[Federal Register Volume 88, Number 37 (Friday, February 24, 2023)]
[Rules and Regulations]
[Pages 11984-12105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02653]



[[Page 11983]]

Vol. 88

Friday,

No. 37

February 24, 2023

Part II





Department of the Treasury





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Internal Revenue Service





Department of Labor





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Employee Benefits Security Administration





Pension Benefit Guaranty Corporation





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26 CFR Part 301

29 CFR Parts 2520 and 4065





Annual Information Return/Reports; Final Rule

  Federal Register / Vol. 88 , No. 37 / Friday, February 24, 2023 / 
Rules and Regulations  

[[Page 11984]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2520

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4065

RIN 1210-AB97


Annual Information Return/Reports

AGENCY: Employee Benefits Security Administration, Labor; Internal 
Revenue Service, Treasury; Pension Benefit Guaranty Corporation.

ACTION: Final forms revisions.

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SUMMARY: This document contains final forms and instructions revisions 
for the Form 5500 Annual Return/Report of Employee Benefit Plan and 
Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit 
Plan effective for plan years beginning on or after January 1, 2023. 
The forms and instructions revisions relate to statutory amendments to 
the Employee Retirement Income Security Act of 1974 (ERISA) and the 
Internal Revenue Code (Code) enacted as part of the Setting Every 
Community Up for Retirement Enhancement Act of 2019 (SECURE Act) for 
multiple-employer plans and groups of plans, as well as changes 
intended to improve reporting of certain plan financial information 
regarding audits and plan expenses and enhance the reporting of certain 
tax qualification and other compliance information by retirement plans. 
There are also some minor changes that further improve defined benefit 
plan reporting by building on changes made to the forms for plan years 
beginning on or after January 1, 2022. The remaining changes are 
technical changes that are part of the annual rollover of the Form 5500 
and Form 5500-SF forms and instructions. The revisions being finalized 
in this document affect employee pension and welfare benefit plans, 
plan sponsors, administrators, and service providers to plans subject 
to annual reporting requirements under ERISA and the Code.

DATES: The final forms and instructions revisions in this document are 
effective for plan years beginning on or after January 1, 2023.

FOR FURTHER INFORMATION CONTACT: Janet Song, Florence Novellino, or 
Colleen Brisport Sequeda, Office of Regulations and Interpretations, 
Employee Benefits Security Administration, U.S. Department of Labor 
(DOL), (202) 693-8500 for questions related to reporting requirements 
under Title I of ERISA. For information related to the IRS reporting 
requirements under the Code, contact Cathy Greenwood, Employee Plans 
Program Management Office, Tax Exempt and Government Entities, (470) 
639-2503. For information related to Pension Benefit Guaranty 
Corporation (PBGC) reporting and changes in this document, including 
proposed changes to the actuarial schedules, contact Karen Levin, 
Regulatory Affairs Division, Office of the General Counsel, PBGC, (202) 
229-3559.
    Customer service information: Individuals interested in obtaining 
general information from the DOL concerning Title I of ERISA may call 
the EBSA Toll-Free Hotline at 1-866-444-EBSA (3272) or visit the DOL's 
website (www.dol.gov/agencies/ebsa).

SUPPLEMENTARY INFORMATION: 

A. ERISA Reporting Framework

    Titles I and IV of the Employer Retirement Income Security Act of 
1974 (ERISA) and the Internal Revenue Code (Code) generally require 
pension and other employee benefit plans 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) or, if eligible, a Form 5500-SF Short Form 
Annual Return/Report of Small Employee Benefit Plan (Form 5500-SF), 
together with any required schedules and attachments (together ``Form 
5500 Annual Return/Report''), in accordance with related instructions, 
generally satisfies these annual reporting requirements. ERISA sections 
103 and 104 broadly set out annual financial reporting requirements for 
employee benefit plans under Title I of ERISA. The Form 5500 Annual 
Return/Report, and related instructions and regulations, are also 
promulgated under the DOL's general regulatory authority in ERISA 
sections 109 and 505.\1\
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    \1\ ERISA sections 103 and 104 broadly set out the content and 
filing requirements for the annual report under Title I of ERISA. 
The Form 5500 Annual Return/Report and the DOL's implementing 
regulations are promulgated through notice and comment rulemaking 
under general ERISA regulatory authority and specific 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 Form 5500 Annual Return/Report 
filings are also information collections for the Agencies, subject 
to a separate clearance process under the Paperwork Reduction Act 
(PRA).
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    In the United States, there are an estimated 2.5 million health 
plans,\2\ an estimated 673,000 other welfare plans,\3\ and 
approximately 747,000 private pension plans.\4\ These plans cover 
roughly 152 million private sector workers, retirees, and 
dependents,\5\ and have estimated assets of $12 trillion.\6\ The Form 
5500 Annual Return/Report serves as the principal source of information 
and data available to the DOL, the Internal Revenue Service (IRS), and 
the Pension Benefit Guaranty Corporation (PBGC) (together ``Agencies'') 
concerning the operations, funding, and investments of approximately 
864,000 pension and welfare benefit plans that file.\7\ Accordingly, 
the Form 5500 Annual Return/Report is essential to each Agency's 
enforcement, research, and policy formulation programs, as well as for 
the regulated community, which makes increasing use of the information 
as more capabilities develop to interact with the data electronically. 
The data is also an important source of information for use by other 
Federal agencies, Congress, and the private sector in assessing 
employee benefits, tax, and economic trends and policies. The Form 5500 
Annual Return/Report also serves as a primary means by which the 
operations of plans can be monitored by participating employers in 
multiple-

[[Page 11985]]

employer plans and other group arrangements, by plan participants and 
beneficiaries, and by the general public.
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    \2\ Source: U.S. Department of Labor, EBSA calculations using 
the 2021 Medical Expenditure Panel Survey, Insurance Component 
(MEPS-IC), the Form 5500 and 2019 Census County Business Patterns.
    \3\ Source: U.S. Department of Labor, EBSA calculations using 
non-health welfare plan Form 5500 filings and projecting non-filers 
using estimates based on the non-filing health universe.
    \4\ Source: U.S. Department of Labor, EBSA. Private Pension Plan 
Bulletin: Abstract of 2020 Form 5500 Annual Reports.
    \5\ Source: U.S. Department of Labor, EBSA calculations using 
the Auxiliary Data for the March 2021 Annual Social and Economic 
Supplement to the Current Population.
    \6\ EBSA projected ERISA covered pension, welfare, and total 
assets based on the 2020 Form 5500 filings with the U.S. Department 
of Labor (DOL), reported SIMPLE assets from the Investment Company 
Institute (ICI) Report: The U.S. Retirement Market, Second Quarter 
2022, and the Federal Reserve Board's Financial Accounts of the 
United States Z1 September 9, 2022.
    \7\ Estimates are based on 2020 Form 5500 filings. Welfare plans 
with fewer than 100 participants that are unfunded or insured (do 
not hold assets in trust) are generally exempt from filing a Form 
5500. Therefore, while DOL estimates there are 2.5 million health 
plans and 673,000 non-health welfare plans, respectively only 63,000 
and 21,000 of these plans filed a 2020 Form 5500.
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B. September 2021 Proposed Rule and Final Rule Phases I, II and III

    On September 15, 2021, the Agencies published a notice of proposed 
forms revisions (NPFR) to amend the Form 5500 Annual Return/Report 
primarily to implement annual reporting changes related to legislative 
provisions in the Setting Every Community Up for Retirement Enhancement 
Act of 2019 (SECURE Act) focused on multiple-employer pension plans 
(MEPs) and defined contribution group reporting arrangements (DCGs or 
DCG reporting arrangements).\8\ 86 FR 51488 (Sep. 15, 2021). The NPFR 
also set forth additional proposed changes intended to improve 
reporting on multiemployer and single-employer defined benefit pension 
plans, update reporting on Form 5500 Annual Return/Report to make the 
financial information collected on the Form 5500 Annual Return/Report 
more useful and usable, enhance the reporting of certain tax 
qualification and other compliance information by retirement plans, and 
transfer to the DOL Form M-1 (Report for Multiple Employer Welfare 
Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)) 
participating employer information for multiple-employer welfare 
arrangements that are required to file the Form M-1. 86 FR 51488 (Sept. 
15, 2021). The DOL simultaneously published a proposed rulemaking 
(NPRM) required to implement the proposed forms revisions. 86 FR 51284 
(Sep. 15, 2021). The NPFR and the NPRM are collectively referred to as 
the September 2021 proposal.
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    \8\ The SECURE Act was enacted December 20, 2019, as Division O 
of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-
94).
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    The Agencies received 114 comments on the September 2021 proposal. 
The comments, which were all posted on the DOL's website, generally 
focused on the proposed changes for the 2022 plan year forms and on 
future rulemakings.
    In December 2021, the DOL published a final forms revisions 
rulemaking (2021 Final Forms Revisions) that set forth a narrow set of 
changes to the instructions for the Form 5500 and Form 5500-SF, 
effective for plan years beginning on or after January 1, 2021. 86 FR 
73976 (Dec. 29, 2021). Those instruction changes generally implemented 
annual reporting changes for MEPs, including pooled employer plans 
(PEPs), that were described in the September 2021 proposal. The DOL 
noted in that publication that other changes to the Form 5500 Annual 
Return/Report would be the subject of one or more separate and later 
final notices to address other elements of the September 2021 proposal. 
That rule is also referred to herein as Final Rule Phase I.\9\
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    \9\ See/www.reginfo.gov/public/do/eAgendaViewRule?pubId=202204&RIN=1210-AB97.
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    In May 2022, the Agencies published a second final forms revisions 
rulemaking effective for plan years beginning on or after January 1, 
2022. 87 FR 31133 (May 23, 2022). Those forms and instructions 
revisions generally implemented annual reporting changes for defined 
benefit plans on Schedules MB, SB and R, but also added certain plan 
characteristics codes for MEPs, including one to specifically identify 
PEPs, to the list of plan characteristics the plans must use to 
describe the plan on their annual report. That 2022 rule is referred to 
herein as Final Rule Phase II.
    The Agencies stated in the 2022 Final Forms Revisions notice that 
the remaining proposed changes from the September 2021 proposal to the 
Form 5500 Annual Return/Report would be addressed either in a further 
final forms revisions notice or possibly re-proposed with modifications 
in a separate proposal as part of a broader range of improvements to 
the annual reporting requirements.\10\ The decision to defer further 
changes until a third final rule was also based on the need to 
coordinate the careful consideration of public comments and other 
regulatory processes for adopting final changes to the Form 5500 Annual 
Return/Report with a separate contractual development schedule for 
integrating forms and instructions changes into the wholly-electronic 
EFAST2 filing system that receives and displays Form 5500 Annual 
Return/Report filings.\11\
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    \10\ As noted in the September 2021 proposal, the DOL has a 
separate regulatory project on its semi-annual agenda in 
coordination with the IRS and PBGC to: (i) modernize the financial 
and other annual reporting requirements on the Form 5500 Annual 
Return/Report; (ii) continue an ongoing effort to make investment 
and other information on the Form 5500 Annual Return/Report more 
data mineable; and (iii) consider potential changes to group health 
plan annual reporting requirements, among other improvements that 
would enhance the Agencies' ability to collect employee benefit plan 
data in a way that best meets the needs of compliance projects, 
programs, and activities. See www.reginfo.gov for more information.
    \11\ EFAST2 is an all-electronic system designed by the Agencies 
to simplify and expedite the submission, receipt, and processing of 
the Form 5500 and Form 5500-SF. Under EFAST2, filers choose between 
using EFAST2-approved vendor software or an EFAST website (IFILE) to 
prepare and submit the Form 5500 or Form 5500-SF. Completed forms 
are submitted via the internet to EFAST2 for processing. EFAST2 is 
operated by a private sector government contractor on behalf of the 
Agencies. Each year the EFAST2 system is rolled over for the coming 
year's annual return/report filings; for example, the system must be 
updated to reflect changes from the 2022 plan year return/report 
filings to the 2023 plan year return/report filings. That rollover 
process is governed by a contractual development schedule with 
deadlines designed to ensure that forms and instructions changes are 
smoothly integrated into the EFAST2 system and the products 
developed by private software developers to provide filing services 
to employee benefit plans. Integration of the regulatory and EFAST2 
processes is less complicated in years that do not involve material 
changes to the forms or instructions. These processes, however, are 
more complex when the Agencies make substantial changes to the forms 
and instructions.
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    This third rulemaking document (herein referred to as Final Rule 
Phase III) addresses the remaining subjects included in the September 
2021 proposal, including DCG reporting arrangements, Schedule DCG and 
related audit issues, Schedule MEP and related reporting requirements 
regarding MEPs, financial statement improvements to the Schedule H and 
Schedules of Assets, changes in participant counting methodology for 
determining eligibility for small plan reporting purposes, including 
the conditional waiver of the Independent Qualified Public Accountant 
(IQPA) audit requirements, and additional questions on pension plan 
compliance with certain Code requirements. Some changes in those areas 
are being adopted in final form and others that were included in the 
September 2021 proposal are being deferred for further development and 
public input as part of a more general Form 5500 improvement project 
listed on DOL's semi-annual regulatory agenda. The final forms and 
instructions changes adopted in this Final Rule Phase III generally 
apply beginning with the 2023 plan year Form 5500 Annual Return/Report.

C. Overview of SECURE Act Changes Related to Form 5500 Annual Reporting 
Changes

    The SECURE Act, which overall was designed to expand and preserve 
workers' retirement savings, is the most significant legislation 
impacting ERISA and Code provisions pertaining to retirement plans 
since the Pension Protection Act of 2006. Among other things, the 
SECURE Act directed the Secretaries of the Departments of Labor and 
Treasury (together the ``Departments'') to develop a new aggregate 
annual reporting option for certain groups of retirement plans and 
included other statutory amendments that directly impact annual 
reporting requirements for MEPs. In relevant part, the SECURE Act's 
expansion of MEPs and direction for the Departments to

[[Page 11986]]

establish a consolidated reporting option for defined contribution 
pension plans that share certain key characteristics should help expand 
retirement coverage by making it easier for record keepers and other 
financial services providers to offer attractive retirement plan 
alternatives and for employers, especially small ones, to pick from an 
array of retirement plan alternatives and structure that works best.
    Section 101 of the SECURE Act amended ERISA section 3(2) and added 
ERISA sections 3(43) and 3(44) to allow for a new type of ERISA-covered 
MEP--a defined contribution pension plan called a ``pooled employer 
plan'' (PEP), operated by a ``pooled plan provider'' (PPP). PEPs allow 
multiple unrelated employers to participate without the need for any 
common interest among the participating employers (other than having 
adopted the plan).\12\ Under ERISA section 3(2), a PEP is treated for 
purposes of ERISA as a single plan that is a MEP. A PEP is defined in 
ERISA section 3(43) as a plan that is an individual account plan 
established or maintained for the purpose of providing benefits to the 
employees of two or more employers; that is a qualified retirement 
plan, a plan that consists of annuity contracts described in Code 
section 403(b) that also meets the requirements of Code section 
403(b)(15),\13\ or a plan funded entirely with individual retirement 
accounts (IRA-based plan); and the terms of which must meet certain 
requirements set forth in the statute.\14\
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    \12\ DOL sought comments through a Request for Information 
published on July 31, 2019, on ``open'' MEP structures (those 
without the need for any commonality among the participating 
employers or other genuine organization relationship unrelated to 
participation in the plan) being treated as one multiple-employer 
plan for purposes of compliance with ERISA. The DOL does not have 
any current plan to take further action regarding defined 
contribution open MEPs due to the SECURE Act provisions permitting 
PEPs as a type of open MEP.
    \13\ After the final rule had been submitted to OMB on November 
21, 2022, for review under Executive Order 12866, the SECURE Act 2.0 
of 2022 (SECURE Act 2.0) was signed into law on December 29, 2022, 
as Division T of the Consolidated Appropriations Act, 2023, H.R. 
2617, as amended. Section 106 of the SECURE Act 2.0 amended ERISA 
section 3(43) and added a new subparagraph 15 to Code section 403(b) 
to permit 403(b) PEPs for plan years beginning after December 31, 
2022. This notice of final forms revision includes certain SECURE 
2.0 updates to the definition of a PEP in the Schedule MEP 
instructions and general instructions for Form 5500 and Form 5500-
SF.
    \14\ 29 U.S.C. 1002(43).
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    ERISA section 3(43) further provides that PEPs do not include 
multiemployer plans as defined in ERISA section 3(37) or plans 
maintained by employers that have a common interest other than having 
adopted the plan.\15\ The term PEP also does not include a plan 
established before the date the SECURE Act was enacted unless the plan 
administrator elects to have the plan treated as a PEP and the plan 
meets the ERISA requirements applicable to a PEP established on or 
after such date. The PPP for a PEP must file a registration statement 
with the Secretary of Labor and the Secretary of Treasury pursuant to 
ERISA section 3(44) and section 413(e)(3)(A)(ii) of the Code. On 
November 16, 2020, as part of implementing the SECURE Act section 101, 
the DOL published a notice of final rulemaking establishing Form PR 
(Pooled Plan Provider Registration) (Form PR) and making its filing the 
registration requirement for PPPs. 85 FR 72934 (Nov. 16, 2020). The 
Treasury, DOL, and the IRS have advised that filing the Form PR with 
the DOL will satisfy the requirement to register with the Secretary of 
the Treasury.\16\ The instructions to the Form PR tell PPP registrants 
to use the same identifying information on the Form 5500 Annual Return/
Reports filed by the PEPs, particularly name; EIN for the PPP; any 
identified affiliates providing services; trustees; and plan name and 
number for each PEP.
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    \15\ In establishing a PEP as a new type of multiple-employer 
plan, the SECURE Act in section 101(c) specifically referred to 
plans maintained by employers that have a common interest other than 
having adopted the plan. For example, the DOL's recent final 
association retirement plan regulation, at 29 CFR 2510.3-55, 
published July 31, 2019, clarified and expanded the types of 
arrangements that could be treated as MEPs under Title I of ERISA to 
include plans established and maintained by a bona fide group or 
association of employers or by a professional employer organization 
(PEO). The SECURE Act provision excluding a ``plan maintained by 
employers that have a common interest'' from the definition of a PEP 
does not preclude employers with a common interest other than 
participating in the plan from establishing or participating in a 
PEP. Rather, in the Departments' view, the SECURE Act provision 
means that if a group of employers with a common interest other than 
participating in the plan establish a MEP based on a common interest 
among the employers, e.g., an association retirement plan under the 
DOL's regulation, the MEP will not be subject to the SECURE Act 
requirements for a plan to be a PEP.
    \16\ Like other pooled plan providers, pooled plan providers for 
403(b) PEPs authorized in SECURE Act 2.0 are subject to the Form PR 
registration requirements.
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    Section 101 of the SECURE Act also amended ERISA section 103(g) for 
MEPs. Section 103(g) of ERISA requires that the Form 5500 Annual 
Return/Report of a MEP generally must include a list of participating 
employers and a good faith estimate of the percentage of total 
contributions made by each participating employer during the plan year. 
The SECURE Act amended section 103(g) to expand the participating 
employer information that must be reported on the Form 5500 Annual 
Return/Report \17\ also to require the aggregate account balances 
attributable to each employer in the plan (determined as the sum of the 
account balances of the employees of each employer and the 
beneficiaries of such employees), and applied section 103(g) to 
retirement plans that currently meet the definition of a MEP under 
ERISA section 210(a), including any PEPs, for plan years beginning on 
or after January 1, 2021.\18\ With respect to a PEP, section 103(g) 
further requires that the annual return/report must include the 
identifying information for the person designated under the terms of 
the plan as the PPP.
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    \17\ SECURE Act Section 101(d).
    \18\ SECURE Act Section 101(e)(1).
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    Section 101 of the SECURE Act also amended ERISA section 
104(a)(2)(A) to permit the Secretary of Labor to prescribe by 
regulation simplified reporting for MEPs subject to ERISA section 
210(a) with fewer than 1,000 participants in total, so long as each 
participating employer has fewer than 100 participants.
    Section 202 of the SECURE Act provides that the Departments, shall, 
in cooperation, modify the Form 5500 Annual Return/Report so that all 
members of a group of defined contribution pension plans that are 
individual account plans described in section 202 may file a single 
consolidated annual return/report satisfying the requirements of both 
section 6058 of the Code and section 104 of ERISA, effective for plan 
years beginning on or after January 1, 2022.\19\ The SECURE Act further 
provides that, in developing the consolidated return/report, the 
Departments may require any information regarding each plan in the 
group determined to be necessary or appropriate for the enforcement and 
administration of the Code and ERISA. The SECURE Act also mandates that 
the consolidated reporting by such a group must include such 
information as will enable participants in each of the plans to 
identify any aggregated return/report filed with respect to their plan. 
Section 202 provides that to constitute an eligible group of plans, all 
of the plans in the group must be either individual account plans or 
defined contribution plans as defined in section 3(34) of

[[Page 11987]]

ERISA or in section 414(i) of the Code; must have the same trustee as 
described in section 403(a) of ERISA; the same one or more named 
fiduciaries as described in section 402(a) of ERISA; the same 
administrator as defined in section 3(16)(A) of ERISA and plan 
administrator as defined in section 414(g) of the Code; must have plan 
years beginning on the same date; and must provide the same investments 
or investment options to participants and beneficiaries. Section 202 
further provides that a plan not subject to Title I of ERISA shall be 
treated as meeting these requirements for being eligible to be part of 
a consolidated reporting group of plans, if the same person that 
performs each of the functions described in the above requirements, as 
applicable, for all other plans in such group performs each of such 
functions for such plan.\20\
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    \19\ The SECURE Act Section 202 appears to use the terms 
``combined,'' ``aggregated,'' and ``consolidated'' interchangeably 
when directing the Departments to develop a new alternative method 
for the Form 5500 Annual Report/Return for DCGs. This final rule 
generally uses the term ``consolidated'' to describe the DCG 
reporting arrangement filing.
    \20\ SECURE Act Section 202(c).
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    Accordingly, the statutory authorization to develop a new type of 
consolidated reporting arrangements for groups of plans (i.e., DCGs), 
the establishment of a new type of multiple-employer plan (i.e., PEP), 
and the changes to the required reporting on participating employers in 
multiple-employer plans required some adjustments to the Form 5500 
Annual Return/Report.

D. Overview of Final Form and Instruction Changes and Discussion of 
Public Comments

    After consideration of the written comments received, the Agencies 
have determined to adopt various elements of the proposed forms and 
instructions changes with some modifications as set forth below. The 
forms and instructions changes fall into seven major categories: (1) 
adding a DCG consolidated reporting option; (2) adding Schedule MEP to 
collect MEP information; (3) adding certain new Code compliance 
questions; (4) changing the methodology for counting participants in 
defined contribution plans for purposes of determining eligibility for 
small plan reporting options; (5) additional defined benefit plan 
reporting improvements; (6) adding new breakout categories to the 
``Administrative Expenses'' category of the Income and Expenses section 
of the Schedule H balance sheet; and (7) miscellaneous and conforming 
changes to forms and instructions. The DOL is also concurrently 
publishing a separate final rule that adds new regulations at 29 CFR 
2520.103-14 and 2520.104-51, pursuant to section 110 of ERISA, and 
revises existing reporting regulations as needed to conform the Title I 
annual reporting regulations to the forms and instructions changes 
being adopted in this notice.

1. SECURE Act Section 202 DCG Reporting Arrangements

    As noted above, section 202 of the SECURE Act directs the 
Departments to modify the Form 5500 to allow certain groups of defined 
contribution pension plans to file a single consolidated annual return/
report. For a group of plans to be able to file a consolidated return/
report, section 202(c) of the SECURE Act provides that all plans must 
be individual account plans or defined contribution plans that have the 
same trustee; the same one or more named fiduciaries; the same plan 
administrator under ERISA and the Code; the same plan year; and provide 
the same investments or investment options for participants and 
beneficiaries. The SECURE Act also provides that in developing the 
consolidated return/report for such arrangements, the Departments shall 
require such information as will enable a participant in a plan to 
identify any consolidated return or report filed with respect to the 
plan. The SECURE Act statutory provision further expressly provides the 
Departments with the authority to require such return/report to include 
any information regarding each plan in the group they determine is 
necessary or appropriate for the enforcement and administration of the 
provisions of ERISA and the Code.
    The Departments explained in the proposal, and continue to believe, 
that the conditions in section 202 of the SECURE Act suggest that the 
section was primarily aimed at plans of unrelated small businesses that 
adopt a plan that has received approval from the IRS as to its form 
through the IRS Pre-Approved Program (pre-approved plan) offered by the 
same provider, and that section 202 was intended to provide this type 
of business structure with annual reporting cost efficiencies similar 
to those that MEPs and PEPs can offer to their participating employers. 
The Departments gave significant weight to that view of the purpose of 
the SECURE Act provision as they considered public comments and reached 
conclusions on final forms revisions in this area.
    After considering the public comments on the proposal, the 
Departments continue to believe that an efficient and effective 
approach to establishing such a consolidated return/report option is to 
amend the Form 5500 Annual Return/Report and its related instructions 
to provide that the filing requirements for large pension plans and 
direct filing entities (DFEs) will generally apply to this new type of 
DFE--a defined contribution group (DCG) reporting arrangement--except 
that an additional schedule (Schedule DCG Individual Plan Information) 
to report individual plan-level information will have to be attached 
for each plan included in the DCG filing. As described in more detail 
below, the final rule is largely consistent with the September 2021 
proposal, although several changes are being made in response to public 
comments, including eliminating the requirements that the DCG reporting 
arrangement and participating plans use a ``single trust'' and obtain 
an IQPA audit of that single trust, and that the investments of all 
participating plans be in investments that satisfy the qualifying 
assets condition that currently applies for small plans to be eligible 
to file a Form 5500-SF and for the small plan audit waiver. The 
separate Notice of Final Rulemaking being published with these final 
form revisions adds new DOL regulations at 29 CFR 2520.103-14 and 
2520.104-51, pursuant to section 110 of ERISA, that set forth this DCG 
reporting arrangement option as an alternative method of compliance for 
eligible plans to satisfy the generally applicable requirement under 
Title I of ERISA to file their own separate Form 5500.
a. Conditions Applicable to DCG Reporting Arrangements
    This final rule provides that a DCG reporting arrangement is 
treated as a new type of DFE that is required to: (1) file a Form 5500 
under rules and conditions generally applicable to large defined 
contribution pension plans; (2) report specific plan-level information 
on the new Schedule DCG regarding each individual plan in the DCG, 
which shall include an IQPA audit report for each large plan and each 
small plan that does not meet the conditions in 29 CFR 2520.104-46 for 
a waiver of the IQPA audit and opinion requirements in ERISA section 
103; and (3) ensure that each individual plan included in the DCG 
filing meets specified eligibility conditions that are consistent with 
SECURE Act Section 202 statutory criteria and designed to meet 
necessary and appropriate financial accountability and oversight 
protections.
    The final rule sets forth the eligibility conditions for a defined 
contribution pension plan to file as part of a DCG reporting 
arrangement, and thus rely on this alternative method of compliance to 
satisfy the annual reporting obligation in section 104 of ERISA and in 
section 6058 of the Code. To satisfy such annual reporting obligations, 
all defined contribution pension plans filing as part

[[Page 11988]]

of a DCG must meet the following eligibility conditions with respect to 
such DCG:
    All plans are individual account plans or defined contribution 
plans that--
    (1) Have the same trustee meeting the requirements set forth in 
ERISA section 403(a) (``common trustee'');
    (2) Have the same one or more named fiduciaries designated in 
accordance with the requirements set forth in ERISA section 402(a) 
(``common named fiduciaries''), except that an individual employer may 
be a named fiduciary of each employer's own plan, provided that the 
other named fiduciaries are the same and common to all plans;
    (3) Have a designated administrator under ERISA section 3(16)(A) 
that is the same plan administrator and common to all plans (``common 
plan administrator'');
    (4) Have plan years beginning on the same date (``common plan 
year'');
    (5) Provide the same investments or investment options to 
participants and beneficiaries in all the plans (``common investments 
or investment options'') (as discussed below, a single dedicated 
brokerage window provided by the same designated registered broker-
dealer common to all plans that restricts participant and beneficiary 
investments solely to assets with a readily determinable fair market 
value as described in 29 CFR 2520.103-1(C)(2)(ii)(C) will be treated as 
a ``common investment option'' for purposes of this paragraph);
    (6) Do not hold any employer securities at any time during the plan 
year, except that this condition does not prohibit investments in any 
employer's publicly traded securities within an otherwise ``common 
investment or investment option'' available to all participants and 
beneficiaries in the plans participating in the DCG;
    (7) Either obtain an audit by an IQPA and file the IQPA report with 
the DCG consolidated Form 5500, or be eligible for the waiver of the 
annual examination and report of an IQPA under 29 CFR 2520.104-46; \21\ 
and
---------------------------------------------------------------------------

    \21\ After the final rule had been submitted to OMB on November 
21, 2022, for review under Executive Order 12866, the SECURE Act 2.0 
of 2022 (SECURE Act 2.0) was signed into law on December 29, 2022, 
as Division T of the Consolidated Appropriations Act, 2023, H.R. 
2617, as amended. The SECURE Act 2.0 includes a specific direction 
to the DOL and the Treasury Department on audit requirements for the 
DCG consolidated Form 5500 reporting option. Specifically, section 
345 of SECURE Act 2.0 provides that with respect to the IQPA audit 
provisions in section 103 of ERISA ``any opinions required by 
section 103(a)(3) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1023(a)(3)) shall relate only to each individual 
plan which would otherwise be subject to the requirements of such 
section 103(a)(3).'' This final forms revisions notice and the 
related final rule notice being published concurrently include DCG 
plan-level audit provisions that are consistent with the SECURE Act 
2.0 direction.
---------------------------------------------------------------------------

    (8) Are not a MEP (including a PEP) or a multiemployer plan.
    The Form 5500 also includes a new checkbox on the Form 5500 (Part 
II, line 10a(4)) to indicate that at least one Schedule DCG is attached 
to the Form 5500, with a space for the filer to enter the number of 
Schedules DCG (one per participating plan) attached to the Form 5500 
filing.
    These conditions are designed to meet SECURE Act section 202 
statutory criteria for plans participating in a group filing as well as 
related administrative requirements for DCG compliance and agency 
enforcement, including important information and transparency 
requirements that enable participants to find information in DCG 
filings regarding their particular plan. This approach also responds to 
public comments that asked the Departments to reconsider some of the 
proposed conditions for DCG reporting in an effort to reduce the costs 
and administrative burdens, particularly with respect to audit costs 
and for smaller plans, while continuing the benefits of having 
appropriate financial transparency and accountability for plans 
participating in, and persons managing and operating, DCG reporting 
arrangements.\22\
---------------------------------------------------------------------------

    \22\ See also discussion in DOL-only final rule being published 
concurrently in this issue of the Federal Register titled ``Annual 
Reporting and Disclosure'' that adopts a new regulatory section at 
29 CFR 2520.104-51 to set forth, for ERISA Title I purposes, the DCG 
eligibility and plan participation conditions.
---------------------------------------------------------------------------

b. Eliminating the Single DCG Trust, DCG Trust Audit, and ``Eligible 
Plan Assets'' Requirements for All Investments in DCG Reporting 
Arrangements
    The September 2021 Proposal included conditions that the investment 
assets of the plans participating in the DCG would have to be held in a 
single trust and the consolidated Form 5500 Annual Return/Report filed 
by the DCG would have to include an audit of the single trust's 
financial statements. The proposal also required that all investments 
of the participating plans be 100% invested in certain secure, easy to 
value assets that are treated as having a ``readily determinable fair 
market value'' under 29 CFR 2520.103-1(c)(2)(ii) and that participating 
plans satisfy the small plan audit waiver under 29 CFR 2520.104-46 by 
virtue of having 95% or more of their assets as ``qualifying plan 
assets'' and not by virtue of enhanced bonding. For the reasons 
discussed below, these conditions are revised in the final forms 
revisions and rule. The DCG reporting arrangement may, but is not 
required to, use a single trust to satisfy the SECURE Act condition 
that all plans in the DCG have the ``same trustee.'' Rather, the plans 
participating in the DCG must instead hold all plan assets in trust by 
one or more trustees in accordance with section 403(a) of ERISA,\23\ 
with the condition that such trustee(s) be the same, i.e., a common 
trustee, for all plans participating in the DCG. The common trustee or 
trustees are required to be either named in the trust instrument or in 
the plan instrument or appointed by a person who is a named fiduciary 
of the participating plan. Upon acceptance of being named or appointed, 
such trustee or trustees must have exclusive authority and discretion 
to manage and control the assets of the plan, except to the extent that 
the authority to manage, acquire, or dispose of assets of the plan is 
delegated to one or more investment managers pursuant to section 
402(c)(3) of ERISA or the plan expressly provides that the trustee or 
trustees are subject to the direction of a named fiduciary who is not a 
trustee (in which case the trustees must be subject to proper 
directions of such fiduciary which are made in accordance with the 
terms of the plan and which are not contrary to ERISA).
---------------------------------------------------------------------------

    \23\ Section 403(a) of ERISA states that, except as provided in 
ERISA section 403(b), all assets of an employee benefit plan shall 
be held in trust by one or more trustees. The issue of Code section 
403(b) plans' ability to participate in a DCG is discussed in detail 
in a subsequent part of this Federal Register notice.
---------------------------------------------------------------------------

    With respect to requiring use of a single trust, several commenters 
argued that nothing in the SECURE Act limits DCGs to only those plans 
that utilize a single group trust arrangement, noting that the statute 
directive was to use the ``same trustee.'' Two commenters argued that 
there were no strong practical or policy reasons for treating sub-
trusts of a single trust as qualitatively different from separate 
trusts with the same trustee for DCG eligibility purposes. Two 
commenters noted that some DCG structures may want to use a master 
trust, with sub-trusts for each individual plan in the DCG, while other 
DCGs may use pre-approved plan documents and identical trust documents 
that name the same entity as trustee. Another commenter pointed out 
that many trust agreements are negotiated in a custom way to fit a 
particular employer's requirements, so that requiring all employers in 
a particular DCG to be bound by the same trust terms is unnecessarily 
restrictive. One commenter expressed concern

[[Page 11989]]

about the potential inapplicability of section 3(a)(2) of the 
Securities Act of 1933 and section 3(c)(11) of the Investment Company 
Act of 1940, which contain similar registration exemptions for 
interests and participations in a single trust fund issued in 
connection with ERISA plans and for collective trust funds maintained 
by a bank through the exercise of substantial investment authority over 
trust assets. The commenter argued that SEC staff has historically 
taken the view that, for purposes of both exemptions, a single trust 
fund must be maintained in connection with a single-employer plan or in 
connection with plans sponsored by a group of commonly controlled or 
otherwise closely related plan sponsors. The commenter expressed 
concern about additional costs and burdens for DCG arrangements if the 
SEC registration exemptions are unavailable to a DCG ``single trust.'' 
Finally, a commenter suggested that, as an alternative to requiring use 
of a single trust, the DOL revise the proposal to permit both use of a 
single trust or multiple trusts.
    With respect to the audit requirements, one commenter supported 
both the trust level audit and the separate audit requirement for any 
large plan that elects to participate in a DCG and rely on the DCG's 
consolidated Form 5500 to satisfy the plan's annual reporting 
obligation. One commenter opposed the concept of auditing different 
types of plans together on the basis that there are significant 
differences in the standards for and operation of plans so that they 
should not be treated the same and not audited together. Most 
commenters, however, raised various concerns regarding the cost and 
administrative burdens related to obtaining IQPA audits. Some 
commenters claimed that the cost of a plan-level audit would be in the 
range of an average of $15,000-$25,000 per plan and complained that 
this cost would negate cost savings that a DCG consolidated reporting 
option was supposed to provide. One commenter argued that the 
objectives of an audit to validate funds flowing in and out of the 
plan, identify late or missing contributions, obtain confirmation that 
the plan has sufficient controls to prevent and detect errors, and 
confirm compliance with DOL rules generally can be achieved through 
other less expensive means. A few commenters argued that they read the 
SECURE Act's provisions on a consolidated or aggregated annual report 
as envisioning some type of consolidated or aggregated audit as part of 
the DCG filing and, based on that premise, argued that requiring any 
individual plan audits would frustrate the SECURE Act's goal of easing 
administrative burdens associated with the Form 5500 filing 
requirement. Several other commenters suggested the DOL should allow 
for a ``consolidated audit'' of all the plans participating in a DCG 
reporting requirement, rather than requiring separate audits by each 
participating plan. One commenter argued that requiring plan-level 
audits puts DCGs at a commercial disadvantage relative to PEPs and MEPs 
because under Generally Accepted Auditing Standards (GAAS), PEPS and 
MEPS are subject to a single audit of the single plan. One commenter 
suggested that separate audits should be required only when the auditor 
discovers something in a consolidated audit requiring further 
investigation at the individual plan level. Some commenters supported a 
consolidated trust audit but only in lieu of individual plan audits if 
the single trust condition was retained. Another commenter suggested 
DOL consider an alternative where DCGs are treated similar to a master 
trust (or MTIA), which itself is not subject to audit and, if each plan 
within a master trust has fewer than 100 participants and otherwise 
meets the requirements to be exempt from audit, there would be no audit 
at the plan or master trust level. A commenter suggested that the new 
Schedule DCG for Form 5500 could require additional information from 
the plan administrator that would provide transparency and 
accountability at a lower cost than a plan-level audit.\24\
---------------------------------------------------------------------------

    \24\ One commenter appears to have misunderstood the SECURE Act 
provision giving the DOL the discretionary authority to decide 
whether to provide a simplified reporting option for MEPs with fewer 
than 1,000 participants in total as long as each participating 
employer has fewer than 100 participants. The SECURE Act did not 
establish a new audit threshold for MEPs. Rather, section 101 of the 
SECURE Act amended ERISA section 104(a)(2)(A) to permit the 
Secretary of Labor to prescribe by regulation simplified reporting 
for MEPs subject to ERISA section 210(a) with fewer than 1,000 
participants in total, as long as each participating employer has 
fewer than 100 participants. The DOL explained in the September 2021 
proposal that it was not proposing to amend the current reporting 
rules to establish a ``simplified report'' for such plans. The DOL 
asked interested stakeholder for comments on why MEPs should be 
subject to different reporting requirements than single-employer 
plans that cover fewer than 1,000 participants and, if they thought 
there were reasons for different treatment, to identify appropriate 
conditions and limitations for such a simplified report that would 
ensure transparency and financial accountability comparable to that 
for other large retirement plans. Thus, contrary to the commenter's 
suggestion, there is no 1,000 participant audit threshold for MEPS. 
Further, the SECURE Act's grant of discretionary authority for MEPs 
does not include DCG reporting arrangements.
---------------------------------------------------------------------------

    With respect to the requirement that participating plans be 100% 
invested in ``eligible plan assets,'' some commenters argued that the 
DOL exceeded its statutory authority claiming that the SECURE Act limit 
is that investments or investment options be the same for each DCG 
participating plan. Another argued that the requirement hindered cost 
efficiencies for large plans that participate in a DCG, hampered an 
investment fiduciary's ability to prudently select investment 
alternatives for participants, and placed indirect restrictions on the 
range of plans that could join DCGs by prohibiting individual account 
plans that use ``white label'' funds from joining a DCG.
    In the September 2021 proposal, the DOL explained that the single 
trust requirement was designed to allow for DCG reporting arrangements 
to have a single trust level audit, and also to reflect DOL's thoughts 
that a trust level audit would provide important financial 
accountability and oversight protections for arrangements that may be 
reporting on very large sums of plan assets in the aggregate. The DOL 
also explained that the ``single trust'' structure was based in part on 
the single trust structure used by plans of unrelated small businesses 
that adopt a plan offered by the same provider that has received 
approval from the IRS as to its form through the IRS Pre-Approved 
Program (pre-approved plan).\25\ The DOL also noted that an efficiency 
that would flow from an audit of a DCG single trust would be that the 
versions of the separate schedules referenced in ERISA section 
103(a)(3)(A) and 29 CFR 2520.103-10(b) filed as part of the DCG 
consolidated Form 5500 would be treated as ERISA section 103(b)(3) 
supplemental schedules for purposes of the required IQPA's opinion on 
whether those schedules were presented in conformity with DOL rules and 
regulations, including the delinquent participant contributions 
schedule filed by the DCG in connection with line 4a of its Form 5500, 
Schedule H. The single trust, taken together with the condition that

[[Page 11990]]

plans relying on the DCG consolidated Form 5500 report arrangement must 
be 100% invested in eligible plan assets and be eligible for the small 
plan audit waiver under 29 CFR 2520.104-46, but not by reason of 
enhanced bonding (which are current requirements for small plans being 
eligible to file the Form 5500-SF), was expected to simplify the audit 
requirement for the DCG single trust and the audits of participating 
plans subject to a separate plan-level audit because all the 
investments would be secure, easy-to-value assets.
---------------------------------------------------------------------------

    \25\ In the September 2021 proposal, the Departments noted that, 
historically, IRS conditions applicable to many pre-approved plans 
required that employers who used what was known as a ``master'' plan 
were required to use the same trust or custodial account, whereas 
each employer had a separate trust or custodial account in a 
``prototype plan.'' Under the proposal, the ``same trust'' 
requirement for the consolidated report would have been satisfied by 
the same trust structure historically used by employers using 
``master'' plans. The proposal also provided that use of sub-trusts 
of the DCG trust would be permitted, but that separate plans using a 
separate trust for investments would not be permitted. The final 
rule changes the proposal's restrictions on single trusts and sub-
trusts.
---------------------------------------------------------------------------

    In the September 2021 proposal, the DOL also explained that an 
audit of a DCG trust would not be an adequate substitute for plan-level 
audits of the plans relying on the DCG consolidated Form 5500 filing. 
Although the line items on the trust's financial statement would be 
audited, the underlying participating plans themselves would not be 
audited, so that compliance with the provisions of the plans that are 
invested in and funded by the trust would not be audited. In a trust 
audit, the amount of contributions received by the trust might be 
tested against the contributions remitted by participating plans, but, 
whether those contribution amounts remitted are in accordance with the 
individual plan provisions would not be tested, as they would be tested 
in an audit of the plan. There could be undisclosed, material errors in 
the amount of contributions remitted to the trust versus what should 
have been remitted. Similarly, in a trust audit, the benefit payments 
to participants might be tested in terms of amounts paid and whether 
they were authorized, but whether such payments were in compliance with 
plan provisions, such as vesting provisions, would not be tested as 
they would be tested in a plan's audit. In a plan audit, participant 
data is tested. Participant data testing involves determining whether 
employees are properly included or excluded from participating and 
whether the census data upon which eligibility for certain 
contributions and distributions are made is accurate. The audit of a 
trust would not test this at all. Finally, the materiality threshold 
for a trust audit could be significantly higher than that which would 
apply in the case of an individual participating plan because the trust 
threshold would be based on total assets in the trust rather than 
assets in each individual plan.
    Although the DOL continues to believe that the single trust 
proposal carried reporting and efficiency benefits, the DOL also agrees 
that adopting an alternative approach suggested by some commenters that 
permits use of either a single DCG-level trust or multiple plan-level 
trusts would provide more flexibility to DCG arrangements in attempting 
to realize the operational efficiencies and cost savings for 
participating plans that DCGs were intended to achieve.
    Thus, the final rule addresses commenters' concerns by providing 
flexibility to utilize one or more separate trusts as part of a DCG 
reporting arrangement, including trusts that may be set up for 
particular employers. It similarly removes the restriction on types of 
sub-trusts that can be used, should a particular DCG choose to utilize 
a single trust. The above structure serves to treat plans that join a 
DCG, versus those that do not, on a level playing field with respect to 
audits, and will support plans freely entering and exiting DCG 
reporting arrangements according to plan needs and in the best 
interests of plan participants and beneficiaries. Although the 
``eligible plan asset'' restriction on investments is not being adopted 
as part of the final forms revisions, the Departments expect that the 
SECURE Act requirement that all plans participating in the DCG 
reporting arrangement have the same investments or investment options, 
together with the requirement for a plan-level audit for small plans 
that do not meet the conditions for the DOL small pension plan audit 
waiver regulation, will likely result in DCG reporting arrangements 
requiring participating small plans to invest in ``eligible plan 
assets'' in any event. Thus, it is expected that plan assets covered by 
the DCG report would generally be held by regulated financial 
institutions.
    However, consistent with the September 2021 proposal, this final 
rule retains the requirement that a large plan that elects to 
participate have a plan-level audit. Also, the final rule requires that 
small plans participating in the DCG either separately meet the audit 
waiver conditions or have a plan-level audit and attach the audit 
report to the DCG's consolidated Form 5500 filing.\26\
---------------------------------------------------------------------------

    \26\ As discussed below, the final forms revisions and the 
related amendment to the DOL annual reporting regulations includes a 
change in the methodology of counting participants for purposes of 
determining eligibility for certain simplified reporting options for 
small plans, which is based on whether the individual has an account 
balance rather than whether the individual is eligible to 
participate in the plan, even if the individual does not choose to 
participate. Thus, plans participating in the DCG will be able to 
rely on that new counting methodology for determining whether the 
plan is able to use the conditional audit waiver.
---------------------------------------------------------------------------

    As explained in the September 2021 proposal, the DOL views an IQPA 
audit at the plan level as an important financial transparency and 
accountability condition for DCG reporting arrangements. Generally, 
pension plans and funded welfare plans with 100 or more participants 
are required to have an audit of the plan's financial statements 
performed by an IQPA. The DOL explained that in an audit of the DCG 
trust, the line items on the trust's financial statement are audited, 
but, because the underlying participating plans themselves are not 
audited, compliance with the provisions of the plans that are invested 
in and funded by the trust are not audited. Therefore, in a trust 
audit, the amount of contributions received by the trust might be 
tested against the contributions remitted by participating plans, but, 
whether those contribution amounts remitted are in accordance with the 
individual plan provisions would not be tested, as they would be tested 
in an audit of the plan. There could be undisclosed, material errors in 
the amount of contributions remitted to the trust versus what should 
have been remitted. Similarly, in a trust audit, the benefit payments 
to participants might be tested in terms of amounts paid and whether 
they were authorized, but whether the payments were in compliance with 
plan provisions, such as vesting provisions, would not be tested as 
they would be tested in an audit at the plan level. In a plan audit, 
participant data is tested. Participant data testing involves 
determining whether employees are properly included or excluded from 
participating and whether the census data upon which eligibility for 
certain contributions and distributions are made is accurate. The audit 
of a trust would not test this at all. Finally, the materiality 
threshold for a trust audit could be significantly higher than the 
threshold that would apply in the case of an individual participating 
plan. This is because the trust threshold would be based on total 
assets in the trust rather than assets in each individual plan. In 
comparison, under Statement on Auditing Standards No. 136 (SAS 136), 
Forming an Opinion and Reporting on Financial Statements of Employee 
Benefit Plans Subject to ERISA, independent qualified public 
accountants are required to consider relevant plan provisions that 
affect the risk of material misstatement for various transactions, 
account balances, and related disclosures. Areas such as participant 
eligibility, plan contributions, benefit payments and participant loans 
are all covered as part of a plan-level audit. Additionally, auditors 
are required to communicate

[[Page 11991]]

reportable findings to the plan that are identified during the audit of 
the plan. For example, it has been the DOL's experience that plan 
audits lead to increased reporting of prohibited transactions, such as 
identifying and disclosing delinquent participant contributions. The 
DOL has not changed its views in this regard and disagrees with the 
commenter who suggested that the IQPA audit could be replaced with 
lesser safeguards and reliance on certain other filings to report plan 
noncompliance with specific plan asset requirements.
    Thus, after considering the public comments, the DOL continues to 
believe that a plan-level audit in accordance with the requirements of 
section 103 of ERISA, and accompanying regulations, is necessary and 
appropriate for plans participating in a DCG unless the plan 
individually meets the conditions for an audit waiver under the DOL's 
regulations.\27\ The final rule, however, does not require that all 
plans (both large and small) be 100% invested in the types of assets 
that are required for a plan to be able to file the Form 5500-SF. The 
final rule also does not include the requirement that plans must be 
eligible for the small plan audit waiver by virtue of having 95% or 
more of its assets invested in ``qualifying plan assets'' under 29 CFR 
2520.104-46(b)(1)(i)(A)(1), and not by reason of enhanced bonding. 
These elements of the proposal have not been included in the final 
changes and have been replaced with a more ``audit neutral'' approach 
to the DCG reporting arrangement requirements under which an IQPA audit 
and IQPA audit report are required unless the plan meets the conditions 
for the existing small plan audit waiver that would be available to any 
small plan, regardless of whether the plan participates in a DCG 
reporting arrangement.
---------------------------------------------------------------------------

    \27\ See, 29 CFR 2520.104-41; 29 CFR 2520.104-46.
---------------------------------------------------------------------------

    With respect to the commenters who argued that the SECURE Act's 
provisions on a consolidated or aggregated annual report envision some 
type of consolidated or aggregated audit as part of the DCG filing, the 
DOL disagrees. The September 2021 proposal explained that it was not 
possible under GAAS to have a consolidated audit of all the 
participating plans in the DCG reporting arrangement. Rather, for a 
GAAS audit, the audit would have to be of the participating plans in 
the DCG reporting arrangement. Comments submitted by accounting 
industry stakeholders confirmed that conclusion. Nothing in the SECURE 
Act indicates that Congress intended to make wholesale changes to 
ERISA's GAAS and Generally Accepted Accounting Principles (GAAP) 
requirements applicable to plan audits and opinions of plan financial 
statements. The DOL also does not interpret the SECURE Act to provide 
for any new IQPA audit exceptions or exclusions for plans in a DCG. The 
statute directs the Departments to jointly modify requirements under 
Code Section 6058 and ERISA Section 104 to allow a group of plans to 
file a single aggregated return or report that meets the requirements 
of both sections. Section 202 of the SECURE Act makes no mention of 
audit relief for plans participating in a DCG. It also does not amend 
sections 103 or 104 of ERISA for DCG reporting arrangements, which set 
forth the generally applicable plan audit requirements and authorizes 
the DOL to provide conditional audit waivers through regulation.\28\ To 
the contrary, SECURE Act section 202(b) specifically provides the 
Departments with authority to include any information regarding each 
plan in the DCG reporting arrangement determined to be necessary or 
appropriate for enforcement and compliance with the Code and ERISA.
---------------------------------------------------------------------------

    \28\ Section 104(a)(2) of ERISA sets forth reporting 
requirements for employee benefit plans and includes a grant of 
regulatory authority to the DOL to provide for simplified annual 
reporting by small pension plans. Section 103(a)(3)(A) of ERISA 
permits the DOL Secretary to waive audit requirements for small 
plans that are eligible for simplified reporting under Section 
104(a)(2).
---------------------------------------------------------------------------

    As for commenters arguing for DCGs receiving analogous audit 
requirements to those applicable to MEPS, including PEPs, the DOL does 
not view DCGs as analogous to MEPs for audit purposes. Unlike MEPs, 
which are single plans subject to a single plan audit, DCGs are a 
collection of separate plans. Further, as described above, under GAAS, 
which is expressly incorporated into ERISA as the source of audit 
standards for plans, it is not possible to have a consolidated audit of 
all the individual plans in the DCG reporting arrangement. Commenters 
also provided no substantial evidence that a DCG consolidated report 
would provide better or different protections for plan participants 
with regard to risks a plan audit addresses, such as financial 
misstatements in plan books and records or plan-level failures to 
comply with applicable Code or ERISA Title I requirements.\29\
---------------------------------------------------------------------------

    \29\ Some commenters did cite duplication of audit procedures at 
the trust and plan level, but with the removal of the trust level 
audit in this final rule, that objection is rendered moot.
---------------------------------------------------------------------------

    Thus, the final forms revisions do not provide for a ``consolidated 
audit'' of all the plans in the DCG for purposes of complying with 
ERISA IQPA audit and reporting requirements.
c. Content Requirements for DCG Form 5500
    The final forms notice also adopts content requirements for the 
consolidated Form 5500 return/report filed by the DCG reporting 
arrangement that, except for the single trust and audit provisions 
described above, are largely unchanged from the proposal. Under the 
final forms revisions, DCG reporting arrangements must file a Form 5500 
Annual Return/Report that includes largely the same information that 
large pension plans and other DFEs are required to file, except that a 
DCG reporting arrangement would also be required to include in its 
annual report a Schedule DCG (described below) to report individual 
participating plan information for each plan that is a part of the DCG 
reporting arrangement. One commenter expressed support for a separate 
Schedule DCG for each plan saying it allows for participants to know 
where they stand in relation to their separate plans; but otherwise 
cautioned against too much streamlining in other DCG reporting areas. 
Another commenter urged individual plan disclosures on DCG be as 
streamlined as possible, saying most questions should be answered on a 
group basis and asserting that supplemental information should only be 
supplied with respect to plans with compliance issues, rather than 
requiring broader disclosures. Another commenter expressed concerns 
with reconciling plan-level information on Schedule DCG, suggesting 
development of a separate schedule or attachment, similar to Schedule 
MEP, for DCG participating employers. As discussed below, the final 
forms revisions attempt to strike a balance between important plan 
information required to be disclosed on Schedule DCG, and other 
information that is disclosed on an aggregate basis on Form 5500 and 
specified Schedules as applicable to particular DCG filings.
    Specifically, the content of the DCG annual return/report would 
include a Form 5500 Annual Return/Report of Employee Benefit Plan and 
any statements or schedules required to be attached to the form for 
such entity, 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), Schedule DCG (Individual

[[Page 11992]]

Plan Information), schedules described in Sec.  2520.103-10(b)(1) and 
(b)(2) with information aggregated for all the participating plans 
unless otherwise provided in the instructions to the Form 5500, and, 
for DCG consolidated Form 5500 filings that cover large plans 
(generally those with 100 or more participants) and small plans that do 
not meet the regulatory conditions for the small pension plan audit 
waiver, an IQPA audit report and the related financial statements for 
each such plan, attached to the Schedule DCG for the plan. This would 
include separate financial statements described in ERISA section 
103(a)(3)(A) and Sec.  2520.103-1(b)(2) if such financial statements 
are prepared in order for the independent qualified public accountant 
to form the required opinions on the individual participating plans 
subject to the audit requirement.
    Information reported on the various schedules to the Form 5500, 
other than Schedule DCG, would be reported for all participating plans 
in the aggregate. Thus, a Schedule A would be required for all 
insurance contracts that constitute one of the common investments or 
investment alternatives available to the participants in all the 
participating plans, regardless of whether certificates were to be 
issued to individual plans or participants upon selection of that 
option by a participant. Similarly, service providers to the DCG 
arrangement and to each of the participating plans would all be 
reported on Schedule C, even if the service provider did not actually 
provide services or charge fees to a particular plan because, for 
example, the service provider provided investment management services 
with respect to a particular investment option that was not selected by 
any of the participants in a particular plan. The $5,000 threshold for 
a service provider to be reported on Schedule C would be based on the 
total amount received by the service provider from all sources, not 
broken down and measured on a per plan or other allocated method. For 
example, reporting on Schedule C would still be required if the total 
amount was $5,000 or more, even if the amount paid by or charged 
against the assets of each of the participating plans or otherwise 
allocated to each plan was less than $5,000 per plan. Reportable 
transactions on Schedule G would include all reportable transactions 
for all the participating plans. For reporting delinquent participant 
contributions on Schedule H, Line 4a, the DCG filing would be required 
to answer ``yes'' and report the aggregate of all delinquent 
participant contributions for all the plans covered by the DCG filing, 
but would not file a Schedule of Delinquent Participant Contributions. 
The individual plans would report delinquent participant contributions 
for the plan on the plan's Schedule DCG, and plans subject to the IQPA 
audit requirements would attach a Schedule of Delinquent Contributions 
to their Schedule DCG. For Schedule H, Line 4i, Schedule of Assets 
information is reported on a consolidated basis for all plans in the 
DCG reporting arrangement; some of that information would come from the 
Schedule of Assets attached to Schedule DCG for those plans required to 
have an audit. For plans not subject to an audit, the common plan 
administrator would maintain the necessary records to prepare the 
consolidated Schedule of Assets, showing all plans' assets, that is 
attached to Schedule H of the DCG reporting arrangement's Form 5500.
    The Departments expect that this will help streamline the process 
of answering compliance questions by having the question answered on a 
group basis rather than by each plan and allowing the common 
administrator of all the participating plans to use a consolidated 
supplemental schedule to identify only the plans with compliance 
issues.
d. Schedule DCG (Individual Plan Information)
    Section 202(b) of the SECURE Act specifically provides that the 
Departments may require the consolidated Form 5500 return/report filed 
by the DCG reporting arrangement to include any information regarding 
each plan in the group as IRS and DOL may determine necessary or 
appropriate for the enforcement and administration of the Code and 
ERISA. The IRS examines individual plans, not groups of plans, to 
ensure that plan sponsors and/or employers comply with the tax laws 
governing retirement plans, and to help protect the retirement benefits 
of participants and beneficiaries. Although various provisions of Title 
I of ERISA, including the fiduciary responsibility provisions, apply to 
investments and financial and administrative services providers, the 
DOL similarly focuses much of its enforcement and oversight on plan 
level compliance. The Departments concluded that it is necessary and 
appropriate for their enforcement and administration of the Code and 
ERISA to require information with respect to a plan's qualification, 
investments, financial condition, and operation on a separate basis for 
each plan relying on the DCG consolidated Form 5500. Thus, consistent 
with the proposal, the final forms revision provides that a separate 
Schedule DCG is required for each individual plan relying on the DCG 
consolidated Form 5500 to satisfy their annual return/report filing 
obligation. The Schedule DCG includes:
     Part I--DCG Information includes the DCG name, EIN, and 
plan number. Information in Part I must match the DCG information 
reported on Part II of the consolidated Form 5500.
     Part II--Individual Schedule DCG Information includes 
checkboxes to confirm that the plan for which the Schedule DCG is being 
filed is a single-employer plan (as noted above, MEPs and multiemployer 
plans may not participate in a DCG) or a collectively bargained plan; 
and checkboxes to indicate if the Schedule DCG is a first filing, an 
amended filing, or a final filing.
     Part III--Basic Individual Plan Information, including the 
plan name, plan number, plan effective date; plan sponsor's information 
(name and address, EIN, telephone number, and business code); plan 
administrator's information (name and address, EIN, and telephone 
number); total number of participants; total number of active 
participants; number of participants with account balances; and number 
of participants who terminated employment during the plan year with 
accrued benefits that were less than 100% vested.
     Part IV--Plan Financial Information, including total plan 
assets (including participant loans); total plan liabilities; net plan 
assets; contributions received or receivable in cash from the employer, 
participants, and others; noncash contributions and total 
contributions; benefit payments; corrective distributions, and certain 
deemed distributions of participant loans; direct expense information; 
net income; and assets transferred to (from) plans.
     Part V--Plan Characteristics, including two-digit boxes 
for entry of all applicable codes in the List of Plan Characteristics 
Codes in the instructions to the Form 5500.
     Part VI--Compliance Questions, including delinquent 
participant contributions, nonexempt transactions, plan assets/
liabilities transferred from the plan, indication of whether the plan 
is a defined contribution plan subject to section 412 of the Code, plan 
coverage and nondiscrimination information, and whether a plan is a 
pre-approved plan that received a favorable IRS Opinion Letter.

[[Page 11993]]

     Part VII--Accountant Opinion Information for Participating 
Plans, including questions regarding the required individual IQPA 
report and financial statements that must be filed with the Schedule 
DCG filed for participating large plans (generally, plans that cover 
100 or more participants with account balances as of the beginning of 
the plan year) and small plans that do not meet the audit waiver 
conditions.
    One commenter expressed support for the DCG reporting proposal, 
saying a separate Schedule DCG allows participants to know where they 
stand in relation to their plan, adding that the Schedule DCG requires 
less information than a plan would provide on a single Form 5500. 
Another commenter said the DCG schedule will create more work for 
auditors because they must separately review each Schedule DCG and 
reconcile the form at the plan level. The commenters argued that this 
will require more audit work and more work by record keepers to provide 
the data. They suggested the DCG file a new consolidated attachment for 
all the participating plans using a schedule similar to Schedule MEP 
for employers participating in a multiple-employer plan.
    The Departments view the Schedule DCG as consistent with and 
supported by the SECURE Act's express direction to provide a 
consolidated filing option in a way that enables participants to find 
information on their plan. The Departments agree with the commenter 
supporting the new Schedule DCG as providing participants with 
important and streamlined information regarding their plan. Further, as 
previously mentioned, the consolidated filing for DCG reporting 
arrangement is different from a MEP filing since it essentially 
aggregates the information of many separate plans, as opposed to the 
MEP which is one plan with multiple participating employers. Moreover, 
since there is a plan at the MEP level, MEP level information, with a 
supplementary schedule showing a list of participating employers and 
certain information on each employer's account balances and other 
specific data items is what the SECURE Act section 101 requires for 
MEPs.\30\ For a DCG reporting arrangement, since it is an aggregate 
report on many different separate plans, the additional details in 
Schedule DCG provide important plan-level information for purposes of 
DOL and IRS oversight and enforcement obligations and also provide a 
straightforward way for participants in a plan relying on the DCG 
consolidated Form 5500 to find information on their particular plan.
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    \30\ Section 101 of the SECURE Act amended ERISA section 103(g) 
for MEPs. Section 103(g) of ERISA requires that the annual return/
report of a MEP generally include a list of participating employers 
and a good faith estimate of the percentage of total contributions 
made by each participating employer during the plan year. The SECURE 
Act amended section 103(g) to expand the participating employer 
information that must be reported on the Form 5500 Annual Return/
Report by requiring reporting of the aggregate account balances 
attributable to each employer in the plan (determined as the sum of 
the account balances of the employees of each employer and the 
beneficiaries of such employees), and applied section 103(g) to 
retirement plans that currently meet the definition of a MEP under 
ERISA section 210(a), including any pooled employer plans, for plan 
years beginning on or after January 1, 2021. With respect to a 
pooled employer plan, section 103(g) further requires that the 
annual return/report must include identifying information for the 
person designated under the terms of the plan as the pooled plan 
provider.
---------------------------------------------------------------------------

    Another commenter recommended that the agencies allow a DCG to file 
a single Form 8955-SSA, Annual Registration Statement Identifying 
Separated Participants with Deferred Vested Benefits, on behalf of all 
individual plans filing a Form 5500 as part of a DCG reporting 
arrangement. The commenter also suggested that filing of the Form 8955-
SSA be incorporated into the DOL EFAST2 system, because, according to 
the commenter, the EFAST2 system is a more scalable, robust system and 
better suited for enterprise-level processing. Section 202 of the 
SECURE Act provides for the filing of a combined annual report for a 
group of plans that satisfies the annual reporting requirements under 
Code section 6058 and ERISA section 104. Section 202 of the SECURE Act 
does not apply to the annual registration statement (Form 8955-SSA) 
that is required under Code section 6057.\31\ Accordingly, the IRS 
declined to provide for the filing of a combined annual registration 
statement for the Form 8955-SSA as part of the DCG consolidated 
reporting option.
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    \31\ Form 8955-SSA is an IRS form used to satisfy the reporting 
requirements of Code section 6057(a). The information reported on 
Form 8955-SSA is transmitted to the Commissioner of Social Security, 
as required by Code section 6057(d). The Social Security 
Administration (SSA) is then able to provide this information, in 
accordance with section 1131(a) of the Social Security Act, to 
individuals and beneficiaries who apply or are eligible for social 
security benefits or hospital insurance benefits. Form 8955-SSA 
currently can be filed electronically through the IRS ``Filing 
Information Returns Electronically'' (FIRE) System, which provides 
for data transmittal to SSA. Thus, Form 8955-SSA is not part of this 
final rulemaking.
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e. Other DCG Participating Plan Conditions
i. Same Fiduciary
    The September 2021 proposal included the SECURE Act section 202 
condition that plans in a DCG reporting arrangement must have the 
``same one or more named fiduciaries.'' ERISA section 402 separately 
provides that every employee benefit plan shall be established and 
maintained pursuant to a written instrument and that the ``named 
fiduciaries'' must be identified in that instrument.\32\ The DOL stated 
in the proposal that they understand that it is customary for the 
employer/plan sponsor to be a named fiduciary of the employer's plan 
and do not believe the SECURE Act intended that each employer in a 
group of plans be a named fiduciary of every plan in the group. The 
proposal included an exception under which the employer/plan sponsor 
can be a named fiduciary of each employer's own plan, provided that the 
other named fiduciaries under the plans are the same and common to all 
plans. There were no significant comments on this requirement or the 
exception. Accordingly, this requirement is being adopted in these 
final forms revisions unchanged from the proposal.
---------------------------------------------------------------------------

    \32\ ERISA section 402 requires that such instrument shall 
provide for one or more named fiduciaries who jointly or severally 
have authority to control and manage the operation and 
administration of the plan. Section 402 of ERISA further provides 
that the term ``named fiduciary'' means a fiduciary who is named in 
the plan instrument, or who, pursuant to a procedure specified in 
the plan, is identified as a fiduciary (A) by a person who is an 
employer or employee organization with respect to the plan or (B) by 
such an employer and such an employee organization acting jointly.
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ii. Same Plan Administrator
    The SECURE Act requires that all the plans have the same 
administrator as defined in section 3(16)(A) of ERISA and plan 
administrator as defined in Code section 414(g). As explained in the 
September 2021 proposal, in general, under ERISA and the Code the 
``plan administrator'' or ``administrator'' is the person specifically 
so designated by the terms of the instrument under which the plan is 
operated. If an administrator is not so designated, the administrator/
plan administrator is the plan sponsor, as defined in ERISA section 
3(16)(B). The Departments explained that they do not believe that the 
default ``plan sponsor'' provision is workable in the context of a 
statutorily mandated construct for a consolidated annual report 
covering multiple separate plans. No significant comments were received

[[Page 11994]]

raising concerns with the proposal or suggesting alternatives. 
Accordingly, the final forms revisions require that there be a 
designated common plan administrator for all the participating plans of 
the DCG reporting arrangement and that the common plan administrator 
(which is expected to be an entity or organization) must be identified 
as the administrator on the DCG Form 5500 and any applicable schedules 
pursuant to the Form 5500 instructions, which have been updated to 
accommodate DCG filers.
iii. Same Investments or Investment Options
    The SECURE Act further requires that all the participating plans of 
the DCG provide the ``same investments or investment options'' to 
participants and beneficiaries to be able to rely on the DCG 
consolidated Form 5500 as satisfying their annual reporting obligation. 
In the Departments' view, the ``same investments'' requirement covers 
individual account plans in which some or all of the investments are 
not subject to participant direction, and the ``same investment 
options'' requirement applies to those aspects of the plan's 
investments that are subject to participant direction. This statutory 
requirement was, in part, intended to allow for appropriate 
transparency in the aggregated financial information that will be filed 
by the DCG consistent with the objective of the DCG to provide plans 
with a more efficient and less burdensome filing alternative. The 
Committee Report of the House Ways and Means Committee for the House 
version of the SECURE Act expressly states that the DCG provisions were 
intended to apply to identical plans: ``The Committee believes that, in 
the case of identical plans (that is, plans with the same plan year, 
trustee, administrator and investments) maintained by unrelated 
employers, permitting a single Form 5500, containing information 
specific to each plan, rather than requiring a separate Form 5500 for 
each plan as under present law, can reduce aggregate administrative 
costs, making it easier for small employers to sponsor a retirement 
plan and thus improving retirement savings.'' \33\
---------------------------------------------------------------------------

    \33\ H.R. Report No. 116-65 Part 1 at pages 81-82 (2019).
---------------------------------------------------------------------------

    Commenters did not raise objections or concerns with this ``common 
investments'' condition in general, but some commenters did raise 
questions regarding whether there would be further clarifications or 
examples provided regarding the criteria for the offering of the ``same 
investments or investment options,'' with one specifically asking about 
use of investment platforms that allow participating plans to choose 
investments to offer their participants from a menu of available 
investments. The commenters suggested that DOL should clarify that the 
``same investments or investment options'' condition is met in the case 
of a common investment platform in which participating plans may select 
from available investments but each participating plan is not required 
to make all available investments available to their participants. A 
few commenters focused on the related provision in the proposal that 
prohibited the use of brokerage windows and investments in employer 
securities, saying that the proposal inappropriately limited these plan 
features from the DCG reporting arrangement and urged the Agencies to 
reconsider.
    On the brokerage window prohibition in the proposal, one commenter 
opposed inclusion of brokerage windows in DCG reporting arrangements. 
That commenter believes the type of disclosures necessary are 
unworkable in group reporting arrangements and that plans with 
brokerage windows would not meet the ``same investment option'' 
requirement the commenter deems crucial to DCG reporting requirements 
because of the wider range of investments in brokerage windows. Most 
commenters, however, cited varying reasons for supporting inclusion of 
brokerage windows, also known as self-directed brokerage accounts 
(SDBAs), including arguments that: (1) a wider choice of investments 
improves participant engagement with the plan, (2) allowing a brokerage 
window allows plan sponsors to otherwise offer a smaller menu of plan 
investments, (3) almost half of defined contribution pension plans use 
SBDAs, and (4) SBDAs are considered an important retirement plan 
offering.
    Commenters that supported allowing brokerage windows argued that 
the brokerage window itself, not each underlying investment available 
through the window, should be classified as the ``investment or 
investment option.'' \34\ However, views diverged as to whether all 
plans within a DCG must offer brokerage windows to their participants 
and whether the investment options offered through brokerage windows 
must be the same for each plan participating in a DCG. One commenter 
argued that a SDBA with a designated brokerage provider with the same 
types of investments for all the plans within a DCG should be seen as 
meeting the SECURE Act requirement. This commenter also recommended 
that ``Qualifying SDBA'' should be defined as: a self-directed 
brokerage account or window available to all plans in the DCG as an 
investment alternative in addition to other investment options offered 
to such plans and that meets the following conditions: (1) it is 
provided by a single designated registered broker-dealer, and (2) the 
only permitted investments in the Qualifying SDBA are assets with a 
readily determinable fair market value as described in 29 CFR 2520.103-
1(c)(2)(ii)(C).\35\ Other commenters suggested that the SECURE Act's 
investment commonality requirement could be achieved if all individual 
plans within a DCG were offered the same brokerage window; but that 
each such individual plan should not be required to make all of the 
investments in the brokerage platform available to its participants. 
One association commenter stated that some of its members believe 
commonality would be achieved only if all individual plans within a DCG 
offer a brokerage window, while other members believe commonality would 
be achieved if each such individual plan within a DCG has

[[Page 11995]]

the option of whether to make the brokerage window available to its 
participants.
---------------------------------------------------------------------------

    \34\ As an alternative interpretation of Section 202 of the 
SECURE Act, a commenter suggested considering brokerage windows a 
``valuable service to a participant offered through a broker dealer, 
rather than an investment or investment option,'' as supposedly 
consistent with DOL guidance that brokerage windows are not 
designated investment alternatives. The DOL does not believe that 
this is a viable interpretation of the SECURE Act, especially if the 
brokerage window ``service'' allows for non-uniform investment 
options for different participating plans. Such an interpretation 
could authorize a DCG reporting arrangement to have plans that only 
provide a ``brokerage window'' service and effectively read out of 
the statute the requirement that participating plans have the same 
investment or investment options.
    \35\ 29 CFR 2520.103-1(c)(2) sets forth conditions for small 
pension plans to be eligible to file the Form 5500-SF, including 
requirements in 29 CFR 2520.103-1(c)(2)(ii)(C) that focus on whether 
the plan's investments are in assets that have a readily 
determinable fair market value. The regulation generally defines 
assets that have a readily determinable fair market value as shares 
issued by an investment company registered under the Investment 
Company Act of 1940; investment and annuity contracts issued by any 
insurance company (subject to certain state business qualification 
and valuation disclosures), bank investment contracts issued by a 
bank or similar financial institution (See, 29 CFR 2550.408b-4(c)) 
subject to annual valuation disclosures, securities (except employer 
securities) traded on a public exchange; government securities 
issued by the United States or by a State; cash or cash equivalents 
held by a bank or similar financial institution (See 29 CFR 
2550.408b-4(c)) by an insurance company, by a registered broker-
dealer under, or by any other organization authorized to act as a 
trustee for individual retirement accounts under Code section 408; 
and any loan meeting the requirements of ERISA section 408(b)(1), 
and the regulations issued thereunder.
---------------------------------------------------------------------------

    One commenter supporting inclusion of SBDAs did not support any 
changes to the Form 5500 requiring additional information regarding 
SDBAs, participants using SDBAs, or the individual assets held by plans 
as a result of investments made through SDBAs, assuming the DOL adopts 
the commenter's definition for ``Qualifying SDBAs.'' Under that 
definition, as described above, a ``Qualifying SDBA'' would not include 
tangible personal property, loans, partnerships or joint-venture 
interests, real property, employer securities, or investments that 
could result in a loss in excess of the account balance of the 
participant or beneficiary who directed the transaction. Those are the 
classes of assets that the Form 5500-SF currently requires to be 
reported separately even if held through a brokerage window. Other 
commenters argued that assets in brokerage window investments should be 
reported in the aggregate generally as one asset held for investment 
purposes and that brokerage window investments should not be broken 
down further. The commenter argued that further detail would be too 
costly due to the need to involve third parties and also asserted that 
more detailed information would not provide valuable information to the 
Agencies.
    With respect to allowing employer securities as a DCG investment 
option, one commenter expressed support for the restriction on the 
holding of employer securities as an investment and three others 
supported allowing employer securities as an investment. The commenters 
stated that the proposal would exclude existing plans that offer 
employer securities to its participants from participating in DCGs. One 
of those commenters cited the example of the separate retirement plans 
of a parent company and its subsidiaries that would qualify to file a 
consolidated report except for the presence of one plan in the group 
that offers employer securities. That same commenter also was concerned 
that employers should not be forced to choose between making employer 
securities available as an investment option (which ERISA specifically 
contemplates and encourages) and participating in a DCG reporting 
arrangement. All of the commenters who addressed the employer security 
issue argued that indirect holding of employer securities in a bank 
collective investment fund or insurance company pooled separate account 
should not preclude a plan from joining a DCG reporting arrangement. 
The commenters asked the DOL to clarify that a plan with a diversified 
pooled investment fund, such as a collective investment trust, under 
which participants may indirectly invest in employer securities, would 
be eligible to participate in a DCG arrangement, as long as the 
diversified pooled investment fund option is offered to all plans in 
the DCG.
    The DOL disagrees with commenters who argued that the SECURE Act 
precludes the exercise of regulatory discretion to place reasonable 
guardrails on the use of the DCG alternative reporting method, given 
the cited authorities under SECURE Act Section 202(b) and ERISA section 
110. Rather, under existing ERISA authorities, the DOL must find that a 
simplified reporting option is ``appropriate'' under ERISA's protective 
provisions. Similarly, for the DOL to establish an alternative method 
of complying with the generally applicable annual reporting 
requirements under ERISA, the DOL would need to make findings that: (1) 
the alternative method provides adequate disclosure to participants and 
beneficiaries and adequate reporting to the Secretary; (2) the 
application of the requirement of part 1 of Title I of ERISA would (A) 
increase the costs to the plan, or (B) impose unreasonable 
administrative burdens with respect to the operation of the plan; and 
(3) the application of part 1 would be adverse to the interests of plan 
participants in the aggregate. The Departments do not view the SECURE 
Act as directing them to ignore the protective conditions of ERISA and 
look only to the specific enumerated criteria in section 202(b) of the 
SECURE Act in establishing a consolidated reporting option for DCGs. 
Rather, such a reading of the SECURE Act would compromise enforcement 
and administration of ERISA and the Code and impair the disclosure 
interests of plan participants and beneficiaries in plans that rely on 
a DCG consolidated return/report.
    The DOL also is not persuaded by commenters arguments that 
Congress' direction of ``sameness'' for investments, and other 
indications that a DCG is intended for essentially ``identical'' plans, 
should be ignored in favor of allowing substantial variation in the 
menu of investment options available to participants in different plans 
covered by the DCG Form 5500, including employer securities. In the 
DOL's view, allowing substantial variation in the investments or 
investment options of participating plans is not an appropriate reading 
of the SECURE Act terminology requiring the ``same'' investments or 
investment options. That kind of investment structure also would 
require more detailed financial reporting at the plan level on the 
Schedule DCG to provide appropriate oversight and accountability and, 
therefore, would be inconsistent with the objective of reduced 
aggregate administrative costs of annual reporting for plans in DCG 
reporting arrangements. Accordingly, the final forms revisions and 
related final rule would not permit a DCG to satisfy the same 
investments or investment options requirement by offering a common 
investment platform with a broad array of available investments with 
each participating plan potentially having unique investment option 
menus selected from that broad platform. Further, the Departments note 
that a DCG is just one alternative reporting method that eligible plans 
may use. Separate annual reporting alternatives remain in place for 
plans that would prefer a broader range of investment choices or a more 
customized plan design. The fact that certain types of plans might not 
be able to file as part of a DCG based on types of investments they 
wish to offer as options does not outweigh the interest in following 
Congress' directive to develop a new filing option aimed at simplifying 
filing and reducing costs (while still meeting important transparency 
safeguards) for plans with key common characteristics, including plan 
investments, plan trustees, plan fiduciaries and plan administrators.
    Nonetheless, the Departments agree that some modifications to the 
proposal regarding brokerage windows and employer securities could be 
adopted that would provide more flexibility to plans and DCGs while 
still providing for an adequate level of uniformity, financial 
transparency and accountability. Specifically, the DOL and IRS 
concluded that they could permissibly interpret the SECURE Act to 
classify a brokerage window as the ``same investment option'' provided 
that: (1) the brokerage window is available through a single designated 
brokerage window provider that is a registered broker-dealer, and (2) 
the only permitted investments in the brokerage window are assets with 
a readily determinable fair market value as described in 29 CFR 
2520.103-1(c)(2)(ii)(C). Also, the Departments agree that publicly 
traded securities of a particular employer held in a DCG common 
investment option, such as a mutual fund or some type of collective 
trust or pooled account investment option, that is otherwise a prudent 
plan option and is an available option to all

[[Page 11996]]

DCG participating plans, would not preclude a plan sponsored by the 
issuing employer from being included in the DCG reporting arrangement, 
provided all other DCG structural requirements are met. In this case, 
the DOL views the indirect holding to be part of the otherwise ``same 
investment'' option holding such security, rather than being the 
investment option itself. The Departments are not adopting the 
commenters' other suggested loosening of the ``same investments or 
investment options'' because the Departments concluded that the 
suggested further loosening was not consistent with the SECURE Act 
requirements and underlying goal of improving the administrative 
simplicity and efficacy of annual reporting for plans in a DCG 
reporting arrangement.
f. DCG Eligibility for Plans Without a Trustee
    Although, as described above, section 202 of the SECURE Act 
includes a requirement that eligible plans must have the same 
``trustee'' as described in section 403(a) of ERISA, the DOL and IRS 
note that it is commonplace for ERISA-covered plans to use insurance 
(e.g., individual account plans using variable annuity structures and 
Code section 403(b)(1) plans) and custodial accounts (e.g., Code 
section 403(b)(7) plans) as funding vehicles. ERISA section 403(b) 
includes explicit exceptions to the trust requirement for such plan 
designs. There is no legislative history for SECURE Act section 202 
discussing why the provision was limited to plans with ``trustees.'' 
Although, in the September 2021 proposal, the DOL and IRS expressed 
concern about whether the SECURE Act section 202 requirement for a 
``trustee'' could be read to include plans without trustees funded by 
insurance or custodial accounts pursuant to the trust exceptions in 
ERISA section 403(b), the DOL and IRS specifically solicited comments 
on whether they should, pursuant to their general regulatory authority, 
provide a consolidated reporting option for plans that use the same 
custodial account or insurance policy as the funding vehicle for their 
plans, and if so, whether special conditions should apply in light of 
the absence of a trustee or trustees.
    A number of commenters responded to the request and said they 
support and encourage expanding DCG reporting to 403(b) plans, even 
though they technically do not have trustees but instead use annuities 
or custodial accounts. Notwithstanding the explicit trust requirement 
in the statutory provision, a number of commenters said there was no 
evidence of intent by Congress to exclude 403(b) plans and urged the 
DOL and IRS to allow 403(b) plans to participate in DCGs.\36\ Several 
commenters said the Departments have the regulatory authority to expand 
access to 403(b) plans and encouraged exercising it in this instance. 
Several commenters said that such plans that use the same insurance 
company or the same custodian are functionally equivalent to groups of 
plans that have a common trustee, and another commenter said limiting 
DCG reporting to only trusteed plans was unnecessarily restrictive. 
Other commenters cited section 403 of ERISA and 401(f) of the Code as 
providing support for custodial accounts and contracts to be treated 
similar to trusts for DCG purposes, since they are treated similar to 
trusteed plans in other contexts. Notwithstanding the fact that section 
202(c)(2)(A) of the SECURE Act requires all plans in a DCG to have 
``the same trustee (as described in section 403(a) of [ERISA] . . .),'' 
one commenter said they found no legal or policy basis to preclude such 
plans from the cost efficiencies that SECURE Act section 202 was 
intended to offer.
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    \36\ Several commenters argued that it is a permissible reading 
of the statute to say that Congress by requiring the ``same 
trustee'' meant to include plans that lack a trustee because having 
``no trustee'' is the ``same trustee'' (i.e., none). The Departments 
are not prepared to conclude that the identical plan conditions in 
the SECURE Act can reasonably be read to say that a plan having no 
trustee is the same as that plan having the same trustee or trustees 
as other plans participating in the DCG.
---------------------------------------------------------------------------

    After considering the comments, the Departments continue to believe 
that the SECURE Act provision is limited to plans with trustees but 
agree that it may still be possible pursuant to their general 
regulatory authority to provide a DCG reporting option for 403(b) plans 
notwithstanding the fact that the plans' assets are held by an 
insurance company or a custodian rather than a trustee. However, the 
Departments anticipate that any rules that would permit 403(b) plans to 
participate in a DCG would require a DCG to consist of only 403(b) 
plans because it does not appear to be possible for a 403(b) plan to 
meet the commonality requirements of SECURE Act section 202 with 401(a) 
plans participating in a DCG. There may be other unique complications 
with properly structuring a DCG reporting option for 403(b) plans that 
need to be identified and addressed. Accordingly, before exercising any 
regulatory authority to permit 403(b) plans to participate in a DCG, 
the Departments request comments on how such an arrangement would be 
implemented. The Departments are particularly interested in comments 
(1) concerning whether a 403(b) plan DCG should include (a) only 403(b) 
plans consisting of only Code section 403(b)(1) annuity contracts 
offered by the same insurance company or of only Code section 403(b)(7) 
custodial accounts maintained by the same custodian, or (b) a group of 
403(b) plans, each of which consist of both annuity contracts under 
Code section 403(b)(1) offered by the same insurance company and 
custodial accounts under Code section 403(b)(7) maintained by the same 
custodian, (2) concerning arrangements described in (1)(b) above, (a) 
views on how the SECURE Act's investment commonality requirement would 
be met given that, unlike trustees in 401(a) plans, the insurance 
companies and custodians that hold plan assets in 403(b) plans also are 
responsible for deciding the investments available under the plan, and 
(b) views on how the common plan administrator requirement will be 
satisfied if the insurance company and custodian are not related 
entities.
g. No DCG Participation by Multiemployer Plans or MEPs
    With respect to the condition in the proposal that prohibited 
multiemployer plans and MEPs from being part of DCG reporting 
arrangements, the September 2021 proposal solicited public comments on 
whether the final rule should include multiemployer plans and MEPs, and 
if so, what conditions should apply to DCG reporting arrangements that 
would include such plans. Two commenters supported the restrictions on 
the ability of multiemployer plans' and MEPs' to participate in a DCG. 
One representative of audit professionals cited complicating audit 
procedures as a reason for such exclusion. No comments raised 
substantial concerns or proposed alternatives. The DOL and IRS do not 
believe that section 202 of the SECURE Act was focused on allowing 
groups of multiemployer plans or MEPs, which already file a single Form 
5500 that covers all of the employers that participate in the plan, to 
file a single consolidated Form 5500 covering the group of 
multiemployer plans or MEPs. Further, the DOL and IRS are concerned 
that allowing a single consolidated Form 5500 in the case of such 
plans, for example, in the case of a group of multiemployer section 
401(k) plans, could result in an undesirable reduction in transparency 
and financial accountability. Accordingly, the DOL and IRS retain this 
restriction in the final forms revisions.

[[Page 11997]]

h. Form 5558 Extension for DCG Reporting Arrangements
    The September 2021 proposal did not expressly allow for plans 
participating in a DCG reporting arrangement to use a single filing of 
a Form 5558 to obtain an extension of the due date for their annual 
return report. The proposal did, however, request public comments on 
that issue. The current Form 5558, Application for Extension of Time To 
File Certain Employee Plan Returns, is the IRS Form used by a plan 
sponsor to apply for an extension of time to file a Form 5500 series 
return, Form 8955-SSA, and Form 5330. The commenters expressed concerns 
that requiring a separate Form 5558 for each participating employer 
would be burdensome, be likely to result in inadvertent mistakes by 
plan sponsors who were relying on the DCG to satisfy their plan's 
annual reporting obligations, and not be necessary to ensure 
appropriate accountability. The commenters on this issue recommended 
that the Agencies permit a DCG reporting arrangement to file a single 
Form 5558 requesting an extension of time to file the Form 5500 for all 
plans that participate in the DCG reporting arrangement. The commenters 
further recommend that a list of participating employers' EINs and plan 
numbers be attached to the single Form 5558. The Agencies agreed that 
the commenters' recommendation would reduce burdens and still provide 
appropriate accountability. Accordingly, the final forms revisions 
permit a DCG reporting arrangement to file a single Form 5558 for an 
extension of time to file a Form 5500 return that includes a list of 
the individual plans participating in the DCG reporting arrangement 
covered by the single Form 5558 request for an extension. Form 5558 is 
also revised to allow electronic filing with EFAST2.
i. No Form 5500-SF or Form 5500-EZ Filing Options for DCGs
    The September 2021 proposal noted the Departments' expectation that 
savings for plans relying on a DCG filing compared to plans filing 
separately would generally only begin to emerge when the DCG 
collectively exceeds an aggregate participant count of 100 
participants. In other words, it was not expected that a DCG filing 
would provide meaningful cost savings for plans, as compared to the 
plans filing their own annual report, in the case of DCG arrangements 
with an aggregate participant count of under 100 participants. Rather, 
it was expected in such cases involving participant counts of under 100 
participants that the individual plans would likely qualify to file on 
Form 5500-SF and that they would likely find it more cost effective to 
file their own separate Form 5500-SF rather than relying on a DCG 
filing.\37\ Accordingly, the proposed rule did not provide any ``small 
plan'' option for a DCG consolidated annual report. The September 2021 
proposal, however, solicited comments on whether stakeholders expect 
there to be ``small'' DGCs, whether a ``small'' DCG alternative should 
be made available, and what the content requirements for such an 
alternative should be, e.g., whether the content of the ``small'' DCG 
annual return/report should include Schedule I instead of Schedule H, 
whether it should include the IQPA audit report on the DCG trust, and 
whether it should include the Schedule C.\38\ One commenter opposed 
simplified DCG reporting as a general matter and also specifically 
opposed allowing DCGs to file as small plan filers, citing a lack of 
transparency regarding plan information that could occur should that be 
permitted.
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    \37\ See Section III.A.1 of the September 2021 proposal, which 
discussed the Departments' view that creating a consolidated group 
filing for employers required to file a Form 5500-EZ is similarly 
unlikely to generate administrative efficiencies for those 
employers, as compared to continuing to file separately.
    \38\ Since the aggregate participant count of the entire DCG 
would be less than 100, there could be no ``large plans'' 
participating in such a ``small'' DCG, so the issue of an individual 
audit for a participating large plan would not arise.
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    The final forms revisions do not include an option under which such 
a ``small'' DCG could file as a small plan filer. The final rule also 
does not adopt a separate DCG reporting arrangements for one-
participant plan sponsors. Two commenters provided input regarding 
whether the IRS should establish a separate DCG reporting arrangement 
for one-participant plan sponsors that file the Form 5500-EZ. One 
commenter did not think any of their clients currently filing Form 
5500-EZ would be interested in participating in a DCG reporting 
arrangement. This is because investments in the commenter's clients' 
one-participant plans are typically customized to meet the needs of the 
single participant and differ from investment alternatives under a plan 
with participant-directed investments. Another commenter encouraged the 
IRS to develop a DCG reporting arrangement for Form 5500-EZ filers--
particularly a structure under which Form 5500-EZ filers would be 
permitted to file as part of a group consisting only of Form 5500-EZ 
filers. As discussed in the September 2021 proposal, the IRS views the 
current Form 5500-EZ as a simple and streamlined method for one-
participant plan sponsors to satisfy the annual reporting requirement 
under Code section 6058. Consequently, creating a separate DCG 
reporting arrangement for one-participant plan sponsors would not 
effectively reduce filing burdens and would be unlikely to generate the 
administrative efficiencies and cost-savings that were the purpose 
behind the inclusion of a consolidated group filing structure in the 
SECURE Act. The information requested on the Schedule DCG that is 
required to be completed by each individual plan participating in a DCG 
reporting arrangement would be almost identical to the information 
requested on the current Form 5500-EZ. Additionally, the IRS would 
incur significant costs and use substantial resources to develop and 
process a separate DCG reporting arrangement for the Form 5500-EZ 
filers. The IRS will continue evaluating and communicating with 
stakeholders to determine if it is in their best interests to have a 
DCG reporting arrangement for one-participant plan sponsors in the 
future and will consider revisiting its decision not to have a DCG 
reporting arrangement for Form 5500-EZ filers, if stakeholders 
demonstrate a significant demand for this structure.

2. Schedule MEP (Multiple-Employer Pension Plan Information) and MEP 
Reporting

    Consistent with the proposal, the final rule adds a new Schedule 
MEP (Multiple-Employer Pension Plan Information) to the Form 5500 
Annual Return/Report, and also adds a limited number of additional data 
items elsewhere on the Form 5500 relevant to MEPs. The Schedule MEP 
will generally consolidate SECURE Act related reporting for a MEP filer 
in one easily identifiable schedule. The Schedule MEP will report 
information specific to MEPs, including the ERISA section 103(g) 
participating employer information and aggregate account 
information.\39\ Questions intended to satisfy the SECURE Act's 
reporting requirements for PEPs and questions to link the Form PR 
(Pooled Employer Registration) and the Form 5500 for each plan operated 
by a PPP will also be on the Schedule MEP. A new checkbox will be added 
to the Form 5500 (Part II, line 10a(5)) to indicate that

[[Page 11998]]

Schedule MEP is attached to the Form 5500. The Schedule MEP will 
require information consistent with that which was required to be 
reported via attachment for 2021 and 2022 forms revisions, but will 
also accommodate certain SECURE Act 2.0 changes related to 403(b) 
plans, and will be largely consistent with the changes set forth in the 
proposal to create a new Schedule MEP. As discussed in more detail in 
later sections of the preamble, the DOL took into account commenters' 
input on certain items of information proposed on part III of Schedule 
MEP.
---------------------------------------------------------------------------

    \39\ The requirement to add the aggregate account balance and 
the new PEP information was already implemented beginning with the 
2021 forms pursuant to the Final Rule Phase I. The change being 
adopted in this final forms revision is to have the information 
reported in standardized format on the Schedule MEP itself, rather 
than as a non-standard attachment to the Form 5500.
---------------------------------------------------------------------------

    Schedule MEP, Part I, like the other schedules to the Form 5500, 
requires filers to enter identifying information (which must match the 
information entered on the Form 5500) and to indicate the plan type by 
checkbox. The instructions provide general definitions for purposes of 
annual reporting for the various categories of pension plans that must 
complete the Schedule MEP. The different types of MEP checkbox choices 
set forth in Part I of Schedule MEP are: (a) group or association 
retirement plans within the meaning of 29 CFR 2510.3-55(b) (i.e., 
association retirement plans); (b) professional employer organization 
plans within the meaning of 29 CFR 2510.3-55(c) (i.e., PEO plans): (c) 
pooled employer plans within the meaning of ERISA section 3(43) (PEPs); 
and (d) other MEPs covering the employees of two or more employers that 
are not single or multiemployer plans for annual reporting purposes. 
Multiemployer plans, as defined under section 3(37) of ERISA, are not 
required to complete the Schedule MEP.\40\
---------------------------------------------------------------------------

    \40\ Multiemployer defined benefit pension plans are required to 
provide on Form 5500, Schedule R (Retirement Plan Information), 
identifying information and the percentage of contributions for 
those plans that are five percent or more contributors for the plan 
year being reported.
---------------------------------------------------------------------------

    Schedule MEP, Part II includes a repeating line item on which all 
MEPs would report information under ERISA section 103(g) regarding 
participating employers, including employer/plan sponsor name, EIN, the 
percentage of total contributions to the plan or arrangement by each 
participating employer, and, for defined contribution plans only, the 
aggregate account balances information the SECURE Act added to ERISA 
section 103(g). That information is currently collected for MEPs as a 
non-standard attachment to the Form 5500 and Form 5500-SF, including, 
pursuant to the SECURE Act, the new data element added by the Final 
Rule Phase I to require reporting of the aggregate account balances for 
each participating employer in defined contribution MEPs only. Thus, 
the final forms revisions continue the provision in the September 2021 
proposal and Final Rule Phase I confirming that defined benefit MEPs 
are not required to report the aggregate account balances. Also, 
consistent with the September 2021 proposal, Part II includes special 
instructions and questions 2(e) through 2(g) for ``working owners'' 
(see 29 CFR 2510.3-55(d)(2)) or other individuals who are participants 
or beneficiaries who are no longer associated with a participating 
employer or participating employer plan.\41\
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    \41\ As noted above, the September 2021 proposal included 
changes that would have transferred to the DOL Form M-1 (Report for 
Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities 
Claiming Exception (ECEs)) (Form M-1) participating employer 
information for multiple-employer welfare arrangements that are 
required to file the Form M-1. The public comments on the proposal 
were mixed. Some supported the reporting of participating employer 
information by MEWAs, including plan and non-plan MEWAs, and the 
transfer of the reporting requirement to the Form M-1 for MEWAs that 
are group health plans and non-plan MEWAs that provide benefits 
consisting of medical care. Others, however, opposed both the 
collection in general and the transfer to the Form M-1 citing 
alleged absence of statutory authority to require such reporting 
either as part of the Form 5500 or the Form M-1 and privacy concerns 
with the reported information being included in the web available 
copies of filed Form 5500 and Form M-1 reports. After considering 
the public comments, the DOL decided to defer any transfer of the 
reporting requirement to the Form M-1 and to consider that change as 
part of the Agencies' broader Form 5500 improvement project. The 
DOL's semi-annual regulatory agenda describes the improvement 
project as including potential changes to group health plan annual 
reporting requirements. The DOL concluded that changes to the 
current requirements relating MEWA reporting of participating 
employer information would be better considered as part of that 
broader initiative. The Department, however, does not agree with the 
commenters who claimed the DOL lacked statutory or regulatory 
authority to require MEWA plans, including multiple employer group 
health plans, to report participating employer information as part 
of the Form 5500. The DOL's position on its legal authority was set 
forth in the September 2021 proposal. Accordingly, multiple-employer 
welfare plans required to file a Form 5500 are required to continue 
to report the participating employer information as an attachment to 
the Form 5500.
---------------------------------------------------------------------------

    Schedule MEP, Part III is comprised of only the two questions that 
were added to the annual report by the Final Rule Phase I as 
information reported via non-structured attachment (i.e., for form 
years 2021 and then until further notice). This final forms revisions 
transfers that data collection from being reported on a non-structured 
attachment to being reported on the Schedule MEP, Part III, Line 3. On 
Line 3, PEPs are required to indicate whether they are in compliance 
with the Form PR registration requirements and provide the Ack ID 
number for their latest Form PR filing.\42\
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    \42\ Ack ID is the acknowledgement code generated by the IRS in 
response to a completed filing for the most recent Form PR 
submitted. The instructions to the Form PR advise the pooled plan 
provider that it must keep, under ERISA section 107, the electronic 
receipt for the Form PR filing as part of the records of each pooled 
employer plan operated by the pooled plan provider.
---------------------------------------------------------------------------

    Two commenters expressed support for a separate Schedule MEP. One 
commenter pointed out that a new Schedule MEP makes it possible to 
systematically track and evaluate recently established plan types; 
significantly improves the disclosure and reporting regime for all 
plans (including MEPs), and eases access to, and use of, Form 5500 
information. Another commenter agreed, noting that a new Schedule MEP 
is consistent with changes necessary under the SECURE Act. Some 
commenters opposed a Schedule MEP as singling out PEPs for special 
reporting requirements that are not imposed on other MEPs. Others did 
not object to the idea of a Schedule MEP in general but expressed 
concern about some elements of Part III of the proposed Schedule 
MEP.\43\ Comments raising concerns with reporting on Form PR compliance 
were addressed in the Final Rule Phase I,\44\ and will not be revisited 
here as this final forms revisions notice simply transfers those 
questions regarding Form PR compliance from being answered in a non-
standard attachment to the Schedule MEP without substantive change to 
the questions (i.e., simply renumbering to conform to the Schedule MEP 
format). The remaining comments on other questions proposed in 2021 for 
Schedule MEP, Part III are set forth below.
---------------------------------------------------------------------------

    \43\ Several had more general concerns regarding audits of PEPs 
that were previously addressed in the 2021 Final Forms Revisions. 
See Final Rule Phase I, 86 FR 73976, 73977 fn.7 and related text 
(Dec. 29, 2021).
    \44\ 86 FR 7396, (Dec. 29, 2021).
---------------------------------------------------------------------------

    In the Final Rule Phase I, the DOL stated it read certain 
commenter's questions as primarily directed at issues that may arise in 
the context of a standardized Schedule MEP structure for reporting this 
information. One commenter said that the instructions to Part II should 
be clarified. The amounts listed in line 2c and line 2f must equal 100% 
(with a permitted variance of less than 1% due to rounding). The 
amounts listed in line 2d and 2g must equal the amount listed on line 
1l(b) of the Schedule H or on line 1c(b) of the Schedule I (with a 
permitted variance of less than 1% of the amount from Schedule H or 
Schedule I due to rounding). Another commenter requested clarification 
of the requirement to report the ``Percentage of Total Contributions 
for the Plan Year'' on line 2c (element 3 for the 2021 non-standard 
attachment). Specifically, the

[[Page 11999]]

commenter asked whether the total of all participating employers must 
equal 100 percent, and whether it will cause red flags with the DOL/IRS 
if it does not. They also asked whether filers should round the 
percentage entry for each employer to decimal places, and if so, how 
many. Two commenters noted that the information on participating plans 
will be reported in a structured format on Schedule MEP and recommended 
DOL consider implementing checks within the filing system to ensure 
these summations are valid before accepting filings to reduce errors 
and align with the instructions. The Agencies have taken into account 
these comments in designing the form and developing appropriate 
instructions and edit tests consistent with principles on rounding set 
forth in the 2021 Final Forms Revisions.\45\ The DOL also reiterates 
that the SECURE Act expressly states that the aggregate account 
balances information should be determined as the sum of the account 
balances of the employees of the employer and the beneficiaries of such 
employees. In the DOL's view, an end-of-year valuation is an 
appropriate reporting requirement, as it will provide the most up-to-
date value for the plan year covered by the Form 5500 report. The final 
instructions for the 2023 Form 5500 include directions to that effect. 
Further, rounding to the nearest dollar, as with the financial 
reporting on other parts of the Form 5500 and schedules, will be used 
for data entered on Schedule MEP. The final instructions to 2021 Form 
5500 were revised to provide this clarification as well.\46\
---------------------------------------------------------------------------

    \45\ The 2021 Final Forms Revisions provided that, for the 2021 
reporting year, it would be acceptable for filers to round to the 
nearest whole number similar to rounding conventions that apply to 
the Form 5500 financial statements and schedules. It further stated 
that to the extent the filer's concern is whether rounding could 
result in the total reported percentage either slightly above or 
slightly below 100 percent, the filer can indicate that on the non-
standard attachment as part of its filing.
    \46\ The DOL understands from some comments on the proposal 
that, depending on the treatment of receivables and forfeitures by 
the plan, the sum of the account balances of the employees of each 
employer and the beneficiaries of such employees may not match the 
net asset value reported on Schedule H or I. The DOL believes that 
the aggregate account balance information should be calculated and 
reported in accordance with the statutory direction in the SECURE 
Act. Filers can attach an explanatory statement to the extent they 
wish to explain any difference between that sum and other total 
asset values reported on the Form 5500.
---------------------------------------------------------------------------

    Some commenters opposed new PEP specific questions arguing that 
their inclusion without specific guidance on PEP's administrative 
duties under section 3(44)(C) is beyond the scope of Congress' 
directive to the Agencies (specifically DOL) and also not supported by 
the text of the SECURE Act. For example, one commenter said that the 
question regarding whether the PPP operating the plan is in compliance 
with the PPP registration statement is ambiguous and unclear, including 
due to pending agency rulemakings (e.g., IRS one bad apple guidance). 
That commenter, and others, also indicated that, while the SECURE Act 
adds specific disclosures for PEPs, it does not include a special 
reporting standard for PEPs. They claimed subjecting a PEP to 
heightened reporting requirements, when other plans treated as single 
plans are not, is arbitrary and unsupported by statute. As indicated 
below, the final Schedule MEP, Part III, includes only questions 
already added in 2021 and 2022 by the Final Rule Phase I regarding Form 
PR compliance for reasons articulated in the Final Rule Phase I.
    The largest number of commenters expressed a concern with adding 
questions regarding prohibited transactions before guidance is issued, 
with one saying ERISA section 3(44)(D) specifically provides for a good 
faith reliance standard before ERISA section 3(44)(C) statutory 
guidance is issued. One commenter said that Schedule H already requires 
the disclosure of any nonexempt transactions with any party-in-interest 
and noted that adding required disclosures on the subject on the 
Schedule MEP would be burdensome on businesses, including small 
businesses entering the PEP service provider market. Four commenters 
said that adding Part III, Line 6, of the proposed Schedule MEP 
provides little benefit and that this line should not be added before 
issuing additional guidance. Five commenters said not to add questions 
before DOL addresses the issues raised in the RFI related to PEPs, 
which specifically requested information relating to conflicts and 
prohibited transaction exemptions (PTEs). One commenter argued that the 
prohibited transaction rules are complex. Requiring a disclosure that 
boils complex legal opinions down to a few sentences will likely result 
in many disclosures that are confusing and potentially misleading. One 
commenter had very specific concerns for PEO compliance with Part III 
of Schedule MEP, saying it introduces requirements that would apply 
only to a subset of multiple-employer retirement plans. That commenter 
said that the proposed rule would have the effect of establishing 
different sets of reporting requirements for PEOs, depending on whether 
the PEO is sponsoring a MEP or acting as a PPP for a PEP. For the 
latter, the proposed Schedule MEP would require completion of Part III 
of Schedule MEP. Among other requirements, the commenter noted that, as 
proposed, Part III would have obligated a PEP to indicate whether the 
PPP has complied with the registration requirements for PPPs and to 
indicate whether certain services were provided by an affiliate and, if 
relying on a PTE for the use of an affiliate, to identify the 
prohibited transaction exemption. Finally, two commenters pointed out 
that the instructions for the proposed Part III PPP questions included 
a reporting requirement related to ``affiliates or other related 
parties'' to the PPP that did not define ``other related parties.'' 
They noted that to the extent that ``related party'' is intended to 
encompass any entity in which the PPP may have an interest which may 
affect its best judgement as a fiduciary, this is a very intensive 
facts and circumstances inquiry for which even DOL itself will not 
issue advisory opinions.
    After considering the public comments, the DOL decided to not 
include some questions originally proposed for Part III on the final 
Schedule MEP. Some questions regarding Form PR compliance were already 
added to the Schedule MEP, Part III, by the Final Rule Phase I on 2021 
form changes. This final forms revision transfers those two PEP 
specific questions from Form 5500, Part I, Line A checkbox instructions 
to Schedule MEP, Part III, Line 3a and Line 3b, starting with the 2023 
Form 5500 Annual Return/Report. The specific changes to accomplish this 
transfer can be found in Appendix A, which sets forth the new Schedule 
MEP and related instructions, and Appendix F, dealing with conforming 
and other miscellaneous changes to forms and instructions.
    In the September 2021 proposal, the DOL solicited comments on 
enhancing fee transparency, specifically on whether more tailored 
questions should be added, in addition to those already on the 
Schedules C and H, to report fee and expense information on PEPs and 
other MEPs, including information on how fees and expenses are 
allocated among participating employers and among covered participants 
and beneficiaries. Two commenters expressed opposition to more 
questions on fees and expenses. One simply opined that currently 
required fee and expense reporting and disclosure is sufficient for 
MEPs. The second commenter provided a more detailed comment stating 
that in the case of a defined benefit MEP, generating and

[[Page 12000]]

reporting an expense amount per participant would be particularly 
unhelpful because expenses do not reduce or affect the benefit to which 
a participant is entitled, and requiring disclosure of expenses with 
respect to each employer would require that this amount be calculated, 
as it is not currently a metric used or found useful by such plans. One 
commenter supporting the DOL's proposal for more disclosures on fees 
and expenses, noting that research suggests that for multiple-employer 
plans disclosure about services provided by affiliates, as well as 
comprehensive disclosure about the allocation of fees and expenses, is 
critical for effective monitoring and oversight. The commenter 
identified a variety of PEO situations involving PEO MEPs, saying it is 
necessary to consider how the bundling of services and costs for a 
variety of HR services may affect the required disclosures on Form 
5550. The commenter noted that PEOs may offer various benefits, 
including retirement plans, health insurance, workers' compensation, 
and unemployment insurance policies. In this capacity, the PEO may pay 
itself or an affiliated entity for the provision of administrative or 
investment services to a plan, charge a markup on rates that the 
``pool'' can obtain, and pay itself insurance broker fees. This 
commenter noted that individual client employers, meanwhile, may have 
limited ability and incentive to monitor their PEO-sponsored benefit 
plans, particularly if the fees for various HR services and benefits 
are bundled, and if leaving a PEO entails high switching costs. This 
final forms revision does not include such additional PEP and other MEP 
specific disclosures, but does include some enhancement of fee 
disclosures on administrative expenses for all filers, including MEP 
and PEP filers. Those enhancements are discussed below in the section 
on breaking out certain administrative expense categories on Schedule 
H.
    Further, as finalized for the 2021 Forms and instructions, the 
Schedule MEP and related Form 5500 and Form 5500-SF instructions will 
provide that all PEPs, similar to the current rule for multiemployer 
plans (and for DCGs as provided elsewhere in this final rule), file the 
Form 5500 regardless of whether they would otherwise be eligible to 
file the Form 5500-SF. Making the filings across plan types more 
uniform provides more consistent and informed oversight of collective 
retirement arrangements. Small PEPs, like other small plans that file 
the Form 5500, could file the Schedule I instead of the Schedule H and 
its financial attachments, are not required to complete the Schedule C 
or Schedule G, and may file without having an IQPA audit and attaching 
an IQPA report if the PEP meets the conditions for the small plan audit 
waiver.
    One commenter noted that while PEPs currently can only be offered 
as 401(a) plans, there are legislative proposals that, if enacted, 
would allow for 403(b) plan PEPs.\47\ The commenter urged agencies to 
finalize the Schedule MEP and instructions in a way that would make it 
easy for 403(b) plan PEPs to fill out Form 5500, should that bill be 
enacted into law. As noted above in the overview section, the SECURE 
Act 2.0 of 2022 (SECURE Act 2.0), which was modeled in some aspects on 
H.R. 2954, was signed into law on December 29, 2022, and included 
changes to the Code and ERISA that would permit 403(b) plans meeting 
certain criteria to participate in PEPs for plan years beginning after 
December 31, 2022. This final forms revision amends the definition of a 
PEP in the Schedule MEP instructions to reflect that change.
---------------------------------------------------------------------------

    \47\ The commenter points to the Securing a Strong Retirement 
Act of 2021, H.R. 2954 Sec.  103, as an example of such legislation.
---------------------------------------------------------------------------

3. Internal Revenue Code Compliance Questions

    A limited number of new IRS tax compliance questions are being 
added to the forms, schedules, and instructions beginning with the 2023 
plan year reports, including questions on the new Schedule DCG that are 
answered at the individual plan level (not the DCG level). The changes 
are largely unchanged from the September 2021 proposal and are in three 
major areas:
     Add a nondiscrimination and coverage test question to Form 
5500-SF, Schedule R, and new Schedule DCG. The question asks if the 
employer aggregated plans in testing whether the plan satisfied the 
nondiscrimination and coverage tests of Code sections 401(a)(4) and 
410(b).\48\
---------------------------------------------------------------------------

    \48\ This question was on Schedule T before that schedule was 
eliminated from the Form 5500 Annual Return/Report beginning with 
2005 plan year filings.
---------------------------------------------------------------------------

     Add a question to Form 5500-SF, Schedule R, and new 
Schedule DCG, for section 401(k) plans, asking whether, if applicable, 
the plan sponsor used the design-based safe harbor rules or the ``prior 
year'' or ``current year'' ADP test.
     Add a question to Form 5500-SF, Form 5500-EZ, Schedule R, 
and new Schedule DCG asking whether the employer is an adopter of a 
pre-approved plan that received a favorable IRS Opinion Letter, the 
date of the favorable Opinion Letter, and the Opinion Letter serial 
number.\49\
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    \49\ The list of plan characteristics codes for Lines 8a and 8b 
of Form 5500 and Lines 9a and 9b of Form 5500-SF are being amended 
to add ``403(b)'' after ``403(a),'' to read as follows: ``3D: Pre-
approved pension plan--A pre-approved plan under sections 401, 
403(a), 403(b), and 4975(e)(7) of the Code that is subject to a 
favorable opinion letter from the IRS.''
---------------------------------------------------------------------------

a. Revisions to IRS Tax Compliance Questions for Coverage, 
Nondiscrimination Testing, and Safe Harbor Status
    With respect to adding tax compliance questions, fifteen commenters 
submitted views on additional IRS tax compliance questions and other 
IRS-related changes that were included in the September 2021 proposal. 
Some of those commenters strongly supported the IRS including the tax 
compliance questions and recommended adding more questions. Other 
commenters recommended revising the IRS compliance questions to capture 
more accurately the information sought and to streamline data capture. 
One commenter recommended specifically that questions relating to 
coverage and nondiscrimination testing reflect that a plan may comply 
with nondiscrimination testing using multiple testing methods for 
different portions of the plan. The IRS revised the questions and 
instructions to gather information with respect to different testing 
methods used for different portions of the plan.
    One commenter recommended exempting multiple-employer 401(k) plans 
from answering nondiscrimination questions because these plans may have 
many participating employers, each of which is required to pass 
nondiscrimination testing separately. The commenter further noted that 
participating employers in a MEP, including in a PEP, may use different 
methods to separately satisfy nondiscrimination requirements. The IRS 
revised the instructions to exempt MEPs and PEPs from answering certain 
nondiscrimination questions.
    That same commenter also recommended simplifying the 
nondiscrimination questions by asking whether a plan uses ADP or ACP 
testing without regard to whether the testing is based on prior-year or 
current-year testing. The IRS is not adopting this recommendation. This 
nondiscrimination testing information enables the IRS to more precisely 
select issues and returns for audits and assists IRS agents in 
performing pre-audit

[[Page 12001]]

analysis and preparing initial audit information and document requests.
    One commenter expressed concern that completing the Code section 
410(b) coverage and ADP test results reported on a Form 5500 may not 
match the Form 5500 reporting period. The IRS believes that the plan's 
coverage and nondiscrimination tests (such as the ADP test) must be 
reported for the plan year for which those tests are completed. For 
each plan year, a 401(k) plan that is not a safe harbor plan is 
required to perform ADP testing. In calendar-year 401(k) plans, the 
current-year ADP test for a plan year is usually performed around the 
end of January of the following plan year. The due date for filing Form 
5500 for the plan year is the last day of the 7th calendar month after 
the end of the plan year, so the IRS expects that testing data will be 
available for reporting on the Form 5500 for that plan year.
    The final revisions include an additional nondiscrimination and 
coverage test question for the 2023 Form 5500 and Form 5500-SF. The 
question asks whether a plan maintained by an employer that has 
aggregated plans in its testing group satisfies the nondiscrimination 
and coverage tests of Code sections 401(a)(4) and 410(b). Adding this 
question allows the IRS to identify plans that have an increased risk 
of being non-compliant. The question is also helpful to the IRS in 
performing pre-audit analysis and allows the IRS to focus audit 
inquiries on information that is specifically relevant to the plan 
sponsor. This question also reflects an increased need to gather 
specific testing-group information in light of the elimination of 
optional coverage and nondiscrimination demonstrations under the IRS 
determination letter process. See Rev. Proc. 2012-6, 2012-1 I.R.B. 235, 
and Announcement 2011-82, 2011-52 I.R.B. 1052.
    The final revisions also include an additional question on the Form 
5500 and Form 5500-SF, with respect to section 401(k) plans, that asks 
whether the plan sponsor used a design-based safe harbor approach or, 
if applicable, the ``prior year'' or ``current year'' ADP test. Adding 
this question will allow the IRS to distinguish between section 401(k) 
plans that use ADP testing and those that use designed-based safe 
harbor approaches. This question will also help the IRS perform pre-
examination analysis and, for design-based safe harbor plans, verify 
whether safe harbor contributions comply with the terms of the plan and 
applicable safe harbor requirements.
b. Revisions to IRS Compliance Questions for Pre-Approved Plan Adopters
    One commenter recommended that the IRS eliminate or delay a new 
question included in the NPFR requiring disclosure by the adopter of a 
pre-approved plan document of the date and serial number of the pre-
approved plan document's favorable opinion letter, on the grounds that 
this information is not currently maintained in the adopter's 
recordkeeping systems. Further, the commenter urged that, if this 
question is added, that it be significantly delayed. The IRS does not 
agree with either of these recommendations. The IRS believes that a 
pre-approved plan document provider should make pre-approved plan 
information, including a favorable IRS opinion letter date and serial 
number, available to each adopting employer. Accordingly, the favorable 
opinion letter should be readily available when an adopting employer 
prepares a Form 5500 series return. Pre-approved plan information 
provided in response to the new question will assist the IRS in 
determining if the plan document is up to date for all required law 
changes.
    Accordingly, the final forms revisions include an additional 
question on the Form 5500, Form 5500-SF, and Form 5500-EZ, which asks 
whether the employer is an adopter of a pre-approved plan that received 
a favorable IRS opinion letter, and the date and serial number of the 
favorable IRS opinion letter. This question will help the IRS identify 
whether an employer has adopted a pre-approved plan and to determine 
whether the plan was timely adopted and amended.
    In addition, one commenter requested clarification in the 
instructions regarding whether an employer that makes modifications to 
a pre-approved plan document loses reliance on the favorable IRS 
opinion letter and, accordingly, is no longer a pre-approved plan 
adopter. The IRS agrees with the recommendation and revises the 
instructions to clarify that, pursuant to Revenue Procedure 2017-41, 
2017-29 IRB 92, an adopting employer is an employer that adopts a pre-
approved plan offered by a provider, including a plan that is word-for-
word identical to, or a minor modification of, a plan of a mass 
submitter. If a pre-approved plan is modified in such a way as to lose 
reliance on the favorable IRS opinion letter for that plan, then the 
plan is treated as an individually designed plan and, consequently, the 
adopting employer is no longer a pre-approved plan adopter.
c. Trust Questions are Removed From the 2023 Form 5500 Series
    As discussed in the NPFR, adding trust questions to the Form 5500 
series would enable the Agencies to focus on compliance concerns more 
efficiently for retirement plan trusts, including those for PEPs and 
DCG reporting arrangements. The Agencies received several comments 
regarding the new trust questions. Some commenters agreed that 
information about trusts should be reported on the Form 5500 and 
recommended adding an additional trust question to increase 
transparency if plans utilize multiple trusts. Some commenters 
expressed concerns about administrative costs and burdens of answering 
the new trust questions, because trust EINs often are not used and 
distributions are typically reported under a service provider EIN, and 
requested that these questions either be eliminated or made optional. 
Additionally, commenters noted that certain plans that are required to 
file a Form 5500 do not have a trust, such as 403(b) plans subject to 
Title I of ERISA. For those plans, the plan sponsor cannot confirm the 
trust's EIN or whether the IRS has deactivated the trust's EIN. One 
commenter also expressed concern that the plan's trust EIN is not an 
item of information currently maintained in most recordkeeping systems. 
Another commenter requested elimination of the trust questions because 
Announcement 2007-63, 2007-30 IRB 236, eliminated the employee benefit 
trust reporting requirement that had been included in the now-
discontinued Schedule P (Form 5500), Annual Return of Fiduciary of 
Employee Benefit Trust. Some commenters expressed concerns that trust 
questions do not fit the business model for insurance companies that 
provide recordkeeping services for retirement plans. Many of these 
commenters' clients utilize insurance company products, such as 
contracts with separate accounts, and do not have trusts. One commenter 
recommended that plans should be directed to skip these questions if 
the plans have engaged an insurance company to provide both insurance 
contract and recordkeeping services, because the trust-related 
questions do not fit an insurance-contract-only arrangement. One 
commenter requested clarification that leaving the trust questions 
blank in such cases would not increase the probability of an audit.
    Under Announcement 2007-63, the IRS elected to treat a plan's Form 
5500 series return as a filing for the plan's trust for purposes of 
starting the statute of limitations period under Code section

[[Page 12002]]

6501(g)(2). After consideration of all comments, the IRS has decided 
not to add trust questions to the 2023 Form 5500 series return. 
However, the IRS intends to continue evaluating possible alternative 
approaches for reporting trust information.
d. Declining To Add Certain New 403(b) Plan Questions To Form 5500 and 
Form 5500-SF
    One commenter recommended adding two new questions to the Form 5500 
and Form 5500-SF for 403(b) plans that would ask whether the 403(b) 
plan has notified all newly eligible participants of their eligibility 
to participate in the plan, and whether the 403(b) plan has 
communicated eligibility requirements annually to all eligible 
employees. This sort of additional annual reporting on 403(b) plans was 
not included in the September 2021 proposal, and would benefit from 
more public comment on the merits of asking such questions as part of 
an annual filing. Accordingly, although the Departments will continue 
to consider the relative costs and benefits of annual reporting on 
those subjects, such questions are not being added to the 2023 Form 
5500 and Form 5500-SF.
e. Declining To Add New Questions for Qualified Plan Loan Offsets
    Three commenters recommended adding qualified plan loan offset 
questions to Schedule H. Commenters expressed concerns that qualified 
plan loan offsets are a leading cause of premature distributions from 
401(k) plans and other similar defined contribution retirement plans, 
but that these loan offsets are not separately reported on Form 5500. A 
plan loan offset occurs when, pursuant to loan terms, a participant's 
benefit is reduced to repay the loan. A plan loan offset is treated as 
a distribution for tax purposes. Form 1099-R and its instructions 
already provide information for plan distributions including qualified 
plan loan offsets (as qualified plan loan offsets are reported using 
Distribution Code M).
    The Agencies note that in 2019 the Government Accountability Office 
recommended that DOL, in coordination with IRS, revise the Form 5500 to 
require plan sponsors to report qualified plan loan offsets as a 
separate line item distinct from other types of distributions to better 
identify the incidence and amount of loan offsets in 401(k) plans 
nationwide. In 2021, DOL advised GAO that a project to improve Form 
5500 data reporting was being reopened and that the specifics of the 
project were still under development. As noted above, that Form 5500 
general improvement project is on DOL's semi-annual agenda, and the DOL 
expects to focus on that project once final actions implementing the 
September 2021 proposal are completed.
    The IRS considered the public comments submitted on this issue and 
concluded that it does not need this information on Form 5500 for 
compliance audit purposes. The September 2021 proposal did not include 
a proposed addition of a line item to report loan offsets for Form 5500 
or Form 5500-SF filers. The DOL believes public comments on a proposal 
should be the next step and does not believe it is in a position to 
adopt such an annual reporting requirement as part of this final forms 
revisions notice. Accordingly, the Agencies are not adding such a 
question to the 2023 Form 5500, but DOL intends to consider GAO's 
recommendations and those of the public commenters noted above in 
connection with evaluating the specifics of its general Form 5500 
improvement project.
4. Participant-Count Methodology for Determining Eligibility for Small 
Plan Simplified Reporting Options for Individual Account Plans
    Both Form 5500 and 5500-SF and their instructions are being revised 
to reflect a change in the reporting methodology related to the number 
of participants used in the current threshold (i.e., less than 100 
participants) for determining when a defined contribution pension plan 
may file as a small plan. This change in methodology also includes 
eligibility for the waiver of the requirement for small plans to have 
an audit and include the report of an independent qualified public 
accountant (IQPA) with their annual report.
    The September 2021 proposal included a proposed change to the 
method of counting participants for determining when a defined 
contribution pension plan would be eligible for small plan reporting 
options, including the conditional waiver from the IQPA audit and 
report requirements. Currently, defined contribution pension plans 
determine whether they may file as small plans and whether they qualify 
for an audit waiver based on the number of participants with plan 
accounts as of the beginning of the plan year and on the number of 
participants who are eligible to elect to have contributions made under 
a section 401(k) qualified cash or deferred arrangement, even if they 
have not elected to participate and do not have an account balance in 
one of these plans. Specifically, the Form 5500 instructions currently 
instruct filers to ``[u]se the number of participants required to be 
entered in line 5 of the Form 5500 to determine whether a plan is a 
``small plan'' or ``large plan.'' Individual account plan filers are 
instructed to include on line 5 any individuals who are currently in 
employment covered by the plan and who are earning or retaining 
credited service under the plan. The instructions explain that ``[t]his 
includes any individuals who are eligible to elect to have the employer 
make payments under a Code section 401(k) qualified cash or deferred 
arrangement.'' \50\ The ``Who May File'' section of the Form 5500-SF 
Instructions lists among the eligibility conditions for filing the Form 
5500-SF that: ``The plan (a) covered fewer than 100 participants at the 
beginning of the plan year . . . '' and instructs filers to ``see 
instructions for line 5 on counting the number of participants.'' Those 
instructions instruct pension plan filers to include in their 
participant count ``any individuals who are eligible to elect to have 
the employer make payments under a Code section 401(k) qualified cash 
or deferred arrangement . . . .'' \51\
---------------------------------------------------------------------------

    \50\ 2021 Form 5500 instructions at page 19.
    \51\ 2021 Form 5500-SF instructions at pages 4, 11.
---------------------------------------------------------------------------

    Under the September 2021 proposal, instead of using all those 
eligible to participate, filers would look to the number of 
participants/beneficiaries with account balances as of the beginning of 
the plan year (the first plan year would use an end- of- year measure). 
This change was proposed partly in light of section 112 of the SECURE 
Act, which provides that long-term, part-time workers that have reached 
specified minimum age requirements and worked at least 500 hours in 
each of three consecutive 12-month periods must be permitted to make 
elective contributions to a Code section 401(k) qualified cash or 
deferred arrangement for plan years beginning on or after January 1, 
2024.\52\ This could add to the number of participants who are eligible 
to, but might not, elect to participate in a plan, and carry the 
unintended consequence of having more plans with fewer than 100 active 
participants being subject to more extensive and costly annual 
reporting

[[Page 12003]]

obligations applicable to large plans merely as a result of a statutory 
requirement to offer plan participation to long-term part-time workers. 
The policy underlying the proposed change was to reduce expenses for 
small employers to establish and maintain a retirement plan, and as a 
consequence, encourage more employers to offer workplace-based 
retirement savings plans to their employees.\53\
---------------------------------------------------------------------------

    \52\ Under section 125 of SECURE Act 2.0, this three year 
measurement period is reduced to two years with the effect that 
long-term, part-time workers must be treated as meeting the time in 
service requirements to participate in Code section 401(k) qualified 
cash or deferred arrangements and, as added by section 125 of the 
SECURE Act 2.0, Code section 403(b) plans once they have worked two 
consecutive years (with at least 500 hours of service per year) 
effective for plan years starting on or after January 1, 2025.
    \53\ See 86 FR 51284 at pages 51298-99 (DOL discusses burden 
change and how it is consistent with policy goal of ``pension plan 
establishment and maintenance, particularly in the small business 
community . . .'').
---------------------------------------------------------------------------

    The DOL received nearly 100 comment letters that included the issue 
of counting participants for plan audits, a large majority of those 
comments commented solely, or mainly, on this issue. Approximately one-
third of those commenters, primarily benefit plan auditors and 
associations of audit professionals, opposed the September 2021 
proposal with some commenters asking the DOL to, at a minimum, delay 
its implementation. The auditors and related associations argued the 
risks associated with this proposal exceed any potential savings. 
Generally, the commenters opposing the proposal expressed two main 
concerns: (1) small plans are particularly vulnerable to control, 
compliance, and operations errors, and it would leave them without 
adequate protections; and (2) it would discourage employers from 
encouraging eligible employees to participate in their plans in order 
to avoid an audit requirement.
    Several commenters suggested that the DOL reevaluate the small plan 
audit waiver to consider adding additional conditions for eligibility 
to address control, compliance, and operations errors that are not 
currently addressed by the exemption and, at the least, make auto-
enrollment a condition for eligibility for the waiver should this 
proposal go forward. Commenters also suggested the development of a 
cost-effective alternative to the IQPA audit for small plans that would 
focus more on operational and compliance issues rather than financial 
statements, with several suggestions for different types of periodic 
compliance assessments. Some commenters expressed concern with the 
timing of the proposal, stating that the pandemic has left small plans 
at heightened risk because of plan disruptions and difficulty hiring 
staff.
    Conversely, about two-thirds of all commenters on audit issues, 
made up primarily of small plan sponsors, third party administrators 
(TPAs), and associations representing employers supported the September 
2021 proposed changes. A few commenters also mentioned that employers 
could increase their contributions rather than incur the expense of an 
audit. Commenters also stated that the current audit requirement deters 
plan formation and results in inconsistent treatment of plans and that 
the proposal provides a clear and logical way for participants to be 
counted which will prevent counting mistakes and does not require new 
data elements. TPA commenters also took issue with auditor comments 
regarding TPA knowledge of ERISA and their ability to help plans with 
compliance and expressed a belief the auditor comments are self-serving 
because of the potential for business loss under the proposal. One 
commenter stated TPAs often know ERISA, the Code, and DOL regulations 
better than auditors and provide better value than an audit. 
Additionally, many small plan sponsors disputed auditor assertions that 
employers would discourage participation in their plans to avoid the 
audit. Several commenters argued that the expense and continual rising 
costs of getting an audit outweighs the benefit of an audit for small 
plans and that eliminating the audit will encourage smaller employers 
to establish retirement plans.
    Several commenters suggested delaying changes not related to the 
SECURE Act to lessen cost and administrative burden impacts on plans 
that already will be making changes associated with the SECURE Act and, 
in some cases, to make it part of a larger Form 5500 reform project. 
However, others recommended immediate implementation because of their 
belief that no additional data elements would be required for forms in 
order to implement the change.
    After considering the public comments, the Agencies decided to 
adopt the proposed counting method change for defined contribution 
individual account plans by adding a new line item on both the Form 
5500 and Form 5500-SF for defined contribution pension plans to report 
participants with account balances at the beginning of the plan year 
(there already is a line item for reporting the number of participants 
with account balances at the end of the plan year). Instead of using 
all those eligible to participate, defined contribution plan filers 
will look at the number of participants/beneficiaries with account 
balances as of the beginning of the plan year (the first plan year 
would use an end- of- year measure) when determining if they are 
eligible for small plan reporting options, e.g., the Form 5500-SF. 
Conforming changes are also made to the short plan year filings and the 
``80-120'' Participant Rule instructions to reflect this new counting 
method. See Appendix C for details on changes to forms and instructions 
related to this audit-related participant counting method change.
    The DOL believes it is striking the right balance among the 
interest in providing secure retirement savings for participants and 
beneficiaries, the interest in minimizing costs and burdens on small 
pension plans and the sponsors of those plans, and the interest in 
promoting the establishment of retirement plans, especially by small 
businesses, to provide a workplace retirement savings option for their 
employees.
    As described in greater detail in the regulatory impact analysis, 
making this revision to participant counting methods would be expected 
to reduce expenses for a significant number of plans. That analysis 
estimates that there would be a reduction of 19,442 large plan filings 
for defined contribution pension plans. Each plan would save an 
estimated $7500 (or more) on audit expenses. The reduction in expenses 
could encourage more employers to offer workplace-based retirement 
savings plans to their employees and might free up resources for more 
generous employer contributions.
    With respect to concerns that small employers may seek to avoid 
enrolling otherwise eligible employees in order to avoid an audit, the 
DOL has seen no evidence, other than conjecture on the part of some 
commenters, indicating that employers would purposely discourage 
enrollment in their plans if this change is implemented. However, the 
DOL does take commenters' concerns regarding this issue seriously and 
notes that in addition to enforcement actions the DOL and individuals 
have available under Section 502 of ERISA in cases where participants 
are denied benefits, Section 510 of ERISA specifically provides 
protections to participants against employers interfering with their 
rights to attainment of benefits by making it unlawful.
    Some commenters suggested an alternative to the proposal that would 
ensure that eligible participants are provided with opportunities to 
enroll in their retirement plans, such as making automatic enrollment a 
condition for eligibility for the small plan audit waiver, at least for 
defined contribution plans. The DOL declines to implement such a 
condition as part of this regulatory action. The proposal did not 
include any provision similar to what the commenter suggested. Current

[[Page 12004]]

statutory provisions on automatic enrollment permit, but do not 
require, automatic enrollment for any size defined contribution 
retirement plan.\54\ In the DOL's view, such a substantial departure 
from current statutory and regulatory provisions governing automatic 
enrollment, even if in the context of an additional condition for the 
small plan audit waiver, would require at least an opportunity for 
public comment and possibly a statutory amendment to alter the 
voluntary nature of that plan feature.
---------------------------------------------------------------------------

    \54\ See 29 CFR 2550.404c-1, ERISA Section 404(c) Plans.
---------------------------------------------------------------------------

    As to commenter concerns about compliance errors that might go 
undetected without an audit, that concern applies broadly to all small 
plans that are eligible for the audit waiver, not just on the plans 
that will be newly eligible for the conditional small plan audit waiver 
based on the new counting methodology. The DOL does not believe that it 
would be appropriate to eliminate the audit waiver for all small plans. 
Rather, the DOL concluded many years ago that a conditional audit 
waiver struck an appropriate balance for small plans.\55\ Also, under 
the new counting methodology, plans with equal numbers of active 
participants would be treated similarly rather than one plan with fewer 
than 100 active participants being eligible for the audit waiver while 
another with an equal number of active participants being required to 
pay for an audit simply because in the latter case there are enough 
eligible but not participating employees to push the participant count 
to 100 or above.
---------------------------------------------------------------------------

    \55\ The Department notes that these final forms revisions do 
not prohibit any particular plan or DCG provider from conducting 
annual or periodic audits or other agreed upon reviews of compliance 
issues.
---------------------------------------------------------------------------

5. Additional Defined Benefit Plan Reporting Improvements

    On August 29, 2022, PBGC published a Proposed Submission of 
Information Collection for OMB Review at 87 FR 52822 (Aug. 29, 2022). 
PBGC received one comment, in support of the collection of information. 
On November 4, 2022, PBGC published a Submission of Information 
Collection for OMB Review at 87 FR 66762 (Nov. 4, 2022).
a. Schedule R Modifications
    In summary, and as described in more detail below, the changes to 
Schedule R, line 19 and its instructions, include the following: (1) 
modify Schedule R, line 19a, to require that all defined benefit 
pension plans (except DFEs) with 1,000 or more participants at the 
beginning of the plan year show the end-of-year distribution of assets, 
broken down in seven reconfigured categories of plan assets, and 
provide clarification concerning classification of atypical 
investments; (2) modify Schedule R, line 19b, to change the available 
categories for current average duration; and (3) eliminate Schedule R, 
line 19c.
i. Line 19a--Percentage of Plan Assets Held by Category
    Currently, line 19a of Schedule R requires that all defined benefit 
plans (except DFEs) that have 1,000 or more participants at the 
beginning of the plan year provide a breakdown of plan assets by 
reporting the percent of assets held in five categories of investments, 
with the percentages reported reflecting the asset allocation as of the 
beginning of the plan year. Currently, the five categories of 
investments are: Stock, Investment-Grade Debt, High-Yield Debt, Real 
Estate, and Other.
    In the solicitation for public comment, PBGC proposed to 
reconfigure the categories to: Public Equity; Private Equity; 
Investment-Grade Debt and Interest Rate Hedging Assets; High-Yield 
Debt; Real Assets; Cash or Cash Equivalents; and Other. In addition, 
for certain investments, PBGC proposed to modify the instructions to 
clarify how certain atypical investments should be categorized for this 
purpose. For example, as currently drafted, it is not clear whether 
cash equivalents should be included in the ``Investment-Grade Debt'' 
category or in the ``Other'' category. Similarly, it is not clear 
whether infrastructure investments should be included in the ``Real 
Estate'' or the ``Other'' category. No comments were received. By 
expanding the list of categories and modifying the instructions, the 
more detailed information should be reported consistently, which will 
enable PBGC to better model important characteristics of plan 
portfolios. Accordingly, the Agencies are adopting these changes as 
proposed.
    PBGC also proposed to modify the instructions for line 19a so that 
the percentages reported reflect the asset allocation as of the end of 
the plan year instead of the beginning of the plan year. No comments 
were received. Having more recent information will lead to better 
projections and more accurate analysis by PBGC, and because the Form 
5500 isn't due until several months after the end of the plan year, 
this change should not create any timing issues for filers. 
Accordingly, the Agencies are adopting this change as proposed.
ii. Line 19b--Average Duration
    Currently, line 19b of Schedule R requires applicable filers to 
check the box that shows the average duration of the plan's combined 
Investment-Grade and High-Yield Debt portfolio. In the solicitation for 
public comments, PBGC proposed changes to line 19b (average duration) 
and its instructions. Under modified line 19b, applicable filers would 
be required to check a box to indicate the average duration of the 
plan's Investment-Grade Debt and Interest Rate Hedging Assets 
portfolio, thereby replacing the current requirement to check the box 
that shows the average duration of the plan's combined Investment-Grade 
and High-Yield Debt portfolio. The average duration ranges were also 
adjusted from multiple 3-year periods to multiple 5-year periods, with 
the last choice being a period of 15 or more years. No comments were 
received. Accordingly, the Agencies are adopting this change as 
proposed.
iii. Line 19c--Duration Measure
    Line 19c currently asks for the duration measure used to calculate 
line 19b. PBGC has proposed to eliminate line 19c in the solicitation 
for public comment. Because the alternative duration measures do not 
provide meaningfully different results, PBGC has proposed to eliminate 
line 19c. No comments were received. Accordingly, the Agencies are 
adopting this change as proposed.
b. Schedule SB Modifications
    In summary, and as described in more detail below, the changes to 
Schedule SB include the following: (1) modify Schedule SB, line 6 
(Target Normal Cost), and its instructions, to address a possible, 
albeit unlikely, situation in which the amount reported on line 6c 
would not be consistent with IRS regulations and the statute if the 
calculation was done in accordance with the instructions, (2) change 
the current instructions for line 26a to revise a line reference, and 
(3) change the current instructions for the Schedule SB, line 26b 
attachment (projected benefit payments), for situations where a plan 
assumes some, or all, benefits are paid in a lump sum, and uses the 
annuity substitution rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to 
determine the funding target.
1. Line 6--Target Normal Cost
    The Schedule SB for the 2022 plan year requires that two components 
of target normal cost be reported: (1) the present value of current 
plan year benefit accruals reduced by mandatory

[[Page 12005]]

employee contributions, but not below zero, and (2) the expected plan-
related expenses. Those items are summed up and reported as the target 
normal cost on line 6c. In the solicitation for public comment, PBGC 
proposed modifications to Schedule SB, line 6 (Target Normal Cost), and 
its instructions, to address a possible, albeit unlikely, situation in 
which line 6c (Target Normal Cost) reported on Schedule SB would not be 
consistent with IRS regulations and the statute if lines 6a and 6b were 
determined in accordance with the current line 6 instructions. This 
situation would arise only if (1) a plan requires mandatory employee 
contributions and (2) the mandatory employee contributions for the plan 
year exceed the present value of benefits accruing during the plan 
year. PBGC's proposed changes to lines 6a and 6c of the instructions, 
and to line 6c of the Form, will rectify this situation by requiring 
that the amount to be reported in line 6a is the present value of 
expected benefit accruals (i.e., not reduced by mandatory employee 
contributions) and by modifying the instructions for line 6c to require 
reporting the sum of lines 6a and 6b, ``reduced (but not below zero) by 
any mandatory employee contributions expected to be made during the 
plan year.'' No comments were received. Accordingly, the Agencies are 
adopting this change as proposed.
2. Line 26a--Schedule of Active Participant Data
    The current instructions for Line 26a of Schedule SB provide that a 
plan reporting 1,000 or more active participants on line 3d, column 
(1), must also provide average compensation data. However, the correct 
line reference should be to line 3c, column (1). Accordingly, the 
Agencies are adopting this change with this final rule.
3. Line 26b--Projected Benefit Payments (Attachment)
    Line 26b of Schedule SB currently requires plans covered by Title 
IV of ERISA that have 1,000 or more participants as of the valuation 
date to provide a 50-year projection of expected benefit payments and 
that, for purposes of the projection, benefits are assumed to be paid 
in the form assumed for valuation purposes. In the solicitation for 
comments, PBGC noted that, in situations where a plan assumes some, or 
all, benefits are paid as a lump sum, but uses the annuity substitution 
rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to determine the funding target, 
those instructions suggest projected benefits be shown in a different 
form of payment than what was used to determine the funding target. To 
clarify that this was not the intent, PBGC proposed changing the 
instructions to provide that, in such situations, the attachment may 
show projected benefits payable in the annuity form instead of in the 
form of payment assumed for valuation purposes. PBGC did not receive 
any comments. Accordingly, the Agencies are adopting this change as 
proposed.
4. Schedule H Schedules of Assets Changes and Breakout Categories for 
Administrative Expense
a. Deferring Schedules of Asset Changes for Re-Proposal as Part of 
DOL's General Form 5500 Improvement Project
    The September 2021 proposal included revisions to the content 
requirements for the ``Schedule of Assets Held for Investment'' and the 
``Schedule of Assets Held and Disposed of within the Plan Year'' to 
modernize the data elements required to be reported about a plan's 
investments and to require that the schedules be filed electronically 
in a structured format so that they are data-minable. The proposed 
changes were designed to improve the consistency, transparency, and 
usability of information reported regarding plan investments. For 
example, there is no efficient method for the DOL to identify all of 
the ERISA plans that invest in a specific investment such as a 
collective investment trust, mutual fund, or limited partnership. 
Better data about plan investments would assist the DOL, IRS, and the 
PBGC more effectively and efficiently provide oversight, assist with 
compliance, and enforce the provisions of ERISA and the Code. 
Standardizing an electronic format for the plan's investment schedules 
would allow data aggregation and review, which could be used both by 
the DOL and IRS for enforcement and oversight, but also by private 
sector organizations.
    The Agencies received several comments in response to this proposed 
change. While many commenters supported establishing a standardized 
electronic format for the plan's investment schedules, some said that 
further consultation with stakeholder groups is needed, especially 
custodians who would likely be called upon to provide asset information 
needed to satisfy the proposed new data elements on the Schedules of 
Assets. Several commenters requested delaying the effective date to 
give sufficient lead time for filers and service providers to implement 
the changes and update the recordkeeping systems. Some commenters 
opposed the proposed change, expressing concerns about potential 
burdens and costs associated with creating a mandatory electronic 
filing requirement for the Schedules of Assets, especially for large 
plans where information is not currently provided in a data-capturable 
format. Two commenters provided extensive comments regarding reordering 
and regrouping the data elements of the proposed Schedules of Assets to 
minimize confusion and variability in the data entries. Some commenters 
raised concerns regarding the proposed new checkbox to identify if an 
asset is a hard-to-value asset. Three commenters requested 
clarification and made suggestions on proposed elements to add legal 
entity and other industry and regulatory identifiers for investment 
assets. The Agencies also received comments on other proposed elements, 
including the checkboxes to identify if an asset is a designated 
investment alternative or qualified default investment alternative in a 
defined contribution plan.
    After considering the public comments, the Agencies decided that 
the improved transparency and financial accountability goals of the 
September 2021 proposal would best be furthered by using the public 
comments to refine the Schedule of Asset changes and include them in 
the proposal that is part of the more general Form 5500 improvement 
project currently on the DOL semi-annual regulatory agenda.
b. Schedule H Breakout of Administrative Expenses Paid by the Plan
    The final forms revisions update Schedule H to add new breakout 
categories to the ``Administrative Expenses'' category of the Income 
and Expenses section of the Schedule H balance sheet. As discussed in 
the NPFR, the Agencies have determined that to get a better picture of 
plan expenses, particularly those related to service providers, more 
detail in this category is warranted. The data element breakouts for 
Administrative Expenses will now be ``Salaries and allowances,'' 
``Contract administrator fees,'' ``Recordkeeping fees,'' ``IQPA audit 
fees,'' ``Investment advisory and investment management fees,'' ``Bank 
or trust company trustee/custodial fees,'' ``Actuarial fees,'' ``Legal 
fees,'' ``Valuation/appraisal fees,'' ``Other Trustee fees/expenses,'' 
and ``Other expenses.''
    Commenters complained that the new breakout categories are 
unnecessary and burdensome, and add layers of expense and difficulty to 
Form 5500 filing without added useful information. The

[[Page 12006]]

commenters argued that the DOL should justify, both on a substantive 
and economic basis, which breakouts are useful for the purpose of the 
annual return/report and eliminate those that are not useful. One 
commenter asserted that the proposed changes lack clarity, would 
require substantial additional information, and provide very little 
lead time to adjust systems and processes. Another commenter claimed 
that adding additional break-out categories to the expenses lines will 
significantly and unnecessarily heighten the risk of frivolous 
litigation because the plaintiffs' bar focuses on these lines for 
purposes of bringing litigation in connection with 401(k) fees. Another 
commenter expressed concerns with the two categories of data element 
breakouts to report fees related to trusts, saying the DOL should 
provide additional clarity on reporting by bank trustees vs. individual 
trustees, and also suggested that trustee fees exclude reporting of 
pass-through entity trustee fees relating to custody of assets.
    Transparency and improved reporting of fees and expenses is an 
ongoing objective for the DOL and an important goal for continuing to 
improve the Form 5500 as a tool for financial transparency and 
accountability among employee benefit plans.
    The new breakouts will also supplement and allow for some cross-
testing of amounts that should be recorded as a payment of direct 
compensation to a service provider on line 2 of Schedule C, to the 
extent that the service provider receives more than $5,000 from the 
plan during the year. Since those amounts are already required to be 
reported on the Schedule C, it should be a relatively straightforward 
exercise in arithmetic to sum up the Schedule C entries for purposes of 
reporting them on the Schedule H expense statement. Also, the total 
currently reported on the Schedule H should include all of the items 
that would be reported in the new breakouts, so plans should already 
have collected and recorded those payments to satisfy current Schedule 
H requirements. To the extent filers believe that they may have 
challenges in classifying particular payments into one of the breakout 
categories, the instructions will provide that the administrator can 
use any reasonable method of classifying expenses into appropriate 
categories (although the categories are sufficiently distinct that the 
DOL does not expect plans to face significant difficulty in this area). 
Also, other than IQPA audit fees and bank or trust company trustee/
custodial fees, the new breakouts are similar to breakouts of plan 
expenses that were reported for many years until the detail of expense 
reporting on the Schedule H was reduced as part of a paperwork 
reduction and reporting simplification project implemented with the 
1999 Form 5500 in connection with the implementation of the first stage 
of the EFAST filing system.\56\ The DOL did not observe plans having 
difficulty with this level of reporting at that time, and improvements 
in systems and technologies for plan administration since that time 
presumably should make it easier to report the required level of detail 
on expenses paid by the plan.
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    \56\ See 1998 Form 5500, line 32(g).
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5. Miscellaneous and Conforming Changes for Forms and Instructions
    Various other technical, formatting, and conforming changes to the 
forms, schedules, and instructions are being adopted as part of this 
final forms revisions notice. The changes primarily are needed to 
reflect the new DCG consolidated reporting option and the new Schedule 
MEP for multiple-employer pension plans, including PEPs, and Schedule 
MB to clarify special financial assistance reporting requirements for 
multiemployer plans. A conforming change was made to the Form 5500 
instructions for the ``Limited Pension Plan Reporting'' option for IRA-
based plans to require IRA-based MEPs relying on the option to complete 
the Schedule MEP, which replaced a participating employer and PEP 
reporting attachment requirement for Part I, Line A of the 2022 Form 
5500 that applied to such IRA-based MEPs. Other technical and 
conforming changes include minor technical amendments applicable to 
plan years starting after December 31, 2022, to update several line 
instructions for Form 5500-SF and Schedules H and I for information 
reported by plans regarding plan benefits payments and unpaid required 
minimum distributions.\57\
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    \57\ As noted above, SECURE Act 2.0 was enacted subsequent to 
the September 2021 proposal. Section 107 of the SECURE Act 2.0 
amends Code Section 401(a)(9) to increase the age at which required 
minimum distributions are required, from age 72 currently to age 75 
by 2032. The instructions to the Form 5500, 5500-SF, and Schedules 
DCG, H and I have been updated accordingly to reflect language that 
refers to a statutory applicable age rather than a fixed age.
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    The instructions defining what constitutes a MEP for purposes of 
the Form 5500 include conforming changes in appropriate places 
throughout to include references to PEPs, DCGs, Schedule MEP, and 
Schedule DCG. The Form 5500 instructions for Part I, DFE box, are being 
updated to add a code for DCGs, which would include an instruction to 
check the DFE box and enter the DCG code. Entries for the Schedule MEP 
and Schedule DCG would be added to the checkbox list on the Form 5500 
pension schedules. DCG filers would have to check that they are adding 
the Schedule DCG and enter the number of Schedule DCG attached. The 
Form 5500-SF instructions are being amended to add DCGs to those types 
of filers that are not permitted to file a Form 5500-SF, but must 
instead file the Form 5500, with all required schedules and 
attachments. The Form 5500 and Schedule D instructions are being 
revised to state that PEPs and DCGs cannot use master trust investment 
account (MTIA) reporting designed for master trust investments of 
affiliated plans. This is because the purpose of the MTIA provisions is 
to provide an annual reporting structure for groups of affiliated plans 
(e.g., separate plans of controlled group members) that utilize master 
trusts for the collective investment of the assets of the affiliated 
plans. The DOL does not believe that separate PEPs or plans in DCGs are 
``affiliated'' in the way that was envisioned for MTIA reporting and 
may in fact create an overly complex and undesirable lack of 
transparency if used in the case of PEPs and DCGs.
    In the September 2021 proposal, the Agencies specifically requested 
comments on whether the final rule should require more detailed 
reporting regarding fee and expense information on the Form 5500, 
noting that useful comments would include, for example, suggestions on 
how to improve reporting of direct and indirect service provider 
compensation, generally and in particular with respect to PEPs, other 
MEPs, and DCG reporting arrangements (including information about how 
the fees and expenses are allocated among participating plans, 
employers, and plan participants and beneficiaries, as applicable). 
Another example of an area of interest on fee information is whether 
the Form 5500 would be an appropriate vehicle for collecting 
information on fees charged to participants or alternate payees by a 
retirement plan--including plan service provider fees the plan passes 
on to participants--for review and qualification of domestic relations 
orders.\58\
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    \58\ See Government Accountability Office (GAO) Report GAO 20-
541, ``Retirement Security: DOL Could Better Inform Divorcing 
Parties About Dividing Savings,'' which recommended that ``EBSA 
should explore ways to collect information on fees charged to 
participants or alternate payees by a retirement plan--including 
plan service provider fees the plan passes on to participants--for 
review and qualification of domestic relations orders and evaluate 
the burden of doing so. For example, DOL could consider collecting 
fee information as part of existing reporting requirements in the 
Form 5500.''

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[[Page 12007]]

    This final forms revisions notice also amends the Form 5500 and 
Form 5500-SF instructions and makes conforming changes to the other 
parts of the forms, schedules, and instructions to implement the 
changes described above to the participant count methodology for 
individual account plans for determining whether such plans have to 
file as a large plan and whether they have to attach an IQPA report.

III. Paperwork Reduction Act Statement

    In accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44 
U.S.C. 3506(c)(2)(A)), the Agencies solicited comments concerning the 
information collection requests (ICRs) included in the revision of the 
Form 5500 Annual Return/Report.\59\ At the same time, the Agencies also 
submitted ICRs to the Office of Management and Budget (OMB), in 
accordance with 44 U.S.C. 3507(d).
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    \59\ 86 FR 51488.
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    The Agencies did not receive comments that specifically addressed 
the paperwork burden analysis of the information collection requirement 
contained in the proposed rule.
    In connection with publication of the final regulations and final 
forms revision, the Agencies are submitting ICRs to OMB requesting a 
revision of the collections of information under OMB Control Numbers 
1210-0110 (DOL), 1545-1610 (IRS), 1212-0057 (PBGC) and 1210-0040 (DOL 
for SAR) reflecting the final regulations and instruction changes being 
finalized in this document. The Agencies will notify the public when 
OMB approves the ICRs.
    A copy of the ICRs may be obtained by contacting the PRA addressee 
shown below or at www.RegInfo.gov. PRA ADDRESSEE: Address requests for 
copies of the ICRs to James Butikofer, Office of Research and Analysis, 
U.S. Department of Labor, Employee Benefits Security Administration, 
200 Constitution Avenue NW, Room N-5655, Washington, DC 20210 or email: 
[email protected]. ICRs submitted to OMB also are available at http://www.RegInfo.gov.
    The burden analysis is based on data from the 2020 Form 5500 
filings (the latest year for which complete data are available). The 
burden analysis includes the burden of the current information 
collection and adjusts it for changes made by the final rule and final 
forms revisions. Burden estimates consider the change in plan counts 
due to the creation of PEPs and DCGs, with an increase in MEPs and a 
decrease in single-employer plans, reflecting some single-employer 
plans moving to PEPs or filing as a DCG. The burden also includes the 
additional burden from the changes to the 2023 Form 5500 and related 
schedules.
    The Agencies' burden estimation methodology excludes certain 
activities from the calculation of ``burden.'' If the activity is 
performed for any reason other than compliance with the applicable 
Federal tax administration system or the Title I annual reporting 
requirements, it was not counted as part of the paperwork burden. For 
example, most businesses or financial entities maintain, in the 
ordinary course of business, detailed accounts of assets and 
liabilities, and income and expenses for the purposes of operating the 
business or entity. These recordkeeping activities were not included in 
the calculation of burden because prudent business or financial 
entities normally have that information available for reasons other 
than Federal tax or Title I annual reporting. Only time for gathering 
and processing information associated with the tax return/annual 
reporting systems, and learning about the law, was included. In 
addition, an activity is counted as a burden only once if performed for 
both tax and Title I purposes. The Agencies also have designed the 
instruction package for the Form 5500 Annual Return/Report so that 
filers generally will be able to complete the Form 5500 Annual Return/
Report by reading the instructions without needing to refer to the 
statutes or regulations. The Agencies, therefore, have considered in 
their PRA calculations the burden of reading the instructions and find 
there is no recordkeeping burden attributable to the Form 5500 Annual 
Return/Report.
    A summary of paperwork burden estimates follows. As noted above, 
these estimates include the burden of the overall Form 5500 information 
collection for all three agencies and makes adjustments for the final 
revisions to the instructions included in this document. It also 
reflects updates to the Summary Annual Report for DOL.
    Agency: DOL-EBSA.
    Type of Review: Revision of existing collection.
    Title of Collection: Annual Information Return/Report of Employee 
Benefit Plan.
    OMB Control Number: 1210-0110.
    Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
    Forms: Form 5500 and Schedules.
    Total Respondents: 839,382.
    Total Responses: 845,028.
    Frequency of Response: Annually.
    Estimated Total Burden Hours: 2,872,410.
    Total Annualized Costs: 0.
    Agency: Department of Treasury--IRS.
    Type of Revision: Revision of existing collection.
    Title of Collection: Annual Return/Report of Employee Benefit Plan.
    OMB Control Number: 1545-1610.
    Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
    Forms: Form 5500 and Schedules.
    Total Respondents: 984,008.
    Total Responses: 984,008.
    Frequency of Response: Annually.
    Estimated Total Burden Hours: 1,878,544.
    Total Annualized Costs: 0.
    Agency: PBGC.
    Type of Revision: Revision of existing collection.
    Title of Collection: Annual Information Return/Report.
    OMB Control Number: 1212-0057.
    Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
    Forms: Form 5500 and Schedules.
    Total Respondents: 25,260.
    Total Responses: 25,260.
    Frequency of Response: Annually.
    Estimated Total Burden Hours: 15,089.
    Total Annualized Costs: 0.
    Agency: DOL-EBSA.
    Type of Revision: Revision of existing collection.
    Title of Collection: Summary Annual Report Requirement.
    OMB Control Number: 1210-0040.
    Affected Public: Not-for-profit institutions, Businesses or other 
for- profits.
    Total Respondents: 809,901.
    Total Responses: 178,211,549.
    Frequency of Response: Annually.
    Estimated Total Burden Hours: 1,114,751.
    Total Annualized Costs: $18,423,119.
    The DOL solicited comments regarding whether or not any 
recordkeeping beyond that which is usual and customary is necessary to 
complete the Form 5500 Annual Return/Report. No comments were received 
on this issue. Comments were also solicited on whether the Form 5500 
Annual Return/Report instructions are generally sufficient to enable 
filers to complete the Form 5500 Annual Return/Report without needing 
to refer to the statutes or regulations. No comments were received on 
this issue.

[[Page 12008]]

    Paperwork and Respondent Burden: Estimated time needed to complete 
the forms listed below reflects the combined requirements of the IRS, 
the DOL, and the PBGC. The times will vary depending on individual 
circumstances. The estimated average times are:

----------------------------------------------------------------------------------------------------------------
                                                                     Pension plans
                                      --------------------------------------------------------------------------
                                                Large           Small, filing Form 5500   Small, filing 5500-SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................  1 hr, 50 min...........  1 hr, 19 min...........
Sch A................................  2 hr, 52 min...........  2 hr, 52 min...........
Sch MB...............................  8 hr, 52 min...........  8 hr, 40 min...........  8 hr, 40 min.
Sch SB...............................  6 hr, 38 min...........  6 hr, 49 min...........  6 hr, 49 min.
Sch C................................  2 hr, 51 min...........
Sch D................................  1 hr, 39 min...........  20 min.................
Sch G................................  14 hr, 49 min..........
Sch H................................  7 hr, 40 min...........
Sch I................................  .......................  2 hr, 6 min............
Sch R................................  1 hr, 43 min...........  1 hr, 7 min............
Form 5500-SF.........................  .......................  .......................  2 hr, 35 min.
----------------------------------------------------------------------------------------------------------------
                                                       Welfare plans that include health benefits
                                      --------------------------------------------------------------------------
                                       Large                    Small, unfunded, combination unfunded/fully
                                                                 insured, or funded with a trust 5500-SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................  1 hr, 45 min...........  1 hr, 14 min.
----------------------------------------------------------------------------------------------------------------
Sch A................................  3 hr, 40 min...........  2 hr, 43 min.
----------------------------------------------------------------------------------------------------------------
Sch C................................  3 hr, 38 min...........
----------------------------------------------------------------------------------------------------------------
Sch D................................  1 hr, 52 min...........                       20 min
----------------------------------------------------------------------------------------------------------------
Sch G................................  11 hr, 0 min...........
----------------------------------------------------------------------------------------------------------------
Sch H................................  8 hr, 36 min...........
----------------------------------------------------------------------------------------------------------------
Sch I................................  .......................                    1 hr, 56 min.
----------------------------------------------------------------------------------------------------------------
Form 5500-SF.........................  .......................                    2 hr, 35 min.
----------------------------------------------------------------------------------------------------------------
                                                   Welfare plans that do not include health benefits
                                      --------------------------------------------------------------------------
                                       Large                    Small, Filing Form 5500  Small, Filing Form 5500-
                                                                                          SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................  1 hr, 45 min...........  1 hr, 14 min...........
Sch A................................  3 hr, 40 min...........  2 hr, 43 min...........
Sch C................................  3 hr, 38 min...........
Sch D................................  1 hr, 52 min...........  20 min.................
Sch G................................  11 hr, 0 min...........
Sch H................................  8 hr, 36 min...........
Sch I................................  .......................  1 hr, 56 min...........
Form 5500-SF.........................  .......................  .......................  2 hr, 35 min.
----------------------------------------------------------------------------------------------------------------


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Direct filing entities
                                 -----------------------------------------------------------------------------------------------------------------------
                                     Master trusts           CCTs                PSAs             103-12 IEs             GIAs                DCGs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 5500.......................  1 hr, 50 min......  1 hr, 29 min......  1 hr, 24 min......  1 hr, 33 min......  1 hr, 22 min......  1 hr, 50 min.
Sch A...........................  2 hr, 54 min......  2 hr, 48 min......  2 hr, 46 min......  2 hr, 52 min......  2 hr, 53 min......  2 hr, 52 min.
Sch C...........................  3 hr, 1 min.......  1 hr, 1 min.......  29 min............  1 hr, 22 min......  51 min............  2 hr, 42 min.
Sch D...........................  1 hr, 30 min......  47 min............  34 min............  49 min............  41 min............  1 hr, 39 min.
Sch G...........................  12 hr, 32 min.....  ..................  ..................  5 hr, 42 min......  ..................  11 hr, 6 min.
Sch H...........................  8 hr, 7 min.......  7 hr, 36 min......  7 hr, 33 min......  8 hr, 17 min......  7 hr, 38 min......  8 hr, 36 min.
Sch DCG.........................  ..................  ..................  ..................  ..................  ..................  1 hr, 33 min.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The aggregate hour burden for the Form 5500 Annual Return/Report 
(including schedules and short form) is estimated to be 4.3 million 
hours annually shared between the DOL, IRS, and the PBGC. The hour 
burden reflects filing activities carried out directly by filers. 
Presented below is a chart showing the total hour burden of the revised 
Form 5500 Annual Return/Report separately allocated across the DOL, the 
IRS, and the PBGC.

[[Page 12009]]



                                  Table 2--Hour Burden Distribution per Agency
----------------------------------------------------------------------------------------------------------------
                                                                                    Hour burden
                                                                 -----------------------------------------------
                                                                        DOL             IRS            PBGC
----------------------------------------------------------------------------------------------------------------
Pension Large Plans.............................................         691,355         329,297           2,412
Pension Small Plans.............................................         937,892       1,070,054          12,601
Welfare Large Plans.............................................       1,065,746          17,755  ..............
Welfare Small Plans.............................................          84,446          36,342  ..............
DFEs............................................................          89,588          50,756              76
EZ Filers.......................................................  ..............         374,340  ..............
January 2013 Revision...........................................             630  ..............  ..............
2014 CSEC Revision..............................................           2,753  ..............  ..............
                                                                 -----------------------------------------------
    Total Agency Burden.........................................       2,872,410       1,878,544          15,089
----------------------------------------------------------------------------------------------------------------

IV. Appendices

    The Agencies have included the following appendices to provide more 
detailed illustrations and explanations of the changes, which will be 
implemented for the 2023 Forms 5500, expected to be available for 
filing on January 1, 2024:
    (1) Appendix A--a facsimile of Schedule MEP (Multiple-Employer 
Pension Plan) and its instructions;
    (2) Appendix B--a facsimile of Schedule DCG (Individual Plan 
Information) and its instructions;
    (3) Appendix C--a description of changes in participant count 
reporting and counting methodology;
    (4) Appendix D--description of changes to Schedule R, Form 5500-SF 
Instructions to add new Code compliance questions;
    (5) Appendix E--description of additional defined benefit plan 
reporting improvements;
    (6) Appendix F--description of miscellaneous other changes to the 
Form 5500, Form 5500-SF, and schedules and instructions, including a 
description of changes to breakout categories for administrative 
expenses in Schedule H.\60\
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    \60\ Consistent with prior year practice, ``information-only'' 
copies of the forms, schedules, and instructions may be published 
earlier than January 1, 2024.
---------------------------------------------------------------------------

    Consistent with the Agencies' annual updates to the forms, the 
final versions may include technical corrections, additions, and 
formatting adjustments that do not require further notice and comment 
under the PRA, the APA, or any relevant Executive Order.
    Consistent with the proposal, to implement some of the proposed 
revisions to the forms, the DOL is publishing separately today in the 
Federal Register proposed amendments to the DOL's annual reporting 
regulations. That document includes a discussion of the findings 
required under sections 104 and 110 of ERISA that are necessary for the 
DOL to adopt the Form 5500 Annual Return/Report, including the Form 
5500-SF, if revised as proposed herein, as an alternative method of 
compliance, limited exemption, and/or simplified report under the 
reporting and disclosure requirements of Part 1 of Subtitle B of Title 
I of ERISA.
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V. Statutory Authority

    Pursuant to the authority in sections 101, 103, 104, 109, 110 and 
4065 of ERISA and sections 6058 and 6059 of the Code, the Form 5500 
Annual Return/Report and the instructions thereto are amended as set 
forth herein.

    Signed at Washington, DC.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
Eric Slack,
Director, Employee Plans, Tax Exempt and Government Entities Division, 
Internal Revenue Service.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2023-02653 Filed 2-23-23; 8:45 am]
BILLING CODE 4510-29-C