divided into three basic plan types: defined benefit pension plans,
defined contribution pension plans, and welfare plans. Each of these
major plan types is then further subdivided into multiemployer and
single-employer plans, and within multiemployer and single-employer
plans into self-insured plans, fully insured plans, and split-funded
plans. Since the filing requirements differ substantially for smaller
and larger plans, the plan types are further divided by plan size. For
smaller plans (those with fewer than 100 participants) the
multiemployer/single-employer distinction is not retained because there
are so few small multiemployer plans. Thus, for larger plans,
calculations are prepared for fifteen different plan types, and for
smaller plans, calculations are prepared for nine different plan types.
In addition to separating plans by type and size, to make the
burden hour calculations manageable and more meaningful, individual
questions on the form are grouped by the type of information requested.
The grouping of items include the following categories: (1)
Instructions and plan identification information; (2) plan operation
information; (3) financial/fiduciary information; (4) plan
qualification and tax information; (5) minimum funding questions; (6)
plan assets with financial schedules (including Schedules C and G); (7)
Schedule A; (8) Schedule B; and (9) Schedule SSA.
Each group of related items is reviewed and an estimate of the time
needed to complete that group is developed. When items in a category
are required by more than one Agency, the estimated time required by
each type of plan filing is allocated among the Agencies for that
particular category of items. This allocation is based on whether only
a single item in a group is required by more than one agency or whether
several or all of the items are required by more than one agency. Since
filers must read not only the instruction to particular categories but
also general instructions pertaining to the general filing requirements
for small and large plans, a burden is assessed for the instructions on
the particular group and as a whole. This burden is included within the
plan identification category.
This methodology is designed to approximate the burden actually
imposed on filers. Thus, a plan's reporting burden is defined in terms
of the specific items and schedules it must comply with and will depend
on its size, funding method and investment structures. On the average,
it is estimated that the total completion time of the proposed Form
5500 Series in its
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first year will range from 1.12 hours per plan for the simplest Form
5500 report to 4.55 hours per plan for the most complex Form 5500
filing. For example, the annual report for a large fully insured
welfare plan not subject to Internal Revenue Code section 6039D would
consist of only a few questions on Form 5500 and a Schedule A
(Insurance Information). The requirement that this plan provide very
limited information on the Form 5500 would be reflected in the
estimates of reporting burden time. By contrast, a large defined
benefit pension plan intended to be tax qualified and utilizing a trust
fund and investing in insurance contracts would submit an annual report
completing almost all the line items of the Form 5500, plus Schedules A
(Insurance Information), Schedule B (Actuarial Information), Schedule C
(Service Provider Information), Schedule D (DFE/Participating Plan
Information), Schedule FIN (Financial Statements), Schedule PEN
(Pension Plan Information), Schedule Q (Qualified Pension Plan
Information), and the independent accountant's report. The Department's
methodology attempts to capture, through its categorization, these
different reporting burdens, while remaining general and manageable
enough to provide meaningful estimates of the characteristics of the
reporting scheme which lead to significant differences in the burdens
placed on different types of filers. As noted above, PWBA has not
attributed a recordkeeping burden to the Form 5500 in its Paperwork
Reduction Act analysis because it has concluded that plan
administrators' obligations to keep financial records necessary to
complete the Department of Labor portions of the Form 5500 result from
usual and customary management practices for any financial entity, not
as result of ERISA annual reporting requirements.
Under the forms revisions the reduction in the Department of Labor
burden for the 1998 reporting year results from (1) adjustments
(changes in the Paperwork Reduction Act regarding calculation of burden
hours vs. costs and changes in assumptions used in prior year
calculations) and (2) program changes (revised information reporting
requirements). On the basis of the above methodology, approximately
1,706,550 (in its initial year) and 1,329,471 (in subsequent years)
total hours will be needed to complete all information items on the
annual reports required by all three Agencies and the Social Security
Administration. Of this total, 752,555 (initial year) and 566,462
(subsequent years) burden hours have been allocated to DOL.
Estimated Time per Response, Estimated Burden Hours, Total Annual
Burden (per DOL methodology and based on 801,934 respondents.):
[Figures are in hours, unless otherwise specified]
------------------------------------------------------------------------
Year 1 Year 2 Year 3
------------------------------------------------------------------------
Time per response range
(completion of entire form)
\1\.......................... 1.12-4.55 .55-4.55 .55-4.55
Time per response range
(completion of DOL portion of
form)........................ .67-1.88 .39-1.88 .39-1.88
-----------------------------------------
Total burden hours \1\.. 1,706,550 1,329,471 1,329,471
Total DOL burden hours.. 752,555 566,462 566,462
Total burden hour cost
range (millions) \1\
\2\.................... $90.4-99.0 $82.9-89.5 $82.9-89.5
Total DOL burden hour
cost range (millions).. $29.0-32.8 $25.3-28.1 $25.3-28.1
------------------------------------------------------------------------
\1\ This does not include IRS Schedules E, F and P.
\2\ This includes the start-up costs associated with upgrading automated
systems to accommodate the new Form. These costs have been distributed
pro-rata over the expected ``life'' of the new Form, 10 years.
Estimated Share of Total Form 5500 Series Preparation Burden: 44
percent (initial year) and 43 percent in subsequent years.
Estimated Reduction in Burden Due to Streamlining Project: 12
percent annually over the estimated 10-year life of the Form; this
figures includes an increase in burden in the first year due to start-
up costs and system changes to adjust to the new form.
Department of the Treasury
Burden Estimation Methodology: IRS's estimates of business taxpayer
burden are calculated using a series of mathematical models that were
developed from regression analysis of survey data on the amount of time
that partnerships, corporations, and their paid tax preparers spend
performing activities that are necessary to meet tax filing
requirements. These activities, which correspond to the Paperwork
Reduction Act's definition of burden (44 U.S.C. 3502(2)), are: (1)
Recordkeeping, (2) learning about tax law, (3) preparing tax forms, and
(4) copying, assembling, and sending tax forms to IRS. A burden
equation for each activity takes into account basic characteristics of
tax forms and instructions, form and line usage by taxpayers, and
characteristics of the taxpayer populations using the forms. Certain
activities, however, have been excluded from the definition of burden.
If the activity is performed for any reason other than compliance with
the federal tax administration system, it is not counted as part of the
tax paperwork burden. For example, most businesses maintain detailed
accounts of income and expenses, and profit and loss, for the purpose
of operating the business. These recordkeeping activities were not
included in the definition of burden, despite the fact that there are
some businesses, particularly those which do not borrow funds from
banks, that prepare this type of information only to meet business tax
requirements. Prudent businesses normally have that information
available for reasons other than federal taxes. Only the time for
gathering and processing information associated solely with the tax
system, such as depreciation accounting and the review of tax returns
prepared by professional tax advisors, was included.
The data used to construct the burden models for business taxpayers
were obtained from a survey of 4,000 corporations and partnerships and
their paid tax preparers. These businesses were sent a questionnaire
that requested information on how much time they spent performing
activities that they undertook for the express purpose of meeting their
tax filing requirements. Multiple linear regression analysis was used
to identify variables that correlated with time spent on taxes. Through
careful model specification, more than 100 variables that were likely
to have a causal relation with time spent were tested. Some of the
predictor variables in the final burden models include (for a given
form): (1) The total number of
[[Page 46565]]
annual taxpayer responses filed, (2) the fraction of taxpayers using
paid preparers, (3) the total number of line items on the form, (4) the
total number of references to the Internal Revenue Code and regulations
appearing on the form and its instructions, and (5) the total number of
attachments requested that are IRS forms. The accuracy of the burden
estimates that result from the models reflect the quality of survey
data obtained from taxpayers. While every effort was made to obtain
valid burden information from a representative sample of taxpayers, the
accuracy of the data depended on their ability and conscientiousness in
reporting accurately their tax activity times.
The business burden models predict by type of activity (i.e.,
recordkeeping, learning, obtaining materials, locating/using a
preparer, preparing, sending) and by preparer (paid vs. self) the
average business taxpayer paperwork burden to file a given form. The
total burden for all business taxpayers filing the form is obtained by
summing the burden over all activities, which results in the total
burden for each taxpayer, and then multiplying by the total number of
taxpayer responses submitted during the tax year. It should be
emphasized that the taxpayer burden models predict the average
paperwork burden borne by the population that file a given form. For
any form, the distribution of time burden across the filing population
may vary considerably. For example, the size of the business completing
the form or the complexity of its tax situation will have a direct
bearing on the amount of time spent. This is especially true for the
Form 5500 burden estimates, since large plans will complete different
portions of the schedules for Form 5500 and will therefore have a
different paperwork burden than small plans. The burden models
necessarily represent a substantial simplification of a very complex
situation involving the interaction of the tax system and diverse
income and revenue generating tax entities.
Estimated Time per Response, Estimated Burden Hours, Total Annual
Burden (per IRS methodology and based on 901,400 respondents):
The time needed to complete and file the forms listed below
reflects the combined requirements of the IRS, Department of Labor,
Pension Benefit Guaranty Corporation, and the Social Security
Administration as calculated by the IRS using the IRS methodology.
These times will vary depending on individual circumstances. The
estimated average times are:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Copying,
Recordkeeping Learning about the Preparing the form assembling, and Total time per Total annual
law or the form sending the form response burden hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 5500........................ 11 hr 14 min....... 5 hr 26 min........ 6 hr 47 min........ 16 min............. 23 hr 43 min....... 21,381,208
Sch A............................ 17 hr 56 min....... ................... 17 min............. ................... 18 hr 14 min....... 4,521,787
Sch B Part 1..................... 30 hr 37 min....... 3 hr 16 min........ 3 hr 55 min........ ................... 37 hr 48 min....... 3,402,000
Sch B Part 2..................... 16 hr 1 min........ 1 hr 23 min........ 1 hr 43 min........ ................... 19 hr 7 min........ 57,360
Schedule C....................... 4 hr 47 min........ ................... 5 min.............. ................... 4 hr 52 min........ 486,000
Schedule D....................... 2 hr 23 min........ ................... 2 min.............. ................... 2 hr 26 min........ 10,935
Sch E (Non-leveraged)............ 1 hr 12 min........ 12 min............. 13 min............. ................... 1 hr 37 min........ 8,100
Schedule E (Leveraged)........... 10 hr 2 min........ 1 hr 41 min........ 1 hr 56 min........ ................... 13 hr 39 min....... 27,320
Schedule F....................... 2 hr 52 min........ 24 min............. 28 min............. ................... 3 hr 44 min........ 208,880
Schedule G....................... 9 hr 49 min........ 24 min............. 34 min............. ................... 10 hr 47 min....... 6,993
Schedule P....................... 1 hr 55 min........ 30 min............. 33 min............. ................... 2 hr 58 min........ 2,095,680
Sch PEN I........................ 2 hr 52 min........ ................... 3 min.............. ................... 2 hr 55 min........ 627,800
Sch PEN II....................... 9 hr 34 min........ ................... 9 min.............. ................... 9 hr 43 min........ 1,535,950
Sch Q............................ 11 hr 43 min....... 3 hr 53 min........ 4 hr 14 min........ ................... 19 hr 50 min....... 1,408,833
Sch FIN.......................... 32 hr 17 min....... 53 min............. 1 hr 28 min........ ................... 34 hr 38 min....... 2,355,520
Sch FIN-SP....................... 9 hr 5 min......... 42 min............. 53 min............. ................... 10 hr 40 min....... 8,550,938
Sch SSA.......................... 5 hr 30 min........ 6 min.............. 11 min............. ................... 5 hr 47 min........ 2,000,700
Total.......................... ................... ................... ................... ................... ................... 48,686,004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Share of Total Form 5500 Series Burden: 56%.
Estimated Reduction in Burden Due to Streamlining Project: 13.6%.
Pension Benefit Guaranty Corporation
Burden Estimation Methodology: PBGC's share of the Form 5500
paperwork burden is very small relative to that of IRS and DOL. The
paperwork burden allocated to PBGC includes a portion of the general
instructions, basic plan identification information, a portion of
Schedule B, and item 10 on Schedule PEN.
PBGC follows DOL's methodology for computing estimates of its share
of the Form 5500 paperwork burden. To estimate the PBGC-allocated
burden associated with the general instructions and plan identification
items, PBGC simply applies its applicable percentage to the burden
estimates computed by DOL.
PBGC shares a portion of the burden associated with Schedule B with
IRS. To estimate the PBGC-allocated burden associated with the shared
items on Schedule B, PBGC modifies the burden estimates computed by IRS
so that they conform to the DOL methodology, and simply applies its
applicable percentage to the modified burden estimate.
Estimated Share of Total Form 5500 Series Burden: 18,600 hours and
$2.6 million dollars per year.
Estimated Reduction in Burden Due to Streamlining Project: The
PBGC's share of Form 5500 burden is higher than in previous years
because the Agencies have increased PBGC's percentage of the overall
burden to more accurately reflect PBGC's use of Form 5500 information.
In particular, PBGC has been allocated a larger share of Schedule B
burden than in the past because of PBGC's concern with plan funding.
Thus, although some PBGC-related items have been eliminated from the
streamlined Form 5500, PBGC's share of the Form 5500 burden is higher
than when it was last reported in 1994.
Request for Comments
In addition to the specific questions throughout this notice, the
Agencies are particularly interested in comments that:
<bullet> Evaluate whether the proposed collection of information is
appropriate for the type of disclosure required of the respondents,
including whether the information will have practical utility;
[[Page 46566]]
<bullet> Evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used (which appear above);
<bullet> Propose ways to enhance the quality, utility, and clarity
of the information to be collected; and
<bullet> Propose ways to minimize the burden of the collection of
information on those who are to respond, including through the use of
appropriate automated, electronic, mechanical, or other technological
collection techniques or other forms of information technology, e.g.,
permitting electronic submissions of responses.
In addition, the Agencies are interested in comments that:
<bullet> Evaluate the Agencies' respective burden estimation
methodologies;
<bullet> Assess the need for and accuracy of the IRS's and
Department of Labor's respective estimates of recordkeeping and
learning about the law burdens attributable to this filing requirement;
and
<bullet> Estimate capital or start-up costs and costs of operation,
maintenance, and purchase of services to comply with this filing
requirement.
Comments submitted in response to this notice will be summarized
and included in the request for Office of Management and Budget
approval of the information collection request. All comments will
become a matter of public record.
Statutory Authority
Accordingly, pursuant to the authority in sections 101, 103, 104,
109, and 4065 of ERISA, and sections 6039D and 6058 of the Code, it is
proposed that the Form 5500 Series Annual Return/Report Forms and the
instructions thereto be revised as set forth below.
Signed at Washington, D.C. this 21st day of August, 1997.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S.
Department of Labor.
Evelyn A. Petschek,
Assistant Commissioner, Employee Plans and Exempt Organizations,
Internal Revenue Service.
David M. Strauss,
Executive Director, Pension Benefit Guaranty Corporation.
BILLING CODE 4510-29-P
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[FR Doc. 97-22878 Filed 9-2-97; 8:45 am]
BILLING CODE 4510-29-C
