[Federal Register Volume 81, Number 140 (Thursday, July 21, 2016)]
[Proposed Rules]
[Pages 47496-47532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14892]



[[Page 47495]]

Vol. 81

Thursday,

No. 140

July 21, 2016

Part II





Department of Labor





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Employee Benefits Security Administration





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29 CFR Parts 2520 and 2590





 Annual Reporting and Disclosure; Proposed Rule

Federal Register / Vol. 81 , No. 140 / Thursday, July 21, 2016 / 
Proposed Rules

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Parts 2520 and 2590

RIN 1210-AB63


Annual Reporting and Disclosure

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Proposed rule.

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SUMMARY: This document contains proposed amendments to Department of 
Labor (DOL) regulations relating to annual reporting requirements under 
Part 1 of Subtitle B of Title I of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA). The proposed amendments 
contained in this document would conform the DOL's reporting 
regulations to proposed revisions to the Form 5500 Annual Return/Report 
of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/
Report of Small Employee Benefit Plan, which are being published 
concurrently in today's Federal Register in a separate Notice of 
Proposed Forms Revisions (NPFR) prepared jointly by the Department of 
Labor (DOL), the Internal Revenue Service (IRS), and the Pension 
Benefit Guaranty Corporation (PBGC) (collectively the Agencies). The 
proposed regulation, and related forms revisions, would improve 
employee benefit plan reporting for filers, the public, and the 
Agencies. The revision is necessary because the annual return/report 
forms have not kept pace with market developments and changes in the 
laws covering employee benefit plans, presenting problems with outdated 
and missing information that negatively impact the Agencies' effective 
and efficient protection of employee retirement and health benefits. 
The proposed revisions would affect employee pension and welfare 
benefit plans, plan sponsors, administrators, and service providers.

DATES: Written comments must be received by the Department of Labor on 
or before October 4, 2016.

ADDRESSES: To facilitate the receipt and processing of written comment 
letters on the proposed regulation, EBSA encourages interested persons 
to submit their comments electronically. You may submit comments, 
identified by RIN 1210-AB63, by any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov.
    Follow instructions for submitting comments.
    Email: e-ORI@dol.gov. Include RIN 1210-AB63 in the subject line of 
the message.
    Mail: Office of Regulations and Interpretations, Employee Benefits 
Security Administration, Attn: RIN 1210-AB63; Annual Reporting and 
Disclosure, Room N-5655, U.S. Department of Labor, 200 Constitution 
Avenue NW., Washington, DC 20210.
    Hand Delivery/Courier: Office of Regulations and Interpretations, 
Employee Benefits Security Administration, Attn: RIN 1210-AB63; Annual 
Reporting and Disclosure, Room N-5655, U.S. Department of Labor, 200 
Constitution Avenue NW., Washington, DC 20210.
    Instructions: All comments received must include the agency name 
and Regulatory Identifier Number (RIN) for this rulemaking (RIN 1210-
AB63). Persons submitting comments electronically are encouraged not to 
submit paper copies. All comments received will be made available to 
the public, posted without change to http://www.regulations.gov and 
http://www.dol.gov/ebsa, and made available for public inspection at 
the Public Disclosure Room, N-1513, Employee Benefits Security 
Administration, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Mara S. Blumenthal, Office of 
Regulations and Interpretations, Employee Benefits Security 
Administration, U.S. Department of Labor, (202) 693-8523 (not a toll-
free number) for all changes other than group health plan information; 
Suzanne Adelman, EBSA, U.S. Department of Labor, 202-693-8383 (not a 
toll-free number), for questions relating to the collection of group 
health plan information.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

A. Purpose of the Regulatory Action

    Under Titles I and IV of ERISA and the Internal Revenue Code 
(Code), pension and other employee benefit plans are generally required 
to file annual returns/reports concerning, among other things, the 
financial condition and operations of the plan. Filing a Form 5500 
Annual Return/Report of Employee Benefit Plan (Form 5500 Annual Return/
Report), or a Form 5500-SF Short Form Annual Return/Report of Small 
Employee Benefit Plan (Form 5500-SF) (depending on certain plan 
characteristics), together with any required schedules and attachments 
(together ``the Form 5500 Annual Return/Report''), in accordance with 
their instructions, generally satisfies these annual reporting 
requirements. In addition to being an important disclosure document for 
plan participants and beneficiaries, the Form 5500 Annual Return/Report 
is a critical enforcement, compliance, and research tool for the DOL, 
IRS, and the PBGC (together ``Agencies''). It is also an important 
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. In the United States, there are an 
estimated 2.3 million health plans, a similar number of other welfare 
plans, and nearly 681,000 private pension plans. These plans cover 
roughly 143 million private sector workers, retirees, and dependents, 
and have estimated assets of $8.7 trillion. The Form 5500 Annual 
Return/Report is the principal source of information and data 
concerning the operations, funding, and investments of more than 
806,000 of these pension and welfare benefit plans.
    Generally, the Agencies have conducted notice and comment 
rulemaking before making significant changes to the forms and 
schedules. This proposed revision to the DOL's reporting regulations is 
needed to implement the forms revisions proposed in the three-agency 
(DOL, IRS, and the PBGC) Notice of Proposed Forms Revisions (NPFR), 
which is being published separately in today's Federal Register.
    As noted above and discussed in detail below, because the Form 5500 
Annual Return/Report has not kept pace with market developments and 
changes in the laws covering employee benefit plans, problems with 
outdated and missing information negatively impact the Agencies' 
effective and efficient protection of employee retirement and group 
health benefits. That fact is reflected in the more than 15 reports 
that have been issued since the publication of the last major forms 
revisions from the Government Accountability Office (GAO), the DOL's 
Office of Inspector General (DOL-OIG), the United States Treasury 
Inspector General for Tax Administration (the TIGTA), and the ERISA 
Advisory Council that all call for expanded annual reporting by 
employee benefit plans and improvements in the Form 5500 Annual Return/
Report.\1\ In

[[Page 47497]]

developing these proposed updates to the Form 5500 Annual Return/
Report, the DOL, along with IRS and PBGC, carefully considered those 
reports in determining where changes are needed.
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    \1\ See, e.g., U.S. Gov't Accountability Office, GAO-10-54, 
Private Pensions: Additional Changes Could Improve Employee Benefit 
Plan Financial Reporting (2009) (available at www.gao.gov/assets/300/298052.pdf); U.S. Gov't Accountability Office, GAO-14-441, 
Private Pensions: Targeted Revisions Could Improve Usefulness of 
Form 5500 Information (2014) (available at www.gao.gov/products/GAO-14-441); 2013 ERISA Advisory Council Report: Private Sector Pension 
De-risking and Participant Protections, Dep't of Labor, www.dol.gov/ebsa/publications/2013ACreport2.html); Dep't of Labor Office Of 
Inspector Gen., 05-14-003-12-12, EBSA Could Improve Its Usage of 
Form 5500 Data (2014) (available at www.oig.dol.gov/public/reports/oa/2014/05-14-003-12-121.pdf); U.S. Gov't Accountability Office, 
GAO-14-92, Private Pensions: Clarity of Required Reports and 
Disclosures Could Be Improved (2013) (available at www.gao.gov/assets/660/659211.pdf); U.S. Gov't Accountability Office, GAO-14-92, 
Private Pensions: Clarity Of Required Reports And Disclosures Could 
Be Improved, Report to Congressional Requesters (2013) (available at 
www.gao.gov/assets/660/659211.pdf); U.S. Dep't of Labor Office of 
Inspector Gen., 09-13-001-12-121, Employee Benefits Security 
Administration Needs to Provide Additional Guidance And Oversight to 
ERISA Plans Holding Hard-to-Value Alternative Investments (2013) 
(available at www.oig.dol.gov/public/reports/oa/2013/09-13-001-12-121.pdf); U.S. Gov't Accountability Office, GAO-12-665, Private 
Sector Pensions: Federal Agencies Should Collect Data and Coordinate 
Oversight of Multiple Employer Plans (2012) (available at 
www.gao.gov/assets/650/648285.pdf); U.S. Dep't of Labor Office Of 
Inspector Gen., 09-12-002-12-121, Changes Are Still Needed In The 
ERISA Audit Process To Increase Protections For Employee Benefit 
Plan Participants (2012) (available at www.oig.dol.gov/public/reports/oa/2012/09-12-002-12-121.pdf); U.S. Gov't Accountability 
Office, GAO-12-325, 401(K) Plans: Increased Educational Outreach and 
Broader Oversight May Help Reduce Plan Fees (2012) (available at 
www.gao.gov/products/GAO-12-325); U.S. Gov't Accountability Office, 
GAO-08-692, Defined Benefit Plans: Guidance Needed to Better Inform 
Plans of the Challenges and Risks of Investing in Hedge Funds and 
Private Equity (2012) (available at www.gao.gov/products/GAO-08-692); Treasury Inspector Gen. for Tax Administration, The Employee 
Plans Function Should Continue Its Efforts to Obtain Needed 
Retirement Plan Information (2011) (available at www.treasury.gov/tigta/auditreports/2011reports/201110108fr.pdf); 2011 ERISA Advisory 
Council Report: Hedge Funds and Private Equity Investments, Dep't of 
Labor, www.dol.gov/ebsa/publications/2011ACreport3.html); 2013 ERISA 
Advisory Council Report: Locating Missing and Lost Participants, 
Dep't of Labor, www.dol.gov/ebsa/publications/2013ACreport3.html#2; 
2010 ERISA Advisory Council Report: Employee Benefit Plan Auditing 
and Financial Reporting Models, Dep't of Labor, www.dol.gov/ebsa/publications/2010ACreport2.html; 2008 ERISA Advisory Council Report: 
Working Group on Hard-to-Value Assets and Target Date Funds, Dep't 
of Labor, www.dol.gov/ebsa/publications/2008ACreport1.html.
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    In addition, a significant update being made to the Form 5500 
Annual Return/Report is the introduction of basic reporting 
requirements for all plans that provide group health benefits that have 
fewer than 100 participants and are covered by Title I of ERISA, most 
of which are currently exempt from reporting requirements, and the 
addition of a new schedule (Schedule J) proposed to be required for all 
group health plans. This reflects a new emphasis on transparency under 
the Affordable Care Act \2\ and a desire to offer plan sponsors the 
opportunity to satisfy certain Affordable Care Act reporting 
requirements addressed in this proposal by a more robust Form 5500 
Annual Return/Report filing for those group health plans currently 
required to file and by elimination of the current exemption for plans 
that provide group health benefits that have fewer than 100 
participants that are fully insured, unfunded, or a combination. Once 
finalized, these proposed changes will result in annual return/report 
forms that are a more effective policy, enforcement, and research tool, 
and one that will increase transparency, accountability, and confidence 
in the employee benefit plan system.
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    \2\ The Patient Protection and Affordable Care Act, Public Law 
111-148, was enacted on March 23, 2010, and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152, was 
enacted on March 30, 2010. These statutes generally are collectively 
known as the ``Affordable Care Act.''
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    The Agencies' proposed changes to the Form 5500 Annual Return/
Report also should be viewed in light of the fact that the last two 
major revisions of the Form 5500 Annual Return/Report \3\ occurred in 
1999 and 2009 in connection with a major shift from a paper-based 
filing system to the current internet-based wholly electronic filing 
and electronic data processing system (EFAST and now EFAST2), which is 
operated by a private sector contractor. For the last two major form 
revision cycles, the Agencies were focused on moving filers to new 
technologies for filing Form 5500 Annual Return/Report data. In 
recognition of the burden and challenges that filers would face in 
migrating to new filing technologies, the Agencies' generally deferred 
proposing major form changes that would add substantial new burdens. In 
fact, by deferring our current proposals until now, the new EFAST2 
capabilities are making more feasible and efficient processing of both 
the existing and the expanded data we are proposing to collect.
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    \3\ The Agencies' last tri-agency major revision to the Form 
5500 Annual Return/Report series was effective for the 2009 plan 
year forms. Before that, the last major revision was effective for 
the 1999 plan year forms and was implemented together with the 
initial implementation of EFAST. In interim years, the Agencies have 
made other focused changes, which are set forth annually in the 
``Changes to Note'' section in the instructions.
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B. Summary of the Major Revisions of the Regulatory Action

    The proposed forms revisions and the DOL implementing regulations 
are intended to address changes in applicable laws and the employee 
benefit plan and financial markets, and corresponding shifts in agency 
priorities and needs since the last major revision. The proposed 
revisions are also expected ultimately to make filing and processing 
more efficient and accurate and to restore a greater level of 
transparency in the employee benefit plan market.\4\ The proposed forms 
revisions fall under the following general categories:
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    \4\ In addition, this rulemaking and forms revisions are being 
coordinated generally with a re-bid and updating of the ERISA Filing 
Acceptance System (EFAST2)--the wholly electronic Form 5500 Annual 
Return/Report filing and processing system. Unlike the 1999 and 2009 
forms revisions, the re-bid of EFAST2 does not involve major changes 
in the EFAST2 key system requirements, capabilities, and functions. 
Rather, although there are some changes to the system, the re-bid 
process is largely being undertaken in response to Federal 
Acquisition Regulation (FAR) requirements on periodic re-bidding of 
longer term contracts. Under these circumstances, there may be 
opportunities to implement various form changes either before or 
after the re-bid EFAST2 contract is awarded. The timing of the re-
bid of EFAST2 and implementation of form changes may also be 
affected by whether funds necessary for the re-bid or form 
implementation are appropriated as part of the Agencies' respective 
budgets. Accordingly, although the overall objective is to implement 
these proposed form changes as part of a re-bid EFAST2 contract, 
rulemaking and budget issues may require the Agencies to consider a 
more staged approach.
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1. Modernize Financial and Investment Reporting by Pension Plans
    A key component of the proposal would expand and modernize 
financial and investment information reported by pension plans. 
Reporting on the financial operations and integrity of U.S. private 
pension plans (both defined benefit and defined contribution) is 
critical given the ongoing importance of such plans to the retirement 
security of America's workforce. Moreover, improved transparency of 
financial products and investments acquired by plans is critical to the 
ability of the Agencies to fulfill their statutory oversight role. It 
is also important for ongoing monitoring of retirement plans by 
employers, plans, participants and beneficiaries, and policy makers. 
These proposed changes to financial reporting are specifically designed 
to improve reporting of alternative investments, hard-to-value assets, 
and investments through collective investment vehicles and participant-
directed brokerage accounts.
    An overriding objective of these proposed revisions to the 
financial

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information collected as part of the annual return/report is to present 
plan financial and balance sheet information, including the currently 
required schedules of assets, in a way that better reflects the 
investment portfolios and asset management practices of employee 
benefit plans. The basic objective of ERISA's mandatory financial 
reporting is to provide information about the reporting entity for the 
Agencies' enforcement, research, and policy formulation programs; for 
other federal agencies, Congress, and the private sector to assist them 
in assessing employee benefit, tax, and economic trends and policies; 
and for plan participants and beneficiaries and the general public to 
understand and monitor better the activities and investments of 
employee benefit plans. As reflected in the various reports from the 
GAO, the DOL-OIG, the ERISA Advisory Council, and the TIGTA, the 
current information collected on the Form 5500 Annual Return/Report and 
Form 5500-SF is insufficient to satisfy those objectives.
    The financial statements contained in the current Schedule H (Large 
Plan Financial Information) and Schedule I (Small Plan Financial 
Information) are based on data elements that have remained largely 
unchanged since the Form 5500 Annual Return/Report was established in 
1975. Over the past four decades, the U.S. private pension system has 
shifted from defined benefit (defined benefit or DB) pension plans 
toward defined contribution (defined contribution or DC) pension plans, 
often participant-directed 401(k)-type DC pension plans. The financing 
of retirement benefits has changed dramatically coincident with the 
shift from DB to DC pension plans. In 1978, when legislation was 
enacted authorizing 401(k) plans that allow employees to contribute to 
their own retirement plan on a pre-tax basis, participants contributed 
only 29 percent of the contributions to DC pension plans and only 11 
percent of total contributions to both DB and DC pension plans. ``In 
the years following 1978, employee contributions to DC pension plans 
steadily rose to a peak of approximately 60 percent in 1999, where it 
has remained.'' See Dep't of Labor, Private Pension Plan Bulletin 
Abstract of 2012 Form 5500 Annual Reports, at 1 (2015). Simultaneously, 
the number of single-employer DB pension plans has decreased from 
92,000 in 1990 to just under 29,000 single-employer pension plans in 
2009. See U.S. Gov't Accountability Office, GAO-09-291, Defined Benefit 
Pensions: Survey Results of the Nation's Largest Private Defined 
Benefit Plan Sponsors Highlights (2009) (available at http://www.gao.gov/new.items/d09291.pdf).
    The shift from DB pension plans to DC pension plans--and the 
corresponding increase of participants' own contributions to those 
plans as opposed to employer contributions--has led to increased 
responsibility for participants to manage their own retirement savings, 
which includes having to select among investment options in their 
retirement plans. See Private Pension Plan Bulletin Abstract Of 2012 
Form 5500 Annual Reports, at 2 (Of the 516,000 section 401(k)-type 
plans in 2012, 87.8 percent allowed participants to direct investment 
of all of their assets, and 3.1 percent allowed participants to direct 
investment of a portion of their assets.) The need for more relevant 
and comparable financial information is not limited to 401(k) and other 
DC pension plans; it also extends to DB pension plans. Reports cited 
above from GAO, the DOL-OIG, the TIGTA, and the ERISA Advisory Council 
also have focused on the need for increased transparency and 
accountability generally in connection with employee benefit plan 
investments in hard-to-value and alternative assets, as well as assets 
held through pooled investment vehicles.
    Further, the Agencies need better information to effectively 
oversee and enforce existing rules and regulations. For example, as 
part of the 1999 and 2009 forms revisions, the Agencies stopped 
collecting a variety of information regarding ESOPs. ESOPs, however, 
continue to be a significant enforcement focus and concern for both DOL 
and the Department of Treasury (Treasury)/IRS. Under the proposal, 
ESOPs would be required to again report information, on the Schedule E, 
about their employer stock acquisitions. Plan investment in hard-to-
value and other alternative investments, such as derivatives, limited 
partnerships, hedge funds, private equity, and real estate, was 
highlighted as an oversight risk by both GAO and the DOL-OIG. Plans 
invested in derivatives, limited partnerships, hedge funds, private 
equity, real estate, and other alternative investments would be 
required under the proposal to identify such investments specifically. 
Having plans and direct filing entities (DFEs) report this information 
would be a significant improvement; the Agencies would no longer be 
limited to identifying issues involving investments in derivatives and 
other hard-to-value assets by opening investigations on a plan-by-plan 
basis. For example, regulators would be able to search the data base 
for particular investments or managers where there were indications 
that there were problems with such investment or manager for all plans 
that made such investments. The improved financial transparency in the 
proposed revisions to the Form 5500 Annual Return/Report data 
collection in general would better enable public and private data users 
to identify patterns and trends in plan investments and behavior.
    For defined contribution pension plans, especially participant-
directed plans, the proposal also would provide better information on 
employee participation rates in 401(k)-type plans and more relevant 
information on the types of investment alternatives available in such 
plans (including information on each designated investment alternative 
in the plan, information on qualified default investment alternatives, 
and information on whether the investment alternatives are actively 
managed or passively managed index funds). As Form 5500 Annual Return/
Report information is required by Title I of ERISA to be publicly 
available, not only would expanded data collection assist in the 
Agencies' research and policymaking objectives, public access to this 
information would enable interested private sector and other 
governmental stakeholders to perform data-based research or help plan 
sponsors, fiduciaries, and participants and beneficiaries better 
understand their plan and plan investments. For example, it would be 
more feasible to compare performance of plans based on types of 
investments, and get information on how certain plan investment options 
and structures might correlate to participation, overall performance, 
or best preparation of workers for retirement.
2. Support Oversight of Group Health Plans and Ongoing Implementation 
of the Affordable Care Act
    The proposed forms revisions and DOL implementing regulations would 
expand Form 5500 reporting by group health plans \5\ by eliminating 
obsolete

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exemptions for certain plans from Form 5500 reporting. Specifically, 
most private employer-sponsored group health plans with fewer than 100 
participants that are fully insured, unfunded, or a combination of the 
two, currently do not file the Form 5500 Annual Return/Report under the 
terms of the current DOL exemptions. As a result, for policy 
formulation, research, and regulatory impact analyses, the DOL must 
rely on surveys, instead of Form 5500 Annual Return/Report data, to 
generate even basic estimates of the size of the ERISA group health 
plan universe that is a major part of the nation's health care delivery 
system. The current lack of information collected on the Form 5500 
Annual Return/Report from group health plans impairs the effectiveness 
of EBSA's ability to develop health care regulations and complicates 
the DOL's ability to enforce such regulations and educate plan 
administrators regarding compliance.
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    \5\ Under the proposed changes, all ``group health plans'' that 
meet the definition in 733(a) of the Act, including plans that claim 
``grandfathered'' status under 29 CFR 2950.715-1251, are required to 
file some or all of the Form 5500 Annual Return/Report and 
applicable schedules, including the Schedule J, regardless of 
whether such plans are exempt from certain market reform 
requirements under ERISA Sec.  732(a) (exemption for certain small 
group health plans that have less than two participants who are 
current employees) or ERISA Sec.  733(c) (group health plans 
consisting solely of excepted benefits). Employee welfare benefit 
plans as defined in ERISA Sec.  3(1) that do not meet the definition 
of ``group health plan'' under 733 of the Act (i.e., they do not 
provide benefits for medical care) are not subject to the proposed 
enhanced reporting requirements applicable to group health plans.
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    In addition, section 1253 of the Affordable Care Act requires the 
Secretary of Labor to prepare an annual report that includes certain 
general information on self-insured group health plans using data 
collected from the Form 5500 Annual Return/Report (the ``Self-Insured 
Health Plan Report''). Current Form 5500 Annual Return/Report data 
provides the basis only for an incomplete assessment of self-insured 
plans. For example, information about the amount of outstanding claims 
for a self-insured plan, a proposed new data element on the Schedule J, 
would be a critical flag that would identify the need for further 
inquiry or investigation of a group health plan that may be unable to 
pay outstanding claims. Early intervention by EBSA could prevent a 
participant from facing bankruptcy over unpaid medical expenses that 
otherwise would have been covered had the group health plan been 
properly funded.
    We expect more group health plan filings will help the DOL allocate 
enforcement resources and streamline enforcement actions. For example, 
these additional filings will enable the DOL to correlate information 
reported by different group health plans to help identify widespread 
noncompliance perpetuated by a common service provider rather than 
relying on multiple investigations of client plans to detect a pattern 
of non-compliance by a single service provider. Obtaining a correction 
by going directly to the service provider makes the correction process 
more efficient for the service provider and the Department and results 
in uniform and efficient corrective action for participating plans. 
EBSA anticipates that Form 5500 Annual Return/Report data may similarly 
be used in future versions of the biennial Paul Wellstone and Pete 
Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) Report 
to Congress on the compliance of group health plans and health 
insurance coverage offered in connection with such plans with the 
requirements of MHPAEA. The proposed changes to group health plan 
reporting thus are important to the government's ability to accomplish 
oversight obligations under the Affordable Care Act and other federal 
laws governing group health plans, to more effectively monitor health 
policy issues as they pertain to ERISA-covered plans, and to provide 
Congress with accurate information about self-insured plans and whether 
the plan is complying with the protections of MHPAEA.
3. Reporting To Satisfy Public Health Service Act Sections 2715A and 
2717
    Sections 2715A and 2717 of the Public Health Service Act (PHS Act), 
as added by the Affordable Care Act and incorporated into ERISA section 
715,\6\ include important new reporting requirements for group health 
plans and health insurance issuers in the group and individual markets. 
Specifically, section 2715A of the PHS Act incorporates the 
transparency provisions of section 1311(e)(3) of the Affordable Care 
Act to require non-grandfathered group health plans and health 
insurance issuers offering non-grandfathered group or individual health 
insurance coverage to make available to the DOL, the Department of 
Health and Human Services (HHS), Treasury, State insurance 
commissioner, and the public a host of information on health plan 
enrollment and claims.\7\ This includes: (1) Claims payment policies 
and practices; (2) periodic financial disclosures; (3) data on 
enrollment and disenrollment; (4) data on the number of denied claims; 
(5) data on rating practices; (6) information on cost-sharing and 
payments with respect to any out-of-network coverage; (7) information 
on enrollee and participation rights; and (8) other information as 
determined by the Secretary. Moreover, section 2717 of the PHS Act 
generally requires non-grandfathered group health plans and health 
insurance issuers offering non-grandfathered group or individual health 
insurance coverage to report annually to the DOL, HHS and the Treasury 
and to enrollees under the plan whether the benefits under the plan: 
(A) Improve health outcomes through the implementation of activities 
such as quality reporting, effective case management, care 
coordination, chronic disease management, and medication and care 
compliance initiatives, including through the use of the medical homes 
model as defined for purposes of section 3602 of the Affordable Care 
Act, for treatment or services under the plan or coverage; (B) 
implement activities to prevent hospital readmissions through a 
comprehensive program for hospital discharge that includes patient-
centered education and counseling, comprehensive discharge planning, 
and post discharge reinforcement by an appropriate health care 
professional; (C) implement activities to improve patient safety and 
reduce medical errors through the appropriate use of best clinical 
practices, evidence based medicine, and health information technology 
under the plan or coverage; and (D) implement wellness and health 
promotion activities.
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    \6\ Sections 2715A and 2717 of the PHS Act are also incorporated 
into section 9815(a)(1) of the Code.
    \7\ Information required under sections 2715A and 2717 of the 
PHS Act that is provided as part of a Form 5500 Annual Return/Report 
would be made available to the public and to the plan's participants 
and beneficiaries. Section 104(b)(4) of ERISA requires the plan 
administrator, on written request of a participant or beneficiary, 
to furnish among other documents, a copy of the latest annual 
report. See also 29 CFR 2520.104b-1(b)(2). The DOL's regulation at 
29 CFR 2520.104b-30 provides that the plan administrator of an 
employee benefit plan may impose a reasonable charge that is not to 
exceed 25 cents per page to cover the cost of furnishing the latest 
annual report, but also provides that participants and beneficiaries 
must be provided at no charge a copy of the statement of the assets 
and liabilities of the plan and accompanying notes, and the 
statement of income and expenses of the plan and accompanying notes. 
See also 29 CFR 2520.104b-10(d)(3) and (4).
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    These regulations propose conforming amendments in 29 CFR 2590.715-
2715A and 29 CFR 2590.715-2717 to clarify that compliance with the 
reporting requirements in 29 CFR 2520.103-1 (including filing any 
required schedules to the annual report) by plans subject to ERISA 
would satisfy the reporting requirements of PHS Act sections 2715A and 
2717, incorporated in ERISA through ERISA section 715(a)(1).\8\ As 
explained in FAQs issued

[[Page 47500]]

August 11, 2015,\9\ HHS proposed an information collection for public 
comment in connection with the transparency provisions of section 
1311(e)(3) of the Affordable Care Act. The proposed data collection 
would collect certain information from Qualified Health Plan (QHP) 
issuers in Federally-facilitated Exchanges and State-based Exchanges 
that use the federal eligibility and enrollment platform. The HHS 
proposal explained that other reporting requirements would be proposed 
at a later time, through a separate rulemaking with respect to non-
Exchange coverage, including those that extend to health insurance 
issuers offering non-grandfathered group or individual health insurance 
coverage outside of the Exchanges and non-grandfathered group health 
plans (including large group and self-insured health plans).\10\
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    \8\ The Treasury Department and the IRS intend to publish 
proposed regulations in 26 CFR 54.9815-2715A and 54.9815-2717 
clarifying that group health plans required to file an annual report 
pursuant to section 104 of ERISA that comply with the reporting 
requirements in 29 CFR 2520.103-1 (including filing any required 
schedules to the annual report) would satisfy the reporting 
requirements of sections 2715A and 2717 of the PHS Act, as 
incorporated in the Code. Group health plans that are not required 
to file an annual report pursuant to section 104 of ERISA but that 
are subject to sections 2715A and 2717 of the PHS Act as 
incorporated in the Code, will not be required to do any reporting 
to comply with sections 2715A and 2717 of the PHS Act, as 
incorporated in the Code, unless and until the Treasury Department 
and the IRS issue subsequent further guidance or rulemaking 
regarding any such reporting by such plans.
    \9\ See FAQs about Affordable Care Act Implementation (Part 
XXVIII), available at http://www.dol.gov/ebsa/faqs/faq-aca28.html 
and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/ACA-FAQ-Part-XXVIII-transparency-reporting-final-8-11-15.pdf.
    \10\ Nonfederal governmental plans (as defined in PHS Act 
section 2791(d)(8)(C)) and health insurance issuers (as defined in 
PHS Act section 2791(b)(2) and ERISA section 733(b)(2)) are not 
required to file annual reports pursuant to ERISA sections 103 or 
104. Accordingly, any reporting required of such plans and issuers 
to satisfy PHS Act sections 2715A and 2717 will be addressed 
separately by HHS in future rulemakings and/or guidance.
---------------------------------------------------------------------------

    This rulemaking proposes transparency and quality reporting for 
non-grandfathered group health plans under PHS Act sections 2715A and 
2717, as incorporated in ERISA. It takes into account differences in 
markets and other relevant factors to streamline reporting under 
multiple reporting provisions and reduce unnecessary duplication. The 
DOL is proposing to collect and provide high-value data to 
participants, beneficiaries, and regulators, such as information about 
benefits and plan design characteristics, funding, grandfathered plan 
status, rebates received by the plan (such as medical loss ratio 
rebates), service provider information (including information regarding 
any third party administrators, pharmacy benefit managers, mental 
health benefit managers, and independent review organizations), 
information on any stop loss insurance, claims processing and payment 
information (including number of claims filed, paid, appealed and 
denied), wellness program information, and other compliance 
information. In addition to improving DOL's oversight and enforcement 
activities, the collection of high-value data will lead to greater 
transparency for consumers, which may assist them in making a decision 
whether to elect the coverage or opt for another plan such as through 
their spouse's employer, with the caveat that these data will be 
collected a number of months after the end of the plan year they 
describe and thus will not be timely for use in concurrent oversight, 
enforcement, or consumer choice activities. The DOL may propose 
collecting additional data in the future. The DOL requests comments 
regarding other plan characteristics that may be helpful for 
participants to have information on in evaluating their plan. Further, 
as noted above, this document includes proposed conforming amendments 
in 29 CFR 2590.715-2715A and 29 CFR 2590.715-2717 to clarify that 
compliance with the proposed annual reporting requirements by plans 
subject to ERISA that provide group health benefits would satisfy the 
ACA reporting requirements under PHS Act sections 2715A and 2717 
incorporated in ERISA through ERISA section 715(a)(1). The Department 
is specifically seeking public comments on those conforming amendments 
and the proposed annual reporting requirements for plans that provide 
group health benefits, including the new Schedule J, in light of the 
Supreme Court's recent decision in Gobeille v. Liberty Mutual Insurance 
Co., 136 S. Ct. 936 (2016).
4. Modernize Data Collection and Usability
    This project would standardize and structure the Form 5500 Annual 
Return/Report to make key retirement and health and welfare benefit 
data, including information on assets held for investment, more 
available and usable in the electronic filing and data environment. 
Modernization is consistent with the Administration's ``Smart 
Disclosure'' effort. Executive Office of the President of the United 
States, Nat'l Science and Technology Council, Smart Disclosure and 
Consumer Decision-making: Report of the Task Force on Smart Disclosure 
(2013). The proposed changes would enable private sector data users to 
develop more individualized tools for employers to evaluate both their 
retirement and welfare plans and for employees to manage their 
retirement savings and welfare plan choices.
5. Updating and Improving Reporting of Service Provider Fee and Expense 
Information
    The DOL has been engaged in a long term initiative focused on 
transparency and oversight of service provider and investment fees and 
expenses. The fee initiative has focused on reporting indirect 
compensation received by service providers (2009 Form 5500 Annual 
Return/Report revisions), disclosures about service provider 
compensation to plan fiduciaries (DOL's regulation, effective in 2012, 
at 29 CFR 2550.408b-2), and plan disclosures to participants and 
beneficiaries particularly in 401(k)-type plans (DOL's regulation, 
effective in 2012, at 29 CFR 2550.404a-5).
    The fee disclosure regulations were finalized after the publication 
of the 2009 forms changes. The 2009 indirect compensation reporting 
requirements permitted filers to disclose rather than report most 
indirect compensation. This was in response to commenters concerns 
about potentially inconsistent requirements in Form 5500 reporting and 
disclosure under the then proposed disclosure regulations. Accordingly, 
the 21st Century initiative includes proposed revisions that are 
designed to harmonize Form 5500 reporting requirements with the now 
final disclosure regulations, especially the ERISA section 408b-2 
regulation. The GAO, in particular, recommended that the DOL require 
plans to report all indirect compensation received by certain of their 
service providers and to harmonize the ERISA section 408b-2 regulation 
disclosure and annual reporting requirements. U.S. Gov't Accountability 
Office, GAO-14-441, Private Pensions: Targeted Revisions Could Improve 
Usefulness of Form 5500 Information (2014) (available at www.gao.gov/products/GAO-14-441).
    A key purpose of the required fee disclosures in the ERISA section 
408b-2 regulation is to help make sure that pension plan fiduciaries 
can more effectively negotiate service provider fees based on a better 
understanding of compensation that the service provider expects to 
receive, including from third-party sources that might represent a 
conflict of interest. We believe that annually reporting compensation 
received by a service provider and its sources on the Form 5500 Annual 
Return/Report will provide a powerful tool and economic basis for 
improved evaluation of investment, recordkeeping, and administrative 
service arrangements. We have already

[[Page 47501]]

seen innovative uses of Form 5500 Annual Return/Report data by private 
sector companies that have created tools for evaluating and 
benchmarking employee benefit plans. Further, service provider failures 
to disclose indirect compensation as required under the ERISA section 
408b-2 regulation have resulted in EBSA obtaining corrective monetary 
recoveries to plans. Comparing disclosures of anticipated compensation 
under the ERISA section 408b-2 regulation to compensation received as 
reported on the Form 5500 Annual Return/Report may uncover disparities 
between anticipated and actual compensation, which may provide the 
basis for improved targeting of our enforcement actions.
6. Improving Employee Benefit Plan General Compliance With ERISA and 
the Code
    The Form 5500 Annual Return/Report and related financial audit 
requirements historically have served to establish discipline for plan 
fiduciaries by requiring an annual examination of the employee benefit 
plan's financial and administrative operations. The proposed forms 
revisions and DOL implementing regulations would add selected new 
questions regarding plan operations, service provider relationships, 
and financial management of plans. These questions are intended to 
compel fiduciaries to evaluate plan compliance with important 
requirements under ERISA and the Code and to provide the Agencies with 
improved tools to focus oversight and enforcement resources. The 
proposed regulations would also update the requirements for 
certifications for limited scope audits under 29 CFR 2520.103-8.

C. Costs and Benefits

    The regulatory impact analysis includes a qualitative discussion of 
the benefits associated with the proposed rules' five primary 
objectives. Under the current regulations and forms, the Form 5500 
Annual Return/Report annually collects data from approximately 816,000 
large and small plan filers--pension and all types of welfare plans, 
including group health--and DFEs with an aggregate annual cost of 
$488.1 million. The Form 5500 Annual Return/Report is a central part of 
the Agencies' enforcement programs, but the benefits of an updated Form 
5500 Annual Return/Report would extend beyond the value of enhanced 
enforcement. A modernized Form 5500 Annual Return/Report that is more 
aligned with current investment practices and reflects the requirements 
of current law also has benefits for plan sponsors, plan participants, 
Congress, academics, and others, as explained in more detail below.
    As with the current reporting scheme, the proposed revisions are 
crafted to limit burden increases for small plans, both pension and 
welfare, including group health plans. The burden increase for small 
pension plans that are eligible to file the Form 5500-SF is much less 
than it is for those pension plans filing the Form 5500 Annual Return/
Report that have complex portfolios that include alternative and hard-
to-value assets or are employee stock ownership plans, which plans are 
of greater concern with respect to retirement security of their 
participants. Similarly, the burden increase for fully insured welfare 
plans that provide group health benefits with fewer than 100 
participants, is much less than it is for welfare plans that provide 
group health benefits and are fully or partially self-insured, which 
are at greater risk for non-payment of benefit claims. As is discussed 
in more detail below, the burden increase for small pension plans that 
are invested in simple, Form 5500-SF eligible portfolios is very 
modest, and the changes that apply to those plans (which will mostly 
apply to all filers) will provide much needed information about the 
operations, compliance, and asset allocations of such plans. Similarly, 
welfare plans that provide group health benefits with fewer than 100 
participants and that are fully insured, which are currently exempt 
from filing any Form 5500 Annual Return/Report, would file limited 
identifying and coverage information. The changes were intentionally 
limited in order that the burden would be as minimal as possible, while 
still getting the crucial information about that significant component 
of the nation's healthcare delivery system and reinforcing for the 
fiduciaries responsible for many of those plans the need to satisfy 
important consumer protections required by Title I of ERISA and the 
Affordable Care Act-related health care benefits. The proposed changes 
involve only a nominal burden increase for welfare plans other than 
group health.
    Under the proposed regulations and revised forms, the Form 5500 
Annual Return/Report would collect data from approximately 2.97 million 
filers with an aggregate annual cost of $817.0 million. New reporting 
requirements for the 2.15 million welfare plans that provide group 
health benefits that we estimate are currently covered under Title I of 
ERISA, but exempt under current Form 5500 annual reporting rules, 
represent over 73 percent of the increased burden for the entire 
proposal. That increase is largely due to the number of new filers and 
not the per plan cost. Other than the initial filing year burden for 
learning the new reporting requirements, the burden per plan for even 
these new filers, almost all of which are fully insured plans with 
fewer than 100 participants, is very limited because they are only 
required to provide registration-type and other nominal benefit 
coverage information.
    This expansion in the number of first-time filers that are plans 
that provide group health benefits that have fewer than 100 
participants represents new data on group health care issues that is 
otherwise unavailable or not gathered in a way that is readily usable 
for ERISA compliance, policy, and enforcement purposes. From a 
compliance perspective, requiring reporting will be useful to educate 
plan sponsors and fiduciaries of their obligations with respect to 
group health plans. Getting first time information on the full breadth 
of plans providing health benefits that are subject to ERISA will be 
key data for policy-making regarding such plans and their participants. 
From an enforcement perspective, data analysis could lead to detection 
and intervention in a distressed health plan, which could help minimize 
financial harm suffered by participants when medical claims are unpaid 
by such plans. Medical bills contribute to a large and increasing share 
of personal bankruptcies in the United States.\11\ Moreover, the 
potential burden for new filers is expected to be overcome by 
satisfying, to some extent, data collections required by Congress in 
the Affordable Care Act. Sections 2715A and 2717 of the PHS Act, as 
added by the Affordable Care Act, significantly expand reporting 
requirements for group health plans subject to ERISA. EBSA is 
coordinating with HHS on using the Form 5500 Annual Return/Report as an 
alternative mechanism to satisfy these reporting requirements.\12\
---------------------------------------------------------------------------

    \11\ David U. Himmelstein, M.D., Deborah Thorne, Ph.D., 
Elizabeth Warren, JD, and Steffie Woolhandler: The American Journal 
of Medicine, Medical Bankruptcy in the United States, 2007: Results 
of a National Study. Available online at http://www.amjmed.com/article/S0002-9343(09)00404-5/abstract?cc=y=.
    \12\ Section 2715A of the PHS Act extends the transparency 
reporting provisions set forth in section 1311(e)(3) of the 
Affordable Care Act (applicable to issuers of ``qualified health 
plans'' offered on Exchanges) to non-grandfathered group health 
plans and non-grandfathered group or individual health insurance 
coverage offered through or outside of Exchanges. As more fully 
described on pages 13-14 herein, section 2717 of the PHS Act 
generally requires non-grandfathered group health plans and health 
insurance issuers offering non-grandfathered group or individual 
health insurance coverage to submit annual reports to the DOL, HHS 
and the Treasury regarding quality of care programs offered by the 
plan.

---------------------------------------------------------------------------

[[Page 47502]]

    Revisions to the financial schedules (Schedule H and related 
investment asset reporting changes) and service provider reporting 
(Schedule C changes) impact predominantly large plans with complex 
investment portfolios (often involving alternate investments, hard-to-
value assets and employer securities). These changes comprise the 
second and third largest shares of the burden increase, respectively, 
adding $57.6 million and $12.9 million. Small pension plans that are 
subject to expanded reporting under these proposed revisions are a 
small percentage of total small pension plan filers and the additional 
burdens are generally limited to those plans that choose to invest in 
alternative and hard-to-value assets, which present more risk and 
demand more transparency.
    Revisions to Schedule D and DFE reporting represent the largest 
burden reduction within the proposed changes. These changes affect all 
DFEs and those plans that invest in DFEs and reduce aggregate burden by 
$10.1 million.
    In addition, it is important to note that the total burden 
associated with the Form 5500 Annual Return/Report has risen from 
$327.98 million to $488.1 million since the last rulemaking in November 
2007 primarily due to the increase in wage rates and the number of plan 
filers over the last eight years under the current rule. In other 
words, approximately 90 percent of the $160.1 million increase to the 
baseline burden since the last RIA was prepared is simply due to 
changes in the broader economy over the past decade, not this 
rulemaking.

Estimated Burden Change

Estimated Total Burden Change

------------------------------------------------------------------------
                                   Annual costs     Annual burden hours
                                    (millions)             \13\
------------------------------------------------------------------------
Total for current reporting               $488.1  4.4 million.
 requirements.
Change due to proposed GHP                 241.6  2.2 million.
 requirements.
Change due to all other Proposed            87.2  798,000.
 Requirements.
Total for Proposed Reporting               817.0  7.2 million.
 Requirements.
Increase in baseline since 2007            127.0  0.
 due to update in wage rates.
Increase in baseline since 2007             16.9  149,000.
 due to update in number of
 plans (not including plans
 subject to new GHP reporting).
------------------------------------------------------------------------

Estimated Burden Change by Type of Filer
---------------------------------------------------------------------------

    \13\ The Burden Hours column shows the amount of time necessary 
to fulfill filing requirements, whether that burden is incurred by 
the plans themselves or by outside service providers hired by the 
plans. The Cost column shows the monetized version of those burden 
hours.

----------------------------------------------------------------------------------------------------------------
                                                                                     Aggregate
                                     Number of       Number of       Aggregate      annual cost      Aggregate
                                   filers under    filers under     annual cost        under        annual cost
          Type of filer               current        proposed      under current     proposed         change
                                    (thousands)     (thousands)    requirements    requirements     (millions)
                                                                    (millions)      (millions)
----------------------------------------------------------------------------------------------------------------
Form 5500 Large Plans...........           148.5           148.5          $252.4          $309.3           $56.9
    Pension/Large...............            75.1            75.1           141.2           174.6            33.5
    Welfare/Large Health........            47.9            47.9            91.7           114.2            22.5
    Welfare/Large Non-Health....            25.6            25.6            19.6            20.5             1.0
Form 5500 Small Pension and Non-            29.7            29.7            14.4            38.3            23.9
 Health Plans...................
    Pension ESOP................             3.8             3.8             1.8             5.8             4.1
    Pension Non-ESOP............            22.6            22.6            11.1            29.9            18.8
    Welfare/Non-Health..........             3.3             3.3             1.5             2.5             1.0
Form 5500-SF Small Pension and             622.4           622.4           205.8           227.3            21.5
 Non-Health Plans...............
    Pension.....................           621.8           621.8           205.6           227.0            21.4
    Non-Health Welfare..........             0.7             0.7             0.2             0.2             0.0
Form 5500 Small Health..........             6.2         2,158.0             4.1           227.9          223.86
    Fully Insured Health........             0.0         1,869.0             0.0            69.6            69.6
    Other Health................             6.2           289.0             4.1           158.2           154.2
DFEs............................             9.4             8.9            11.4            14.2             2.8
                                 -------------------------------------------------------------------------------
    Overall Total...............           816.3         2,967.5           488.1           817.0           328.8
----------------------------------------------------------------------------------------------------------------
Note: Some displayed numbers do not sum up to the totals due to rounding.
Large plans--100 participants or more.
Small plans--generally fewer than 100 participants.

Estimated Burden Change by Form Revision

[[Page 47503]]



----------------------------------------------------------------------------------------------------------------
                                                                                   Filers under
                                     Change in       Change in     Filers under      proposed       Annual cost
            Revisions              annual costs    annual burden      current      requirements    per affected
                                    (millions)         hours       requirements     (thousands)        filer
                                                    (thousands)     (thousands)        \14\
----------------------------------------------------------------------------------------------------------------
Changes in Schedule H (Including           $57.6           535.4           115.1           114.6            $502
 changes to Schedules of Assets
 and Reportable Transactions)
 and Eliminate Schedule I.......
Schedule C......................            12.9           116.6            82.4           100.2             128
DFE Reporting Changes (Including           -10.1           -94.2            61.1             8.9          -1,137
 changes to Schedule D).........
Schedule E......................             2.5            22.0             0.0             6.7             374
Completion of lines 1-5 on Form             69.6           623.0             0.0           1,869              37
 5500 and lines 1-8 on Schedule
 J by fully insured GHPs with
 fewer than 100 participants....
Completion of Form 5500 by GHPs             39.0           349.1            54.1           336.9             116
 with fewer than 100
 participants that are unfunded,
 combination unfunded/fully
 insured, or funded with a trust
 and GHPs with 100 or more
 participants...................
Completion of Schedule J by GHPs           133.0         1,179.2             0.0           336.9             395
 with fewer than 100
 participants that are unfunded,
 combination unfunded/fully
 insured, or funded with a trust
 and GHPs with 100 or more
 participants...................
All Other Revisions.............            24.4           217.9         1,076.7         1,024.2              24
----------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \14\ The elimination of the concept of Master Trust Investment 
Account reporting and requiring reporting by a master trust instead, 
whose burden change is accounted for in the DFE Reporting Changes 
row, results in a reduction in the number of schedules attached. 
These reductions are reflected in the rows specific to the schedule 
affected.
---------------------------------------------------------------------------

II. Discussion of the Proposed Revisions to 29 CFR Part 2520

    ERISA section 103 broadly sets out annual financial reporting 
requirements for employee benefit plans. The Form 5500 Annual Return/
Report and the DOL's related regulations generally are promulgated 
under the ERISA provisions authorizing limited exemptions to these 
requirements and simplified reporting and disclosure for welfare plans 
under ERISA section 104(a)(3), simplified annual reports under ERISA 
section 104(a)(2)(A) for pension plans that cover fewer than 100 
participants, and alternative methods of compliance for all pension 
plans under ERISA section 110. The forms, instructions, and related 
regulations are also promulgated under the DOL's general regulatory 
authority in ERISA sections 109 and 505.
    The forms, schedules, and instructions, in addition to providing an 
alternative method of compliance under ERISA section 110 for the 
mandatory reporting requirements under section 103, also serve to help 
the DOL carry out its statutory directives under sections 506 and 513 
of ERISA. Specifically, section 506(a) of ERISA authorizes the 
Secretary of Labor to coordinate with other Agencies to avoid 
unnecessary expense and duplication of functions among Government 
agencies; the Form 5500 Annual Return/Report is designed to 
simultaneously satisfy annual reporting requirements for each of the 
three Agencies and help the Agencies more effectively and efficiently 
(from both an Agency and a public perspective) enforce the provisions 
of ERISA and the Code. Section 506(b) gives the DOL responsibility for 
detecting and investigating civil and criminal violations of Title I of 
ERISA. The Form 5500 Annual Return/Report is one of the important tools 
the DOL uses to effectuate its responsibility to detect and investigate 
such violations. Section 513(b)(2) of ERISA specifically directs DOL to 
undertake research studies relating to pension plans, including but not 
limited to (A) the effects of this subchapter upon the provisions and 
costs of pension plans, (B) the role of private pensions in meeting the 
economic security needs of the Nation, and (C) the operation of private 
pension plans including types and levels of benefits, degree of 
reciprocity or portability, and financial and actuarial characteristics 
and practices, and methods of encouraging the growth of the private 
pension system. The Form 5500 Annual Return/Report is the most 
important overall tool DOL has to fulfill this statutory imperative, 
and the changes in the proposal are essential for required research, as 
well as enforcement.
    The proposed changes to the Form 5500 Annual Return/Report and 
regulations are designed to: (1) Modernize financial information filed 
regarding plans; (2) harmonize information on fees and expenses that 
plans pay to service providers with the information that service 
providers disclose to plans under 29 CFR 2550.408b-2; (3) enhance 
mineability of data filed on the Form 5500 Annual Return/Report; (4) 
require reporting by all plans covered by Title I of ERISA that provide 
health benefits, including adding a new Schedule J (Group Health Plan 
Information); and (5) focus filers on compliance with certain ERISA and 
Code provisions through new questions on plan operations, service 
provider relationships, and financial management. If adopted, the 
changes generally would apply for plan years beginning on or after 
January 1, 2019. See the regulatory impact analysis in this document 
for a discussion of how the proposed amendments and the proposed form 
revision address these goals. These revisions are being proposed in 
conjunction with recompeting the contract for operation of the ERISA 
Filing and Acceptance System (EFAST2), which is expected to begin 
processing Plan Year 2019 forms, beginning January 1, 2020. Certain 
changes may be made earlier, particularly those changes collecting 
information under the Code or Title IV of ERISA that do not require 
amendment to DOL regulations to implement (but not those related to 
group health plans). The Notice of Proposed Forms Revisions published 
concurrently in today's Federal Register sets forth a comprehensive 
discussion of form and instruction changes that relate to this proposed 
regulation.
1. Section 2520.103-1
    Section 2520.103-1 generally describes the content of the Form 5500 
Annual Return/Report as a limited

[[Page 47504]]

exemption and alternative method of compliance for ERISA-covered 
employee benefit plans to satisfy annual reporting requirements under 
Title I. To accommodate the form, schedule, and instruction changes in 
the Notice of Proposed Forms Revisions, the proposed regulatory 
amendments in this document would update form and schedule references 
in Sec.  2520.103-1. The proposal would also require all plans that 
provide group health benefits, regardless of size, to file the Form 
5500 Annual Return/Report in accordance with the instructions. Group 
health plans, regardless of size, would not be eligible to file the 
Form 5500-SF.\15\ The proposal would also require pension benefit plans 
with fewer than 100 participants that are required to file the Form 
5500 Annual Return/Report to file the Schedule C (Service Provider 
Information). It would also generally require both large and small 
employee stock ownership plans to file the Schedule E (ESOP 
Information). Under the proposal, only DFEs would be required to 
complete the Schedule D to report participating plan information; plans 
would no longer be required to file Schedule D because they would be 
reporting detailed information about the collective investment vehicles 
in which they invest, including DFEs, on the Schedule of Assets Held 
for Investment and the Schedule of Assets Disposed of During Plan Year. 
In order to improve the transparency of reporting for plans that 
participate in a master trust, the proposal would require that master 
trusts operate either on a calendar year basis or on the same fiscal 
year as all the plans that participate in the master trust. In general, 
a master trust is a trust maintained by a bank or similar institution 
to hold the assets of more than one plan sponsored by a single employer 
or by a group of employers under common control.
---------------------------------------------------------------------------

    \15\ The details of the limited reporting that would be required 
for small fully insured group health plans would be set forth in the 
instructions.
---------------------------------------------------------------------------

2. Section 2520.103-2
    Section 2520.103-2 describes the content of the Form 5500 Annual 
Return/Report for a group insurance arrangement (GIA) that files an 
annual report under Sec.  2520.104-43. The amendments proposed in this 
document include the requirement to file the proposed new Schedule J. 
Group health plans that are part of a GIA would continue to be exempt 
from filing a Form 5500 Annual Return/Report under 29 CFR 2520.104-43. 
For plans to be eligible for this exemption, the GIA would have to file 
a separate Schedule J for each group health plan participating in the 
GIA.
3. Section 2520.103-3, 2520.103-4, and 2520.103-1(e)
    Section 2520.103-3 provides an exemption for employee benefit plans 
from certain annual reporting requirements for plan assets held in a 
common collective trust (CCT) maintained by a bank, trust company, or 
similar institution. Section 2520.103-4 provides a similar exemption 
for plan assets held in a pooled separate account (PSA) maintained by 
an insurance carrier. Section 2520.103-1(e) provides for special 
reporting rules for plans that participate in a master trust. The 
Notice of Proposed Forms Revisions would alter the annual reporting 
requirements for plans investing in CCTs, PSAs and master trusts in 
significant ways to increase the transparency of plan investments in 
such pooled investment vehicles. The DOL proposes revising language to 
29 CFR 2520.103-3, 29 CFR 2520.103-4, and 29 CFR 103-1(e) to reflect 
those changes.
4. Section 2520.103-6
    Section 2520.103-6 sets forth the contents of the Schedule of 
Reportable Transactions that is part of the Form 5500 Annual Return/
Report. The Schedule of Reportable Transactions is required to be filed 
by plans and DFEs that file their own Form 5500 Annual Return/Report. 
This schedule is used to report, subject to conditions and exceptions, 
individual transactions or series of transactions that involve more 
than five percent of the current value of the assets of the plan or 
DFE. The existing rules require the schedule to include the name of 
each party to a ``reportable transaction.'' The form and instructions 
changes being published concurrently with this document include certain 
additions and clarifications of the content of the Schedule of 
Reportable Transactions designed to improve the information regarding 
parties involved in these significant plan transactions or series of 
transactions. 29 CFR 2520.103-6(d)(1) sets forth the content 
requirements for the Schedule of Reportable Transactions. Rather than 
list all the schedules' content requirements, the proposed amendment to 
paragraph (d)(1) would simply reference the schedules' contents in the 
relevant Form 5500 Annual Return/Report instructions.
5. Section 2520.103-8
    Section 2520.103-8 implements the limited-scope audit exemption 
described in ERISA section 103(a)(3)(c). Specifically, this exemption 
allows a plan to exclude from the examination and report of an 
independent qualified public accountant (IQPA) any statement or 
information regarding plan assets held by banks, similar institutions, 
or insurance carriers if the statement or information is prepared and 
certified by the bank, similar institution, or insurance carrier. The 
GAO and the DOL's Inspector General (DOL-OIG) have recommended that the 
Department revise section 2520.103-8 to improve the information being 
reported by plan administrators electing a limited scope audit. The DOL 
agrees that better information is needed by plan administrators in 
connection with limited scope audits. To address concerns it has 
observed, as well as to respond to the GAO and the DOL-OIG 
recommendations,\16\ the DOL proposes amending section 2520.103-8. 
Currently, section 2520.103-8 requires the bank or insurance company to 
certify the accuracy and completeness of the information being provided 
by a written declaration which is signed by a person authorized to 
represent the bank or insurance carrier. The DOL proposes to amend the 
requirements under section 2520.103-8 to require that the 
certification:
---------------------------------------------------------------------------

    \16\ The Agencies discuss various GAO and DOL-OIG 
recommendations with respect to the Form 5500 Annual Return/Report 
and the steps the Agencies are taking that are consistent with the 
recommendations in the Notice of Proposed Forms Revisions published 
today in the Federal Register.
---------------------------------------------------------------------------

    (1) Appear on a separate document from the list of plan assets 
covered by the certification;
    (2) Identify the bank or insurance company holding those plan 
assets that are the subject of the certification;
    (3) Describe the manner in which the bank or insurance company is 
holding the assets covered by the certification;
    (4) State whether the bank or insurance company is providing 
current value information regarding the assets covered by the 
certification, and if so, state that the assets for which current value 
is being certified are separately identified in the list of assets 
covered by the certification;
    (5) If current value is not being certified for all of the assets 
covered by the certification, include a caution that the certification 
is not certifying current value information and the asset values 
provided by the bank or insurance company may not be suitable for use 
in satisfying the plan's obligation to report current value information 
on the Form 5500 Annual Return/Report; and
    (6) If the certification is being provided by an agent on behalf of 
the bank or insurance company, a statement

[[Page 47505]]

certifying that the person providing the certification is an authorized 
agent acting on behalf of the bank or insurance company and affirming 
that the bank or insurance company is taking responsibility for the 
accuracy and completeness of the certification and the underlying 
records used as a basis for the information being certified.
6. Section 2520.103-10
    Section 2520.103-10 identifies the financial schedules that are 
required to be included as part of the Form 5500 Annual Return/Report, 
which include the ``Schedule of Assets Held for Investment'' and 
``Schedule of Assets Acquired and Disposed within the Plan Year.'' 
Paragraph (b)(1)(i) of Sec.  2520.103-10 sets forth the content 
requirements for the Schedule of Assets Held for Investment. The Notice 
of Proposed Forms Revisions proposes certain additions and 
clarifications to the content of the Schedule of Assets Held for 
Investment that are designed to improve the information regarding 
parties and assets involved in these significant plan investments. 
Rather than list all the required contents of this schedule, the 
proposed amendment to paragraph (b)(1)(i) of Sec.  2520.103-10 would 
simply reference the contents of the schedule listed in the relevant 
Form 5500 Annual Return/Report instructions.
    Paragraph (b)(2)(i) of Sec.  2520.103-10 sets forth the content 
requirements for the ``Schedule of Assets Acquired and Disposed of 
During the Plan Year.'' This proposed amendment reflects the Agencies' 
proposal to revise and rename the current ``Schedule of Assets Acquired 
and Disposed of Within the Plan Year.'' Filers would be required to 
report information on the disposal of certain assets, regardless of 
when the assets were acquired. The Notice of Proposed Forms Revisions 
also includes certain proposed additions and clarifications of the 
content of the Schedule of Assets Disposed of During the Plan Year that 
are designed to improve the information regarding parties and assets 
involved in these plan transactions. Rather than list the required 
contents of the Schedule of Assets Disposed of During the Plan Year, 
the proposed amendment to paragraph (b)(2)(i) of Sec.  2520.103-10 
would reference the contents of the schedule listed in the relevant 
Form 5500 Annual Return/Report instructions.
7. Section 2520.104-20 and 2520.104-26
    Section 2520.104-20 provides an exemption from certain annual 
reporting and disclosure provisions of ERISA for certain welfare plans 
that cover fewer than 100 participants at the beginning of the plan 
year and for which benefits are paid exclusively from the general 
assets of the employer or employee organization sponsoring the plan, 
exclusively through insurance, or a combination of both. An expansion 
of the annual reporting of information regarding plans that provide 
group health benefits is described in detail in the Notice of Proposed 
Forms Revisions. To implement those changes, the DOL proposes 
eliminating the existing regulatory exemption for welfare plans that 
provide group health benefits (the exemption will continue to apply to 
other small welfare plans). Thus, small plans that provide group health 
benefits that are unfunded, or a combination of unfunded and fully 
insured, will be required to file an annual return/report, including 
the new Schedule J, in accordance with the requirements in the proposed 
instructions. Under the proposal, small fully insured plans will only 
be required to answer basic identifying and plan characteristic 
information on the Form 5500 and limited health plan benefit, 
insurance, and participant information on the Schedule J. Similarly, 
the limited exception in Sec.  2520.104-26 for certain unfunded dues-
financed welfare plans maintained by employee organizations would be 
amended to further limit the exemption to those unfunded dues-financed 
welfare plans that do not provide health benefits.
8. Section 2520.104b-10
    Section 104(b)(3) of ERISA provides in part that, each year, 
administrators must furnish to participants and beneficiaries receiving 
benefits under a plan materials that fairly summarize the plan's annual 
report. Section 2520.104b-10 sets forth the requirements for the 
Summary Annual Report (SAR) and prescribes formats for such reports. 
The amendments being proposed do not include any change to the SAR 
requirements. However, in order to facilitate compliance with the SAR 
requirement, the DOL is updating its cross-reference guide to 
correspond to the line items of the Form 5500 Annual Return/Report and 
Form 5500-SF. The cross-reference guide has also been updated to 
reflect that defined benefit pension plans that furnish an annual 
funding notice to participants and beneficiaries, pursuant to 29 CFR 
2520.101-4, are not required to furnish a SAR. This update reflects 
statutory changes enacted as part of the Pension Protection Act of 2006 
extending the annual funding notice requirements of section 101(f) of 
ERISA. The cross-reference guide, as before, would continue to be an 
appendix to 29 CFR 2520.104b-10.
9. Technical and Conforming Changes for Forms and Instructions
    Various other technical and conforming changes are being proposed 
as part of the restructuring of the Form 5500 Annual Return/Report.

III. Regulatory Impact Analysis

Executive Order 12866 and 13563 Statement

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, and public 
health and safety effects; distributive impacts; and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility.
    Under Executive Order 12866, it must be determined whether a 
regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and review by the Office of 
Management and Budget (OMB). Section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule's (1) having an annual effect on the economy of 
$100 million or more, or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs, or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been 
determined that this regulatory action is likely to have an annual 
effect on the economy of $100 million or more. Therefore, this action 
is being treated as ``economically significant'' and subject to OMB 
review under section 3(f)(1) of Executive Order 12866. The DOL 
accordingly has undertaken to assess the costs and

[[Page 47506]]

benefits of this regulatory action in satisfaction of the applicable 
requirements of the Executive Order and provides herein a summary 
discussion of its assessment.

                    Table 1--Accounting Statement: Estimated Costs From Current Reporting Requirements to 2019 Reporting Requirements
                                                                      [In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Estimates                                                 Units
                                         ---------------------------------------------------------------------------------------------------------------
                Category                      Primary                                                      Discount rate
                                             estimate      Low estimate    High estimate    Year dollar      (percent)            Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
    Annualized Monetized................  ..............  ..............  ..............  ..............  ..............  ..............................
    ($millions/year)....................  ..............  ..............  ..............  ..............  ..............
    Annualized Quantified...............  ..............  ..............  ..............  ..............  ..............  ..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualitative.............................   The proposal pursues five main objectives: (1) Improve reliability of reporting and transparency of financial
                                             products and investments acquired by plans, especially alternative investments, hard-to-value assets, and
                                               investments through collective investment vehicles; foster ongoing monitoring of retirement plans by
                                            employers, plans, participants and beneficiaries, and policymakers; and better leverage the ability of the
                                           Agencies to fulfill their statutory oversight role. (2) Establish better compliance awareness and education,
                                          provide critical data for Agency oversight, collect information needed for Congressionally mandated reports on
                                          group health plans, and satisfy certain reporting requirements under sections 2715A and 2717 of the PHS Act as
                                            added by the Affordable Care Act and incorporated into ERISA section 715. (3) Standardize and structure the
                                               Form 5500 Annual Return/Report to make key retirement and health and welfare benefit data, including
                                              information on assets held for investment, more available and usable in the electronic filing and data
                                          environment, which, consistent with the Administration's ``Smart Disclosure'' effort, to enable private sector
                                             data users to develop more individualized tools for employers to evaluate their retirement plans and for
                                             employees to manage their retirement savings. (4) By harmonizing reporting on Schedule C of the Form 5500
                                            Annual Return/Report with the now final disclosure requirements in DOL's regulation at 29 CFR 2550.408b-2,
                                               provide a powerful tool and economic basis for improved evaluation of investment, recordkeeping, and
                                            administrative service arrangements, including potential innovative uses of Form 5500 Annual Return/Report
                                             data by private sector companies that have created tools for evaluating and benchmarking employee benefit
                                            plans, provide tools to benefit participants where failures to disclose indirect compensation received by a
                                          service provider have resulted in corrective monetary recoveries to plans, as well as minimize filer confusion
                                           with the harmonization of reporting and disclosure requirements. (5) Enhance reporting on plan compliance to
                                          improve plan operations, protect participants and beneficiaries and their retirement benefits, and educate and
                                                                          provide annual discipline for plan fiduciaries.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs:
    Annualized Monetized................           372.6  ..............  ..............            2016               7  2019 and later.
    ($millions/year)....................           366.2  ..............  ..............            2016               3  2019 and later.
    Annualized Quantified...............  ..............  ..............  ..............  ..............  ..............  ..............................
    Qualitative.........................  ..............  ..............  ..............  ..............  ..............  ..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------

Background and Need for Regulatory Action

    The Form 5500 Annual Return/Report is the principal source of 
information and data available to the Agencies concerning the 
operations, funding, and investments of pension and welfare benefit 
plans covered by ERISA and the Code. Accordingly, the Form 5500 Annual 
Return/Report is essential to each Agency's enforcement, research, and 
policy formulation programs and is 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 
Form 5500 Annual Return/Report also serves as the primary means by 
which the operations of plans can be monitored by plan participants and 
beneficiaries and the general public.
    As discussed in the Notice of Proposed Forms Revisions published 
concurrently with this document and below, the DOL has received several 
reports from the GAO, the DOL-OIG, and the ERISA Advisory Council 
indicating the need for substantive changes to annual reporting forms 
and regulations. TIGTA has also suggested to the IRS that substantive 
changes are needed. In response to these reports, the continued shift 
from DB to DC plans, and legislative and regulatory changes that have 
been issued since the last major revision to the Form 5500 Annual 
Return/Report, the DOL has determined that the substantial revisions to 
the reporting scheme discussed earlier in this preamble and in the 
Notice of Proposed Forms Revisions, published concurrently, are 
necessary and appropriate. These changes will ensure that the Agencies, 
plan participants and beneficiaries and the general public can monitor 
the operations of employee benefit plans. With their help, the Form 
5500 Annual Return/Report will continue to serve its essential 
functions.
    As described earlier in this document, the proposed revisions to 
the Form 5500 Annual Return/Report reflect priorities of and efforts by 
the Agencies to improve the quality of the information collected, while 
limiting wherever possible, especially for small pension plans invested 
in easy to value assets and plans that provide group health benefits 
that have fewer than 100

[[Page 47507]]

participants that are fully insured, the overall burden of the 
statutory reporting requirements and the forms. To accomplish this 
goal, the Agencies have pursued five objectives. The need for 
regulatory action to achieve these objectives is discussed below.
    (1) Modernizing financial information.
    Modernizing the Schedule H Balance Sheet and Income Statement: The 
financial statements contained in the current Schedule H (Large Plan 
Financial Information) and Schedule I (Small Plan Financial 
Information) are based on data elements that have remained largely 
unchanged since the Form 5500 Annual Return/Report was established in 
1975. Many investments in alternative and hard-to-value assets and 
those held through collective investment funds that are frequently held 
by plans and the investment industry today were not as prevalent in 
1975. Thus, they do not fit squarely into any of the existing Schedule 
H reporting categories. Further, some of these investments in 
alternative and hard-to-value assets, including those held through 
collective investment funds, are sufficiently complex that plan 
administrators and plan accountants may not completely understand how 
they fit into the balance sheet reporting on the Form 5500 Annual 
Return/Report. This results in inconsistent financial reporting by 
filers because certain types of investments may arguably fall into one 
or more categories. For example, a ``hedge'' fund could potentially be 
reported as a limited partnership or some other type of collective 
investment entity, or could be reported in a different reporting 
category based on the primary assets held through a particular type of 
collective investment vehicle.
    Additionally, many filers simply report investments that do not 
readily fit into one of the existing categories in ``Other.'' For 
example, large retirement plans reported having $153 billion in assets 
that they categorized as ``Other'' on the Schedule H balance sheet for 
2013. DFEs reported an additional approximately $407 billion in assets 
as ``Other'' for the 2013 plan year. In order to determine why there is 
a substantial amount in ``Other,'' the Agencies now have to rely on the 
current, unstructured Schedule H Line 4i Schedules of Assets, which 
might not specifically indicate the necessary details, or the Agencies 
would need to contact the filer for the information. The types of 
alternative and hard-to-value assets that might be reported in 
``Other'' include: Options, index futures, state and municipal 
securities, hedge funds, and private equity. Some of these asset types 
can be fairly complex and merit more rather than less transparency in 
order to determine the overall financial health of the plan. The 
inability to distinguish these types of assets on the Form 5500 Annual 
Return/Report reduces the form's usefulness for policy analysis and 
research as well for monitoring plans for enforcement purposes.
    A recent GAO report stated, for example, that, ``while hedge funds 
and private equity have very different risk, return, and disclosure 
considerations from state and municipal securities, all of these 
investments could be included in the ``other plan asset'' category.'' 
\17\ GAO also noted that the plan asset categories on the Schedule H 
are not representative of current plan investments, and provide little 
insight into the investments themselves, the level of associated risk, 
or structures of the investments.\18\ The DOL-OIG also recommended that 
the Agencies revise the Form 5500 Annual Return/Report to improve 
reporting of hard-to-value assets and alternative investments.\19\ 
Based on their own assessment and experience in research and 
enforcement and the use of the Form 5500 Annual Return/Report to 
support these critical agency functions and responsibilities, as well 
as in response to these recommendations, as discussed in detail earlier 
in this document, the Agencies are proposing to make changes to the 
Schedule H balance sheet and income statement.
---------------------------------------------------------------------------

    \17\ GAO, Private Pensions: Targeted Revisions Could Improve 
Usefulness of Form 5500 Information, at 12.
    \18\ Id. at 11-12.
    \19\ EBSA Needs to Provide Additional Guidance and Oversight to 
ERISA Plans Holding Hard-To-Value Alternative Investments, at 4, 18, 
and 19.
---------------------------------------------------------------------------

    Modernizing the Schedule H, Line 4i Schedules of Assets: As 
discussed in detail in the Notice of Proposed Forms Revisions published 
simultaneously with this document, the Agencies are proposing 
structural, data element and instruction changes to the current 
Schedule H, Line 4i(1) Schedule of Assets Held for Investment and Line 
4i(2) Schedule of Assets Acquired and Disposed of Within Year. These 
schedules are filed by plans required to file the Schedule H and by 
certain DFEs. The Schedules of Assets are a central element of the 
financial disclosure structure of ERISA. They are the only place on the 
Form 5500 Annual Return/Report where plans are required to list 
individual plan investments identified by major characteristics, such 
as issue, maturity date, interest rate, cost and current value. As 
such, they are the only part of the Form 5500 Annual Return/Report that 
can be used to evaluate the year-to-year performance, liquidity, and 
risk characteristics of a plan's individual investments.
    The current reported information, however, suffers from several 
shortcomings. First, this information is not reported in a data-
capturable format. Only an image or picture of the attachments that are 
currently filed as non-standard attachments to filers' electronic Form 
5500 Annual Return/Report filings is available through the EFAST2 
public disclosure function. Second, the Line 4i Schedules of Assets are 
not always found in the same place in each annual return/report. For 
example, the Line 4i Schedules of Assets are often incorporated in the 
larger audit report of the plan's IQPA that itself is filed as a 
nonstandard attachment to the Form 5500 Annual Return/Report. Third, 
the schedules do not require a standardized method for identifying and 
describing assets on the Line 4i Schedules. Therefore, under the 
current reporting rules, the same stock or mutual fund may be 
identified with various different names or abbreviations.
    The creation of more detailed and structured Schedules of Assets is 
a specific recommendation of the DOL-OIG and the GAO.\20\ The proposed 
changes to the Schedules of Assets are designed to remedy the 
shortcomings described above. In addition, data capturability of the 
Line 4i Schedules of Assets will make it much easier and more efficient 
to monitor plan holdings as computer programs can read and analyze the 
data much more efficiently. It will allow the Agencies and the 
interested public to monitor a larger number of pension plans and their 
asset allocations. The existence of a group of private companies that 
are transforming the Line 4i Schedule of Assets Held for Investment of 
the larger pension plans into data-capturable information and using it 
to compare plan investment menus and investment allocations is a clear 
indication that plans sponsors and their service providers also are 
interested in having access to these data. For example, one of these 
companies sent a letter to DOL stating that they believe that the 
information on the Form 5500 Annual Return/Report is very useful in 
``helping the agency understand the performance and design of 
retirement plans in the market place'' and that the data availability 
fosters ``third party data collection and

[[Page 47508]]

evaluation efforts that in turn help protect retirement plan 
participants.'' \21\ Plan sponsors can use this information to see how 
their investment menus compare to similarly situated plans and service 
providers often use this information to identify plans with 
underperforming investments in order to attract new business. This can 
lead to more competition and improved plan performance, which will 
ultimately benefit participants.
---------------------------------------------------------------------------

    \20\ See EBSA Needs to Provide Additional Guidance and Oversight 
to ERISA Plans Holding Hard-to-Value Alternative Investments, at 17; 
Private Pensions: Targeted Revisions Could Improve Usefulness of 
Form 5500 Information, at 37.
    \21\ See August 23, 2010 Comment Letter from Ryan Alfred, 
President, BrightScope, Inc. Re: Proposed Extension of Information 
Collection, Form 5500 http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201009-1210-002).
---------------------------------------------------------------------------

    Changes to DFE Reporting: Under the current reporting rules, DFEs 
are permitted, or in some cases required, to file their own Form 5500 
Annual Return/Report. Generally, pension plans that invest in DFEs only 
are required to report their interest in the DFE but do not have to 
report detailed information regarding the underlying investments in the 
DFE. Such plans are required to file a Schedule D on which the plans 
identify each DFE in which they invest and the year-end values of the 
plans' interests. Although DFEs file their own Form 5500 Annual Return/
Report, only Master Trust Investment Accounts (MTIAs) and entities 
meeting the conditions of DOL regulation 29 CFR 103-12 (103-12 IEs) are 
required to include as part of their own Form 5500 Annual Return/
Report, detailed asset holdings on the Schedule H, Line 4i Schedules of 
Assets. Insurance company pooled separate accounts (PSAs) and bank 
common/collective trusts (CCTs), which together account for 32 percent 
of large plans' reported DFE holdings, do not report such information, 
nor are the investing plans required to report it, although the 
information is required by regulation to be provided by PSAs and CCTs 
to investing plans on an annual basis.
    The Agencies have encountered, and researchers have reported to the 
DOL,\22\ difficulties matching plans' investments in DFEs reported by 
investing plans and DFEs in which the plans and other DFEs are 
participating. Some of this stems from incomplete, unreliable, or 
inconsistent data on Schedule D filings. For example, for 2013, about 
57 percent of plans and 17 percent of DFEs that filed a Schedule D and 
reported non-zero amounts of interest in DFEs on Schedule H have at 
least one discrepancy in reporting of more than $1,000 between the 
value of the investment in a DFE on their Schedule D and their Schedule 
H. There might be some legitimate reasons for these discrepancies, e.g. 
different plan year dates, but these discrepancies make it difficult to 
verify filing accuracy. Another more troubling issue is that there are 
more than 7,000 plan filings for 2013 that report investments in DFEs 
that cannot be directly linked to any applicable DFE filings. This 
problem primarily involves CCTs and PSAs. Investments in these unlinked 
DFEs account for more than $382 billion in assets. A serious 
consequence of not being able to link these plan filings and assets to 
DFE filings is that the Agencies and participants do not get 
information on their plan investments and thus are not able to monitor 
these investments.
---------------------------------------------------------------------------

    \22\ See ``Invisible Pension Investments,'' Peter J. Wiedenbeck, 
Rachael K. Hinkle & Andrew D. Martin (http://sites.lsa.umich.edu/admart/wp-content/uploads/sites/127/2014/08/vatr13.pdf).
---------------------------------------------------------------------------

    GAO has recommended that the Agencies take steps to address the 
problem of incomplete or inaccurate matching between plan and DFE 
filings.\23\ Therefore, as discussed in detail earlier in this 
document, the Agencies are proposing to revise the reporting structure 
of both Schedule H and the Line 4i Schedules of Assets, with 
corresponding changes to Schedule D, that are intended to ensure that 
the Agencies, plan fiduciaries, plan service providers, and other users 
of data have the tools to create a more complete picture of plans' 
investment in pooled investment vehicles.
---------------------------------------------------------------------------

    \23\ See, GAO Private Pensions: Targeted Revisions Could Improve 
Usefulness of Form 5500, at 14-15.
---------------------------------------------------------------------------

    Changes to Financial Information Reporting for Small Plans: Small 
pension plans that are invested in ``eligible'' plan assets and 
otherwise meet certain requirements are eligible to file Form 5500-SF, 
which was established in part to comply with provisions of the PPA 
requiring a simplified form of reporting for plans with fewer than 25 
participants.\24\ Currently, the Form 5500-SF does not require filers 
to breakout assets on the balance sheet into specific categories. Small 
plans that are not eligible to file the Form 5500-SF because they are 
invested in hard-to-value and alternative investments currently file 
Schedule I, but the Schedule I does not require small plan filers to 
provide detailed plan asset information and does not provide 
significantly more useful financial information than the Form 5500-SF 
with respect to alternative and hard-to-value assets.
---------------------------------------------------------------------------

    \24\ See section 1103(b) of the Pension Protection Act of 1996, 
Public Law 109-280, 120 Stat. 780 (2006).
---------------------------------------------------------------------------

    The lack of specific questions on the investment activity of small 
pension plans, which comprise over 80 percent of filers, impairs the 
usefulness of the Form 5500 Annual Return/Report as a tool to obtain a 
meaningful picture of small plan investments, especially investments in 
hard-to-value and alternative investments. As the GAO has noted, the 
limited financial information provided on the Schedule I creates a 
challenge for participants, beneficiaries, oversight agencies, 
researchers, and other users of the Form 5500 Annual Return/Report or 
Form 5500 Annual Return/Report data.\25\ Therefore, as discussed in 
detail in the Notice of Proposed Forms Revisions published today, under 
the proposal, Form 5500-SF filers would be required to provide a modest 
additional breakout of plan investments on the balance sheet. The 
proposal also would eliminate the Schedule I for small plans that are 
not eligible to file the Form 5500-SF, predominantly because they are 
invested in hard-to-value and alternative investments, including 
employer securities. Under the proposal, such plans instead would be 
required to complete Schedule H and the Line 4i Schedules of Assets. 
These changes are designed to ensure that the Agencies are able to 
collect critical information regarding small plan investments in hard-
to-value and alternative investments.
---------------------------------------------------------------------------

    \25\ GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information, at 18.
---------------------------------------------------------------------------

    Although the proposed elimination of Schedule I and the addition of 
basic investment category information to the Form 5500-SF balance sheet 
would result in additional reporting for those small plans invested in 
hard-to-value and alternative investments, those small plans with 
simple investment portfolios would not see a significant increase in 
their annual reporting burden. In light of changes in the financial 
environment and increasing concern about investments in hard-to-value 
assets and alternative investments, however, the Agencies believe that 
requiring the more detailed financial information regarding hard-to-
value investments on the Schedule H is important for regulatory, 
enforcement, and disclosure purposes for those small plans with more 
complex portfolios that include hard-to-value or alternative 
investments. The inherent increased risk posed by hard-to-value or 
alternative investments affects participants in small plans as well as 
large plans, but without these proposed revisions, the participants in 
small plans are left without the protection afforded participants in 
large plans that comes from the reporting that large plans are already 
required to do. Although such small plans would be

[[Page 47509]]

required to complete the Schedule H instead of the Schedule I, 
including the Schedule H Line 4i(1) and 4i(2) Schedules of Assets, 
eligible small plans, as under the current rules, would still be 
eligible for a waiver of the annual examination and report of an IQPA 
under 29 CFR 2520.104-46, and the number count required to determine 
eligibility would be changed from the number of participants at the 
beginning of the plan year to the number of participants with account 
balances at the beginning of the plan year.
    (2) Updating fee and expense information on plan service providers 
with a focus on harmonizing annual reporting requirements on Schedule C 
with DOL's final disclosure requirements at 29 CFR 2550.408b-2.
    The current rules for reporting indirect compensation on the 
Schedule C as part of the Form 5500 Annual Return/Report, including the 
limited reporting option for ``eligible indirect compensation,'' were 
implemented starting with the 2009 forms.\26\ Those changes were part 
of a three-pronged regulatory initiative that included the DOL's 
regulations under 29 CFR 2550.408b-2 and participant-level disclosure 
regulations under 29 CFR 2550.404a-5. At the time the 2009 Schedule C 
rules were finalized, neither the ERISA section 408b-2 regulation nor 
the ERISA section 404a-5 regulation had been promulgated. Some elements 
of the 2009 Schedule C, for example, the eligible indirect compensation 
provisions, were adopted in light of the fact that it was not certain 
at the time what the ERISA section 408b-2 final rule would require. 
Those provisions were also meant to respond to concerns from the 
regulated community, especially large plan service providers, about 
having to create two different record-keeping systems to meet the 
various requirements of the Form 5500 Annual Return/Report and 
disclosures required under 408b-2 should the later promulgated 
provisions differ from the Form 5500 reporting requirements on indirect 
compensation.
---------------------------------------------------------------------------

    \26\ See 72 FR 74731 (Nov. 16, 2007).
---------------------------------------------------------------------------

    Now that EBSA has promulgated the ERISA sections 408b-2 and 404a-5 
final regulations, there is a need to harmonize fee reporting under the 
Schedule C and ERISA section 408b-2 regulations to: (1) Make it easier 
to understand the disclosure and reporting rules regarding indirect 
compensation; (2) improve quality of data by minimizing any filer 
confusion that might result from differences in the two requirements 
and having all the compensation required to be disclosed to be reported 
on the Schedule C; (3) reduce burden by synchronizing the record-
keeping that would be required for ERISA section 408b-2 regulations 
before-the-fact disclosure with Schedule C's after-the-fact reporting; 
and (4) make the information easier to understand for end users of the 
forms by bringing consistency between the service provider fees 
disclosed to the plan fiduciaries and the service provider fees 
reported to the Agencies and made public. In this regard, a recent GAO 
report stated that some filers advised that there was confusion over 
what Schedule C requires to be reported, including in comparison to 
what is required under the ERISA section 408b-2 regulations disclosure 
scheme.\27\ Therefore, as discussed in detail earlier in this document, 
the Agencies are proposing various changes to the Schedule C to better 
harmonize it with the disclosure requirements under the final ERISA 
section 408b-2 regulation. Among other changes, the Agencies are 
proposing to eliminate the concept of ``eligible indirect 
compensation'' on Schedule C in part because ``eligible indirect 
compensation'' was created prior to the finalization of ERISA section 
408b-2 rules to address concerns about possible future inconsistencies 
that are no longer applicable. Instead of being able to rely on the 
construct of ``eligible indirect compensation'' to report only the name 
of the person providing the disclosures to the plan administrator, the 
proposal would require filers to report all types of compensation for 
ERISA section 408b-2 ``covered'' service providers. This change will 
also help address concerns raised by other data sources on service 
provider compensation about the completeness of Schedule C compensation 
data. A recent survey by Deloitte Consulting LLP for the Investment 
Company Institute reported fees paid by 401(k) plans that greatly 
exceeded fees reported on the Schedule C at every asset level.\28\
---------------------------------------------------------------------------

    \27\ See GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information, at 22.
    \28\ Deloitte Consulting LLP (2014, August). Inside the 
Structure of Defined Contribution/401(k) Plan Fees, 2013: A Study 
Assessing the Mechanics of the `all-in' Fee. (Available at https://www.ici.org/pdf/rpt_14_dc_401k_fee_study.pdf).
---------------------------------------------------------------------------

    The proposed forms revisions, and implementing DOL regulations, 
would also require small pension plans that are not eligible to file 
the Form 5500-SF and welfare plans that are funded with a trust with 
fewer than 100 participants to file the Schedule C. Currently, only 
large pension plans and large welfare plans that are not unfunded or 
insured (e.g., funded using a trust) must file the Schedule C, thus 
excluding almost 90 percent of current pension plan filers and over 80 
percent of current welfare plan filers from having to disclose service 
provider fees. The DOL recognizes the burdens small plans face in 
complying with reporting obligations, but must weigh them against the 
market efficiencies that can be gained through improved transparency 
and fee disclosure. The DOL therefore proposes to require small pension 
plans to file Schedule C only if they do not meet the eligibility 
conditions for filing the Form 5500-SF, which predominantly are those 
pension plans that are invested in alternative or hard-to-value assets. 
The DOL proposes to require welfare plans that offer group health 
benefits with fewer than 100 participants to file Schedule C only if 
they are not unfunded or insured (e.g., funded with a trust), because 
those plans are most likely to experience financial difficulties. 
Defined contribution pension plan Form 5500-SF filers, as well as 
defined contribution pension plan Form 5500 Annual Return/Report filers 
required to complete the Schedule H, would also have to attach the 
comparison chart that is required to be furnished to participants under 
the DOL's regulation at 29 CFR 2550.404a-5. Although the comparison 
chart would not be attached in a ``structured'' format, it would 
provide, with a minimal burden increase, a picture of the investment 
earnings and fees for defined contribution pension plans, which 
constitute the majority of small plan filers.
    Requiring those small pension plans that are not eligible to file 
the Form 5500-SF and welfare plans that include group health benefits 
with fewer than 100 participants that are not unfunded or insured 
(e.g., funded with a trust) to complete the Schedule C as part of their 
Form 5500 Annual Return/Report filing, and requiring Form 5500-SF 
defined contribution pension plan filers to include the 404a-5 
comparison chart should address some of the GAO's concerns that service 
provider fee information is incomplete because plans with fewer than 
100 participants are not currently required to file information about 
indirect compensation received by the plans' service providers.\29\ 
Both the proposed Schedule C information for small plans not eligible 
to file the Form 5500-SF and the 404a-5 information would also enable 
sponsors of small plans to more easily compare fee information between 
their plans and increase competition for these services.

[[Page 47510]]

In addition, financial information reporting could be better aligned 
with recently adopted disclosure rules to ensure that all fees are 
reported by the plans.\30\
---------------------------------------------------------------------------

    \29\ See GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information, at 25.
    \30\ Id. at 50.
---------------------------------------------------------------------------

    (3) Enhancing usability of data filed on the annual return/report.
    E-filing, as well as advances in information technology, have 
changed both the regulated community's and government's ability to use 
the Form 5500 Annual Return/Report data. The government can now provide 
the data in a much more timely and comprehensive manner. As a result, 
the Form 5500 Annual Return/Report data sets are posted on the 
Internet, updated monthly, and the images of the individual filings and 
attachments are made available at no cost to the requester.\31\ This 
has allowed the public as well as the Agencies to monitor plan 
investments and trends more efficiently. Several private companies have 
started to build data sets and applications using the Form 5500 Annual 
Return/Report data to compare plans and service providers and make 
these services available to plan sponsors and service providers. These 
developments can lead to better review of plan investments and 
increased competition, ultimately benefiting plans and participants.
---------------------------------------------------------------------------

    \31\ Requests for individual filings and attachments are 
available at no cost to the requester. Bulk requests are available 
at a minimal cost to the requester. See Guide to Submitting Requests 
Under the Freedom of Information Act, Section VIII (http://www.dol.gov/dol/foia/guide6.htm).
---------------------------------------------------------------------------

    The usefulness of the Form 5500 Annual Return/Report data for 
comprehensive plan monitoring is dependent on comparable data being 
available for all or most plans and on the data being available in 
data-capturable formats. The current financial reporting structures and 
requirements, however, do not allow the data to be utilized to the 
fullest extent. As stated above, the Schedule H Line 4i, Schedules of 
Assets, and the Line 4j, Schedule of Reportable Transactions, as well 
as other attachments to various schedules (including Schedules MB and 
SB) are not filed in a standardized electronic format and therefore 
cannot be searched and analyzed electronically. As a result, the 
Agencies, other governmental users, including policymakers, and the 
public have difficulty accessing and making most effective use of key 
information about pension plan investments.
    The proposed requirement for filers to complete a standardized 
Schedule H Line 4i(1), Schedule of Assets Held for Investment and Line 
4i(2) Schedule of Assets Disposed of by End of Plan Year, in a data-
capturable format would address some of the critical gaps in available 
data on pension plan investing, which accounts for over $7.87 trillion 
of United States savings. The Agencies' proposal to standardize the 
Schedule H, Line 4i Schedules of Investments also is responsive to the 
DOL-OIG's recommendation that the Agencies create a searchable 
reporting format for the Schedule H, Line 4i Schedules of Assets and 
otherwise increase the accessibility of Form 5500 Annual Return/Report 
data, particularly information on hard-to value assets and multiple-
employer plans.\32\
---------------------------------------------------------------------------

    \32\ See EBSA Needs to Provide Additional Guidance and Oversight 
to ERISA Plans Holding Hard-to-Value Alternative Investments, at 17; 
see also GAO Private Pensions: Targeted Revisions Could Improve 
Usefulness of Form 5500 Information, at 37; GAO, Federal Agencies 
Should Collect Data and Coordinate Oversight of Multiple Employer 
Plans, at 30.
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    In addition, this proposal would enhance the usability of data by 
replacing some of the attachments to the various schedules (including 
some attachments to Schedules MB and SB) \33\ with text fields and 
having filers report required information in text fields on the face of 
the forms and on schedules instead of requiring this information to be 
filed as non-standard attachments. The Agencies took into account the 
size and complexity of the attachments in determining which should be 
text fields and which should continue to be attachments, despite the 
overarching goal of improving data usability for the complete form. In 
a few cases, especially for detailed actuarial charts, the Agencies 
determined that requiring standardized attachments or requiring the 
information to be provided on the face of the forms and schedules could 
potentially be overly difficult, costly, and complex, and therefore the 
costs would outweigh the benefits.
---------------------------------------------------------------------------

    \33\ The proposed Schedule E, which is based in large part on 
the Schedule E from 2008 and earlier, would use text fields rather 
than attachments for some of the previously asked questions.
---------------------------------------------------------------------------

    Further improvements would be realized from the proposal's 
requirement that other currently unstructured data or new elements 
would also be collected as structured data. These include the lists of 
employers participating in multiple-employer and controlled group plans 
required to be attached to the Form 5500 Annual Return/Report or Form 
5500-SF; the Schedule H, Line 4a Schedule of Delinquent Contributions, 
and Schedule H, Line 4j Schedule of Reportable Transactions. Having 
information on delinquent participant contributions and reportable 
transactions in a ``structured'' data format would benefit the Agencies 
by allowing them to identify common types of violations across plans, 
more quickly respond to any identified issues, and better determine 
areas where more enforcement and encouragement of compliance and 
education is needed. Having this data reported in a structured format 
would also benefit the Agencies and the general public by identifying 
the universe of employers that participate in multiple-employer and 
controlled group plans and allowing them to quickly identify plan 
sponsors that might be affected by adverse market conditions or 
financial distress.
    In summary, advances and developments in technology allow data 
users to run increasingly sophisticated analyses using the existing 
Form 5500 Annual Return/Report data, but this is dependent on the 
availability of these data in a data-capturable format. In addition to 
researchers interested in studying trends in the employee benefits 
industry, some companies have reached out to the DOL to request that 
Form 5500 Annual Return/Report data be collected in a more standardized 
and consistent format.\34\ If these data were available in such a 
format, researchers, businesses and plan professionals could use the 
data more efficiently to inform employers and participants on plan 
structures, operations, and finances. Particularly important in a 
constrained federal budgetary environment, such data will allow EBSA's 
enforcement staff to monitor many more employee benefit plans in a 
systematic and efficient way, producing more fruitful investigations 
and reducing the inefficiencies and disruptions resulting from 
unnecessary investigations.
---------------------------------------------------------------------------

    \34\ See August 23, 2010 Comment Letter from BrightScope Re: 
Proposed Extension of Information Collection, Form 5500 (http://
www.dol.gov/EBSA).
---------------------------------------------------------------------------

    (4) Requiring reporting by all group health plans covered by Title 
I of ERISA, including adding a new Schedule J (Group Health Plan 
Information).
    The enactment of the Affordable Care Act expanded DOL's already 
growing oversight and regulatory responsibilities with respect to the 
provision of group health benefits to workers in private sector 
employer-sponsored group health plans. Generally most welfare plans 
that include group health benefits that have fewer than 100 
participants do not currently file the Form 5500 Annual Return/Report. 
The current regulation exempts small plans from the requirement to file 
if they are unfunded, fully insured or combination unfunded/fully 
insured.\35\ The current lack of information collected on the Form 5500

[[Page 47511]]

Annual Return/Report from group health plans diminishes the 
effectiveness of EBSA's ability to develop health care regulations and 
complicates the DOL's ability to enforce such regulations and educate 
plan administrators regarding compliance. Congress, DOL, other 
governmental users, private researchers, service providers, and other 
members of the regulated community currently are not able to 
confidently estimate even the most basic information regarding group 
health plans, such as the total number of plans that exist or trends 
that are occurring in the marketplace.
---------------------------------------------------------------------------

    \35\ 29 CFR 2520.104-20.
---------------------------------------------------------------------------

    The Affordable Care Act requires the Secretary of Labor to provide 
Congress with an annual report containing general information on self-
insured employee health benefit plans and financial information 
regarding employers that sponsor such plans. This ``Annual Report on 
Self-Insured Group Health Plans,'' by the terms of the statute, must 
use data from the Form 5500 Annual Return/Report. However, as noted 
above, those small plans that are self-insured and do not use a trust 
are not required to file the Form 5500 Annual Return/Report with the 
DOL and the Form 5500 Annual Return/Report only collects limited 
information from self-insured plans that do file.\36\ Also, as the 2015 
Report states, ``health benefits may be reported together with certain 
other benefits, such as disability or life insurance benefits, on a 
single Form 5500 Annual Return/Report. This makes it difficult to 
distinguish how the different benefits are financed.'' \37\ To fulfill 
its responsibility to Congress, the DOL has developed an algorithm to 
try to infer the funding method for plans that file. This methodology, 
however, may not accurately identify self-insured plans and can only 
draw information from the Form 5500 Annual Returns/Reports filed, which 
are a limited sample, and the methodology may compromise the validity 
of any conclusions drawn from the report and any resulting policy 
prescriptions.
---------------------------------------------------------------------------

    \36\ Only a little over 20,000 self-insured and approximately 
4,000 mixed self-insured health plans file annually with the DOL 
under the current reporting scheme. See ``Report to Congress: Annual 
Report on Self-Insured Group Health Plans,'' March 2015, page iii 
(available at http://www.dol.gov/ebsa/pdf/ACAReportToCongress2015.pdf).
    \37\ Id. at v.
---------------------------------------------------------------------------

    In addition, sections 2715A and 2717 of the PHS Act, as added by 
the Affordable Care Act and incorporated into ERISA section 715, 
include important new reporting requirements for group health plans 
subject to ERISA. Specifically, section 2715A of the PHS Act 
incorporates the transparency provisions of section 1311(e)(3) of the 
Affordable Care Act to require non-grandfathered group health plans and 
health insurance issuers offering non-grandfathered group or individual 
health insurance coverage to make available to the public, and the 
government a host of information on health plan enrollment and claims, 
including: (1) Claims payment policies and procedures; (2) periodic 
financial disclosures; (3) data on enrollment and disenrollment; (4) 
data on the number of denied claims; (5) data on rating practices; (6) 
information on cost-sharing and payments with respect to any out-of-
network coverage; (7) information on enrollee and participant rights; 
and (8) other information as determined by the Secretary. Moreover, 
section 2717 of the PHS Act generally requires non-grandfathered group 
health plans and health insurance issuers offering non-grandfathered 
group or individual health insurance coverage to report annually 
whether the benefits under the plan: (A) Improve health outcomes 
through the implementation of activities such as quality reporting, 
effective case management, care coordination, chronic disease 
management, and medication and care compliance initiatives, including 
through the use of the medical homes model as defined for purposes of 
section 3602 of the Affordable Care Act, for treatment or services 
under the plan or coverage; (B) implement activities to prevent 
hospital readmissions through a comprehensive program for hospital 
discharge that includes patient-centered education and counseling, 
comprehensive discharge planning, and post discharge reinforcement by 
an appropriate health care professional; (C) implement activities to 
improve patient safety and reduce medical errors through the 
appropriate use of best clinical practices, evidence based medicine, 
and health information technology under the plan or coverage; and (D) 
implement wellness and health promotion activities.
    These regulations propose conforming amendments in 29 CFR 2590.715-
2715A and 29 CFR 2590.715-2717 to clarify that compliance with the 
reporting requirements in 29 CFR 2520.103-1 (including filing any 
required schedules to the annual report) by plans subject to ERISA 
would satisfy the reporting requirements of PHS Act section 2715A and 
2717,\38\ incorporated in ERISA through ERISA section 715(a)(1).\39\ As 
explained in FAQs issued August 11, 2015,\40\ HHS proposed an 
information collection for public comment in connection with the 
transparency provisions of section 1311(e)(3) of the Affordable Care 
Act. The proposed data collection would collect certain information 
from Qualified Health Plan (QHP) issuers in Federally-facilitated 
Exchanges and State-based Exchanges using the federal eligibility and 
enrollment platform. The HHS proposal explained that other reporting 
requirements would be proposed at a later time, through a separate 
rulemaking with respect to non-Exchange coverage, including those that 
extend to health insurance issuers offering non-grandfathered group and 
individual health insurance coverage outside of Exchanges and non-
grandfathered group health plans (including large group and self-
insured health plans).
---------------------------------------------------------------------------

    \38\ The Treasury Department and the IRS intend to publish 
proposed regulations in 26 CFR 54.9815-2715A and 54.9815-2717 
clarifying that group health plans required to file an annual report 
pursuant to section 104 of ERISA that comply with the reporting 
requirements in 29 CFR 2520.103-1 (including filing any required 
schedules to the annual report) would satisfy the reporting 
requirements of sections 2715A and 2717 of the PHS Act, as 
incorporated in the Code. Group health plans that are not required 
to file an annual report pursuant to section 104 of ERISA but that 
are subject to sections 2715A and 2717 of the PHS Act as 
incorporated in the Code, will not be required to do any reporting 
to comply with sections 2715A and 2717 of the PHS Act, as 
incorporated in the Code, unless and until the Treasury Department 
and the IRS issue subsequent further guidance or rulemaking 
regarding any such reporting by such plans.
    \39\ Nonfederal governmental plans (as defined in PHS Act 
section 2791(d)(8)(C)) and health insurance issuers (as defined in 
PHS Act section 2791(b)(2) and ERISA section 733(b)(2)) are not 
required to file annual reports pursuant to ERISA section 103. 
Accordingly, any reporting required of such plans and issuers to 
satisfy PHS Act sections 2715A and 2717 will be addressed separately 
by HHS in future rulemakings and/or guidance.
    \40\ See FAQs about Affordable Care Act Implementation (Part 
XXVIII), available at www.dol.gov/ebsa/faqs/faq-aca28.html and 
www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/ACA-FAQ-Part-XXVIII-transparency-reporting-final-8-11-15.pdf.
---------------------------------------------------------------------------

    This rulemaking proposes transparency and quality reporting for 
non-grandfathered group health plans under PHS Act sections 2715A and 
2717, as incorporated in ERISA. It takes into account differences in 
markets and other relevant factors and reduces unnecessary duplication. 
The DOL is proposing to collect and provide high-value data to 
participants, beneficiaries, and regulators, such as information about 
benefits and plan design characteristics, funding, grandfathered plan 
status, rebates received by the plan (such as medical loss ratio 
rebates), service provider information (including information regarding 
any third party administrators, pharmacy benefit managers, mental 
health benefit

[[Page 47512]]

managers, and independent review organizations), information on any 
stop loss insurance, claims processing and payment information 
(including number of claims filed, paid, appealed and denied), wellness 
program information, and other compliance information. The collection 
of high-value data will lead to greater transparency for consumers and 
assist in their decision-making process.
    As discussed in detail in the Notice of Proposed Form Revision, the 
proposal would make significant changes to group health plan reporting. 
First, the proposal would add a new Schedule J (Group Health Plan 
Information). Plans that provide group health benefits that have 100 or 
more participants, all of which are currently required to file a Form 
5500 Annual Return/Report, would have to include the new Schedule J in 
their annual report, with the remaining reporting requirements 
generally unchanged, except as proposed to be changed for all filers. 
Plans that provide group health benefits with fewer than 100 
participants that are funded using a trust would generally be required 
to report the same information as plans that provide group health 
benefits with 100 or more participants that are funded using a trust; 
they would no longer be permitted to file the Form 5500-SF. Although 
this would require such plans to complete the Schedule C and the 
Schedule H, for plans with simple investments, there should only be a 
modest burden increase over completing the Form 5500-SF. Small welfare 
plans funded with a trust that are invested in assets that are not 
``eligible plan assets'' for purposes of Form 5500-SF filing, are 
already required to file the Form 5500 Annual Return/Report, along with 
the Schedule I, and if applicable, Schedule A.
    Group health plans that have fewer than 100 participants currently 
exempt from filing an annual report under 29 CFR 2520.104-20 because 
they are completely unfunded or combination unfunded/fully insured now 
would be required to file a Form 5500, a Schedule J, and, if 
applicable, a Schedule A. Plans that are unfunded pay some or all of 
their benefits out of the plan sponsors' general assets, which exempts 
them from state insurance regulation, making the DOL their sole 
regulatory agency. Because such small plans are not currently required 
to file the Form 5500 Annual Return/Report, there is no comprehensive 
and direct source of data about the number and characteristics of these 
plans. Further, because these plans are small, they are more 
susceptible to financial difficulties. Because of these concerns, the 
DOL believes that it is important to have more detailed benefit, 
financial, and compliance information for ``unfunded'' plans that are 
self-insured or partially self-insured than for those small plans that 
are fully insured. These plans would be required under the proposal to 
file the complete Form 5500 and Schedule J and, if applicable, Schedule 
A.
    Plans that provide group health benefits that have fewer than 100 
participants that are fully insured would be required to answer only 
limited questions on both the Form 5500 and Schedule J, and would not 
be required to file any other schedules or attachments. Collecting this 
limited data on fully insured plans providing group health benefits 
that have fewer than 100 participants would give the DOL basic 
information to identify health insurance plans they regulate and allow 
them to better monitor plan trends and activities, but minimize the 
reporting burden from more detailed reporting that is more generally 
required on the Form 5500, Schedule A, Schedule J, and any other 
applicable schedules that comprise the Form 5500 Annual Return/Report.
    (5) Improving compliance under ERISA and the Code through selected 
new questions regarding plan operations, service provider 
relationships, and financial management of the plan.
    In an era of limited financial resources, the Agencies must pursue 
new and creative ways to maximize the efficacy of their enforcement 
budgets. Improving compliance under ERISA and the Code reduces the need 
for costly enforcement actions. Focusing filer compliance through 
selected new questions regarding plan operations, service provider 
relationships, and financial management of the plan under ERISA and the 
Code can also have the effect of allowing the Agencies' enforcement 
staff to work more efficiently, and therefore better protect plan 
participants and beneficiaries.

Analysis of Benefits and Costs

    The DOL believes that the benefits to be derived from this 
proposal, including the amendments to the reporting regulations and the 
forms revisions, would justify their costs. The DOL further believes 
that these revisions to the existing reporting requirements will 
enhance protection of ERISA rights by improving the effectiveness of 
enforcement actions and by improving the quality of data used for 
research and policymaking purposes. The DOL conducted a detailed 
assessment of the costs and benefits of these changes.
Benefits
    As stated previously, the proposal pursues five main objectives. 
The various changes to the forms, schedules, instructions, and DOL 
regulatory exemptions and requirements are together intended to 
integrate these various objectives, and all of the other goals together 
are proposed with the intention of supporting the move towards fuller 
transparency and data mineability overall. Fuller transparency could 
increase participant trust levels, which could encourage pension plan 
participants to increase their retirement savings and welfare plan 
participants to use benefits when needed, resulting in strengthened 
retirement security and improved public health. The benefits of each of 
the five main objectives are discussed below.
    (1) Modernizing financial information.
    As stated previously, the financial information, particularly the 
asset/liability statement, contained in the current Schedule H (Large 
Plan Financial Information), Schedule I (Small Plan Financial 
Information), as well as the more recently established Form 5500-SF, is 
based on data elements that have remained largely unchanged since the 
Form 5500 Annual Return/Report was established in 1975. Many 
investments in alternative and hard-to-value assets and held in 
collective investment funds do not fit squarely into any of the 
existing reporting categories on Schedule H. As discussed previously, 
the GAO has expressed concerns that many investments with widely 
varying risk, return, and disclosure considerations are often reported 
in the catch-all ``other plan asset'' category.\41\ GAO also noted that 
the plan asset categories on the Schedule H are not representative of 
current plan investments, and provide little insight into the 
investments themselves, the level of associated risk, or structures of 
the investments.\42\ The DOL-OIG also recommended that the Agencies 
revise the Form 5500 Annual Return/Report to improve reporting of hard-
to-value assets and alternative investments.\43\
---------------------------------------------------------------------------

    \41\ GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information, at 12.
    \42\ Id. at 11-12.
    \43\ EBSA Needs to Provide Additional Guidance and Oversight to 
ERISA Plans Holding Hard-To-Value Alternative Investments, 
Department of Labor Office of Inspector General Report Number: 09-
13-001-12-121 at 4, 18, and 19.
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    As part of their overall evaluation of how best to restructure 
financial reporting to maximize usable data while limiting burden 
increases, the Agencies also concluded that research and

[[Page 47513]]

enforcement efforts could be enhanced by updating the asset reporting 
categories and by standardizing Schedule H Line 4i attachments. 
Accordingly, the changes the Agencies are proposing to make to the 
asset breakouts on the balance sheet and income statement components of 
Schedule H would make the asset reporting more consistent with the 
current financial marketplace and enable the Agencies, plan sponsors, 
and participants and beneficiaries to develop a more accurate and 
detailed picture of the types of assets held by plans, including hard-
to-value assets and alternative investments and investment held through 
collective investment vehicles. The proposed changes take into account 
many of the sophisticated and complex investments that do not fit 
neatly into any of the existing program categories, which would lead to 
consistent reporting by filers and more transparency by limiting the 
consolidation of many diverse investments into the catch-all ``Other'' 
category on the balance sheet on the Schedule H.
    The Agencies also opted to revise the Schedule H Line 4i Schedules 
of Assets attachment into two, distinct structured data attachments. 
Doing so will produce more consistent data, reduce confusion over the 
proper format to provide required data, and enable data mineability. 
Moreover, as discussed in detail earlier in this document and the 
Notice of Proposed Forms Revisions published simultaneously, the 
structural, data element and instruction changes to the Schedule H, 
Line 4i Schedule of Assets Held for Investment the Agencies are 
proposing will allow the Form 5500 Annual Return/Report to be better 
used as a tool to evaluate the year-to-year performance of a plan's 
individual investments. The creation of more detailed and structured 
Schedule H, Line 4i Schedules of Assets is a specific recommendation of 
the DOL-OIG and the GAO.\44\ The proposed changes to the Schedule H 
Line 4i Schedules of Assets, in addition to better meeting the needs of 
the Agencies, other government users, and other end users of the data, 
should also serve to address the shortcomings identified in these 
reports.
---------------------------------------------------------------------------

    \44\ See EBSA Needs to Provide Additional Guidance and Oversight 
to ERISA Plans Holding Hard-to-Value Alternative Investments, at 17; 
Private Pensions: Targeted Revisions Could Improve Usefulness of 
Form 5500 Information, at 37.
---------------------------------------------------------------------------

    The proposed changes made to DFE reporting would ensure that the 
Agencies, plan fiduciaries, plan service providers, and other users of 
data have the tools to create a more complete picture of plans' 
investments in pooled investment vehicles. Similarly, the proposed 
changes to the financial information reported by small plans would 
improve the utility of the Form 5500 Annual Return/Report as a tool to 
obtain a meaningful picture of small plan investments in hard-to-value 
and alternative investments as suggested by GAO and other government 
oversight and advisory bodies.\45\
---------------------------------------------------------------------------

    \45\ Id.
---------------------------------------------------------------------------

    Although these changes would result in additional reporting for 
certain small plans, the Agencies do not expect that small plans with 
simple investment portfolios would experience a significant increase in 
their annual reporting burden. Small plans with complex portfolios that 
include hard-to-value or alternative investments should have more 
transparent financial statements which may require somewhat more 
complex financial reporting obligations. In light of changes in the 
financial environment and increasing concern about investments in hard-
to-value assets and alternative investments, the Agencies believe that 
requiring separate financial information regarding hard-to-value 
investments is important for regulatory, enforcement, and disclosure 
purposes.\46\
---------------------------------------------------------------------------

    \46\ Although such small plans would be required to complete the 
Schedule H instead of the Schedule I, including the Schedule H Line 
4i(1) and 4i(2) Schedules of Assets, eligible small plans, as they 
can under the current rules, would still be eligible for a waiver of 
the annual examination and report of an IQPA under 29 CFR 2520.104-
46.
---------------------------------------------------------------------------

    A major overriding objective of these proposed forms revisions is 
to modernize the Form 5500 Annual Return/Report information collection 
so that the presentation of plan trust financial and balance sheet 
information is a more transparent and detailed reflection of the 
investment portfolios and asset management practices of employee 
benefit plans. The basic objective of general financial reporting is to 
provide information about the reporting entity for the Agencies' 
enforcement, research, and policy formulation programs, for other 
federal agencies, Congress, and the private sector in assessing 
employee benefit, tax, and economic trends and policies; and for plan 
participants and beneficiaries and the general public in monitoring 
employee benefit plans. Modernizing the financial reporting instruments 
will bring greater transparency to plan transactions, which will 
enhance the efficiency of the Agencies' enforcement efforts. 
Specifically, the Agencies will be better able to target their 
enforcement efforts, which will reduce the number of investigations 
involving plans that are not engaging in problematic activities.
    Additionally, ERISA Section 513(a) authorizes and directs the 
Secretary of Labor and EBSA to conduct a robust research program on 
employee benefits. The Form 5500 Annual Return/Report is one of the 
leading sources of data used in this research program. Modernizing the 
financial information reported on the Form 5500 Annual Return/Report 
will improve the quality of the research conducted by internal and 
external researchers. This improved research will, in turn, improve the 
quality of policy decisions made by DOL and other governmental 
policymakers that rely on the Form 5500 Annual Return/Report data.
    (2) Updating fee and expense information on plan service providers 
with a focus on harmonizing annual reporting requirements on Schedule C 
with DOL's final disclosure requirements at 29 CFR 2550.408b-2.
    As previously discussed, the proposal would harmonize the Schedule 
C rules with the DOL's regulations at 29 CFR 2550.408b-2. The Agencies 
believe that requiring reporting of all indirect compensation (rather 
than continuing the exemption from reporting for ``eligible indirect 
compensation''), but limiting indirect compensation reporting to the 
service providers and types of compensation that are required to be 
disclosed under the ERISA section 408b-2 regulation will provide a 
particular benefit to plan record keepers. The information required to 
be reported would be an after the fact reporting of fees that should 
have been disclosed in advance under the ERISA section 408b-2 
regulation. Because the ERISA section 408b-2 regulation requires 
covered service providers to provide plan administrators the 
information they need to satisfy their Form 5500 Annual Return/Report 
obligations with respect to compensation information, the additional 
burden should be limited to entering the data on the Form 5500 Annual 
Return/Report.\47\
---------------------------------------------------------------------------

    \47\ See 29 CFR 2550.408b-2(c)(iv).
---------------------------------------------------------------------------

    Currently, given that some significant component of indirect 
compensation is not reported because it is permitted to be treated as 
``eligible indirect compensation,'' and the fact that some filers 
report formulas instead of dollar amounts, the Agencies and public only 
have limited information regarding the total compensation that service 
providers receive and that affects plans' finances and potentially 
involves conflicts of interests among service providers. Almost 90 
percent of 2013

[[Page 47514]]

Schedule C filers reported at least one service provider receiving some 
amount of eligible indirect compensation, and nearly 70 percent of 2013 
Schedule C filers reported at least one provider receiving only 
eligible indirect compensation. Filers identifying at least one service 
provider as receiving some amount of eligible indirect compensation on 
their Schedules C, according to the overall Form 5500 data, report 
holding roughly two-thirds of all pension assets. Thus, the limited 
``eligible indirect compensation'' reporting impacts the data relating 
to service provider fees in connection with the servicing and 
management of a significant amount of assets. In addition, analysis of 
these data also indicates that almost 50 percent of Schedule C filers 
report at least one service provider who provides a formula instead of 
an explicit or estimated amount of compensation. These filers report 
holding almost 40 percent of all pension assets. Providing only a 
formula without an actual or estimated dollar amount of the 
compensation makes it very hard for plan sponsors or participants to 
identify the exact amount of compensation.
    The proposed rules and the subsequent reported information would 
make it possible to get a much better understanding on the fees that 
were transferred between service providers in the form of indirect 
compensation, therefore allowing plan sponsors and participants to 
assess the fees that they are incurring. The Agencies anticipate that 
the increased transparency under the proposal would likely lead to 
increased competition in the service provider market.
    Aligning the Schedule C with ERISA section 408b-2 disclosure should 
benefit the regulated community by clarifying and streamlining the 
information reported on the Schedule C, which should reduce filer 
confusion, and in turn reduce any filer burden caused by the confusion. 
The updated service provider information will also improve targeting in 
the Agencies' enforcement efforts, be a resource for independent 
researchers to identify fee trends, and help policymakers identify 
opportunities to make regulatory adjustments.
    The proposed rule would also require small pension plans that are 
not eligible to file the Form 5500-SF and welfare plans that provide 
group health benefits that are not unfunded or insured (e.g., funded 
using a trust) and have fewer than 100 participants to file Schedule C. 
Currently, only large plans (for welfare plans, only large plans that 
are not unfunded or insured) must file a Schedule C, thus a large 
portion of plans do not disclose service provider compensation, except 
total administrative expenses, which includes direct compensation to 
service providers.\48\ The Agencies believe that the ideal solution for 
enforcement, research, policymaking, and participant monitoring 
purposes would be for all indirect compensation to be required to be 
reported, but recognize the burdens small plans face in complying with 
disclosure obligations. The Agencies therefore propose to require small 
pension plans to file Schedule C only if they do not meet the 
eligibility conditions for filing the Form 5500-SF, which generally 
would be those pension plans that are invested in alternative or hard-
to-value assets. The Agencies propose to require welfare plans that 
offer group health benefits with fewer than 100 participants to file 
Schedule C only if they are funded using a trust. This makes the 
reporting requirements consistent with those for other welfare plans 
that are funded using a trust that are required to file the Form 5500. 
Self-insured plans are more susceptible to experience financial 
difficulties than fully insured plans. Requiring these small plans to 
file a Schedule C would address some of the GAO's concerns that not all 
critical information on indirect compensation is being reported to the 
Agencies.\49\
---------------------------------------------------------------------------

    \48\ ``Direct'' compensation is included as an administrative 
expense item on both the Form 5500-SF and on Schedule H, but it is a 
total and is not linked to payments to specific service provider. 
Because it is not a ``balance sheet'' item, indirect compensation is 
not reported as part of the financial statements.
    \49\ See GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information at 25-26 (``Given these various exceptions to fee 
reporting requirements, Schedule C may not provide participants, the 
government, or the public with information about a significant 
portion of plan expenses and limits the ability to identify fees 
that may be questionable.'')
---------------------------------------------------------------------------

    (3) Enhancing mineability of the data filed on the Form 5500 Annual 
Return/Report.
    As stated previously, a key component of the proposal is to make it 
easier and more efficient to use the data from the Form 5500 Annual 
Return/Report for research, policy analysis, and enforcement purposes. 
The primary way the Agencies propose to enhance the mineability of Form 
5500 Annual Return/Report data is by structuring and standardizing the 
questions on the forms and schedules and structuring certain 
information currently required to be reported in the form of a 
nonstandard attachment to the filing. This will improve the integrity 
of the collected data and allow the Agencies and others to compare, 
aggregate, and analyze these data.
    The Agencies have identified a number of areas where the current 
method of reporting information impedes data usability and are 
proposing several changes to facilitate the efficient use of Form 5500 
Annual Return/Report data. Data from Schedule H Line 4i (Schedule of 
Assets), for example, is currently not available in a standardized 
electronic format and would be very useful for monitoring the 
performance of plan investments. The proposed rules would require the 
Schedule H Line 4i, Schedules of Assets, to be filed in a standardized 
electronic format, which will allow them to be searched and matched to 
performance data through common software programs. As a result, the 
Agencies and the public would have much less difficulty accessing key 
information about the plan's investments. Additional improvements in 
data mineability and plan monitoring also would be realized from the 
proposal's requirement that other currently unstructured data or new 
elements also be collected as structured data under the proposal, 
including the lists of employers participating in multiple-employer and 
controlled group plans required to be attached to the Form 5500 Annual 
Return/Report or Form 5500-SF, the Schedule H, Line 4a Schedule of 
Delinquent Contributions, and Schedule H Line 4j Schedule of Reportable 
Transactions.
    Data mineability also would be improved by the proposal's 
requirement that some data would be reported as text fields instead of 
as attachments. This would increase the accessibility of data. Similar 
to the proposed specific data elements for the Schedule H Line 4i 
Schedules, which replace a suggested format for an unstructured 
attachment, the Agencies believe, based on their own use of the data to 
support the research, policy, and oversight efforts of the Agencies, 
and input from other end users, that data mineability will be enhanced 
by requiring the use of text fields on the face of the schedules 
instead of having information filed as non-standard attachments.
    Another limitation on data mineability and usability of the current 
Form 5500 Annual Return/Report is that actuarial information is 
reported in the form of PDF attachments to the Schedules MB and SB, 
rather than on the face of the actuarial schedules. Therefore, as 
discussed above, the proposal would expand data elements on actuarial 
schedules including information previously reported on unstructured 
attachments. If questions are directly answered on structured forms and 
schedules, like the Form 5500

[[Page 47515]]

Annual Return/Report and the listed schedules (as opposed to non-
standard attachments) the data are ``machine-readable'' in the 5500 
data base, and computer programs can be written to read the data sets 
created by DOL. This would make more readily searchable and usable 
actuarial information essential to the Agencies' enforcement efforts 
and in their ability to target plans with likely compliance issues. 
Furthermore, the availability of the data would enhance the ability of 
private-sector auditors using the information to validate a plan 
actuary's calculations. The data would also provide new opportunities 
for research. There is no source of system-wide data on defined benefit 
pension plan participants with age, service, and average benefit 
levels. The availability of such data would allow for more refined 
projections of future coverage and benefits adequacy for plan 
participants and beneficiaries. As more of these data are collected 
over the years, trends in plan coverages and benefits could more easily 
be analyzed and identified.
    The proposed rules make an additional change to reporting 
requirements that is expected to make filing some of the plan 
characteristics easier and more reliable. Instead of having to report 
all applicable plan characteristic codes under one line item, the 
proposal would ask for this information grouped by topic. Currently, 
some filers report an incomplete picture of their plan characteristics. 
For example, some filers have characteristics that should warrant 
supplying five or more codes, but instead they only supply two or 
three. It is expected that the new questions will be easier for filers 
to respond to and that the data reported will be more accurate.
    In summary, these improvements in data mineability will make it 
more efficient to conduct Form 5500 Annual Return/Report data analysis 
and to use the data to monitor plans, and identify trends.
    (4) Requiring reporting by all group health plans covered by Title 
I of ERISA, including adding a new Schedule J (Group Health Plan 
Information).
    As discussed above, the proposal would eliminate the current 
exemption from reporting for certain group health plans covered by 
Title I of ERISA so that all group health plans covered by Title I of 
ERISA will be required to file a Form 5500 Annual Return/Report. 
Currently, generally most plans that provide group health benefits with 
fewer than 100 participants that meet the conditions of existing 
regulations are exempt from filing the Form 5500 Annual Return/Report, 
because they are unfunded, fully insured, or a combination of unfunded/
fully insured. Requiring such plans to file would fill an information 
gap, which would allow the DOL to effectively meet its statutory 
obligation to enforce the ERISA requirements that apply to group health 
plans. Currently, the DOL must rely on complaints from plan 
participants as its primary source to uncover ERISA violations in small 
plans that are exempt from annual reporting. Eliminating this exemption 
would provide the DOL with the information necessary to be more 
proactive and systematic in identifying violations and in providing 
compliance assistance. The DOL would be able to track total health plan 
counts and coordinate its enforcement efforts relating to plans 
providing benefits through common issuers. For example, fully-insured 
plans using the same insurance provider often contain provisions that 
are similar. By requiring plans providing group health benefits, that 
are unfunded, fully insured, or combination unfunded/fully insured and 
have fewer than 100 participants to identify themselves and the 
insurance carrier through which they are insured, the DOL should be 
able to better determine which plans might be affected by noncompliant 
plan provisions. The DOL also could better coordinate its enforcement 
efforts with affected service providers and other Federal and State 
agencies.
    This information also would enhance the DOL's ability to develop 
health care regulations, conduct policy analysis and research with 
respect to participant trends, and comply with the Affordable Care Act 
requirement to report to Congress annually regarding self-insured 
plans.
    (5) Improving compliance under ERISA and the Code through selected 
new questions regarding plan operations, service provider 
relationships, and financial management of the plan.
    Improving compliance under ERISA and the Code through selected new 
questions will bring two main benefits. First, these compliance 
questions will serve as a form of education for plan administrators and 
a self-compliance check. The Agencies believe that the new compliance 
questions under the proposal, as is true of the existing compliance 
questions, would help plan administrators better understand and monitor 
required plan behavior and would remind plan administrators to comply 
with requirements under ERISA and the Code, and thus will improve 
protections for participants and beneficiaries.
    Second, these compliance questions will allow the Agencies, with 
their limited enforcement budgets, to engage in more sophisticated 
targeting and compliance assistance. Improvements in data management 
technology now enable the Agencies to create plan risk profiles to 
improve the effectiveness of investigations. These compliance 
questions, including questions on audit and oversight requirements, 
nondiscrimination, administrative expenses, participant contributions, 
and automatic enrollment, will improve the risk profiles, which will 
further enable the Agencies to use their enforcement resources in the 
most efficient way possible.
Costs
    The costs for plans to satisfy their annual reporting obligations 
would increase under these proposed regulations relative to the current 
regime.\50\ As shown in Table 2 below, the aggregate annual cost of 
such reporting under the current regulations and forms is estimated to 
be $488.1 million annually, shared across the 816,000 filers subject to 
the filing requirement. The DOL estimates that the regulations and 
forms revisions proposed today will impose an annual burden of $817.0 
million on 2.97 million filers, for a total increase of $328.8 million 
annually.
---------------------------------------------------------------------------

    \50\ The DOL believes that the annual cost burden on filers 
would be higher still in the absence of the proposed regulations 
enabling use of the Form 5500 Annual Return/Report in lieu of the 
statutory requirements. Without the Form 5500 Annual Return/Report, 
filers would not have the benefits of any regulatory exceptions, 
simplified reporting, or alternative methods of compliance, and 
standardized and electronic filing methods.

[[Page 47516]]



   Table 2--Summary of Annual Costs: Current Requirements vs. Proposed
                              Requirements
------------------------------------------------------------------------
                                                         Total annual
                                  Total annual costs     burden hours
                                       (millions)         (thousands)
------------------------------------------------------------------------
Current reporting requirements..              $488.1             4,378.5
Change due to Revisions.........               328.8             2,949.0
Proposed Reporting Requirements.               817.0             7,327.5
------------------------------------------------------------------------

    Because this proposal makes substantial changes to the requirements 
currently in effect, filers also will experience some one-time 
transition costs. The DOL estimates that plans will require twice as 
long to supply the new data elements during the first year, relative to 
subsequent years, and will therefore encounter one-time transition 
costs of $328.8 million.
    The DOL has analyzed the cost impact of the individual revisions. 
In doing so, the DOL took account of the fact that various types of 
plans would be affected by more than one revision and that the sequence 
of multiple revisions would create an interaction in the cumulative 
burden on those plans. For example, nearly all pension plans that are 
required to file the Form 5500 and related schedules, including ESOPs, 
would be affected by the changes to the Schedule H. ESOPs, however, 
would be affected not only by the proposed Schedule H changes, but also 
by the proposed restoration of Schedule E. The DOL quantified the 
individual revisions as described below and shown in Table 3.
    (1) Revised financial reporting on the Schedule H and elimination 
of the Schedule I.
    Revising the Schedule H, including the revisions to the Schedule H 
Line 4i Schedules of Assets, and eliminating the Schedule I will 
increase net costs. The DOL estimates that the net effect of these 
changes will be to increase the total burden by 535,400 hours. These 
changes, in conjunction with revisions to the reporting requirements 
for DFEs, discussed below, will decrease the number of filers reporting 
on Schedule H and/or Schedule I from 115,100 to 114,600. Applying an 
hourly labor rate of $114.95 for service providers and $98.25 for plan 
sponsors, the DOL estimates that this revision will increase the 
aggregate annual reporting cost by an estimated $57.6 million.\51\
---------------------------------------------------------------------------

    \51\ The appropriateness of the labor rates used in the 
calculations and assumptions are discussed in the Technical 
Appendix, which can be accessed at the DOL's Web site at 
www.dol.gov/ebsa.
---------------------------------------------------------------------------

    (2) Required reporting by all group health plans covered by Title I 
of ERISA, including addition of a new Schedule J (Group Health Plan 
Information).
    Currently, about 54,000 welfare plans that provide group health 
benefits file the Form 5500 Annual Return/Report and applicable 
schedules. Of these 54,000 filers, approximately 48,000 are welfare 
plans that provide group health benefits with 100 or more participants 
and the rest are welfare plans that provide group health benefits with 
fewer than 100 participants. We estimate that this proposed change will 
increase the number of welfare plan with group health benefit filers to 
approximately 2.2 million. Of these 2.2 million welfare plans with 
group health benefits, 1.9 million welfare plans with group health 
benefits are expected to be fully insured plans with fewer than 100 
participants, while 289,000 welfare plans with group health benefits 
are expected to be unfunded, combination unfunded/fully insured, or 
funded with a trust with fewer than 100 participants, and approximately 
48,000 welfare plans with group health benefits are expected to have 
100 or more participants.
    The 1.9 million plans that provide group health benefits, have 
fewer than 100 participants, and are fully insured would be required to 
complete lines 1-5 on Form 5500 and lines 1-8 on Schedule J. The 
289,000 plans that provide group health benefits, have fewer than 100 
participants, and are unfunded, combination unfunded/fully insured, or 
funded with a trust would be required to file a Form 5500, Schedule J, 
and Schedule A, if applicable, and if they were already required to 
file a Form 5500 Annual Return/Report (i.e., funded with a trust), they 
would be required to attach any other applicable schedules. The 48,000 
plans that provide group health benefits and have 100 or more 
participants that already are required to file a Form 5500 Annual 
Return/Report would be required to attach a Schedule J in addition to 
any other forms and schedules that they are currently required to 
submit.
    The DOL estimates that requiring plans that provide group health 
benefits, have fewer than 100 participants, and are fully insured to 
complete only lines 1-5 of the Form 5500 and lines 1-8 of the Schedule 
J will increase total burden by 623,000 hours and increase the 
aggregate annual reporting cost by $69.6 million. Requiring all other 
plans that provide group health benefits and have fewer than 100 
participants (unfunded, combination unfunded/fully insured, or funded 
with a trust) and all plans that provide group health benefits and have 
100 or more participants to file a Form 5500 Annual Return/Report, 
Schedule J, and any other required schedules and attachments will 
increase the total burden by 349,100 hours for the Form 5500 Annual 
Return/Report and 1.2 million hours for the Schedule J. The aggregate 
annual reporting cost associated with requiring all other group health 
plans with fewer than 100 participants (unfunded, combination unfunded/
fully insured, or funded with a trust) and all group health plans with 
100 or more participants to file a Form 5500 Annual Return/Report, 
Schedule J, and any other required schedules and attachments is $39.0 
million for the Form 5500 Annual Return/Report and $133.0 million for 
the Schedule J.
    Based on the foregoing, the DOL estimates that, in total, group 
health plan annual reporting burden will increase by approximately 2.2 
million hours and the aggregate annual reporting cost will increase by 
$241.6 million.
    (3) Restored Schedule E.
    Approximately 6,700 employee stock ownership plans (ESOPs) will be 
subject to increased reporting on the restored Schedule E. As discussed 
above, the Schedule E is intended to provide increased reporting 
related to areas of concern specific to ESOPs. The DOL estimates that 
the restored Schedule E will add approximately 22,000 hours of burden 
and an additional $2.5 million of aggregate annual reporting cost.
    (4) Revised Schedule C.
    As discussed above, Schedule C revisions are intended to harmonize 
the Schedule C reporting of indirect compensation with the disclosures 
required under the DOL's final rules on service provider compensation 
at 29 CFR 2550.408b-2, expand the Schedule C reporting requirement to 
all pension plans required to file the Form 5500 regardless of size, 
expand the Schedule C reporting requirement to welfare plans that offer 
group health benefits with fewer than 100 participants if they are

[[Page 47517]]

funded with a trust, clarify the indirect compensation reporting 
requirements, and improve the information plan officials receive 
regarding amounts received by plan service providers. The expanded 
reporting requirements are expected to increase the number of Schedule 
C filers from approximately 82,400 to approximately 100,200. Reporting 
burden for Schedule C filers is expected to increase by 116,600 hours, 
i.e. roughly an hour per filer, which will produce an additional $12.9 
million of annual aggregate reporting cost. Of this $12.9 million 
increase, $5.3 million is borne by existing filers and is attributable 
to eliminating the ``eligible indirect compensation'' reporting relief; 
\52\ $7.2 million is borne by filers newly required to attach a 
Schedule C; \53\ and $0.4 million is borne by existing filers and is 
attributable to all other changes to the Schedule C.\54\
---------------------------------------------------------------------------

    \52\ As discussed previously, the DOL is eliminating the limited 
reporting option for ``eligible indirect compensation.'' The DOL 
believes that many of the costs associated with gathering and 
organizing data necessary for expanded service provider reporting, 
to the extent that the information was not already required to be 
provided to and kept by the plan administrator for ``eligible 
indirect compensation'' that did not have to be reported, have 
already been accounted for as part of the RIA for the ERISA section 
408b-2 rule. Therefore, these costs reflect only the incremental 
increase of reporting service provider compensation to the Agencies. 
Under the proposal, indirect compensation reporting would be limited 
to the types of service providers and compensation under ERISA 
section 408b-2, in contrast to all service providers currently 
having to report on the Schedule C receipt of indirect compensation.
    \53\ For new filers, this includes the costs of all other 
changes to the Schedule C.
    \54\ Costs may not add up to the total due to rounding.
---------------------------------------------------------------------------

    As indicated in the regulatory impact analysis in the final 
publication of the regulation at 29 CFR 2550.408b-2, the DOL believes 
that more transparency of service provider compensation serves to 
discourage harmful conflicts, reduce information gaps, improve 
fiduciary decision-making about plan services, enhance value for plan 
participants, and increase the DOL's ability to redress abuses 
committed by service providers. 77 FR 5632, 5650 (Feb. 3, 2012). As is 
true with the improved disclosure required under the DOL's regulation 
at 29 CFR 2550.404a-5, increased transparency and ability to compare 
fees (and, on the improved balance sheet and schedules of assets) are 
expected to reduce participants' time otherwise used for searching for 
fee and other investment information and to produce substantial 
additional benefits, in the form of improved investment decisions, 
although the DOL has not been able to quantify this effect. 75 FR 
64910, 64928 (Oct. 20, 2010).
    (5) Changes to reporting requirements and methods for direct filing 
entities (DFEs), added compliance questions, and all other changes.
    As discussed earlier in the preamble, the rule proposes to make 
several changes to the DFE filing requirements. For example, the 
Agencies propose eliminating the concept of Master Trust Investment 
Accounts (MTIA) reporting and require reporting by a master trust 
instead. The proposal also would change the filing requirements for a 
CCT or PSA in which the plan invests by requiring the plan to report 
the interests in the CCT or PSA on the Schedule H balance sheet (Part 
I, Line 1b) regardless of whether the PSA or CCT in which the plan 
invests files a Form 5500 Annual Return/Report as a DFE, changing how 
assets held through DFEs are reported on the proposed Schedule H Line 
4i(1) Schedule of Assets Held for Investment, and eliminate the 
requirement for plans to file the Schedule D, since the DFE information 
that had been on Schedule D would now be on plans' Schedule H Line 
4i(1) Schedule of Assets Held for Investment. The net effect of these 
changes to DFE reporting is to reduce the number of Schedule D filers 
from 61,100 to 8,900, with smaller reductions in the filing of other 
schedules discussed elsewhere. Reporting burden associated with DFEs is 
expected to fall by 94,200 hours, which will produce a $10.1 million 
reduction in aggregate reporting cost.
    Additionally, the DOL proposes a series of compliance questions 
primarily on the Form 5500, Form 5500-SF, and Schedule R. Other 
miscellaneous changes throughout the forms and schedules include 
requiring new information on employer matching contributions, employee 
participation rates and plan design for defined contribution plans, and 
changes to the reporting on Schedule G.
    Some of these compliance questions and other miscellaneous changes 
add burden, while others reduce burden. Together, the DOL estimates 
that the net effect of these various changes would add approximately 
219,300 hours of aggregate reporting burden, which will produce an 
additional $21.5 million in aggregate reporting cost. In combination 
with the changes to DFE reporting discussed above, these changes will 
reduce the aggregate number of forms and schedules filed by 52,500.
    Table 3 contains a summary of the changes in costs, expressed both 
in dollars and in hours, allocated to the changes outlined above and 
the number of affected filings.

                            Table 3--Summary of Changes to the Reporting Requirements
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of
                                                                     Number of     filers under    [Delta] Cost
                                     Change in       Change in     filers under      proposed      per  affected
            Revisions                  costs       burden hours       current      requirements      filer  by
                                    (millions)      (thousands)    requirements     (thousands)      proposed
                                                                    (thousands)        \55\        requirements
----------------------------------------------------------------------------------------------------------------
Elimination of Schedule I &                $57.6           535.4           115.1           114.6            $502
 Change in Schedule H...........
Schedule C......................            12.9           116.6            82.4           100.2             128
DFE Reporting Changes (Including           -10.1           -94.2            61.1             8.9          -1,137
 changes to Schedule D).........
Schedule E......................             2.5            22.0             0.0             6.7             374
Completion of lines 1-5 on Form             69.6           623.0             0.0           1,869              37
 5500 and lines 1-8 on Schedule
 J by fully insured GHPs with
 fewer than 100 participants....
Completion of Form 5500 by GHPs             39.0           349.1            54.1           336.9             116
 with fewer than 100
 participants that are unfunded,
 combination unfunded/fully
 insured, or funded with a trust
 and GHPs with 100 or more
 participants...................
Completion of Schedule J by GHPs           133.0         1,179.2             0.0           336.9             395
 with fewer than 100
 participants that are unfunded,
 combination unfunded/fully
 insured, or funded with a trust
 and GHPs with 100 or more
 participants...................

[[Page 47518]]

 
All Other Revisions \56\........            24.4           217.9         1,076.7         1,024.2              24
                                 -------------------------------------------------------------------------------
    Total (Unique Filers).......           328.8         2,949.0           816.3         2,967.5             111
----------------------------------------------------------------------------------------------------------------

    The proposal does not otherwise alter reporting costs. With the 
exception of most welfare plans that provide group health benefits, 
plans currently exempt from annual reporting requirements (such as 
certain simplified employee pensions (SEPs) and small unfunded, fully 
insured, or combination unfunded/fully insured welfare plans that do 
not provide group health benefits) would remain exempt. Also, plans 
eligible for limited reporting options (such as certain IRA-based 
pension plans) would continue to be eligible. The revised Form 5500 
Annual Return/Report would retain the structure that is familiar to 
individual and corporate taxpayers--the form would continue to contain 
basic identifying information, participant counts, and plan 
characteristics, along with a checklist of the schedules being filed.
---------------------------------------------------------------------------

    \55\ The proposed change eliminating the concept of MTIA 
reporting and requiring reporting by a master trust instead, whose 
burden change is taken into account in the DFE Reporting Changes 
row, produces a reduction in the number of schedules included in 
filings. The change in the number of schedules filed is taken into 
accounted in the row specific to the schedule affected.
    \56\ The number of filers in this row exceeds the total number 
of filers because an individual filer counts more than once when it 
is affected by more than one revision included in the ``All Other 
Revisions'' category.
---------------------------------------------------------------------------

Assumptions, Methodology, and Uncertainty

    The cost and burden associated with the annual reporting 
requirement for any given plan will depend upon the specific 
information that must be provided, given the plan's characteristics, 
practices, operations, and other factors. For example, a small, single-
employer defined contribution pension plan eligible to file the Form 
5500-SF should incur far lower costs than a large, multiemployer 
defined benefit pension plan that holds multiple insurance contracts, 
engages in reportable transactions, and has many service providers that 
each received over $5,000 in compensation. The DOL separately 
considered the cost to different types of plans in arriving at its 
aggregate cost estimates. The DOL's basis for these estimates is 
described below.
    Assumptions Underlying this Analysis: The DOL's analysis assumes 
that all benefits and costs will be realized in the first year of the 
reporting cycle to which the changes apply and within each year 
thereafter. This assumption is premised on the requirement that each 
plan will be required to file the Form 5500 Annual Return/Report. The 
DOL has used a ``status quo'' baseline for this analysis, assuming that 
the world absent the proposed regulations will resemble the 
present.\57\
---------------------------------------------------------------------------

    \57\ Further detail can be found in the Technical Appendix, 
which can be accessed at www.dol.gov/ebsa.
---------------------------------------------------------------------------

    Methodology: Mathematica Policy Research, Inc. (MPR) developed the 
underlying cost data, which has been used by the Agencies in estimating 
burden related to the Form 5500 Annual Return/Report since 1999. See 65 
FR 21068, 21077-78 (Apr. 19, 2000); Borden, William S., Estimates of 
the Burden for Filing Form 5500: The Change in Burden from the 1997 to 
the 1999 Forms, Mathematica Policy Research, submitted to DOL May 25, 
1999.\58\ The cost information was derived from surveys of filers and 
their service providers, as modified due to comments, which were used 
to measure the unit cost burden of providing various types of 
information. The DOL has adjusted these unit costs since 1999 to 
account for changes to the forms and schedules and increases in the 
cost of labor and service providers since MPR developed the initial 
data.
---------------------------------------------------------------------------

    \58\ The MPR report can be accessed at the DOL's Web site at 
www.dol.gov/ebsa.
---------------------------------------------------------------------------

    For this forms revision, the DOL used the adjusted MPR unit cost 
data for pension and non-health welfare plans. The DOL developed the 
unit cost data for group health plans using the best available data. To 
develop unit costs for DFEs, the DOL created weighted averages of the 
unit costs for plans.
    To obtain filer counts for pension plans, non-health welfare plans, 
and DFEs, the DOL used historical counts of Form 5500 Annual Return/
Report filers tabulated by type and reported characteristics. For 
counts of group health plan filers, the DOL used data from the Medical 
Expenditure Panel Survey, Insurance Component (MEPS-IC) and Census of 
Business data.
    The MEPS-IC is an annual survey of establishments collected by the 
Agency for Healthcare Research and Quality (AHRQ) about employer 
sponsored health insurance. AHRQ uses two sources to draw their data: 
(1) A random sample, from the Census Bureau, of private-sector business 
establishments with annual payroll greater than zero; and (2) a list of 
employers or other insurance providers identified by the Medical 
Expenditure Panel Survey, Household Component respondents who report 
having private health insurance. In 2013, approximately 39,000 private-
sector establishments were surveyed.
    In 2003, DOL began using the MEPS-IC as a basis for estimating the 
number of health plans. The number of plans was based on the share of 
the total number of establishments that offer health insurance by size. 
DOL then attempted to correct for establishments that offer multiple 
health plans by making a reasonable assumption that the share of 
establishments that reported that they ``offer 2 or more plans'' 
offered two distinct plans. Finally, DOL attempted to control for 
multiple establishments covered by the same plan sponsor by using the 
Census of Business ratio of establishment-to-firms and dividing the 
total number of establishment plans by this ratio to produce an 
estimate of the number of health ``plans'' which has been consistently 
around 2.5 million over the years.
    The DOL modeled its approach to calculating burden on the approach 
used during the 2009 forms revision. Aggregate burden estimates were 
produced in both revisions by multiplying the unit cost measures by the 
filer count estimates. The methodology is described in broad terms 
below.\59\
---------------------------------------------------------------------------

    \59\ Further details about the approach are explained in the 
Technical Appendix, which can be accessed at the DOL's Web site at 
www.dol.gov/ebsa.

---------------------------------------------------------------------------

[[Page 47519]]

    To estimate aggregate burdens, types of plans with similar 
reporting requirements were grouped together in various groups and 
subgroups. As shown in Table 4 below, calculations of aggregate cost 
were prepared for each of the various subgroups both under requirements 
in effect prior to this action and under the forms as revised. Table 4 
also shows the number of plans within each subgroup affected by the 
revisions. The universe of filers was divided into four basic types: 
Defined benefit pension plans, defined contribution pension plans, 
welfare plans, and DFEs. For the plans, each of these major plan types 
was further subdivided into multiemployer and single-employer 
plans.\60\ Since the filing requirements differ substantially for small 
and large plans, the plan types were also divided by plan size. For 
large plans (100 or more participants), the defined benefit plans were 
further divided between very large (1,000 or more participants) and 
other large plans (at least 100 participants, but fewer than 1,000 
participants). Small plans (less than 100 participants) were divided 
similarly, except that they were divided into Form 5500-SF eligible and 
Form 5500-SF ineligible plans, as applicable. Welfare plans were 
divided into group health plans and plans that do not provide any group 
health benefits, while plans that provide group health benefits and 
have fewer than 100 participants were divided into fully insured group 
health plans and unfunded, combination unfunded/fully insured plans, or 
funded with a trust group health plans. DFEs were divided into Master 
Trusts/MTIAs, CCTs, PSAs, 103-12 IEs, and GIAs. For each of these sets 
of respondents, burden hours per respondent were estimated for the Form 
5500 Annual Return/Report itself and up to seven schedules or the Form 
5500-SF (and the Schedule SB, for Form 5500-SF eligible defined benefit 
pension plans).
---------------------------------------------------------------------------

    \60\ For purposes of this analysis, multiple employer plans were 
treated as single employer plans.
---------------------------------------------------------------------------

    We also separately estimated the costs for each of the forms and 
for each schedule that is part of the Form 5500 Annual Return/Report. 
When items on a schedule are required by more than one Agency, the 
estimated burden associated with that schedule is allocated among the 
Agencies. This allocation is based on how many items are required by 
each agency. The burden associated with reading the instructions for 
each item also is tallied and allocated accordingly.
    The reporting burden for each type of plan is estimated in light of 
the circumstances that are known to apply or that are generally 
expected to apply to such plans, including plan size, funding method, 
usual investment structures, and the specific items and schedules such 
plans ordinarily complete. For example, under the proposal, a small, 
fully insured group health plan would be required to file only basic 
questions on the Form 5500 and the proposed Schedule J. By contrast, a 
large single-employer defined benefit pension plan that is intended to 
be tax-qualified that has insurance products among its investments and 
whose service providers received compensation above the Schedule C 
reporting thresholds would be required to submit an annual report 
completing almost all the line items of the Form 5500, plus Schedule A 
(Insurance Information), Schedule SB (Single-Employer Defined Benefit 
Plan Actuarial Information), Schedule C (Service Provider Information), 
possibly the Schedule G (Financial Transaction Schedules), Schedule H 
(Financial Information), and Schedule R (Retirement Plan Information), 
and would be required to submit an IQPA report. In this way, the 
Agencies intend meaningfully to estimate the relative burdens placed on 
different categories of filers.
    Burden estimates were adjusted for the proposed revisions to each 
schedule, including items added or deleted in each schedule and items 
moved from one schedule to another.
    The DOL has not attributed a recordkeeping burden to the 5500 Forms 
in this analysis or in the Paperwork Reduction Act analysis because it 
believes that plan administrators' practice of keeping financial 
records necessary to complete the 5500 Forms arises from usual and 
customary management practices that would be used by any financial 
entity and does not result from ERISA or Code annual reporting and 
filing requirements.
    The aggregate baseline burden is the sum of the burden per form and 
schedule as filed prior to this action multiplied by the estimated 
aggregate number of forms and schedules filed.\61\ The DOL estimated 
the burden impact of changes in the numbers of filings and of changes 
made to the form and the various schedules. The burden estimates use 
data from the Form 5500 Annual Return/Report for plan year 2013, which 
is the most recent year for which complete data is available. The 
Overall Total line in Table 4 shows that the aggregate cost under the 
current and proposed requirements, respectively, add up to $488.1 
million and $817.0 million.
---------------------------------------------------------------------------

    \61\ Some filers are eligible to file the Form 5500-SF, but 
choose to file a Form 5500 and attach Schedule I and/or other 
schedules because they find it less burdensome to do so in their 
particular situation. In an effort to be conservative in estimating 
burden, counts of these filings are adjusted to reflect what they 
would have filed if they had chosen to file the Form 5500-SF.

                  Table 4--Number of Affected Filers and Costs Under Prior and New Requirements
----------------------------------------------------------------------------------------------------------------
                                                                                       Aggregate
                                       Number of       Number of       Aggregate      annual cost
                                     filers under    filers under     annual cost        under
           Type of filer                current        proposed      under current     proposed
                                     requirements    requirements    requirements    requirements
                                      (thousands)     (thousands)     (millions)      (millions)
--------------------------------------------------------------------------------------------------
Overall Total.....................           816.3         2,967.5          $488.1          $817.0
Large Plans.......................           148.5           148.5           252.4           309.3
    DB/ME/100-1,000 LARGE (Non-                0.5             0.5             1.6             1.9
     ESOP)........................
    DB/ME/1,000+ LARGE (Non-ESOP).             0.8             0.8             2.8             3.1
    DB/SE/100-1,000 LARGE (Non-                4.8             4.8            13.0            15.2
     ESOP)........................
    DB/SE/1,000+ LARGE (Non-ESOP).             2.8             2.8             8.5             9.6
    DC/ME/LARGE (100+                          1.1             1.1             2.1             2.5
     Participants) (Non-ESOP).....
    DC/SE/LARGE (100+ Partic.)                 2.9             2.9             4.0             6.4
     (ESOP).......................
    DC/SE/LARGE (100+ Partic.)                62.2            62.2           109.2           135.9
     (Non-ESOP)...................
    Welfare/LARGE (Health)........            47.9            47.9            91.7           114.2

[[Page 47520]]

 
    Welfare/ME/LARGE (Non-Health).             0.8             0.8             1.1             1.4
    Welfare/SE/LARGE (Non-Health).            24.8            24.8            18.5            19.1
Small Plans Eligible for 5500-SF..           622.4           622.4           205.8           227.3
    DB/Eligible for 5500-SF/SMALL             41.1            41.1            37.6            39.0
     (Non-ESOP)...................
    DC/Eligible for 5500-SF/SMALL            580.7           580.7           168.0           188.0
     (Non-ESOP)...................
    Welfare/Eligible for 5500-SF/              0.7             0.7             0.2             0.2
     SMALL (Non-Health)...........
Small Plans Not Eligible for 5500-            35.9         2,187.7            18.4           266.1
 SF...............................
    DB/ME/Not Eligible for 5500-SF/           0.05            0.05            0.06             0.1
     SMALL (Non-ESOP).............
    DB/SE/Not Eligible for 5500-SF/            0.9             0.9             1.0             1.8
     SMALL (Non-ESOP).............
    DC/ME/Not Eligible for 5500-SF/          0.001           0.001          0.0004           0.002
     SMALL (ESOP).................
    DC/ME/Not Eligible for 5500-SF/            0.1             0.1             0.1             0.2
     SMALL (Non-ESOP).............
    DC/SE/Not Eligible for 5500-SF/            3.8             3.8             1.8             5.8
     SMALL (ESOP).................
    DC/SE/Not Eligible for 5500-SF/           21.5            21.5            10.0            27.9
     SMALL (Non-ESOP).............
    Welfare/Not Eligible for 5500-             0.0         1,869.0             0.0            69.6
     SF/SMALL (Fully Insured
     Health)......................
    Welfare/Not Eligible for 5500-             6.2           289.0             4.1           158.2
     SF/SMALL (Unfunded,
     Combination Unfunded/Fully
     Insured, or Funded with a
     Trust Health)................
    Welfare/ME/Not Eligible for                0.1             0.1             0.1             0.2
     5500-SF/SMALL (Non-Health)...
    Welfare/SE/Not Eligible for                3.2             3.2             1.5             2.4
     5500-SF/SMALL (Non-Health)...
DFEs..............................             9.4             8.9            11.4            14.2
    Master Trust Investment                    1.6             1.0             2.7             2.2
     Accounts and Master Trusts...
    Common Collective Trusts......             4.0             4.0             4.3             6.0
    Pooled Separate Accounts......             3.2             3.2             3.3             4.7
    103-12 Investment Entities....             0.5             0.5             0.7             0.9
    Group Insurance Arrangements..             0.1             0.1             0.4             0.4
----------------------------------------------------------------------------------------------------------------
Note: Some displayed numbers do not sum up to the totals due to rounding.
DB--defined benefit plans.
DC--defined contribution plans.
SE--single-employer plans.
ME--multiemployer plans.
Large plans--100 participants or more.
Small plans--generally fewer than 100 participants.

    Uncertainty Within Estimates: Because the DOL has access to the 
historical Form 5500 Annual Return/Report filing information, the DOL 
has good data for the number of pension plans, large welfare plans, 
including group health plan filers that file the various schedules, and 
DFEs, and the types of plans those filers represent. However, there is 
some uncertainty regarding the number of welfare plans that provide 
group health benefits and have fewer than 100 participants filing. 
There is also some uncertainty in the unit cost estimates.
    There are two main issues with the methodology for counting welfare 
plans that provide group health benefits. First, MEPS does not 
differentiate between establishments offering single or multiemployer 
plans, which implies EBSA over-counts health plans (i.e., a firm 
offering health insurance is counted as providing benefits to their 
employees when in fact one multiemployer plan may cover several firms). 
Second, MEPS-IC respondents that ``offer 2 or more plans'' are 
generally referencing plan types (i.e. HMO vs PPO) or types of 
employees (part-time plan vs executive plan) which would likely be 
included on a single Form 5500 Annual Return/Report with a single plan 
number on the form, which again would over-count the EBSA estimate.
    With regard to the unit cost estimates, the DOL has no direct 
measure for the unit costs and uses a proxy adapted from the MPR model, 
which was developed in the late 1990s. In addition, some uncertainty is 
inherent in any proposed revision to the existing form, and the level 
of uncertainty increases where the proposal adds a new requirement, 
such as the proposed new group health plan filing requirements, rather 
than revising, deleting, or moving existing items from one schedule to 
another.

Regulatory Alternatives

    Executive Order 12866 directs federal agencies promulgating 
regulations to evaluate regulatory alternatives. The DOL and the other 
Agencies have done so in the process of developing this proposal. The 
following summarizes major alternatives considered, but not proposed.
    (1) Alternative approaches for modernizing financial information 
besides revising the Schedule H and eliminating the Schedule I.
    Most of the changes that are being proposed to modernize the 
financial information that is reported on the form respond to 
recommendations from GAO, DOL-OIG, TIGTA, ERISA Advisory Council and 
other advisory groups. Early in the regulatory process, the Agencies 
considered revising the Schedule I instead of eliminating it, but the 
Agencies determined that reporting on alternative and hard-to-value 
assets, which is not required on the current Schedule I, is just as 
vital for enforcement purposes for small plans as for large plans. 
Adding reporting on alternative and hard-to-value assets to the 
financial statement on Schedule I in a meaningful way would have made 
Schedule H and Schedule I substantially similar. Therefore, to best 
effectuate the goal of providing more transparency on plan investments 
in alternative and hard-to-value assets, which is important for 
understanding the risks to participants in small plans as well as 
large, the Agencies concluded that eliminating the Schedule I and 
requiring small plans with alternative and hard-

[[Page 47521]]

to-value assets to file the Schedule H was the most appropriate 
alternative.
    (2) Alternative approaches for group health plan reporting.
    In addition to the proposed annual reporting regime described in 
detail earlier in this preamble, the DOL considered a variety of other 
reporting options for group health plans. Among the options considered 
were (a) using existing IRS data or entering into a data sharing 
agreement with HHS; (b) requiring all group health plans, including 
small, fully insured plans to file a complete Form 5500 and Schedule J, 
along with the other schedules required to be filed currently by group 
health plans that are not exempt from filing under the existing 
regulations; and (c) requiring small, fully insured plans to file a 
Form 5500 and Schedule J every second or third year and requiring those 
plans to file a registration form in all other years, similar to the 
Form 5500-C/R structure used prior to 1999.
    In an effort to minimize burden and reporting duplication, the DOL 
reviewed existing IRS health plan data to determine if any of these 
data would be usable. The DOL concluded that all data collected by the 
IRS about health plans, such as premium information, minimum essential 
coverage information, and information on the number of employees 
covered, is collected specifically to assess Affordable Care Act-
related excise taxes and penalties and is subject to a higher threshold 
for information sharing than most other data collected by federal 
agencies. Therefore, the DOL concluded that its enforcement, 
policymaking, and research needs would not rise to the threshold to 
enable the IRS to share data. The DOL also consulted with HHS to 
determine whether any of their data might be appropriate; however, HHS 
does not collect any data on the ``plan'' level, which is the level of 
detail needed by the DOL to inform oversight, Congressional reporting, 
and policy obligations under Title I of ERISA.
    The DOL considered requiring welfare plans that offer group health 
benefits with fewer than 100 participants that are fully insured to 
file the complete Form 5500 and Schedule J, as would now be required of 
welfare plans that offer group health benefits with fewer than 100 
participants that are unfunded, combination unfunded/fully insured, or 
funded with a trust. The DOL also considered requiring welfare plans 
that offer group health benefits with fewer than 100 participants that 
are fully insured to attach a Schedule A (in addition to the Form 5500 
and Schedule J). The DOL decided against both of these options after 
weighing the benefits of getting additional data and the likely 
burdens. DOL also took into account that that the data of most benefit 
is the proposed new reporting to provide identity, number, and basic 
funding and benefit structures and types for these plans, which is 
currently unavailable due to the Form 5500 filing exemption from filing 
for these plans. More information than that would provide the DOL with 
somewhat more robust data, but it would not merit the burden of 
requiring the estimated nearly 2 million small, fully insured plans to 
report such information, particularly since much of the information is 
directed towards pension plans and welfare plans that are funded with a 
trust. For comparison, the DOL estimates that a plan that provides 
group health benefits with fewer than 100 participants filing a 
complete Form 5500 Annual Return/Report and a complete Schedule J will 
incur 5 hours and 14 minutes of burden, while one with fewer than 100 
participants answering only limited questions on the Form 5500 and 
Schedule J will incur only 30 minutes of burden. If the DOL were to 
require these plans to file a complete Form 5500 and a complete 
Schedule J, then each of the estimated 2 million welfare plans that 
offer group health benefits with fewer than 100 participants that are 
fully insured would incur an additional 4 hours and 44 minutes of 
burden, at an additional aggregate annual reporting cost of $927.6 
million. Attaching a Schedule A requires 2 hours and 45 minutes of 
burden for welfare plans that offer group health benefits with fewer 
than 100 participants. If the DOL were to require welfare plans that 
offer group health benefits with fewer than 100 participants that are 
fully insured to attach Schedule A, the additional aggregate annual 
reporting cost would be $583.4 million. The DOL concluded that 
requiring these fully insured plans to file a complete Form 5500 and 
Schedule J, as well as potentially Schedule A would grant the DOL 
slightly more robust data in a significantly more burdensome fashion 
compared with the chosen option.
    The DOL decided, however, that plans that provide group health 
benefits and have fewer than 100 participants that are not fully 
insured, i.e., some or all of the funding comes from the general assets 
of the employer or funded through a trust, would have to complete the 
full Form 5500 Annual Return/Report and the full Schedule J, as well as 
the Schedule A, if applicable. The filings for plans that provide group 
health benefits and have fewer than 100 participants that are unfunded, 
combination unfunded/fully insured, or funded with a trust would 
generally be similar to those for plans that provide group health 
benefits and have 100 or more participants that are funded in the same 
way. Group health plans that are unfunded, combination unfunded/fully 
insured, or funded with a trust, by definition, are fully or partially 
self-insured, and the DOL believes that the additional Schedule J 
information, in particular, is important for the DOL's role with regard 
to oversight and to development of the self-insured report.
    Relatedly, the DOL also considered not requiring plans that provide 
group health benefits and have fewer than 100 participants that are 
funded with a trust to file the more detailed financial and service 
provider information required of large plans that are funded with a 
trust, in particular the Schedule C and Schedule H. Small welfare plans 
that provide group health benefits that are funded with a trust are 
already filing either the Form 5500-SF or the Form 5500 Annual Return/
Report and the Schedule I. If a small welfare plan funded with a trust 
is required to file a Form M-1 or is invested in alternative or hard-
to-value assets, it currently would have to file the Form 5500 with a 
Schedule I, and, if applicable, Schedule A. As with small pension plans 
required to file the Form 5500 Annual Return/Report, in general, the 
proposal would have plans that provide group health benefits and have 
fewer than 100 participants that are funded using a trust file in the 
same manner as plans that provide group health benefits that have 100 
or more participants that are funded using a trust.
    With respect to requiring filing of the Schedule C by plans that 
provide group health benefits and have fewer than 100 participants that 
are currently not subject to any filing requirement (i.e., unfunded, 
fully insured, or combination unfunded/fully insured), the Agencies 
took into account that the existing 408b-2 regulation only applies to 
pension plans. Large welfare plans that are funded with a trust are 
already required to file a Schedule C with service provider 
compensation information, and the difference in information reporting 
should not be significant. Moreover, small plans that are funded with a 
trust would already be required to keep as part of their records 
information on direct compensation, because direct expenses are 
reported as administrative expenses of the plan. With respect to 
indirect compensation, given that the class of service providers for 
whom indirect compensation must be reported is

[[Page 47522]]

limited to those identified in 408b-2, a small plan should not have 
many service providers that would be required to be reported, and so 
the burden should be minimal. Just as the Agencies believe that it is 
important to have improved information on small pension plans that 
invest in alternative and hard-to-value assets, so too, they believe 
that is important to have the information for small welfare plans that 
are funded with a trust that invest in such assets. To the extent that 
small plans funded with a trust are the plans most likely to experience 
financial difficulties, having this information should help the 
Agencies and participants and beneficiaries better monitor the 
financial stability. Additionally, the Form 5500 Annual Return/Report 
together with the proposed Schedule J would give basic contribution, 
claims, benefit structure, and group health compliance information. For 
these reasons, the DOL concluded that the burden of requiring plans 
that provide group health benefits and have fewer than 100 
participants, other than those funded with a trust, to also file the 
Schedule C and Schedule H would outweigh the benefits of requiring that 
these schedules be filed; therefore, those plans are not required to do 
so.
    Finally, the DOL considered requiring small, fully insured plans to 
file a Form 5500 Annual Return/Report and Schedule J every second or 
third year and requiring those same plans to file a registration form 
in alternate years. This option was ruled out due to public comments 
made during the 1999 Form 5500 Annual Return/Report revisions. Prior to 
the 1999 revisions, some filers were eligible to file the Form 5500-C/
R, which included robust reporting during one year and more limited 
reporting during the second and third years of a three year cycle. 
Commenters responding to the proposed 1999 revisions were supportive of 
the DOL's plan to eliminate Form 5500-C/R, and accordingly eliminate 
the multi-year cycle of reporting, because they felt that it was 
difficult to keep track of the schedule.\62\ In an effort to take those 
comments into account, the DOL decided not to propose a reporting 
scheme for small, fully insured group health plans that required filing 
a registration statement in certain years and more expansive 
information in other years because DOL thought it would likely be 
confusing, lead to filer error, and inconsistent reporting. The 
proposal to have the currently exempt plans that provide group health 
benefits with fewer than 100 participants complete some or all of the 
Form 5500 Annual Return/Report and Schedule J was designed to get the 
minimal amount of information needed for research, policy, and 
oversight purposes, with the simplest and least amount of reporting.
---------------------------------------------------------------------------

    \62\ See 65 FR 5026.
---------------------------------------------------------------------------

    (3) Alternative approaches for ESOP-specific reporting.
    In addition to the proposed restoration of the Schedule E, the 
Agencies also considered whether to add only certain additional ESOP 
questions to existing schedules, such as the Schedule R, which 
currently has ESOP questions that were moved to the Schedule R from the 
Schedule E when the Schedule E was eliminated for 2009 and later 
filings. As discussed above, before 2009, the Schedule E (ESOP Annual 
Information) was an IRS-only component of the Form 5500 Annual Return/
Report used to collect data on ESOPs. As with other ``IRS-only'' 
schedules that were part of the Form 5500 Annual Return/Report, when 
the DOL mandated electronic filing of the Form 5500 Annual Return/
Report as part of EFAST2, the Schedule E was removed from the Form 5500 
Annual Return/Report in 2009 due to the statutory limits on the IRS's 
authority to mandate electronic filing of such information.
    The DOL believes that many of the ESOP questions that were 
eliminated in 2009 because they were ``IRS-only'' are useful for DOL's 
enforcement and research programs of DOL, as well as for participants 
and beneficiaries in ESOPs. In addition, several new questions have 
been included to provide a more comprehensive view of ESOPs. With the 
increase in ESOP-specific questions, the use of a single schedule for 
all ESOP questions would be a more effective and efficient information 
collection tool for the Agencies than having some questions on the 
Schedule R and some questions on the Schedule E.
    (4) Alternative approaches for service provider reporting.
    Most of the changes that are being proposed to revise the service 
provider information that is reported on the form respond to 
recommendations from GAO, DOL-OIG, TIGTA, and other advisory groups. As 
discussed previously, the Agencies evaluated whether to require welfare 
plans that offer group health benefits with fewer than 100 participants 
to complete the Schedule C. The Agencies also evaluated whether or not 
to require small pension plans that are required to file the Form 5500 
Annual Return/Report to complete the Schedule C, but decided that due 
to the importance of the information for participants and 
beneficiaries, plan officials responsible for understanding 
compensation arrangements, and the Agencies, the benefit outweighed the 
burden. Because the majority of pension plan filers are small plans 
that are eligible to file the Form 5500-SF, the Agencies considered 
whether to add questions to the Form 5500-SF requiring filers to 
provide indirect compensation information. The Agencies determined that 
to minimize burden, rather than adding new questions that were a subset 
or total of those on the Schedule C, they would simply require defined 
contribution pension plan Form 5500-SF filers to file the comparison 
chart under the DOL's regulation at 29 CFR 404a-5. This would provide 
some information (though not in the form of structured data) regarding 
service provider compensation with only minimal burden.
    (5) Alternative approaches for DFE reporting.
    Most of the changes that are being proposed to revise DFE reporting 
respond to recommendations from GAO, DOL-OIG, TIGTA, and others. The 
Agencies considered a variety of alternative ways to improve DFE 
reporting. Included in those alternatives was expanding Schedule D 
reporting to require plans to provide the date of the most recent Form 
5500 Annual Return/Report filing of the DFEs in which a plan or 
investing DFE was invested. The Agencies also considered having both 
plans and CCTs, PSAs, and 103-12 IEs identify on the Schedule H, Line 
4i Schedules of Assets the underlying assets of those DFEs. To minimize 
burden and duplicative reporting, the Agencies instead chose to 
eliminate the requirement for plans to complete the Schedule D, and 
have plans and filing DFE's identify on the plan or filing DFEs Line 4i 
Schedule of Assets underlying assets by category where the DFE has 
filed a Form 5500 Annual Return/Report. The assets would be broken out 
by the plan only if a CCT or PSA did not file a Form 5500 Annual 
Return/Report. The Agencies also considered whether to require plans 
that file the Form 5500-SF that participate in DFEs to provide more 
detailed information on those DFEs to help provide a more complete 
crosswalk between DFE and plan filings. The Agencies determined that 
the burden would outweigh the benefit in that regard. In addition, the 
Agencies considered, but decided against, requiring CCTs and PSAs that 
file the Form 5500 Annual Return/Report and 103-12 IEs to complete both 
Schedule H, Line 4i Schedules of Assets. The Agencies determined that 
having such entities complete just the Line 4i(1) Schedule of Assets 
Held for

[[Page 47523]]

Investment, and not the Line 4i(2) Schedule of Assets Disposed During 
Plan Year, would adequately address concerns with quality and 
usefulness of data, while minimizing burden.

Regulatory Flexibility Act--Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely 
to have a significant economic impact on a substantial number of small 
entities. In accordance with section 603 of the RFA, the following 
reflects EBSA's Initial Regulatory Flexibility Analysis (IRFA) 
describing the impact of the rule on small entities and seeking public 
comment on such impact.
    For purposes of this IRFA, the DOL continues to consider a small 
entity to be an employee benefit plan with fewer than 100 participants, 
as it has in many previous IRFAs measuring the impact of proposed 
regulatory actions on small employee benefit plans. The definition of 
small entity considered appropriate for this purpose differs, however, 
from a definition of small business that is based on size standards 
promulgated by the Small Business Administration (SBA) (13 CFR 121.201) 
pursuant to the Small Business Act (15 U.S.C. 631 et seq.). The basis 
of EBSA's definition of a small entity for this IRFA is found in 
section 104(a)(2) of ERISA, which permits the Secretary to prescribe 
simplified annual reports for pension plans that cover fewer than 100 
participants. While some large employers may have small plans, in 
general small employers maintain most small plans. The Form 5500 Annual 
Return/Report impacts any employer in any private sector industry who 
chooses to sponsor a plan. The DOL is unable to locate any data linking 
employer revenue to plans to determine the relationship between small 
plans and small employers in industries whose SBA size standard is 
revenue-based. For a separate project, the DOL purchased data on ESOPs 
that file the Form 5500 and on defined contribution pension plans that 
file the Form 5500-SF from Experian Information Solutions, Inc. The 
Experian dataset provides the number of employees for the plan sponsor. 
By merging these data with internal DOL data sources, the DOL 
determined the relationship between small plans and small employers in 
industries whose SBA size standard is based on a threshold number of 
employees that varies from 100 to 1,500 employees. Based on these data, 
the DOL estimates that over 97 percent of small retirement plans and 
over 80 percent of small health plans are sponsored by employers with 
less than 100 employees. The DOL estimates that over 99 percent of 
small retirement plans and over 97 percent of small health plans are 
sponsored by employers with less than 1,500 employees. Thus, the DOL 
believes that assessing the impact of these proposed rules on small 
plans is an appropriate substitute for evaluating the effect on small 
entities. In previous regulations, the DOL has consulted with the SBA 
Office of Advocacy concerning use of this participant count standard 
for RFA purposes, see 13 CFR 121.902(b)(4), and the DOL received no 
comments suggesting use of a different size standard. The Department 
solicits public comments on the appropriateness of continuing to use 
this size standard.
    The following subsections address specific components of an IRFA, 
as required by the RFA.
    Need for the rule and its objectives: The DOL is publishing this 
proposal to amend the regulations relating to the annual reporting and 
disclosure requirements of section 103 of ERISA simultaneously with the 
publication of the Notice of Proposed Forms Revisions. The DOL 
continually strives to tailor reporting requirements to minimize 
reporting costs, while ensuring that the information necessary to 
secure ERISA rights is adequately available. The optimal design of 
reporting requirements in order to satisfy these objectives changes 
over time. As discussed in the Need for Regulatory Action section 
above, the Form 5500 and the financial statements contained in the 
current Schedule H (Large Plan Financial Information) and Schedule I 
(Small Plan Financial Information) are based on data elements that have 
remained largely unchanged since the Form 5500 Annual Return/Report was 
established in 1975. Meanwhile, benefit plan designs and practices have 
evolved over time in response to market trends in labor, financial, 
health care, and insurance markets, and markets for various services 
used by plans. In addition, the technologies available to manage and 
transmit information continually advance. Therefore, it is incumbent on 
the Agencies to revise their reporting requirements from time to time 
to keep pace with such changes. The proposed forms revisions, and 
associated DOL regulatory amendments in the proposal, are intended to 
calibrate reporting requirements to take into account certain recent 
changes in markets, the law (including the Affordable Care Act), and 
technology, many of which are referred to above in this document.
    Description and estimate of number of small entities to which rule 
will apply: This proposal increases the number of small plans required 
to comply with annual reporting requirements by requiring approximately 
1.9 million welfare plans that provide group health benefits with fewer 
than 100 participants that previously were exempt from annual reporting 
to file a Form 5500 Annual Return/Report, completing lines 1-5 on Form 
5500 and lines 1-8 on Schedule J. This proposal also requires 
approximately 289,000 plans that provide group health benefits and have 
fewer than 100 participants that are unfunded, combination unfunded/
fully insured, or funded with a trust to file a Form 5500 Annual 
Return/Report, where previously roughly 6,000 were required to do so. 
In total, approximately 2.81 million small pension plans and plans that 
provide group health benefits covering fewer than 100 participants 
would be required to comply with annual reporting requirements, where 
previously approximately 658,000 were required to do so. As described 
previously, estimates of the number of small pension plans and small 
welfare plans that do not offer group health benefits are based on 2013 
Form 5500 filing data. Estimates of the number of plans that provide 
group health benefits and have fewer than 100 participants are based on 
MEPS-IC and Census of Business data.
    Description of projected reporting, recordkeeping, and other 
compliance requirements of the rule: The reporting requirements 
applicable to small plans are detailed above and in the associated 
Notice of Proposed Forms Revision. Almost 89 percent of the 2.81 
million small plans subject to the proposed annual reporting 
requirements can satisfy the requirements through streamlined options.
    The 1.9 million welfare plans that provide group health benefits 
with fewer than 100 participants can fulfill the proposed reporting 
requirements answering lines 1-5 of the Form 5500 and line 1-8 of the 
Schedule J. For these plans, annual reporting will require the use of a 
mix of clerical and professional administrative skills.
    Over 581,000 small defined contribution pension plans and small 
welfare plans that do not provide group health benefits can fulfill the 
proposed reporting requirements with the Form 5500-SF with no schedules 
required to be attached. All of these plans are

[[Page 47524]]

eligible for the waiver of audit requirements. For such plans, 
therefore, satisfaction of the applicable proposed annual reporting 
requirements is not expected to require the services of an IQPA or 
auditor, but, like the small, fully insured group health plans, will 
require the use of a mix of clerical and professional administrative 
skills. Another 41,000 small defined benefit pension plans and money 
purchase plans will continue to be eligible to use the streamlined 
5500-SF; satisfaction of the proposed reporting requirements will 
require additional services of an actuary and submission of the 
Schedule SB or Schedule MB, as applicable, and no other schedules.
    The remaining 319,000 small pension and welfare plans will not be 
eligible to use the Form 5500-SF or any other streamlined reporting 
option. These plans will be required to file the Form 5500 Annual 
Return/Report, along with any other schedules required for pension 
plans or welfare plans that are not fully insured group health 
plans.\63\ Of these plans, approximately 289,000 are welfare plans that 
provide group health benefits and are unfunded, combination unfunded/
fully insured, or funded with a trust, 25,000 are defined contribution 
pension plans, and over 3,000 are welfare plans that do not provide 
group health benefits. All will require a mix of clerical and 
professional administrative skills to satisfy the proposed reporting 
requirements. Fewer than 1,000 small pension plans that are not 
eligible to use the Form 5500-SF are defined benefit pension plans that 
will be required to use an actuary and file Schedule MB or Schedule SB 
in addition to needing a mix of clerical and professional 
administrative skills to satisfy the proposed reporting requirements.
---------------------------------------------------------------------------

    \63\ The exact schedules that these plans are required to attach 
vary based on the plans' specific facts and circumstances.
---------------------------------------------------------------------------

    Satisfaction of the proposed annual reporting requirements under 
these regulations is not expected to require any additional 
recordkeeping that would not otherwise be part of normal business 
practices.
    Table 5 below compares the DOL's estimates of small plans' 
reporting costs under the requirements in effect prior to this action 
with those under the new requirements for various classes of affected 
plans. As shown, costs under the new requirements will be slightly 
higher for small pension plans and small welfare plans that are 
eligible to file the Form 5500-SF and significantly higher for small 
pension and welfare plans that are not eligible to file the Form 5500-
SF (including group health plans). As discussed above, the significant 
increase for group health plans reflects the elimination of prior 
reporting exemptions for most plans that provide group health benefits 
and have fewer than 100 participants. The significant increase for 
small pension plans and small welfare plans that do not offer group 
health benefits that are not eligible to file the Form 5500-SF results 
primarily from the changes to financial and service provider reporting. 
The DOL notes that for the over 90 percent of plans that are eligible 
for annual reporting under streamlined options, the per-filer cost 
under the proposed requirements increases by $35-37 annually relative 
to the current requirements.\64\ These estimates take account of the 
quantity and mix of clerical and professional skills required to 
satisfy the reporting requirements for various classes of plans.
---------------------------------------------------------------------------

    \64\ In the case of the 2.0 million small, fully insured group 
health plans, the increase in per filer cost is from no cost to $37 
per year.

                                          Table 5--Small Plan Reporting Costs Under Prior and New Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Aggregate
                                                             Number of       Number of       Aggregate      annual cost     Annual per      Annual per
                                                           filers under    filers under     annual cost        under        filer cost      filer cost
                   Class of small plan                        current        proposed      under current     proposed      under current  under proposed
                                                           requirements    requirements    requirements    requirements    requirements     requirements
                                                            (thousands)     (thousands)     (millions)      (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Defined Benefit Pension--Eligible for 5500-SF...........            41.1            41.1           $37.6           $39.0            $916            $951
Defined Benefit Pension--Not Eligible for 5500-SF.......             1.0             1.0             1.1             1.9           1,150           1,970
Defined Contribution Pension--Eligible for 5500-SF......           580.7           580.7           168.0           188.0             289             324
Defined Contribution Pension--Not Eligible for 5500-SF..            25.4            25.4            11.8            33.9             484           1,335
Welfare--Non-Health--Eligible for 5500-SF...............             0.7             0.7             0.2             0.2             289             324
Welfare--Non-Health--Not Eligible for 5500-SF...........             3.3             3.3             1.5             2.5             455             758
Welfare--Fully Insured Health...........................             0.0         1,869.0             0.0            69.6               0              37
Welfare--Unfunded, Combination Unfunded/Insured, or                  6.2           289.0             4.1           158.2             654             547
 Funded with a Trust Health.............................
                                                         -----------------------------------------------------------------------------------------------
    Total for All Small Plans...........................           658.3         2,810.1           224.3           493.4             341             176
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In comparison to the costs per filer described in Table 5, the 
75,000 large pension plans will incur an average cost of $2,326 under 
the proposed requirements and the almost 74,000 large welfare plans 
subject to annual reporting requirements will incur an average cost of 
$1,833 each year.\65\
---------------------------------------------------------------------------

    \65\ Average costs for large plans do not include the costs of 
obtaining the report of an IQPA or an actuarial report, if such a 
report is required for the plan's specific situation.
---------------------------------------------------------------------------

    Table 6 below compares the DOL's estimates of small plans' 
reporting costs under the requirements in effect prior to this action 
with those under the new requirements as a percentage of plan assets 
for pension plans and welfare plans that do not offer group health 
benefits and as a percentage of annual health insurance premiums for 
welfare plans that offer group health benefits to show the impact of 
the reporting requirement on small plans of differing

[[Page 47525]]

sizes.\66\ As shown, group health plans with five or fewer participants 
that are unfunded, combination unfunded/fully insured, or funded with a 
trust incur the highest costs as a result of the proposed reporting 
requirements, incurring an annual reporting cost of 0.998 percent of 
their annual health insurance premiums. Non-health welfare plans that 
are eligible to file Form 5500-SF and have between 6 and 10 
participants incur the second highest costs under the proposed 
reporting requirements. These plans' annual reporting cost is 0.561 
percent of their plan assets.
---------------------------------------------------------------------------

    \66\ Plan asset data reflects data reported on 2013 Form 5500 
filings. Because so few plans that provide group health benefits and 
have fewer than 100 participants are currently subject to annual 
reporting requirements and many group health plans do not hold 
assets in trusts, the DOL concluded that annual health insurance 
premium data reported by the Kaiser Family Foundation was a more 
appropriate metric for comparison of group health plans.

Table 6--Small Plan Reporting Costs Under Prior and New Requirements as a Percentage of Plan Assets or Aggregate
                                        Annual Health Insurance Premiums
----------------------------------------------------------------------------------------------------------------
                                                                           Annual per filer
                                                       Annual per filer       cost under
                                                      cost under current       proposed
                                                       requirements as a   requirements as a    Number of plans
         Class of small plan (participants)           percentage of plan  percentage of plan      subject to
                                                           assets or           assets or        proposed filing
                                                       aggregate annual    aggregate annual      requirements
                                                       health  insurance   health insurance
                                                           premiums            premiums
----------------------------------------------------------------------------------------------------------------
Defined Benefit Pension--Eligible for 5500-SF:
    5 or Fewer......................................               0.088               0.091             178,694
    6-10............................................               0.084               0.087             105,458
    11-25...........................................               0.067               0.070             139,971
    26-50...........................................               0.040               0.041              86,936
    51-75...........................................               0.022               0.023              38,822
    76-90...........................................               0.018               0.018              14,491
    90-99...........................................               0.016               0.016               6,341
Defined Benefit Pension--Not Eligible for 5500-SF:
    5 or Fewer......................................               0.002               0.003                 566
    6-10............................................               0.050               0.086                  82
    11-25...........................................               0.041               0.069                  60
    26-50...........................................               0.016               0.027                  40
    51-75...........................................               0.017               0.028                  46
    76-90...........................................               0.016               0.027                  66
    90-99...........................................               0.020               0.034                  90
Defined Contribution Pension--Eligible for 5500-SF:
    5 or Fewer......................................               0.045               0.050             178,694
    6-10............................................               0.036               0.040             105,458
    11-25...........................................               0.024               0.027             139,971
    26-50...........................................               0.014               0.016              86,936
    51-75...........................................               0.010               0.011              38,822
    76-90...........................................               0.008               0.009              14,491
    90-99...........................................               0.007               0.008               6,341
Defined Contribution Pension--Not Eligible for 5500-
 SF:
    5 or Fewer......................................               0.011               0.033              15,650
    6-10............................................               0.040               0.115               1,856
    11-25...........................................               0.021               0.062               1,989
    26-50...........................................               0.012               0.033               1,888
    51-75...........................................               0.009               0.026               1,362
    76-90...........................................               0.009               0.026                 990
    90-99...........................................               0.008               0.024               1,086
Welfare--Non-Health--Eligible for 5500-SF:
    5 or Fewer......................................               0.135               0.151                 263
    6-10............................................               0.501               0.561                  61
    11-25...........................................               0.269               0.301                 124
    26-50...........................................               0.124               0.139                  91
    51-75...........................................               0.036               0.041                  58
    76-90...........................................               0.057               0.064                  32
    90-99...........................................               0.134               0.150                  23
Welfare--Non-Health--Not Eligible for 5500-SF:
    5 or Fewer......................................               0.019               0.032               1,917
    6-10............................................               0.197               0.328                  51
    11-25...........................................               0.172               0.287                 117
    26-50...........................................               0.038               0.064                 218
    51-75...........................................               0.073               0.123                 310
    76-90...........................................               0.028               0.047                 323
    90-99...........................................               0.150               0.250                 404
Welfare--Fully Insured Health.......................  ..................  ..................           1,869,000
    5 or Fewer......................................               0.000               0.068  ..................
    6-10............................................               0.000               0.034  ..................
    11-25...........................................               0.000               0.014  ..................
    26-50...........................................               0.000               0.007  ..................

[[Page 47526]]

 
    51-75...........................................               0.000               0.005  ..................
    76-90...........................................               0.000               0.004  ..................
    90-99...........................................               0.000               0.003  ..................
Welfare--Unfunded, Combination Unfunded/Fully         ..................  ..................             289,000
 Insured, or Funded with a Trust Health.............
    5 or Fewer......................................               1.192               0.988  ..................
    6-10............................................               0.596               0.496  ..................
    11-25...........................................               0.238               0.199  ..................
    26-50...........................................               0.119               0.100  ..................
    51-75...........................................               0.079               0.066  ..................
    76-90...........................................               0.066               0.055  ..................
    90-99...........................................               0.060               0.050  ..................
----------------------------------------------------------------------------------------------------------------
Note: Due to data constraints, the DOL is unable to break out smaller subgroup plan counts for welfare plans
  that provide group health benefits with fewer than 100 participants. Instead, the DOL has provided the total
  number of welfare plans that provide group health benefits with fewer than 100 participants.

    The DOL is unaware of any relevant federal rules for small plans 
that duplicate, overlap, or conflict with these regulations.
    Description of steps the DOL has taken to minimize impact on small 
entities: In developing these regulations and the associated forms 
revisions, the Agencies considered a number of alternative provisions 
directed at small plans, many of which are discussed elsewhere in this 
preamble and in the Notice of Proposed Forms Revision. The DOL believes 
that the proposed changes to the reporting requirements impose the 
least amount of burden on small plans, while allowing the DOL to 
collect sufficient information for it to fulfill its statutory 
responsibilities. Any efforts to further reduce reporting burden would 
have had a detrimental impact on the DOL's ability to protect plan 
participants and beneficiaries.
    The new reporting requirements for welfare plans that offer group 
health benefits with fewer than 100 participants comprise over 83 
percent of the increased burden on small plans. The subset of these 
welfare plans that are fully insured comprises almost 87 percent of 
welfare plans that offer group health benefits with fewer than 100 
participants. As discussed previously, the DOL considered requiring 
welfare plans that offer fully insured group health benefits with fewer 
than 100 participants to file a Form 5500 Annual Return/Report and 
Schedule J annually, or alternatively, on a two or three year cycle. 
The DOL opted instead to have those plans file only limited information 
on the Form 5500 Annual Return/Report and Schedule J. Requiring those 
plans to file a complete Form 5500 Annual Return/Report and Schedule J 
annually would have added $927.6 million in annual reporting costs 
relative to the chosen alternative. The DOL also considered requiring 
welfare plans that offer group health benefits with fewer than 100 
participants that are fully insured to attach a Schedule A (in addition 
to the Form 5500 and Schedule J). If the DOL were to require welfare 
plans that offer group health benefits with fewer than 100 participants 
that are fully insured to attach Schedule A, the additional aggregate 
annual reporting cost would be $583.4 million relative to the option 
chosen. The DOL rejected both of these options because they added 
significant cost ($1.5 billion total) with limited additional benefit.
    As discussed above, the Schedule I is being eliminated for small 
plans that are not eligible to file Form 5500-SF because the Schedule I 
does not require small plans to provide detailed plan asset 
information. This shortcoming impairs the utility of the Form 5500 
Annual Return/Report as a tool to obtain a meaningful picture of small 
plan investments in hard-to-value and other assets. As the GAO has 
noted, the limited financial information provided on the Schedule I 
creates a challenge for participants, beneficiaries, oversight 
agencies, researchers, and other users of the Form 5500 Annual Return/
Report or its data.\67\ Accordingly, under the proposed change, 
approximately 27,000 small plans that are not eligible to file the Form 
5500-SF and currently are required to file the Schedule I would be 
required to complete the Schedule H and the applicable schedules of 
assets. Although this would result in additional reporting details for 
certain small plans, the Agencies do not expect that small plans with 
simple investment portfolios would see a significant increase in their 
annual reporting burden. Small plans with complex portfolios that 
include hard-to-value or alternative investments should have more 
transparent financial statements which may require somewhat more 
complex financial reporting obligations. In light of changes in the 
financial environment and increasing concerns about investments in 
hard-to-value assets and alternative investments, the Agencies continue 
to believe that requiring separate financial information regarding 
hard-to-value investments is important for regulatory, enforcement, and 
disclosure purposes. The DOL notes that although the proposal would 
require such small plans to complete the Schedule H instead of the 
Schedule I, including the Schedule H Line 4i(1) and 4i(2) Schedules of 
Assets, small plans that are eligible for a waiver of the annual 
examination and report of an IQPA under current rules would still be 
eligible for this waiver under the proposal.\68\
---------------------------------------------------------------------------

    \67\ GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information, at 18.
    \68\ 29 CFR 2520.104-46.
---------------------------------------------------------------------------

    The proposed rule would also require approximately 18,200 small 
plans that

[[Page 47527]]

are not eligible to file the Form 5500-SF to file Schedule C. 
Currently, only large plans must file a Schedule C, thus excluding a 
large portion of plans from having to disclose service provider fees. 
The Agencies recognize the burdens small plans face in complying with 
disclosure obligations. The Agencies therefore propose to require small 
pension plans to file Schedule C only if they do not meet the 
eligibility conditions for filing the Form 5500-SF, which generally 
would be those pension plans that are invested in alternative or hard-
to-value assets. Small welfare plans that provide group health benefits 
(which are not eligible to file the Form 5500-SF) would also be 
required to file the Schedule C if they are not unfunded or insured 
(e.g., funded using a trust). This would continue to emphasize 
sensitivity to reporting burden for small plans with simple investment 
portfolios, while addressing some of the GAO's concerns that not all 
critical information on indirect compensations is being reported to the 
Agencies. See GAO Targeted Revisions Could Improve Usefulness of Form 
5500 Information at 25-26 (``Given these various exceptions to fee 
reporting requirements, Schedule C may not provide participants, the 
government, or the public with information about a significant portion 
of plan expenses and limits the ability to identify fees that may be 
questionable.'') In addition, the rule would align financial 
information reporting with recently adopted disclosure rules to ensure 
that all fees are reported by the plans.\69\
---------------------------------------------------------------------------

    \69\ Id. at 50.
---------------------------------------------------------------------------

Paperwork Reduction Act Statement

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA) (44 U.S.C. 3506(c)(2)), the DOL requests comments on the 
information collections included in the proposed amendments to the 
DOL's regulations relating to annual reporting and disclosure 
requirements under Part 1 of Subtitle B of Title I of ERISA and in the 
proposed revision of the Form 5500 Annual Return/Report pursuant to 
Part 1 of Subtitle B of Title I and Title IV of ERISA and the Code. The 
DOL has submitted an information collection request (ICR) to OMB in 
accordance with 44 U.S.C. 3507(d), for OMB's review of the DOL's 
information collections previously approved under OMB Control No. 1210-
0110.
    A copy of the ICR can be obtained by contacting the U.S. Department 
of Labor, Employee Benefits Security Administration, Office of Policy 
and Research, 200 Constitution Avenue NW., Room N-5718, Washington, DC 
20210, Telephone: (202) 693-8410; Fax: (202) 219-4745 or at 
www.RegInfo.gov. These are not toll-free numbers.
    OMB asks that comments about information collections in this NPRM 
be submitted by mail or courier to the Office of Information and 
Regulatory Affairs, Attn: OMB Desk Officer for DOL-EBSA, Office of 
Management and Budget, Room 10235, 725 17th Street NW., Washington, DC 
20503; by Fax: 202-395-6881 (this is not a toll-free number); or by 
email: OIRAsubmission@omb.eop.gov. Commenters are encouraged, but not 
required, to send a courtesy copy of any comments to the party 
identified in the ADDRESSES section of this NPRM. OMB requests that 
comments be received within 75 days of publication of the proposed rule 
to ensure their consideration. Comments submitted in response to this 
request become a matter of public record. The Department and OMB are 
particularly interested in comments that:
     Evaluate whether the collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the DOL's estimate of the burden 
of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     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 submission of responses.

Congressional Review Act

    The proposed rules being issued here are subject to the 
Congressional Review Act provisions of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and, if 
finalized, will be transmitted to the Congress and the Comptroller 
General for review. The proposed rule is a ``major rule'' as that term 
is defined in 5 U.S.C. 804, because it is likely to result in an annual 
effect on the economy of $100 million or more.

Unfunded Mandates Reform Act Statement and Summary

    Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1531-1538 requires each Federal agency to prepare a written statement 
assessing the effects of any Federal mandate in a proposed or final 
agency rule that may result in an expenditure of $100 million or more 
(adjusted annually for inflation with the base year 1995) in any one 
year by State, local, and tribal governments, in the aggregate, or by 
the private sector. Such a mandate is deemed to be a ``significant 
regulatory action.'' The current proposal is expected to have such an 
impact on the private sector, and the DOL therefore hereby provides 
such an assessment. The DOL's written statement as required by this act 
follows:
    The DOL is issuing the current proposed regulations and forms 
revisions under Sections 103, 104, 110 and 505 of ERISA (29 U.S.C. 
1023, 1024, 1030, and 1135). Under Titles I and IV of ERISA and the 
Code, pension and other employee benefit plans are generally required 
to file annual returns/reports concerning, among other things, the 
financial condition and operations of the plan. Filing a Form 5500 
Annual Return/Report of Employee Benefit Plan or Form 5500-SF Short 
Form Annual Return/Report of Small Employee Benefit Plan, together with 
any required schedules and attachments, generally satisfies these 
annual reporting requirements. The current proposal would amend current 
reporting regulations and update the existing forms and schedules as 
explained in the summary information provided above in this document.
    The DOL assessed the anticipated benefits and costs of the current 
proposal pursuant to Executive Order 12866 in the Regulatory Impact 
Analysis for the current proposal, above, and concluded that its 
benefits would justify its costs. The current proposal's material 
benefits and costs generally would be largely confined to the private 
sector, where plans would incur increased costs from expanded reporting 
requirements, while participants and beneficiaries and other end-users 
of the Form 5500 Annual Return/Report data would benefit from improved 
reporting. The DOL itself, as well as IRS, PBGC, and other governmental 
users would benefit from increased efficiency in enforcement activity 
and improved quality in research and policy decisions resulting from 
reporting data that more accurately reflect the current plan 
marketplace.
    Some employee benefit plans sponsored by tribal governments that 
are subject to ERISA because they cover employees who are involved in 
performing commercial activities (whether or not such activities are 
essential government functions) may be affected by the Federal mandate 
contained in this rule, if it is adopted as

[[Page 47528]]

proposed. The DOL does not have sufficient data to estimate the amount 
of the increase in future compliance costs that would be imposed on 
tribal governments that sponsor these plans, but it believes such costs 
would be similar to those imposed on private sector employers that are 
discussed in the regulatory impact analysis. Such increased costs would 
not be paid with Federal financial assistance (or otherwise paid for by 
the government). The DOL is not aware of any available Federal 
resources to carry out this mandate on tribal governments. The 
budgetary impact of the mandate will fall on tribal governments that 
maintain certain employee benefit plans. Apart from this, the DOL does 
not believe that the mandate will cause any disproportionate budgetary 
effects on any particular regions of the nation or particular tribal 
governments, urban, rural or other types of communities, or particular 
segments of the private sector.
    The DOL has not consulted with elected representatives of tribal 
governments, but will do so after the proposed regulations and forms 
revisions are published.
    In summary, the DOL believes the benefits of this proposed rule are 
significant, and will result in a modernized annual return/report that 
has substantially more utility for the agencies, the regulated 
community, and the public. The proposed rule would also impose 
increased costs on employee benefit plan sponsors. Tribal governments 
that sponsor ERISA-covered plans will incur increased costs as will all 
other sponsors of ERISA-covered plans. The DOL lacks sufficient 
information to quantify the number of tribal governments impacted by 
this proposed rule, but believes that the costs imposed on tribal 
governments will be consistent with the costs imposed on all other 
sponsors of ERISA-covered plans. Finally, the DOL does not believe that 
the costs imposed by this proposed rule will have any disproportionate 
budgetary effects based on any particular regions of the nation or 
particular tribal governments, urban, rural or other types of 
communities, or particular segments of the private sector.

Federalism Statement

    Executive Order 13132 (August 4, 1999) outlines fundamental 
principles of federalism and requires adherence to specific criteria by 
federal agencies in the process of their formulation and implementation 
of policies that have substantial direct effects on the States, the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. These proposed rules do not have federalism implications 
because they would have no substantial direct effect on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government. Section 514 of ERISA provides, with certain exceptions 
specifically enumerated, that the provisions of Titles I and IV of 
ERISA supersede any and all laws of the States as they relate to any 
employee benefit plan covered under ERISA. The requirements implemented 
in these rules do not alter the fundamental provisions of the statute 
with respect to employee benefit plans, and as such would have no 
implications for the States or the relationship or distribution of 
power between the national government and the States.

List of Subjects

29 CFR Part 2520

    Accounting, Employee benefit plans, Pensions, Reporting and 
recordkeeping requirements.

29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Department proposes 
to amend Subchapter C, parts 2520 and 2590 of Title 29 of the Code of 
Federal Regulations as follows:

PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE

0
1. The authority section for part 2520 continues to read as follows:

    Authority:  29 U.S.C. 1021-1025, 1027, 1029-31, 1059, 1134, and 
1135; and Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 
2012). Sec. 2520.101-2 also issued under 29 U.S.C. 1132, 1181-1183, 
1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.102-3, 
2520.104b-1, and 2520.104b-3 also issued under 29 U.S.C. 1003, 1181-
1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.104b-1 
and 2520.107 also issued under 26 U.S.C. 401 note, 111 Stat. 788.

0
2. In Sec.  2520.103-1, revise paragraphs (b)(1), (c)(1), (c)(2)(i), 
(c)(2)(ii)(D), (E), and (e), and add paragraphs (c)(2)(ii)(F) and 
(c)(2)(iii) to read as follows:


Sec.  2520.103-1  Contents of the annual report.

* * * * *
    (b) * * *
    (1) A Form 5500 ``Annual Return/Report of Employee Benefit Plan'' 
and any statements or schedules required to be attached to the form, 
completed in accordance with the instructions for the form, including 
Schedule A (Insurance Information), Schedule C (Service Provider 
Information), Schedule E (ESOP Annual Information), Schedule G 
(Financial Transaction Schedules), Schedule H (Financial Information), 
Schedule J (Group Health Plan Information), Schedule MB (Multiemployer 
Defined Benefit Plan and Certain Money Purchase Plan Actuarial 
Information), Schedule R (Retirement Plan Information), Schedule SB 
(Single-Employer Defined Benefit Plan Actuarial Information), and other 
financial schedules described in Sec. 2520.103-10. See the instructions 
for this form.
* * * * *
    (c) * * *
    (1) Except as provided in paragraphs (c)(2), (d), (e), and (f) of 
this section, and in Sec. Sec.  2520.104-43, 2520.104a-6 and 2520.104-
44, the annual report of an employee benefit plan that covers fewer 
than 100 participants at the beginning of the plan year shall include a 
Form 5500 ``Annual Return/Report of Employee Benefit Plan'' and any 
statements or schedules required to be attached to the form, completed 
in accordance with the instructions for the form, including Schedule A 
(Insurance Information), Schedule C (Service Provider Information), 
Schedule E (ESOP Annual Information), Schedule G (Financial 
Transactions), Schedule H (Financial Information), Schedule J (Group 
Health Plan Information), Schedule MB (Multiemployer Defined Benefit 
Plan and Certain Money Purchase Plan Actuarial Information), Schedule R 
(Retirement Plan Information), and Schedule SB (Single Employer Defined 
Benefit Plan Actuarial Information), completed in accordance with the 
instructions for the form. See the instructions for this form.
    (2)(i) The annual report of an employee pension benefit plan or 
employee welfare benefit plan that does not provide group health 
benefits and that covers fewer than 100 participants at the beginning 
of the plan year and that meets the conditions in paragraph (c)(2)(ii) 
of this section with respect to a plan year may, as an alternative to 
the requirements of paragraph (c)(1) of this section, meet its annual 
reporting requirements by filing the Form 5500-SF ``Short Form Annual 
Return/Report of Small Employee Benefit Plan'' and any statements or 
schedules required to

[[Page 47529]]

be attached to the form, including Schedule SB (Single Employer Defined 
Benefit Plan Actuarial Information) and Schedule MB (Multiemployer 
Defined Benefit Plan and Certain Money Purchase Plan Actuarial 
Information), completed in accordance with the instructions for the 
form. See the instructions for this form.
    (ii) * * *
    (D) Is not a multiemployer plan;
    (E) Is not a plan subject to the Form M-1 requirements under Sec.  
2520.101-2 (Filing by Multiple-employer Welfare Arrangements and 
Certain Other Related Entities); and
    (F) Is not a group health plan as defined in section 733(a) of the 
Act.
    (iii) The annual report of an employee benefit plan that meets the 
definition of a group health plan as defined in section 733(a) of the 
Act that covers fewer than 100 participants at the beginning of the 
plan year shall include a Form 5500 ``Annual Return/Report of Employee 
Benefit Plan'' and any statements or schedules required to be attached 
to the form, completed in accordance with the instructions for the 
form, including Schedule A (Insurance Information), Schedule C (Service 
Provider Information), Schedule H (Financial Information), and Schedule 
J (Group Health Plan Information). See the instructions for this form.
* * * * *
    (e) Plans that participate in a master trust. The plan 
administrator of a plan which participates in a master trust shall file 
a Form 5500 Annual Return/Report in accordance with the instructions 
for the form relating to master trusts. For purposes of annual 
reporting, a master trust is a trust for which a regulated financial 
institution serves as trustee or custodian (regardless of whether such 
institution exercises discretionary authority or control respecting the 
management of assets held in the trust) and in which assets of more 
than one plan sponsored by a single employer or by a group of employers 
under common control are held. A master trust must operate either on a 
calendar year basis or on the same fiscal year as all of the plans that 
are participating in the master trust. For purpose of this paragraph, a 
regulated financial institution is a bank, trust company, or similar 
financial institution regulated, supervised, and subject to periodic 
examination by a State or Federal agency. Common control is determined 
on the basis of all relevant facts and circumstances (whether or not 
such employers are incorporated).
0
3. In Sec.  2520.103-2, revise paragraph (b)(1) to read as follows:


Sec.  2520.103-2  Contents of the annual report for group insurance 
arrangement.

* * * * *
    (b) Contents. (1) A Form 5500 ``Annual Return/Report of Employee 
Benefit Plan'' and any statements or schedules required to be attached 
to the form, completed in accordance with the instructions for the 
form, including Schedule A (Insurance Information), Schedule C (Service 
Provider Information), Schedule D (DFE/Participating Plan Information), 
Schedule G (Financial Transaction Schedules), Schedule H (Financial 
Information), a separate Schedule J (Group Health Plan Information) for 
each participating plan, and the other financial schedules described in 
Sec.  2520.103-10. See the instructions for this form.
* * * * *
0
4. In Sec.  2520.103-3, revise paragraph (c) to read as follows:


Sec.  2520.103-3  Exemption from certain annual reporting requirements 
for assets held in a common or collective trust.

* * * * *
    (c) Contents. (1) A plan that meets the requirements of paragraph 
(b) of this section, and that invests in a common or collective trust 
that files a Form 5500 report in accordance with Sec.  2520.103-9, 
shall include in its annual report: information required by the 
instructions to Schedule H (Financial Information) about the current 
value of and net investment gain or loss relating to the units of 
participation in the common or collective trust held by the plan; 
identifying information in the common or collective trust including its 
name, employer identification number, and any other information 
required by the instructions to the Schedule of Assets Held for 
Investment Purposes and Schedule of Assets Disposed of During Plan 
Year; and such other information as is required in the separate 
statements and schedules of the annual report about the value of the 
plan's units of participation in the common or collective trust and 
transactions involving the acquisition and disposition by the plan of 
units of participation in the common or collective trust.
    (2) A plan that meets the requirements of paragraph (b) of this 
section and that invests in a common or collective trust that does not 
file a Form 5500 report in accordance with Sec.  2520.103-9, shall 
include in its annual report: Information required by the instructions 
to Schedule H (Financial Information) about the current value of and 
the net investment gain or loss relating to the units of participation 
in the common or collective trust held by the plan; information 
required by the accompanying instructions to the ``Schedule of Assets 
Held for Investment'' about the current value of the plan's allocable 
portion of the underlying assets and liabilities of the common or 
collective trust; identifying information about the common or 
collective trust including its name, employer identification number, 
and any other information required by the instructions to the Schedule 
of Assets Held for Investment Purposes and Schedule of Assets Disposed 
of During Plan Year; and such other information as is required in the 
separate statements and schedules of the annual report about the value 
of the plan's units of participation in the common or collective trust 
and transactions involving the acquisition and disposition by the plan 
of units of participation in the common or collective trust.
0
5. In Sec.  2520.103-4, revise paragraph (c) as follows:


Sec.  2520.103-4  Exemption from certain annual reporting requirements 
for assets held in an insurance company pooled separate account.

* * * * *
    (c) Contents. (1) A plan that meets the requirements of paragraph 
(b) of this section, and which invests in a pooled separate account 
that files a Form 5500 report in accordance with Sec.  2520.103-9, 
shall include in its annual report: Information required by the 
instructions to Schedule H (Financial Information) about the current 
value of and net investment gain or loss relating to the units of 
participation in the pooled separate account held by the plan; 
identifying information about the pooled separate account including its 
name, employer identification number, and any other information 
required by the instructions to the Schedule of Assets Held for 
Investment Purposes and Schedule of Assets Disposed of During Plan 
Year; and such other information as is required in the separate 
statements and schedules of the annual report about the value of the 
plan's units of participation in the pooled separate account and 
transactions involving the acquisition and disposition by the plan of 
units of participation in the pooled separate account.
    (2) A plan that meets the requirements of paragraph (b) of this 
section and which invests in a pooled separate account that does not 
file a Form 5500 report in accordance with Sec.  2520.103-9, shall 
include in its annual report: Information required by the instructions

[[Page 47530]]

to Schedule H (Financial Information) about the current value of and 
the net investment gain or loss relating to the units of participation 
in the pooled separate account held by the plan; information required 
by the accompanying instructions to the ``Schedule of Assets Held for 
Investment'' about the current value of the plan's allocable portion of 
the underlying assets and liabilities of the pooled separate account; 
identifying information about the pooled separate account including its 
name, employer identification number, and any other information 
required by the instructions to the Schedule of Assets Held for 
Investment Purposes and Schedule of Assets Disposed of During Plan 
Year; and such other information as is required in the separate 
statements and schedules of the annual report about the value of the 
plan's units of participation in the pooled separate account and 
transactions involving the acquisition and disposition by the plan of 
units of participation in the pooled separate account.
0
6. In Sec.  2520.103-6, revise paragraph (d) to read as follows:


Sec.  2520.103-6  Definition of reportable transaction for annual 
return/report.

* * * * *
    (d) Contents. (1) The schedule of reportable transactions shall be 
filed in the format and include information as described in the 
instructions for the Form 5500 Annual Return/Report of Employee Benefit 
Plan.
    (2) [Removed]
0
7. In Sec.  2520.103-8, revise paragraphs (a) and (c) and add new 
paragraphs (d) and (e) to read as follows:


Sec.  2520.103-8  Limitation on scope of accountant's examination.

    (a) General. Under the authority of section 103(a)(3)(C) of the 
Act, the examination and report of an independent qualified public 
accountant need not extend to any statement or information prepared and 
certified by a bank or similar institution or insurance carrier 
provided the certification meets the requirements of paragraph (d) of 
this section.
* * * * *
    (c) Excluded information. Any statements or information certified 
to by a bank or similar institution or insurance carrier described in 
paragraph (b) of this section, provided that the statements or 
information regarding assets so held are prepared and certified to by 
the bank or insurance carrier in accordance with the requirements of 
(d) of this section and Sec.  2520.103-5.
    (d) Contents and manner. The certification described in paragraph 
(a) of this section shall:
    (1) Appear on a separate document from the list of plan assets 
covered by the certification;
    (2) Identify the bank or insurance company holding the plan's 
assets;
    (3) Describe the manner in which the bank or insurance company is 
holding the assets covered by the certification;
    (4) State whether the bank or insurance company is providing 
current value information regarding the assets covered by the 
certification in accordance with 2520.103-5, and if so, state that the 
assets for which current value is being certified are separately 
identified in the list of assets covered by the certification;
    (5) If current value is not being certified for all of the assets 
covered by the certification, include a caution that the certification 
is not certifying current value information and the asset values 
provided by the bank or insurance company may not be suitable for use 
in satisfying the plan's obligation to report current value information 
on the Form 5500 Annual Return/Report; and
    (6) If the certification is being provided by an agent on behalf of 
the bank or insurance company, a statement certifying that the person 
providing the certification is an authorized agent acting on behalf of 
the bank or insurance company and affirming that the bank or insurance 
company is taking responsibility for the accuracy and completeness of 
the certification and the underlying records used as a basis for the 
information being certified.
    (e) The administrator of a plan which meets the requirements of 
paragraph (b) of this section, and which is not required to have 
covered by the accountant's examination or report any of the 
information described in paragraph (c) of this section shall attach to 
the Form 5500 Annual Return/Report of Employee Benefit Plan the 
certification of investment information created by certain banks or 
insurance companies in accordance with the requirements of paragraph 
(d) of this section to comply with the limited scope audit 
requirements.
0
8. In Sec.  2520.103-10, revise paragraphs (b)(1)(i) and (2)(i) to read 
as follows:


Sec.  2520.103-10  Annual report financial schedules.

* * * * *
    (b) * * *
    (1) * * *
    (i) A schedule of all assets held for investment purposes at the 
end of the plan year (see Sec.  2520.103-11) with assets aggregated and 
identified as described in the instructions to the Form 5500 Annual 
Return/Report of Employee Benefit Plan.
* * * * *
    (2) Assets disposed of during the plan year. (i) A schedule of all 
assets disposed of during the plan year (see Sec.  2520.103-11) with 
assets aggregated and identified as described in the instructions to 
the Form 5500 Annual Return/Report of Employee Benefit Plan.
* * * * *
0
9. In Sec.  2520.104-20, revise paragraph (b)(1) to read as follows:


Sec.  2520.104-20  Limited exemption for certain small welfare plans.

* * * * *
    (b) * * *
    (1) Which have fewer than 100 participants at the beginning of the 
plan year, and do not provide benefits consisting of medical care as 
defined in section 733(a)(2) of the Act;
* * * * *
0
10. In Sec.  2520.104-26, revise paragraph (b) to read as follows:


Sec.  2520.104-26  Limited exemption for certain unfunded dues financed 
welfare plans maintained by employee organizations.

* * * * *
    (b) Application. This exemption applies only to welfare benefit 
plans that do not provide benefits consisting of medical care as 
defined in section 733(a)(2) of the Act that are maintained by an 
employee organization, as that term is defined in section 3(4) of the 
Act, paid out of the employee organization's general assets, which are 
derived wholly or partly from membership dues, and which cover employee 
organization members and their families.
* * * * *
0
11. Revise Sec.  2520.104-42 to read as follows:


Sec.  2520.104-42  Waiver of certain actuarial information in the 
annual report.

    Under the authority of section 104(a)(2)(A) of ERISA, the 
requirement of section 103(d)(6) of ERISA that the annual report 
include as part of the actuarial statement (Schedule SB) the present 
value of all of the plan's liabilities for nonforfeitable pension 
benefits allocated by termination priority categories, as set forth in 
section 4044 of title IV of ERISA, and the actuarial assumptions used 
in these computations, is waived.
0
12. In Sec.  2520.104b-10, revise the Appendix to Sec.  2520.104b-10 to 
read as follows:

[[Page 47531]]

Sec.  2520.104b-10  Summary annual report.

* * * * *

 Appendix to Sec.   2520.104B-10--The Summary Annual Report (SAR) Under
              ERISA: A Cross-Reference to the Annual Report
------------------------------------------------------------------------
                                                      Form 5500-SF line
          SAR Item            Form 5500 line items          items
------------------------------------------------------------------------
 A. Pension Plan (defined contribution pension benefit plans and defined
   benefit pension plans that do not furnish the annual funding notice
                        under 29 CFR 2520.101-4)
------------------------------------------------------------------------
1. Funding arrangement......  Form 5500-10a.......  Line 13a.
2. Total plan expenses......  Sch. H--2j..........  Line 10h.
3. Administrative expenses..  Sch. H--2i(12)(C)...  Line 10f.
4. Benefits paid............  Sch. H--2e(4).......  Line 10d.
5. Other Expenses...........  Sch. H--Subtract the  Line 10g.
                               sum of 2e(4) &
                               2i(12)(C) from 2j.
6. Total Participants at end  Form 5500--7f.......  Line 7f.
 of plan year.
7. Value of plan assets
 (net):
    a. end of plan year.....  Sch. H--1l [Col.      Line 9c [Col. (b)].
                               (b)].
    b. beginning of plan      Sch. H--1l [Col.      Line 9c [Col. (a)].
     year.                     (a)].
8. Changes in Net Assets....  Sch. H--Subtract 1l   Line 9c-Subtract
                               [Col. a] from 11      [Col. a] from [Col.
                               [Col. b].             b].
9. Total Income.............  Sch. H--2d..........  Line 10c.
    a. Employer               Sch. H--2a(1)(A, &    Line 10a(1)(A).
     contributions.            2a(2) if applicable.
    b. Employee               Sch. H--2a(1)(B), &   Line 10a(1)(B).
     contributions.            2a(2) if applicable.
    c. Gains (losses) from    Sch. H--2c(4)(C)....  Not applicable.
     sale of assets.
    d. Earnings from          Sch. H--Subtract the  Line 10b.
     investments.              sum of 2a(3) and
                               2c(4)(C) from 2d.
10. Name of insurance         Schs. A--1a.........  Not applicable.
 carriers.
11. Total insurance premiums  Sch. A--5b (total of  Not applicable.
                               all contracts).
12. Unpaid minimum required
 contribution (S-E plans or
 Defined contribution plans)
 or Funding deficiency (ME
 plans):
    a. S-E Defined benefit    Sch. SB--43.........  Same.
     plans.
    b. ME Defined benefit     Sch. MB--10.........  Not applicable.
     plans.
    c. Defined contribution   Sch. R--7c, if not    Line 16b.
     plans.                    zero.
------------------------------------------------------------------------
                             B. Welfare Plan
------------------------------------------------------------------------
1. Name of insurance          Schs. A--1a.........  Not applicable.
 carriers.
2. Total (experience rated    Schs. A--Sum of       Not applicable.
 and non-experienced rated)    9a(1) and 10a
 insurance premiums.           (total of all
                               contracts).
3. Experience rated premiums  Schs. A--9a(1)        Not applicable.
                               (total of all
                               contracts).
4. Experience rated claims..  Schs. A--9b(4)        Not applicable.
                               (total of all
                               contracts).
5. Value of plan assets
 (net).
    a. end of plan year.....  Sch. H--1l [Col.      Line 9c [Col. (b)].
                               (b)].
    b. beginning of plan      Sch. H--1l [Col.      Line 9c [Col. (a)].
     year.                     (a)].
6. Changes in Net Assets....  Sch. H--Subtract 1l   Line 9c--Subtract
                               [Col. a] from [Col.   [Col. a] from [Col.
                               b].                   b].
7. Total Income.............  Sch. H--2d..........  Line 10c.
    a. Employer               Sch. H--2a(1)(A) &    Line 10a(1)(A) if
     contributions.            2a(2) if applicable.  applicable.
    b. Employee               Sch. H--2a(1)(B) &    Line 10a(1)(B) if
     contributions.            2a(2) if applicable.  applicable.
    c. Gains (losses) from    Sch. H--2c(4)(C)....  Not applicable.
     sale of assets.
    d. Earnings from          Sch. H--Subtract the  Line 10b.
     investments.              sum of 2a(3) and
                               2c(4)(C) from 2d.
8. Total plan expenses......  Sch. H--2j..........  Line 10h.
9. Administrative expenses..  Sch. H--2i(12)(C)...  Line 10f.
10. Benefits paid...........  Sch. H--2e(4).......  Line 10d.
11. Other Expenses..........  Sch. H--Subtract the  Line 10g.
                               sum of 2e(4) &
                               2i(12)(C) from 2j.
------------------------------------------------------------------------

PART 2590 --RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
13. The authority citation for Part 2590 continues to read as follows:

    Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c; 
sec. 101(g), Pub. L.104-191, 110 Stat. 1936; sec. 401(b), Pub. L. 
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. 
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029; 
Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012).

Subpart C--Other Requirements

0
14. Add Sec. Sec.  2590.715-2715A and 2590.715-2717 to Subpart C to 
read as follows:


Sec.  2590.715-2715A  Provision of additional information.

    A group health plan that complies with the requirements of Sec.  
2520.103-1 of this Chapter and any implementing guidance (including 
filing any required schedules to the annual report required by Sec.  
2520.103-1) satisfies the requirements of PHS Act section 2715A, as 
incorporated in ERISA.

[[Page 47532]]

Sec.  2590.715-2717  Ensuring the quality of care.

    A group health plan that complies with the requirements of Sec.  
2520.103-1 of this Chapter and any implementing guidance (including 
filing any required schedules to the annual report required by Sec.  
2520.103-1) satisfies the requirements of PHS Act section 2717, as 
incorporated in ERISA.

    Signed at Washington, DC, this 20th day of June 2016.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
[FR Doc. 2016-14892 Filed 7-11-16; 4:15 pm]
 BILLING CODE 4510-29-P