[Federal Register Volume 65, Number 22 (Wednesday, February 2, 2000)]
[Notices]
[Pages 5026-5143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1842]



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Part II





Department of Labor





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Pension and Welfare Benefits Administration



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Department of the Treasury





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Internal Revenue Service



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Pension Benefit Guaranty Corporation





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Revision of Annual Information Return/Report; Notice of Adoption of 
Revised Forms

  Federal Register / Vol. 65, No. 22 / Wednesday, February 2, 2000 / 
Notices  

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

DEPARTMENT OF THE TREASURY

Internal Revenue Service

PENSION BENEFIT GUARANTY CORPORATION

RIN 1210-AA52


Revision of Annual Information Return/Report

AGENCIES:  Pension and Welfare Benefits Administration, Labor; Internal 
Revenue Service, Treasury; Pension Benefit Guaranty Corporation.

ACTION:  Notice of adoption of revised forms.

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SUMMARY:  This document announces the adoption of the revised 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, as amended (ERISA), and the Internal Revenue Code 
of 1986, as amended, (the Code). The Form 5500 Series is the principal 
source of information and data concerning the operation, funding, 
assets and investments of pension, welfare and fringe benefit plans, 
and also serves as the primary means by which the operation of plans 
can be monitored by participants, beneficiaries and the general public. 
The form revisions are being adopted concurrent with the implementation 
of a new computerized ERISA Filing Acceptance System (EFAST) to improve 
the forms and simplify and expedite the receipt and processing of the 
Form 5500 Series by relying on computer scannable forms and electronic 
filing technologies. The revised forms affect the financial and other 
information required to be reported and disclosed by employee benefit 
plans. The Form 5500-EZ is not discussed in this notice.

DATES:  Effective Date: This notice is effective on February 2, 2000.
    Applicability Date: The revised forms apply for plan years 
beginning on or after January 1, 1999.

FOR FURTHER INFORMATION CONTACT:  George M. Holmes, Jr. or Eric A. 
Raps, Pension and Welfare Benefits Administration (PWBA), U.S. 
Department of Labor, (202) 219-8515, for questions relating to the Form 
5500 and Schedules A, C, D, G, H and I as well as the reporting 
requirements under Title I of ERISA; James Flannery, Internal Revenue 
Service (IRS), (202) 622-6214, for questions relating to Schedules B, 
E, F, P, R, T and SSA as well as questions relating to the reporting 
requirements under Title II of ERISA; James J. Bloch, Pension Benefit 
Guaranty Corporation (PBGC), (202) 326-4080 (x 3530) for questions 
relating to Schedule B and line 9 of Schedule R as well as questions 
relating to the reporting requirements under Title IV of ERISA. For 
further information on an item not mentioned above, contact Mr. Holmes. 
The telephone numbers referenced above are not toll-free numbers.

SUPPLEMENTARY INFORMATION:   

I. Background

    Under part 1 of Title I of ERISA, Title IV of ERISA, and the Code, 
administrators of pension and welfare benefit plans subject to those 
provisions are required to file returns/reports annually concerning, 
among other things, the financial condition and operations of employee 
benefit 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.\1\
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    \1\ For purposes of Title I of ERISA, the filing of the Form 
5500 Series, in accordance with its instructions and related 
regulations, by the administrator of a pension or welfare benefit 
plan constitutes compliance with the limited exemption and 
alternative method of compliance prescribed in 29 CFR part 2520, 
promulgated in accordance with the authority granted by the 
Secretary of Labor under sections 104(a) and 110 of ERISA.
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    The Form 5500 Series is the principal source of information and 
data concerning the operation, funding, assets and investments of more 
than 800,000 pension and welfare benefit plans with assets estimated at 
$4.3 trillion. Accordingly, the Form 5500 Series information and data 
necessarily constitute an integral part of each agency's enforcement, 
research and policy development programs and are a source of 
information and data for use by other federal agencies, Congress and 
the private sector in assessing employee benefit, tax, and economic 
trends and policies. The returns/reports also serve as the primary 
means by which the operations of plans can be monitored by 
participants, beneficiaries and the general public.
    On September 3, 1997, the Department of Labor (Department), IRS and 
the PBGC (collectively the Agencies) published in the Federal Register 
(62 FR 46556) a notice of proposed revisions to the Form 5500 Series. 
The Agencies' proposal replaced the Form 5500, Form 5500-C and Form 
5500-R with one Form 5500 intended to streamline the report and the 
methods by which it is filed. Concurrent with the development of the 
new Form 5500, the Agencies also developed a new computerized system to 
process Form 5500 returns/reports (the ERISA Filing Acceptance System 
or ``EFAST''). The new computerized processing system is designed to 
simplify and expedite the receipt and processing of the new Form 5500 
by relying on computer scannable forms and electronic filing 
technologies. The development of the new forms in conjunction with the 
EFAST system is intended to streamline and improve the Form 5500 Series 
and lower the administrative burdens and costs incurred by employee 
benefit plans that file the Form 5500 Series each year.
    A public hearing on the proposed forms revisions was held on 
November 17, 1997, and written comments on the proposal were received 
until the public record was closed on December 3, 1997. The Agencies 
received oral testimony and over 60 written public comments from 
employer groups, employee representatives, financial institutions, 
service organizations and others on the form streamlining proposal. On 
February 4, 1998, the Department announced that, in response to public 
comments, the implementation of the new Form 5500 would be delayed 
until the 1999 plan year.
    Public reaction to the September 3, 1997 Notice of Proposed Forms 
Revisions was generally supportive of the new streamlined structure of 
the Form 5500 Series. The Agencies decided to adopt the new forms 
largely as proposed, but, in response to public comments, made various 
adjustments to the proposed forms and instructions where consistent 
with the purposes of the Form 5500 and the objectives of the 
streamlining project. A revised version of the new Form 5500 was 
submitted to the Office of Management and Budget (OMB) for approval 
under the Paperwork Reduction Act (PRA) and a Notice was published in 
the Federal Register on June 24, 1998 (63 FR 34493) which provided a 
30-day opportunity to submit comments to OMB on the new Form 5500 
submission. At the same time, the revised Form 5500 was made available 
on PWBA's internet site (http://www.dol.gov/dol/pwba) as part of the 
Agencies' commitment to make information about the new forms available 
to plans and their service providers at the earliest opportunity. 
Following its PRA review, OMB gave

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conditional PRA approval to the new Form 5500 on August 26, 1998.\2\
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    \2\ The OMB conditions were described in the Federal Register on 
December 10, 1998 (63 FR 68370) in the preamble to the proposed 
amendments to the Department's reporting regulations. The conditions 
were: (i) consolidating the separate reporting of long-term and 
short-term corporate debt instruments into one line item for all 
corporate debt instruments on the Schedule H (Income and Expense 
Statement), (ii) adding a clarifying instructional statement to the 
text on line 5 of Schedule R, (iii) bolding instructional text on 
line 3 of Schedule T, (iv) adding a statement to the Schedule C 
instructions that trades and businesses (whether or not 
incorporated) are ``persons'' required to be reported as service 
providers, and (v) clarifying the instructions for line 3b(2) of 
Schedule H regarding the inapplicability of the ``short plan year'' 
provisions of 29 CFR 2520.104-50 to Direct Filing Entity (DFE) Form 
5500s filed for group insurance arrangements and investment entities 
described in 29 CFR 2520.103-12 (103-12 IEs).
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    The new Form 5500 Series replaces the Form 5500 and the Form 5500-
C/R with a single new Form 5500 with basic identifying information for 
use by all filers and 13 schedules focused on particular subjects and/
or filing requirements--five pension schedules, seven financial 
schedules, and one fringe benefit schedule. The pension schedules are: 
Schedule B (Actuarial Information); Schedule E (ESOP Annual 
Information); Schedule R (Retirement Plan Information); Schedule T 
(Qualified Pension Plan Coverage Information); and Schedule SSA (Annual 
Registration Statement Identifying Separated Participants With Deferred 
Vested Benefits). The financial schedules are: Schedule A (Insurance 
Information); Schedule C (Service Provider Information); Schedule D 
(DFE/Participating Plan Information); Schedule G (Financial Transaction 
Schedules); Schedule H (Financial Information); Schedule I (Financial 
Information-Small Plan); and Schedule P (Annual Return of Fiduciary of 
Employee Benefit Trust). The fringe benefit schedule is Schedule F 
(Fringe Benefit Plan Annual Information Return). The new schedules are 
Schedules D, H, I, R and T; the schedules that have been revised are 
Schedules A, C and G; and the schedules that have either not been 
revised or have undergone minimal changes are Schedules B, E, F, P and 
SSA.
    The revisions being adopted to the Form 5500 annual return/report 
provide plans using simple tax qualification structures and financial 
operations with correspondingly streamlined annual reporting 
requirements and also target reporting requirements so that welfare 
plans generally complete fewer items than pension plans and small plans 
generally complete fewer items than large plans. The Agencies have 
developed a reference guide, which is included in the instructions for 
the new Form 5500, that is designed to provide general information and 
guidance on completing the revised Form 5500 and schedules entitled: 
``Quick Reference Chart Form 5500 Schedules and Attachments.''
    As part of the development of the revised Form 5500 Series, the 
Department also published in the Federal Register (63 FR 68370), on 
December 10, 1998, proposed amendments to the annual reporting 
regulations (Part 2520 of Chapter XXV of Title 29 of the Code of 
Federal Regulations) to implement under Title I of ERISA certain of the 
proposed changes to the Form 5500 Series. A number of other technical 
amendments to the regulations were proposed in order to update certain 
of the reporting and disclosure regulations. In the December 10, 1998 
Notice, the Department stated that the public comments submitted in 
response to the September 3, 1997 Notice of Proposed Forms Revisions 
would be treated as part of the public record for the Notice of 
Proposed Rulemaking, and, to the extent those comments included 
information relevant to the proposed regulatory amendments, the 
Department would treat those comments as comments on the Notice of 
Proposed Rulemaking to avoid the need to submit duplicate public 
comments. The Department received four comments in response to the 
December 10, 1998 Notice. A notice of final rulemaking regarding those 
regulatory amendments will be published separately by the Department in 
the Federal Register.
    The Agencies also published a Federal Register notice, on June 28, 
1999 (64 FR 34686) soliciting public comments on the draft computer 
scannable versions of the new forms developed by two vendors who were 
competing for the contract to design and build the EFAST system. 
Specifically, contracts were awarded to two national computer firms to 
competitively develop a computerized form processing system and related 
computer scannable versions of the new Form 5500 Series. The Agencies 
subsequently selected one as the vendor to operate EFAST and process 
the new Form 5500 returns/reports.
    As noted above, EFAST has been designed to simplify and expedite 
the receipt and processing of the Form 5500 Series by relying on 
computer scannable forms and electronic filing technologies. In that 
regard, the 1999 Form 5500 is available in two different computer 
scannable formats; both have the same data elements but provide filers 
with a choice of formats for preparing the Form 5500. The first format 
is a ``machine print'' format under which the filer uses a computer and 
software to enter data and complete the form. Upon completion of the 
data entries under this format, the completed forms and any required 
attachments may be filed through electronic means (provided the EFAST 
electronic specifications are met and a copy with all required 
signatures is retained as part of the plan's records), or the filer may 
print a paper copy, and after the required signatures have been 
affixed, mail the return/report to the address specified in the Form 
5500 instructions under the heading labeled ``Where To File.'' The 
completed machine print Form 5500 return/report can be read by 
participants and beneficiaries, and the EFAST system will collect the 
data by scanning bar codes printed out at the bottom of each page. The 
second format is a ``hand print'' format under which the filer enters 
data by hand or typewriter on specially designed green drop-out ink 
forms and the EFAST system uses optical character recognition 
technology to scan the hand or typewritten data entries. The ``hand 
print'' format can be filed only by mail to the address specified in 
the Form 5500 instructions under the heading labeled ``Where To File.''
    The Agencies are printing in this notice informational copies of 
the hand print 1999 Form 5500 and schedules, and the instruction 
package for the 1999 Form 5500 return/report. However, because of the 
new technologies being used by the Agencies for processing the revised 
Form 5500, Federal Register copies of the Form 5500 and schedules will 
not be acceptable for filing. Informational copies of the hand print 
forms, machine print forms and the instruction package will also be 
posted on the Department's web page at www.dol.gov/dol/pwba. The 1999 
Form 5500 package (hand print green drop-out ink forms and 
instructions) will be distributed to employee benefit plan filers in 
the same manner as in prior years. Refer to the EFAST web page at 
www.efast.dol.gov beginning in late March 2000 for information on 
obtaining the machine print forms and related software.

II. Summary of Comments on Proposed Forms

    In addition to a number of general comments relating to the 
statutory and regulatory annual reporting scheme, the Agencies received 
a number of comments relating to specific elements of the proposed 
revisions to the Form 5500. Upon consideration of all the

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written comments and the record of the public hearing, as well as the 
Agencies' respective administrative, enforcement and informational 
requirements, the Agencies were unable to adopt all of the public 
suggestions and recommendations regarding revisions to the annual 
return/report. However, in an effort to facilitate both compliance with 
the annual reporting requirements and the processing of annual returns/
reports, the Agencies have in response to public comments made certain 
changes to the forms and clarifications to the instructions 
accompanying the forms. The following is a summary of the major 
comments received by the Agencies which have been organized on a 
subject matter basis.

A. Annual Reporting Scheme

    Some commentators recommended that Form 5500 return/report filers 
should not be required to report each year various information that was 
reported on the prior year's Form 5500 if the information remains 
unchanged. Other commentators recommended that certain information 
should not be required to be reported, but, instead, should be required 
to be maintained as part of the plan's records and provided to the 
Agencies only in response to a specific request for the information. 
The Agencies believe that adopting these recommendations would make it 
more difficult for the Agencies to carry out their enforcement, 
research and other responsibilities and would diminish the value of the 
Form 5500 as a disclosure document for plan participants and 
beneficiaries. The Agencies, therefore, have not adopted these 
recommendations. A few commentators recommended changes to the Form 
5500 that would eliminate or modify reporting requirements or other 
features of the Form 5500 that, in the Agencies' view, are mandated by 
statute or regulations. The Agencies, accordingly did not adopt these 
changes.

B. Form 5500

    1. Restructuring of the Form 5500 and Elimination of the Form 5500-
C/R. In general, the comments were positive as to the restructuring of 
the Form 5500 Series, including the elimination of Form 5500-C/R. The 
Agencies, accordingly, have decided to adopt the new structure of the 
forms largely as proposed. However, several of the new schedules added 
as part of the proposal have been re-labeled to be consistent with the 
general practice in the current Form 5500 of using a single alphabetic 
identifier for schedules, i.e., Schedule FIN (Financial Information) is 
now Schedule H (Financial Information), Schedule FIN-SP (Financial 
Information-Small Plan) is now Schedule I (Financial Information-Small 
Plan), and Schedule PEN (Pension Plan Information) is now Schedule R 
(Retirement Plan Information). Further, the Schedule Q (Qualified 
Pension Plan Coverage Information) was re-labeled as Schedule T 
(Qualified Pension Plan Coverage Information) to avoid confusion with 
the Schedule Q introduced by the IRS for the Form 5300 Series.
    2. Financial Reporting for Large and Small Plans. Several 
commentators requested that the Agencies require small plans (plans 
that previously were eligible to file the Form 5500-C/R) to report the 
same financial information that is required of large plans (plans that 
previously filed the Form 5500), or, in the alternative, require that 
small plans continue to report the financial information that is now 
contained in the current Form 5500-C. Other commentators suggested that 
the 100 participant threshold for determining whether a plan is 
``large'' or ``small'' should be increased, for example, to 150 or 200 
participants. With respect to the first comment, the Agencies concluded 
that significantly expanding the financial reporting for small plans 
would be inconsistent with a principal objective of this project which 
was to simplify and streamline the information collected on the Form 
5500. Further, the Agencies believe that the financial reporting by 
small plans in the new Form 5500 contains much of the financial 
information on the Form 5500-C (lines 27 and 28) while providing 
improved disclosures over the current Form 5500-C. With respect to the 
second comment, the extension of the reporting threshold to a 200 
participant threshold would expand the number of small plan filers by 
approximately 45,000 plans. In light of the fact that such a change may 
require legislation, and because the Agencies would need to more fully 
explore and consider the consequences of such an extension, the 
Agencies did not alter the current rules regarding the 100 participant 
threshold.
    3. Preparer Identification. Several commentators indicated that it 
was not clear how filers would comply with the proposed requirement to 
identify the ``preparer'' of the Form 5500 because many persons may be 
involved in the collection and preparation of information reported on 
the Form 5500 return/report. The commentators asked for specific 
instructions regarding this requirement if it were to be maintained in 
the final form. In the alternative, a commentator asked that the 
``preparer'' requirement be replaced with authorization for a party to 
be designated as an official contact to discuss filing errors. The 
Agencies agree that it may be difficult to identify a single preparer 
of the Form 5500 for many plans, and accordingly, have changed the item 
so that it is optional and allows a filer to designate the person or 
entity that the filer believes was principally responsible for the 
preparation of the annual return/report.
    4. Multiple Signature Requirements. Several commentators questioned 
the need for multiple signatures on the Form 5500 return/report. In 
response, the Agencies have clarified the instructions for the Title I 
and II signature requirements for administrators and employers on the 
return/report and the IRS eliminated the employer signature requirement 
from the Schedule T. The other signatures required on the return/report 
(independent qualified public accountant's signature, enrolled actuary 
signature on Schedule B, trustee signature on Schedule P, and 
administrator signature on Schedule SSA) serve independent purposes 
such that it is not currently feasible to eliminate these signatures or 
consolidate them onto a single place on the form.
    5. Elimination of Certain Compliance and Disclosure Questions. 
Several commentators suggested that the proposed elimination of certain 
compliance and disclosure questions may adversely affect plan 
participants. Specific areas identified included the following.
    First, commentators questioned the proposed elimination of the 
reporting of the number of active participants who are fully vested, 
partially vested and nonvested. The Agencies did not reinstate these 
questions because the subgrouping of active participants by fully 
vested, partially vested and nonvested was not widely used by the 
Agencies, was a source of confusion for many filers, was duplicative of 
certain information reported on Schedule B, and was not required under 
the current or revised Form 5500 for the small plan filers which 
comprise the majority of all return/report filers. Further, to the 
extent individual participants want vesting information regarding their 
own benefits, they generally can obtain an individual benefit statement 
from their plan administrator.
    Second, commentators questioned the proposed elimination of ``yes/
no'' questions on plan amendments and distribution of summaries of 
material modifications (SMMs). Under Title I of ERISA, plan 
administrators must automatically furnish a notice to

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participants and beneficiaries of material modifications to the plan or 
changes in the information required to be included in the summary plan 
description (SPD) that were adopted during the reporting year. These 
notices typically must be furnished to participants and beneficiaries 
before the plan's Form 5500 return/report would be filed and available 
to participants and beneficiaries. Accordingly, participants and 
beneficiaries should have received a notice regarding the plan 
amendment before they ordinarily would have access to the answers to 
these ``yes/no'' questions on the form. Also, the Department has 
developed an ERISA Compliance Quick Checklist (to be included in the 
Form 5500 instruction package but not required to be filed with the 
government) that makes specific reference to these SPD/SMM 
requirements. The Department, accordingly, has not reinstated these 
questions.
    Third, commentators asked that the Agencies reinstate the question 
for small plan filers on whether 20% or more of plan assets are held in 
a single investment and the question for all filers on compliance with 
fidelity bonding requirements. The Agencies decided to reinstate 
questions on these subjects because they serve important enforcement 
and disclosure functions and provide important protections to 
participants and beneficiaries.
    6. Delay of Effective Date. In response to comments, the Agencies 
postponed the implementation year for the new forms from the 1998 plan 
year until the 1999 plan year. Thus, the earliest filing due date for 
returns/reports using the new forms for plans with calendar year plan 
years is July 31, 2000. (See below for a discussion of the transitional 
rules and special filing due date rules for common or collective trusts 
(CCTs) and pooled separate accounts (PSAs) electing to file as direct 
filing entities (DFEs)).
    7. Uniform Method to Count Plan Participants. Several commentators 
noted that numerical counts of plan participants were required on 
several different schedules using several different counting formulas. 
One commentator suggested that proposed Form 5500 (Line 4), Schedule B 
(Line 2b), Schedule PEN (Lines 1a, 1b, and 1c), and PBGC Form 1 (Line 
13) be revised to permit a plan administrator to provide the same 
participant count for each item. Another commentator suggested that all 
the requested information be in one place on the form. In response, the 
Agencies note that the different participant counts are used for 
different purposes and thus are difficult to make consistent. In an 
effort to clarify and simplify these questions, however, the Agencies 
decided to consolidate most of the participant count questions onto the 
Form 5500 instead of the various schedules (with the exception of 
certain questions on the Schedule B which are certified to by the 
enrolled actuary and certain questions on Schedule T which are unique 
to the application of the qualified plan minimum coverage 
requirements), and to return, in general, to the format for participant 
count questions used currently on the Form 5500. The Agencies have also 
attempted to clarify the accompanying instructions.

C. Schedule A (Insurance Information) and Other Reporting on Insurance 
Products

    1. Policy Year vs. Plan Year Reporting. Several commentators asked 
the Department not to adopt the proposed change to require Schedule A 
reporting of insurance contracts on a plan year basis. The present rule 
allows reporting on a contract or policy year basis as an alternative 
to a plan year basis. The commentators indicated that plan year 
reporting would require a substantial revision of existing 
recordkeeping systems while not providing better information on the 
insurance contracts being reported. Two commentators, however, stated 
that the proposed change could help in coordinating financial 
information on plan investments provided by banks and insurance 
companies. The Department proposed the change to enable better 
coordination of information on the Schedule A regarding individual 
contracts with aggregate investment and benefit payment information on 
the Form 5500 financial statements (which is reported on a plan year 
basis). In view of the complexities and costs attendant to the proposed 
change, the Department has decided to retain the option of contract or 
policy year reporting on the Schedule A.
    2. Insurance Company Noncompliance with Obligation to Provide 
Necessary Information to Plan Administrators. Several commentators 
described difficulty obtaining information (particularly fee and 
commission-related) from insurance companies. They expressed concern 
about requiring any new information on the Schedule A (such as the new 
requirement to report insurance company employer identification numbers 
(EINs) and National Association of Insurance Commissioners (NAIC) 
codes) because they expected that the new requirements would exacerbate 
the current problem. It is the view of the Department that compliance 
with annual reporting requirements requires the filing of complete, 
accurate and timely annual returns/reports, which includes the 
information required to be reported on the Schedule A. Accordingly, 
plan administrators are obliged to take reasonable and prudent steps to 
secure the necessary Schedule A information. In this regard, it should 
be noted that, with respect to the obligation of insurance carriers to 
furnish Schedule A information, ERISA section 103(a)(2) specifically 
provides in pertinent part that, if some or all of the information 
necessary to enable the administrator to comply with the requirements 
of Title I of ERISA is maintained by an insurance carrier or other 
organization which provides some or all of the benefits under a plan or 
holds assets of the plan in a separate account, such carrier or other 
organization is required to transmit and certify the accuracy of such 
information to the administrator within 120 days after the end of the 
plan year. The current instructions for the Schedule A state that if 
necessary information is missing because of an insurer's refusal to 
provide the information, the administrator should complete the Schedule 
A, to the extent possible, and file a timely return/report noting the 
refusal and any deficiencies in the Schedule A. The Department cautions 
administrators that annual return/report filings should not be delayed 
pending receipt of requested Schedule A information beyond the date on 
which the annual report is due (including any timely obtained 
extensions for filing), and that an amended return/report should be 
filed upon receipt of the deficient Schedule A information.
    3. Fair Market Value vs. Contract Value Reporting for Insurance 
Contracts. Certain changes to the Schedule A and accompanying 
instructions were proposed by the Department in light of Financial 
Accounting Standards Board (FASB) Statement of Financial Accounting 
Standards No. 110 (FAS 110) and No. 126 (FAS 126) and American 
Institute of Certified Public Accountants Statement of Position 94-4 
(SOP 94-4), which generally require that financial statements presented 
in accordance with Generally Accepted Accounting Principles (GAAP) must 
disclose the fair value of investment contracts with insurance 
companies (except for certain investment contracts held by defined 
benefit pension plans and ``fully benefit responsive'' contracts held 
by defined contribution plans with assets of $100 million or less). 
Commentators

[[Page 5030]]

representing insurance companies indicated that determining whether a 
contract may be reported at ``book value'' or contract value under 
these accounting rules is a complex determination, and one that 
insurance companies generally will leave to the discretion of a plan's 
administrator and, if applicable, auditor. Therefore, the commentators 
asked the Agencies to permit contract value reporting for all 
applicable insurance and annuity contracts, or alternatively, confirm 
that an insurance company will satisfy its obligation under ERISA 
section 103(a)(2) by furnishing plan administrators with only contract 
value information. The Department did not adopt these recommendations. 
Section 103 of ERISA and the Department's regulations generally require 
reporting of plan assets valued at their ``current value.'' As noted 
above, insurance companies are required under ERISA section 103(a)(2) 
to provide the information needed by the plan administrator to complete 
the plan's annual report, including both contract value and fair value 
information if needed. The Department continues to believe that 
conforming the Schedule A to the financial statement disclosure 
provisions in FAS 110, FAS 126 and SOP 94-4 will foster greater 
uniformity in the reporting of plan asset values without imposing 
significant costs on either plans or service providers.
    The proposal also called for Schedule A reporting of the current 
value of ``plan assets'' in the insurance company general account. Some 
commentators expressed concern about this requirement and asked for its 
elimination or clarification. This proposed Schedule A change was 
intended to provide a line on which plans could comply with the above 
described requirement to report certain general account contracts at 
fair value. One commentator suggested that the question be rephrased to 
ask for the current value of the ``plan's funds'' in the general 
account. Accordingly, the new question has been re-worded; however, for 
consistency with the existing Schedule A question on current value of 
the ``plan's interest'' in insurance company separate accounts, the 
question asks for the current value of the ``plan's interest'' in the 
insurance company general account.
    4. Schedule A Reporting of Investment Contracts with Insurance 
Companies. Several commentators noted that the current Schedule A 
instructions read ``This schedule must be attached to Form 5500 * * * 
where any benefits under the plan are provided by an insurance company, 
insurance service, or other similar organization.'' The proposed 
instructions included the phrase ``(or investments are managed) by an 
insurance company * * *.'' Commentators expressed confusion about 
whether the instruction was intended to clarify existing reporting 
obligations or impose new ones. The proposed instruction was not 
intended to impose any new Schedule A reporting requirements, but 
rather was intended to state the current requirement to report on the 
Schedule A contracts with insurance companies (including investment and 
annuity contracts) that are part of the plan's ``funding arrangement'' 
as well as those that are part of the plan's ``benefit arrangement.'' 
Accordingly, the instruction has been revised to mirror the current 
Form 5500 instructions for line 14 of the Form 5500 and Line 14 of the 
Form 5500-C which explain Schedule A reporting is required for 
contracts with insurance companies that are part of the plan's 
``funding arrangement'' as well as those that are part of the plan's 
``benefit arrangement.''
    5. Reporting of Allocated Insurance Contracts. The Department 
received several comments on the reporting of allocated insurance 
contracts referred to in 29 CFR 2520.104-44(b)(2). Section 2520.104-
44(b)(2) provides pension plans ``the benefits of which are provided 
exclusively through allocated insurance contracts or policies'' with a 
limited exemption from and alternative method of compliance with the 
annual audit requirement and the requirement to report certain 
financial information on the annual report. Although the Notice of 
proposed forms revisions and the proposed amendments to the 
Department's annual reporting regulations did not propose to modify the 
reporting for allocated insurance contracts, the commentators urged 
that the term ``allocated insurance contract'' should be broadened to 
include: (i) Insurance products that ``guarantee benefits'' even if 
they do not provide upon receipt of the required premium a retirement 
benefit of a specified amount; (ii) insurance products that guarantee a 
fixed rate of return even if they do not provide upon receipt of the 
required premium a retirement benefit of a specified amount, and (iii) 
group annuity contracts held by defined contribution plans where each 
participant's interest in the contract is credited or ``allocated'' to 
the participant's individual account in the plan, but the value of each 
participant's interest in the insurance contract is adjusted for market 
value fluctuations.
    The term ``allocated'' insurance contract has been consistently 
defined in the instructions to the Form 5500 Series. Under that 
definition, contracts are not ``allocated'' unless the insurance 
company or organization that issued the contract has unconditionally 
guaranteed, upon receipt of the required premium or consideration, to 
provide a retirement benefit of a specified amount to each covered 
participant without adjustment for fluctuations in the market value of 
the underlying assets of the company or organization, and each 
participant has a legal right to such benefits which is legally 
enforceable directly against the insurance company or organization. See 
the March 1, 1989 Notice of Adoption of Revised Forms (1989 Notice), 54 
FR 8631, 8635.\3\ The 1989 Notice included the following statements 
regarding the Department's longstanding view on this definition: `` 
`allocated' contracts include only those contracts under which an 
insurance company immediately assumes upon receipt of contributions or 
premiums fixed dollar obligations to provide the retirement benefit 
specified in the plan * * *'' and that the reporting exemption for 
allocated insurance contracts ``is premised on the fact that under such 
contracts the plan has effectively transferred the risk for the payment 
of benefits accrued to that date * * * to the insurer and, accordingly, 
limited reporting is appropriate.'' The types of contracts identified 
by the commentators either did not possess these characteristics and/or 
failed to satisfy other components of the definition, or the 
commentators did not provide sufficient information about the 
characteristics of the contract to support a conclusion that the 
policies underlying 29 CFR 2520.104-44 apply such that the audit and 
financial reporting relief for allocated contracts should be broadened 
to include these other types of contracts. Accordingly, the Department 
has not adopted these comments and has retained unmodified the Form 
5500 return/report instructions pertaining to ``allocated'' insurance 
contracts.
---------------------------------------------------------------------------

    \3\ Before the issuance of the 1988 Form 5500, the Form and the 
accompanying instructions were published in a notice in the Federal 
Register, 51 FR 33500 (September 19, 1986), with the public having 
the opportunity to furnish written comments and oral testimony to 
the Department. The definition of the term ``allocated'' insurance 
contract was incorporated into the 1988 Form 5500 instructions and 
has been included in the Form 5500 instructions for all subsequent 
plan years. Also see 43 FR at 10138 (March 10, 1978) for the 
discussion of allocated insurance contracts in the preamble to the 
final Sec. 2520.104-44 regulations.
---------------------------------------------------------------------------

    A commentator also asked for the Department to clarify whether the 
reporting relief for allocated contracts applies only to defined 
benefit pension

[[Page 5031]]

plans. Although the regulatory relief in 29 CFR 2520.104-44(b)(2) is 
limited to pension benefit plans the benefits of which are provided 
exclusively through allocated insurance contracts, neither the 
regulation nor the Form 5500 return/report instructions distinguish 
between defined contribution and defined benefit pension plans.
    One commentator asked the Department to clarify the term 
``contracts with allocated funds'' that is referred to on line 5 of 
Schedule A (Insurance Information). It is the Department's view that 
allocated funds referred to on line 5 represent the portion of an 
insurance contract that would otherwise meet all of the standards for 
an allocated insurance contract described above.
    6. Reporting of Synthetic GICs and Similar Contracts at Book Value. 
Several commentators asked that the form or the instructions authorize 
``synthetic GICs,'' ``separate account GICs,'' and insurance company 
``stable value funds'' to be reported at contract or ``book'' value on 
the Schedule A, Schedule H and Schedule I because, according to the 
commentators, these contracts are designed to provide returns and 
investment features similar to insurance company general account 
investment contracts. Insufficient information was presented on the 
nature of these contracts, the implications of contract value reporting 
and the feasibility of reporting these various contracts on a single 
line item to enable the Agencies to adopt this recommendation. Thus, 
these contracts must continue to be reported in conformance with 
existing annual reporting requirements.
    7. Insurance Fee and Commission Reporting. Several commentators 
noted that insurance fees and commissions must be individually reported 
on Schedule A, whereas fees and commissions on bank investment 
products, mutual funds, or other products are not individually reported 
on a separate schedule. These commentators suggested either eliminating 
the Schedule A requirement to report insurance fees and commissions or 
requiring broader fee/commission reporting from banks and other 
financial institutions. The Department did not adopt this 
recommendation because section 103(e) of ERISA specifically calls for 
the annual report to include information on fees and commissions paid 
by insurance companies, and the Department continues to believe that 
these Schedule A disclosures provide useful information. Also, the 
Department has been generally reviewing fee disclosure issues outside 
the context of this Form 5500 project.
    Several commentators also questioned the proposed requirement to 
report fees and commissions paid to ``other persons'' noting that the 
current Schedule A requests this information only for ``agents and 
brokers.'' Section 103(e) of ERISA includes ``other persons'' with 
agents and brokers in defining the requirement to report insurance 
contract fees and commissions. Further, the current Schedule A 
instructions provide that fees paid by insurance carriers to persons 
other than agents and brokers should be reported on the Schedule A as 
acquisition costs, administrative expenses, etc., as appropriate, and 
note that for large plan filers these fees paid to ``other persons'' 
are subject to separate reporting on the Schedule C. In light of the 
above, the requirement to report fees and commissions paid to ``other 
persons'' has been retained in the Schedule A because the Department 
believes it serves important enforcement targeting and disclosure 
purposes to require individual identification of all persons who are 
paid insurance fees and commissions.

D. Schedule C (Service Provider Information)

    1. Improve Reporting on Plan Fees and Expenses. Several 
commentators suggested that the Agencies require both large and small 
plans to report all fees and expenses whether paid for by the plan or 
employer, including break-out reporting of both bundled fees and fees 
on investment products that are included in determining the net 
investment gain (or loss). Other commentators suggested increasing the 
Schedule C threshold so that only persons receiving compensation in 
excess of substantially increased thresholds (e.g., $10,000, $25,000, 
or $100,000) be reported and/or that only the top 20 highest paid 
service providers be included. The Agencies concluded that requiring 
Schedule C reporting by small plan filers would not be consistent with 
a principal objective of the project which is to streamline the Form 
5500. Similarly, the Agencies concluded that raising the reporting 
thresholds may result in the disclosure of inadequate service provider 
information. Accordingly, the Agencies decided not to adopt these 
suggested changes. However, as noted above, the Department is reviewing 
general fee disclosure issues outside the context of this Form 5500 
project.
    2. Reports on Trustee Identification and Service Provider 
Terminations. The proposal eliminated from the Schedule C the 
requirement that large plans list plan trustees annually and restricted 
the requirement to report service provider terminations to terminations 
of accountants and enrolled actuaries. Several commentators expressed 
concern that restricting the reporting of terminated parties on the 
Schedule C to accountants and actuaries would limit the Agencies' 
ability to evaluate possible fiduciary problems, and suggested that the 
Agencies either retain current requirements or broaden the report to 
include all terminated service providers. Others suggested that the 
Agencies reinstate the requirement to identify terminated trustees and 
add terminations of independent third party appraisers. Other comments 
supported the change, contending that the reports on service provider 
terminations and the trustee list are not useful. It is the view of the 
Agencies that the currently required annual information on Schedule C 
regarding trustees and termination of various service providers is not 
widely used and to a large extent is duplicative of information 
otherwise available to participants either as part of the plan's SPD 
and SMMs or by comparing consecutive annual reports. In addition, the 
majority of annual report filers are small plan filers which are 
already exempt from these requirements because the Schedule C only 
applies to large plan filers.
    3. Clarify ``Service Code'' Entry. Under current rules, Schedule C 
reporting is generally required when any person receives, directly or 
indirectly, $5,000 or more in compensation for services rendered to a 
plan. A commentator asked that the instructions clarify how the $5,000 
threshold is applied when multiple services are provided. The current 
instructions already make it clear that the $5,000 threshold is 
calculated taking into account compensation for all services provided 
(regardless of whether the compensation for any single service among 
the multiple services is less than $5,000). For example, the current 
instructions state: ``If more than one service was provided, enter only 
the code of the primary service.'' Nonetheless, to further clarify the 
instructions and to provide for more accurate disclosure of service 
fees, the Agencies have changed the service code rule to require the 
reporting of a service code for each service included in the total 
compensation figure.
    4. Allow Cash or Accrual Basis Reporting on Schedule C. One 
commentator asked for clarification of whether the Schedule C permits 
use of either the cash or accrual basis method of accounting for 
reporting

[[Page 5032]]

compensation paid to service providers. The Department has clarified 
the instructions to the Schedule C to provide for the use of either the 
cash or accrual basis method for recognition of transactions on the 
Schedule C as long as one method is consistently used.

E. Schedule D (DFE /Participating Plan Information)

    1. Clarify DFE Requirements. The proposal called for a 
comprehensive restructuring of the way Direct Filing Entity (DFE) 
information is reported by PSAs, CCTs, master trusts investment 
accounts (MTIAs), 103-12 investment entities (103-12 IEs), and group 
insurance arrangements (GIAs). Specifically, under the proposal, the 
Form 5500 would be established as the standardized reporting format for 
DFEs. Several commentators described the new DFE provisions as an 
improvement because the standardized reporting format for DFEs 
clarifies the reporting process for DFEs and provides more 
understandable information to participants and beneficiaries regarding 
their plans' participation in these pooled investment and insurance 
arrangements. A commentator also suggested that all PSAs, CCTs, MTIAs, 
other investment entities that hold plan assets, and GIAs be required 
to file directly, and suggested the proposal be expanded to broaden 
disclosure to participants about the DFE investments. Some commentators 
expressed concern about possible competitive disadvantages for PSAs 
that do not choose to file as DFEs, requested that the Department 
reconsider the standardized filing requirement for DFEs, and also 
stated that the DFE changes would increase the reporting requirements 
for PSAs and CCTs.
    The Department believes that the changes to the reporting 
requirements for plans participating in CCTs, PSAs, MTIAs, 103-12 IEs, 
and GIAs is the best alternative for capturing the information needed 
to carry out its oversight responsibilities over the plan assets held 
by these entities and ensuring that there is adequate disclosure of 
plan investment and insurance information to plan participants and 
beneficiaries. Continuation of the current annual reporting rules would 
perpetuate the Department's current inability to correlate and 
effectively use the data regarding the approximately $2 trillion in 
plan assets invested by plans in DFEs, and, therefore, would be adverse 
to the interests of participants and beneficiaries since the DFE 
information is an integral part of the annual report of each 
participating plan. Moreover, with the exception of abbreviated income 
and expense statements for CCTs and PSAs being required as part of 
their Schedule H filing, in the Department's view, substantially all of 
the information that would be required to be reported by DFEs under the 
new Form 5500 currently must be reported. Further, direct reporting by 
CCTs, PSAs, 103-12 IEs and GIAs continues to be optional. Thus, the 
Department believes that the major change in reporting with respect to 
DFEs is that information must be reported in a standardized format 
using the Form 5500 and associated schedules.
    Some commentators expressed concern about the proposed requirement 
that plans classify and report the underlying assets of CCTs and PSAs 
that do not elect to report as DFEs. The commentators stated that 
implementation of this rule will be costly because, under the proposal, 
such plans will have to classify each investment held by the entity and 
report their percentage interest as of the beginning and end of the 
plan year. The commentators suggested that CCTs and PSAs currently are 
only required to provide participating plans and the Department with a 
statement of assets and liabilities as of their fiscal year end, and 
argued that the proposed change would require these entities to prepare 
statements of assets and liabilities on a monthly or more frequent 
basis. Under existing annual reporting rules, however, plans must 
include the current value of their investment in CCTs and PSAs in their 
annual reports as of the beginning and end of the plan year. Further, 
these asset break-out rules do not apply to small plan filers and the 
Department does not envision that the required asset break-out 
reporting rules will impose a substantial additional burden on large 
plan filers inasmuch as there is only a limited number of general asset 
categories on the Schedule H (Financial Information) that could be 
used, e.g., interest bearing cash; U.S. government securities; 
corporate debt instruments; corporate stock; partnership/joint venture 
interests; real estate; loans; other assets; and employer securities. 
Further, the Department does not believe that the new DFE rules should 
result in material cost increases or administrative burdens for plans 
because of the information required to be transmitted by CCTs and PSAs 
to their participating plans.
    2. Notice of DFE Filing to Plans. Several commentators noted that 
there was no explicit provision in the proposed Form 5500 instructions 
that required CCTs and PSAs to annually notify their participating 
plans whether the CCT or PSA will file a Form 5500 as a DFE with the 
Department. The Department clarified the notice requirements in the 
proposed regulatory amendments to 29 CFR 2520.103-5 in a separate 
Notice of Proposed Rulemaking that was published in the Federal 
Register on December 10, 1998 (63 FR 68370). A notice of final 
rulemaking on those regulatory amendments will be published separately 
in the Federal Register.
    3. Reconfigure Schedule D. Several commentators noted that the 
multi-purpose Schedule D as proposed was confusing, and one suggested 
that it be divided into two parts, Part I to be filed by plans and Part 
II to be filed by DFEs. The Department has restructured the Schedule D 
into two parts. Part I must be completed by plans and DFEs to report 
information on their investments in MTIAs, CCTs, PSAs and 103-12 IEs. 
Part II must be completed by DFEs to report information regarding 
participating plans. Another commentator indicated that it is unlikely 
that the space on the Schedule D would be sufficient to list, in many 
cases, every plan that at some time during a year participated in a DFE 
(particularly CCTs and PSAs). The Schedule D was restructured to 
address that issue by using a continuation page approach.
    One commentator noted that among other information that must be 
reported on the Schedule D by a PSA electing to file as a DFE is each 
participating plan's EIN and plan number (PN). The commentator stated 
that most insurers do not possess this information, and, therefore, 
suggested that the Department permit insurers to use their contract 
identification number in lieu of the EIN and PN on the Schedule D. The 
Department did not adopt this recommendation. Plan administrators 
already must furnish EIN and PN information to banks and insurance 
carriers filing statements of assets and liabilities for CCTs and PSAs 
under current direct filing rules. This requirement was originally 
included in 29 CFR 2520.103-9(b)(2), adopted as a final rule on March 
10, 1978 (43 FR 14009). Also, EIN and PN information facilitates 
effective correlation of information filed by plans and DFEs. Another 
commentator asked that the Schedule D listing of plan sponsor names and 
assets should not be open to public inspection. The content of the 
annual report under Title I of ERISA generally is required to be public 
information. See, e.g., ERISA section 106. Accordingly, the Department 
did not adopt this recommendation.
    4. Filing Due Dates and Transitional Rules Regarding DFEs. Some 
CCTs and

[[Page 5033]]

PSAs indicated an intent to file as DFEs but stated that substantial 
lead time would be needed to prepare for the new reporting 
requirements, and suggested making the filing optional for several 
years or otherwise delaying the implementation of the DFE rules. Some 
said no changes should be implemented until effective electronic filing 
options are available to DFEs.
    As previously mentioned, implementation of the new Form 5500 has 
been delayed until 1999 plan year filings. To facilitate the transition 
to the new reporting rules for DFEs, the Department is also clarifying 
the due date for DFE Form 5500 filings and adopting a transitional 
reporting rule for plans and DFEs participating in CCTs and PSAs. 
First, as to the DFE Form 5500 due date, inasmuch as DFE filings 
continue to be considered an integral part of the annual report of each 
participating plan, each participating plan's Form 5500 return/report 
will be treated as incomplete unless the DFE information is filed 
within the prescribed time. The regulatory amendments clarify that, as 
with the current rule for statements of assets and liabilities, the DFE 
Form 5500 filing should pertain to the DFE fiscal year ending with or 
within the plan year. The regulatory amendments also establish the 
filing due date for all DFEs, other than GIAs, as no later than 9-1/2 
months after the end of the DFE's fiscal year.\4\ This structure is 
intended to provide a predictable filing deadline for DFEs while also 
ensuring that all DFE filings will be due on or before the latest 
annual report due date for any participating plan regardless of the 
plan's reporting year.
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    \4\ The Department did not extend the filing due date for GIAs 
(i.e., due no later than the last day of the 7th month after the end 
of the GIA fiscal year) because the GIA filing is in lieu of the 
plan's filing rather than supplementing the plan's filing (as is the 
case with filings made by CCTs, PSAs, MTIAs and 103-12IEs). GIAs, 
however, are able to obtain the same filing extension that is 
available to plans (i.e., 2\1/2\ months by timely filing a Form 
5558).
---------------------------------------------------------------------------

    A transitional rule applies to plans and DFEs participating in CCTs 
or PSAs which do not elect to file as a DFE for their fiscal year 
ending in 1999. The transitional rule waives for the 1999 reporting 
year the requirement that large plan filers and DFEs break out, as 
dollar value entries in the appropriate categories on the asset and 
liability statement contained in Schedule H (Financial Information), 
their percentage interest in the underlying assets of CCTs and PSAs 
that do not file as DFEs. Rather, for the 1999 reporting year only, 
large plans and DFEs may report their interest on the aggregate CCT or 
PSA lines of the Schedule H asset and liability statement (i.e., lines 
1c(9) and 1c(10) of Schedule H) as of the beginning and end of the plan 
year even if the CCT or PSA does not file a Form 5500 as a DFE. Plans 
participating in a CCT or PSA also are not required to attach the CCT's 
or PSA's statement of assets and liabilities to its 1999 filing.

F. Schedule H (Financial Information), Schedule I (Financial 
Information--Small Plan) and Schedule G (Financial Transaction 
Schedules)

    1. Employer Delinquent Transmission of Participant Contributions. 
One commentator requested a change to the question on participant 
contributions to require reporting only when contributions are not 
transmitted by the employer within 15 business days after the end of 
the month in which the contributions are withheld or received by the 
employer in the case of pension plans, and 90 days after such receipt 
or withholding in the case of welfare plans. In comparison, the 
proposed question on Schedule H and Schedule I (referred to as Schedule 
FIN and FIN-SP in the September 3, 1997 proposal) asks whether 
participant contributions were transmitted by the earliest date on 
which such contributions could reasonable be segregated from the 
employer's general assets (which date cannot exceed 15 business days 
after the end of the month in which the contributions are withheld or 
received by the employer in the case of pension plans and 90 days after 
receipt or withholding in the case of welfare plans). The commentator's 
suggested change would undercut the purpose of the question which was 
designed to identify circumstances under which the Department's 
regulatory requirements for timely handling of participant 
contributions may have been violated. Accordingly, the comment has not 
been adopted.
    2. Direct Rollover Reporting. The Agencies proposed to add to the 
Schedule H a requirement to separately report plan distributions in the 
form of ``direct rollovers'' to IRAs and other qualified plans. Several 
commentators stated that this information is currently reported to the 
IRS on Form 1099-R and suggested that additional recordkeeping burdens 
would result from this requirement. The Agencies decided to eliminate 
this question from the Schedule H.
    3. Schedule of Assets Held for Investment Purposes at End of Year, 
Schedule of Investment Assets Both Acquired and Disposed of Within the 
Plan Year, and Schedule of Reportable (5%) Transactions. The Department 
received comments both supporting and opposing the proposal to 
eliminate these schedules from the annual report. Several commentators 
said that elimination of these schedules would deprive participants, 
the Department, and others of valuable plan information. Other 
commentators supported the change as reducing reporting burdens by 
eliminating unnecessary information from the annual report, but noted 
the proposal did not result in significant overall burden savings 
because all the information still had to be retained so that it could 
be made available to participants, beneficiaries, the Department and 
other authorized parties on request. In view of the potential 
importance of the scheduled information to participants and others, and 
the few additional burdens attendant to the filing of such information 
in light of the continued disclosure obligation, the Department decided 
to retain these schedules as part of the annual report for large plan 
filers. However, the Department decided to adopt the elements of the 
proposal that (1) eliminated the requirement to report participant or 
beneficiary directed transactions under an individual account plan on 
the schedule of reportable (5%) transactions, and (2) eliminated the 
requirement to report the historical cost for assets held as a result 
of such participant or beneficiary direction on the Schedule of Assets 
Held for Investment Purposes at End of Year and the Schedule of 
Investment Assets Both Acquired and Disposed of Within the PlanYear. 
Further, the instructions to the Form 5500 return/report state that, 
although these schedules must continue to be attached to the Form 5500 
for large plan filers to report assets held for investment and 
reportable transactions, filers are not required to use computer 
scannable forms for these attachments.
    One commentator also requested that the Department eliminate 
altogether the requirement to report cost information on the schedule 
of reportable transactions and the schedules of assets for 
``participation units'' in insurer pooled accounts regardless of 
participant or beneficiary direction of the asset because, according to 
the commentator, some insurers do not maintain ``cost'' information on 
such participation units. The commentator stated that there is no 
``natural historical cost number'' for these participation units and 
there is no taxable transaction associated with interfund transfers 
while funds are held within a tax qualified plan. Requirements 
regarding reporting of cost of plan assets have long

[[Page 5034]]

been part of the Title I annual reporting rules. Cost reporting in 
conjunction with current value reporting on these schedules for non-
participant directed assets provides comparative information regarding 
the value of plan assets. The Department was unable to conclude, based 
on the limited information provided regarding the type of insurer 
accounts described by the commentator, that these accounts were not 
capable of being reported with a cost figure calculated on an 
acceptable accounting basis, and was unable to conclude that adopting 
this recommendation would be consistent with the purposes of Title I 
and would provide adequate disclosure to participants and beneficiaries 
and adequate reporting to the Department.
    4. Reporting Participant Loans in Default. Several commentators 
asked for guidance on whether participant loans in default must 
continue to be reported on the Schedule G even after a ``deemed 
distribution'' has been reported to the IRS under the Code. Others 
asked that participant loans in default not be required to be reported 
if they are adequately secured by the participant's account balance in 
the plan. Under the proposal, participant loans in default could be 
reported as an aggregate figure rather than as individual loans on the 
Schedule G. In light of the above comments, several changes were made 
to the Schedule G as well as Schedule H and Schedule I to clarify the 
reporting requirements in a way that the Agencies believe will in the 
aggregate reduce administrative burdens and improve reporting regarding 
participant loans.
    5. Reporting Preferred and Common Stocks, Preferred and Other 
Corporate Debt, and Realized and Unrealized Gains/Losses. Some 
commentators stated that the breakout of preferred versus common stock, 
preferred versus other bonds, and realized versus unrealized gains/
losses is unnecessary and suggested that the Agencies consolidate those 
categories into stocks, bonds, and total gains/losses. Several 
commentators also stated that the recharacterization of corporate debt 
instruments from ``preferred'' and ``other'' to ``long term'' and 
``short term'' would require reprogramming and questioned the value of 
this change. The Agencies have examined these breakouts and decided to 
retain them because they serve important enforcement and disclosure 
purposes, but, have decided to adopt the recommendation to retain the 
``preferred'' and ``other'' categories for reporting corporate debt 
instruments.
    6. Reporting of Corrective Distributions.--Plans that fail either 
the actual deferral percentage or actual contribution percentage tests, 
or certain plans that have Code section 415 excess annual additions may 
make corrective distributions to satisfy these rules. A commentator 
asked the Agencies to clarify how such corrective distributions should 
be reported on the form. In response, a new line was added to the 
Income and Expense Statements on Schedule H and Schedule I to report 
corrective distributions.

G. Schedule R (Retirement Plan Information)

    Schedule R (Retirement Plan Information), referred to as Schedule 
PEN in the September 3, 1997 proposal, was modified in response to 
public comments. As noted above, the questions on the number of 
participants were consolidated into the Form 5500. The questions on 
plan distributions and funding were continued, but the requirement to 
report distributions that were not paid as qualified joint and survivor 
annuities, which some commentators characterized as burdensome, was 
replaced, at a commentator's recommendation, with the requirement to 
report the number of single sum distributions. The Agencies, however, 
retained the reporting of distributions paid in property other than 
cash, annuity contracts or publicly traded securities and the EINs of 
the two principal payors of plan benefits because they serve as 
valuable tools for monitoring plans' compliance with the requirements 
and objectives of ERISA and the Code.

H. Schedule T (Qualified Plan Coverage Information)

    Schedule T, referred to as Schedule Q in the September 3, 1997 
proposal, requires the reporting of specific plan coverage data 
pertinent to a plan's compliance with the minimum coverage requirements 
of the Code and is being adopted largely as proposed. The Form 5500 and 
the Schedule T allow plans, in appropriate circumstances, to report 
coverage information as infrequently as every third year under the 
three year testing cycle rule. In response to a commentator's request, 
a space was added to the Form 5500 that allows a filer to indicate that 
a Schedule T is not being attached because the plan is relying on 
coverage testing information for a prior year. Further, in response to 
one comment, the instructions for the Schedule T have been modified to 
allow plans maintained by more than one employer to report which of 
their participating employers automatically meet the minimum coverage 
requirements, thus eliminating the separate Schedule T that would 
otherwise have to be filed for these employers.

I. Miscellaneous Technical Adjustments

    Various commentators submitted technical suggestions on how to 
further improve and clarify various portions of the proposal. Many of 
the suggestions focused on technical corrections and improvements in 
the instructions as opposed to changes on the forms. The Agencies have 
reviewed the comments and made various technical corrections/
clarifications in response to those comments.

III. Regulations Relating to the Final Form

    For purposes of Title I of ERISA, the filing of a completed Form 
5500 (including the report of an independent qualified public 
accountant and any required statements, schedules and attachments) by 
plans with 100 or more participants constitutes compliance with the 
limited exemption and alternative method of compliance prescribed in 
paragraph (b) of 29 CFR 2520.103-1, promulgated in accordance with the 
authority granted the Secretary under sections 104(a)(3) and 110 of 
ERISA. The filing of a completed Form 5500, with the appropriate 
statements, schedules and attachments, also constitutes compliance with 
the simplified annual reporting requirements prescribed at 29 CFR 
2520.104-41, adopted pursuant to the authority granted the Secretary 
under ERISA sections 104(a)(2)(A) and 104(a)(3). Also see 29 CFR 
2520.103-1(c). In the supplementary information accompanying the 1997 
proposed forms revisions (62 FR 46556), the Department noted that 
certain amendments to the annual reporting regulations would be 
necessary to accommodate certain proposed revisions to the forms. As 
stated previously, proposed amendments to the Department's annual 
reporting regulations were published in the Federal Register for public 
comment on December 10, 1998 (63 FR 68370). A final rule amending the 
Department's annual reporting regulations will be published separately 
by the Department in the Federal Register. The findings required under 
sections 104(a)(3) and 110 of ERISA 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 will be contained in that final rule.

Paperwork Reduction Act

    The Form 5500 Series contain information collection requirements.

[[Page 5035]]

They have been approved by the Office of Management and Budget under 
the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506(c)). The Form 5500 Series has been assigned the following OMB 
Control Numbers: U.S. Department of Labor, Pension and Welfare Benefits 
Administration 1210-0110 and 1210-0089; U.S. Department of the 
Treasury, Internal Revenue Service 1545-1610; and Pension Benefit 
Guaranty Corporation 1212-0057. The OMB control numbers and estimates 
of the time required to complete the Form 5500 Series are presented in 
the Paperwork Reduction Act Notice contained in the instructions to the 
Form 5500 Series.

Statutory Authority

    Accordingly, pursuant to the authority in sections 101, 103, 104, 
109, 110 and 4065 of ERISA and sections 6039D and 6058 of the Code, the 
Form 5500 Series Annual Return/Report and the instructions thereto are 
adopted as set forth herein.

    Signed at Washington, DC, this 20th day of January, 2000.
Leslie Kramerich,
Acting Assistant Secretary, Pension and Welfare Benefits 
Administration, Department of Labor.
Carol D. Gold,
Director, Employee Plans, Tax Exempt and Government Entities Division, 
Internal Revenue Service, Department of the Treasury.
David M. Strauss,
Executive Director, Pension Benefit Guaranty Corporation.

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[FR Doc. 00-1842 Filed 2-1-00; 8:45 am]
BILLING CODE 4510-29-C