Proposed Revision of Annual Information Return/Reports [Notices] [07/21/2006]

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October 6, 2008 DOL Home > EBSA

EBSA Federal Register Notice

Proposed Revision of Annual Information Return/Reports [07/21/2006]

[PDF Version]

Volume 71, Number 140, Page 41615-41651

[[Page 41615]]

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Part III

Department of Labor

Employee Benefits Security Administration

Department of the Treasury

Internal Revenue Service

Pension Benefit Guaranty Corporation

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Proposed Revision of Annual Information Return/Reports; Notice

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

DEPARTMENT OF THE TREASURY

Internal Revenue Service

PENSION BENEFIT GUARANTY CORPORATION

RIN 1210-AB06

Proposed Revision of Annual Information Return/Reports

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

ACTION: Notice of proposed forms revisions.

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SUMMARY: This document contains proposed revisions to the Form 5500
Annual Return/Report forms, including a proposed new Short Form 5500,
filed for employee pension and welfare benefit plans under the Employee
Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue
Code (Code). The Form 5500 Annual Return/Report, including its
schedules and attachments (Form 5500 Annual Return/Report), is an
important source of financial, funding, and other information about
employee benefit plans for the Department of Labor, the Pension Benefit
Guaranty Corporation, and the Internal Revenue Service (the Agencies),
as well as for plan sponsors, participants and beneficiaries, and the
general public. The proposed revisions to the Form 5500 Annual Return/
Report, contained in this document, including a new Form 5500-SF short
form annual return/report for certain types of small pension plans, are
intended to reduce and streamline annual reporting burdens, especially
for small businesses, update the annual reporting forms to reflect
current issues and agency priorities, and facilitate the establishment
of a wholly electronic filing system for receipt of the Form 5500
Annual Returns/Reports. The form revisions thus would, upon adoption,
apply for the reporting year for which the electronic filing
requirement is implemented. The proposed revisions would 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: Written comments must be received by the Department of Labor on
or before September 19, 2006.

ADDRESSES: Comments should be addressed to the Office of Regulations
and Interpretations, Employee Benefits Security Administration (EBSA),
Room N-5669, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington, DC 20210. Attn: Revision of Form 5500 (RIN 1210-AB06).
Comments also may be submitted electronically to e-ori@dol.gov or by
using the Federal eRulingmaking Portal: http://www.regulations.gov (follow

instructions provided for submission of comments). EBSA will make all
comments available to the public on its Web site at http://www.dol.gov/ebsa.
The comments also will be available for public inspection at the

Public Disclosure Room, N-1513, EBSA, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Elizabeth A. Goodman or Michael Baird,
Employee Benefits Security Administration (EBSA), U.S. Department of
Labor, (202) 693-8523, for questions relating to the Form 5500, and its
Schedules A, C, D, G, H, and I, and lines 1 through 11 of the proposed
Form 5500-SF (Short Form 5500), as well as the general reporting
requirements under Title I of ERISA; Ann Junkins, Internal Revenue
Service (IRS), (202) 283-0722, for questions relating to Schedules B
and R of the Form 5500, lines 12 and 13 of the proposed Short Form
5500, and the filing of Short Form 5500 instead of the Form 5500-EZ for
plans that are not subject to Title I of ERISA, as well as questions
relating to the general reporting requirements under the Internal
Revenue Code; and Michael Packard, Pension Benefit Guaranty Corporation
(PBGC), (202) 326-4080 for questions relating to Schedule B of the Form
5500, and line 13 of Schedule R, as well as questions relating to the
general reporting requirements under Title IV of ERISA. For further
information on an item not mentioned above, contact Mr. Baird. The
telephone numbers referenced above are not toll-free numbers.

SUPPLEMENTARY INFORMATION: Sections 101 and 104 of Title I and section
4065 of Title IV of the Employee Retirement Income Security Act of 1974
(ERISA), as amended, sections 6058(a) and 6059(a) of the Internal
Revenue Code of 1986 (Code), as amended, and the regulations issued
under those sections, impose certain annual reporting and filing
obligations on pension and welfare benefit plans, as well as on certain
other entities.\1\ Plan administrators, employers, and others generally
satisfy these annual reporting obligations by the filing of the Form
5500 Annual Return/Report, in accordance with the instructions and
related regulations.
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\1\ Other filing requirements may apply to certain employee
benefit plans and to multiple employer welfare arrangements under
ERISA or to other benefit arrangements under the Code, and such
other filing requirements are not within the scope of this proposal.
For example, Code sec. 6033(a) imposes an additional reporting and
filing obligation on organizations exempt from tax under Code sec.
501(a), which may be related to retirement trusts that are qualified
under sec. 401(a) of the Code.
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The Form 5500 Annual Return/Report is the principal source of
information and data available to the Department of Labor (Department),
the IRS, and the PBGC concerning the operations, funding, and
investments of more than 800,000 pension and welfare benefit plans.
These plans cover an estimated 150 million participants and hold an
estimated $4.3 trillion in assets. Accordingly, the Form 5500 Annual
Return/Report necessarily constitutes an integral part of each Agency's
enforcement, research, and policy formulation programs, and is a source
of information and data for use by other federal agencies, Congress,
and the private sector in assessing employee benefit, tax, and economic
trends and policies. The Form 5500 Annual Return/Report also serves as
the primary means by which plan operations can be monitored by
participants and beneficiaries and by the general public.

I. EFAST and Electronic Filing

The Agencies currently use an automated processing system, the
ERISA Filing Acceptance System (EFAST) to process the Form 5500 Annual
Return/Report. As part of the Department's efforts to update and
streamline EFAST's current paper-based processing system, the
Department published in the Federal Register today, a notice of final
rulemaking establishing an electronic filing requirement for the Form
5500 Annual Return/Report for plan years or, for direct filing
entities' reporting years, beginning on or after January 1, 2008
(Electronic Filing Rule).\2\ The rule establishes an electronic filing
requirement for the Form 5500 Annual Return/Report and the proposed
Form 5500-SF (Short Form 5500) under Title I of ERISA. The Electronic
Filing Rule provides that any Form 5500 Annual Return/Report (including
any Short Form 5500) to be filed with the Secretary of Labor

[[Page 41617]]

(Secretary) for any plan year or reporting year beginning on or after
January 1, 2008, must be filed electronically in accordance with
instructions and such other guidance as the Secretary may provide,
applicable to such annual report. The Electronic Filing Rule explains
that such electronic filing by the administrator of a pension or
welfare benefit plan would constitute compliance with the applicable
limited exemption, alternative method of compliance, and/or simplified
reporting requirements, as applicable, prescribed in 29 CFR 2520.103-1
et seq. and promulgated in accordance with the authority granted by the
Secretary under sections 104(a) and 110 of Title I of ERISA. For
purposes of the PBGC's annual filing and reporting requirements under
section 4065 of Title IV of ERISA, a plan administrator's electronic
filing of a Form 5500 Annual Return/Report or the proposed Short Form
5500, in accordance with the instructions, will be treated as
satisfying the administrator's annual reporting obligation under
section 4065 of Title IV of ERISA.\3\ Similarly, for purposes of the
annual filing and reporting requirements of the Code, the IRS has
advised the Department that, although there are no mandatory electronic
filing requirements for a Form 5500 Annual Return/Report or the
proposed Short Form 5500 under the Code or the regulations issued
thereunder, the electronic filing of a Form 5500 Annual Return/Report
or the proposed Short Form 5500 (described below), in accordance with
the instructions and such other guidance as the Secretary of Treasury
may provide, will be treated as satisfying the annual filing and
reporting requirements under Code sections 6058(a) and 6059(a).\4\
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\2\ The notice of proposed rulemaking to mandate electronic
filing was published in the Federal Register on August 30, 2005 (70
FR 51542).
\3\ Administrators of plans required to file reports under ERISA
section 4065 also are required to file annual reports for purposes
of section 104(a) of ERISA.
\4\ The IRS intends that plan administrators, employers, and
certain other entities that are subject to various other filing and
reporting requirements under Code sections 6033(a), 6047(e), 6057
and 6058(a) must continue to satisfy these requirements in
accordance with IRS revenue procedures, regulations, publications,
forms, and instructions.
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The Form 5500-EZ is used by certain plans that are not subject to
the requirements of section 104(a) of ERISA to satisfy the annual
reporting and filing obligations imposed by the Code. To ease the
burdens on these filers, the IRS has also advised the Department that
certain Form 5500-EZ filers will be permitted to satisfy the
requirement to file the Form 5500-EZ with the IRS by filing the
proposed Short Form 5500 electronically through the EFAST processing
system. Information regarding the Form 5500-EZ filers who would be
eligible for this proposed electronic filing option is included in the
proposed instruction for the Short Form 5500 attached as Appendix B.
Therefore, under the IRS' proposal, certain Form 5500-EZ filers will be
provided both electronic and paper filing options. The electronic
option will allow Form 5500-EZ filers to complete and electronically
file selected information on the Short Form 5500. Form 5500-EZ filers
will also have the option to file a paper Form 5500-EZ.\5\
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\5\ Under the voluntary electronic filing option, 5500-EZ filers
filing an amended return for a plan year must file the amended
return electronically using the Form 5500-SF if they initially filed
electronically for the plan year and must file with the IRS using
the paper Form 5500-EZ if they filed for plan year with the IRS on a
paper Form 5500-EZ.
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At the same time as the Electronic Filing Rule was being developed,
the Agencies undertook a comprehensive review of the current forms and
instructions in an effort to improve the data collected and to
determine what, if any, design or data changes should be made in
anticipation of the new processing system. This proposed revision of
the forms and instructions, in conjunction with the Electronic Filing
Rule, is intended to streamline the return/report, facilitate the
electronic filing requirement, and reduce the burden on plans that file
the Form 5500 Annual Return/Report.
Public comments submitted in response to the notice of proposed
rulemaking on the electronic filing requirement (Electronic Filing
Proposal) generally recognized the value of electronic filing over
paper filing and expressed support for increasing the use of electronic
filing. In response to the concerns of some commenters about whether
the proposed 2007 reporting year implementation date would give plans,
plan administrators, plan sponsors, and service providers enough time
to make adjustments necessary to migrate to an e-filing environment,
especially in the absence of specific information on the
characteristics and technical specifications of the new e-filing
system, the Electronic Filing Rule is now effective for plan years, or
for direct filing entities reporting years, beginning on or after
January 1, 2008. Further, in response to commenters' concerns, the
preamble to the final rule states the Department, in deciding whether
to assess annual reporting civil penalties, will take into account
technical and logistical obstacles experienced by plan administrators
who acted prudently and in good faith in attempting to timely file a
complete annual report in the first year of the wholly electronic
filing system. The revised and streamlined data requirements for the
Form 5500 Annual Return/Report being proposed in this document are
intended to be applicable for the reporting year for which the new e-
filing system is implemented.

II. Overview of Form Revisions

The proposed revisions to the annual return/report forms involve
the following major categories of changes, along with other technical
revisions and updates, to the current structure and content of the Form
5500 Annual Return/Report:
Establishment of the Form 5500-SF Annual Return/Report
(Short Form or Short Form 5500) as a new simplified report for certain
small plans;
Removal of the IRS-only schedules from the Form 5500
Annual Return/Report as part of the move to a wholly electronic filing
system;
Elimination of the special limited financial reporting
rules for Code section 403(b) plans;
Revision of the Schedule C (Service Provider Information)
to clarify the reporting requirements and improve the information plan
officials receive regarding amounts being received by plan service
providers; and
Addition of new questions to improve information on
pension plan funding and compliance with minimum funding requirements.
In addition to the description of the proposed form changes
contained in this Notice, the Agencies have included the following
appendices: (1) Appendix A--a facsimile of the proposed Form 5500-SF;
(2) Appendix B--a facsimile of the proposed Instructions to the Form
5500-SF; (3) Appendix C--detailed description of the proposed changes
to the Form 5500 and Schedules; and (4) Appendix D--detailed
description of the proposed changes to the instructions for the Form
5500 and Schedules. The Agencies are also making available on the
Department's Web site mark-ups of the Form 5500, Schedules, and related
instructions showing the proposed form and instruction changes. The
facsimiles and mark-ups are provided to show the data proposed to be
collected electronically beginning with the first reporting year for
which the new e-filing system is implemented. Because of the electronic
filing requirement for the revised Form 5500 Annual Return/Report,
including the proposed Short Form 5500, copies of facsimile forms and
schedules, will not be acceptable for filing under ERISA. Rather, the
facsimile forms and schedules the

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Agencies anticipate publishing in conjunction with the final regulation
will show the required format for satisfying disclosure obligations
under ERISA, including the plan administrator's obligation to furnish
copies of the annual report to participants and beneficiaries on
request pursuant to section 104(b) of ERISA, but paper versions will
not be able to be used for filing.

A. Short Form 5500 as New Simplified Report for Certain Small Plans

As part of continuing efforts to streamline and simplify the annual
reporting process, the Agencies are proposing a new two page form--the
Short Form 5500--to be filed by certain small plans (generally, plans
with fewer than 100 participants) with secure and easy to value
investment portfolios. The Agencies have previously issued simplified
reporting provisions and limited exemptions for small plans to ease the
burdens and costs attributable to annual reporting. After careful
review, the Agencies determined that certain small plans, by virtue of
their assets being held by regulated financial institutions and having
a readily determinable fair market value, present reduced risks for
their participants and beneficiaries. In such cases, therefore, an
abbreviated annual report filing (i.e., the Short Form 5500) could be
established without compromising the enforcement and research needs of
the Agencies or the disclosure needs of participants and beneficiaries
in such plans. In establishing the criteria for such Short Form filers,
the Agencies relied in part on the conditions for a waiver of the audit
requirements for small plans under 29 CFR 2520.104-46.\6\
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\6\ In additional to meeting the small plan size requirement
applicable to both pension and welfare plans, for pension plans the
eligibility requirements for the audit waiver under 29 CFR 2520.104-
46 are: (1) as of the last day of the preceding plan year at least
95% of a small pension plan's assets were ``qualifying plan
assets;'' (2) the plan must include certain information in the
Summary Annual Report (SAR) furnished to participants and
beneficiaries regarding its compliance with the audit waiver
conditions in addition to the information ordinarily required (see
29 CFR 2520.104b-10(d)(3) for a model SAR and the Notice of Proposed
Rulemaking published today for model language for the enhanced
notice requirement); and (3) in response to a request from any
participant or beneficiary, the plan administrator must furnish
without change copies of statements from the regulated financial
institutions holding or issuing the plan's ``qualifying plan
assets'' describing the assets and the amount of the assets as of
the end of the plan year. ``Qualifying plan assets, '' for this
purpose include: shares issued by an investment company registered
under the Investment Company Act of 1940 (e.g., mutual fund shares);
investment and annuity contracts issued by any insurance company
qualified to do business under the laws of a state; participant
loans meeting the requirements of ERISA section 408(b)(1), whether
or not they have been deemed distributed; and any asset held by
banks or similar financial institutions, including trust companies,
savings and loan associations, domestic building and loan
associations, and credit unions, insurance companies qualified to do
business under the laws of a state, organizations registered as
broker-dealers under the Securities Exchange Act of 1934, investment
companies registered under the Investment Company Act of 1940, or
any other organization authorized to act as a trustee for individual
retirement accounts under Code section 408. In the case of an
individual account plan, qualifying plan assets also include any
assets in the individual account of a participant or beneficiary
over which the participant or beneficiary had the opportunity to
exercise control and with respect to which the participant or
beneficiary has been furnished, at least annually, a statement from
one of the above regulated financial institutions describing the
plan assets held or issued by the institution and the amount of such
assets.
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As proposed, a pension or welfare plan would be eligible to file
the Short Form if the plan: (1) Covers fewer than 100 participants or
would be eligible to file as a small plan under the 80 to 120 rule in
29 CFR 2520.103-1(d); (2) is eligible for the small plan audit waiver
under 29 CFR 2520.104-46 (but not by virtue of enhanced bonding); (3)
holds no employer securities; and (4) has 100% of its assets in
investments that have a readily ascertainable fair market value. For
this purpose, participant loans meeting the requirements of ERISA
section 408(b)(1), whether or not they have been deemed distributed,
and investment products issued by banks and licensed insurance
companies that provide valuation information at least annually to the
plan administrator, will be treated as having a readily ascertainable
fair market value. Plans with assets that are employer securities will
not be eligible to file the Short Form. The Agencies believe that the
separate financial information about employer securities on the
Schedule I is important for regulatory, enforcement, and disclosure
purposes. The Agencies also believe that due to the importance of
obtaining financial information concerning employer securities,
allowing plans that hold employer securities to file the Short Form
would conflict with the need to obtain such information. Similarly,
because the Agencies believe that all multiemployer plans should be
required to answer newly proposed questions on the Form 5500 Annual
Return/Report and the Schedule R regarding contributing employers,
multiemployer plans would not be eligible to file the Short Form.
In brief, Short Form filers would be required to provide: (1) Basic
plan and plan sponsor identifying information; (2) abbreviated
participant count data, with defined contribution plan filers providing
the number of participants with account balances at the end of the plan
year; (3) information on features of the plan (e.g., plan type, manner
of providing benefits) using delineated codes; (4) an abbreviated
statement of assets and liabilities and income and expenses; and (5)
responses to a series of ``yes/no/amount'' compliance questions, such
as identification of any delinquent participant contributions, non-
exempt party-in-interest transactions, fidelity bonding coverage,
losses caused by fraud or dishonesty, and total participant loan
balances at the end of the plan year. Like other filers, Short Form
filers would be required to answer new questions on whether during the
plan year the plan reduced or failed to provide any benefit under the
plan, whether there was a blackout period during the plan year, and
whether the blackout notice requirements were met. Short Form pension
plan filers also would be required to provide certain basic pension
coverage and pension funding compliance information. Short Form defined
benefit pension plan filers still would have to file a Schedule B and
its attachments. Plans filing the Short Form on an extension of time or
in connection with the Department's Delinquent Filer Voluntary
Compliance Program would have to include attachments relevant to the
extension or participation in the program.
Because eligible plans can only hold certain types of investments,
several compliance questions have been eliminated for Short Form filers
(e.g., Schedule I questions relating to leases in default or
uncollectible, non-cash contributions, and assets whose current value
was not readily determinable).
Instead of filing Schedule A, Short Form 5500 filers would be
required to provide a total of all fees or commissions paid to any
brokers, agents, or other persons by an insurance carrier, insurance
service, or other organization that provides some or all of the
benefits under the plan. Short Form filers will still need to receive,
and insurers will still be required to provide, Schedule A fee and
commission information with respect to each contract necessary to
complete the Short Form 5500. Plan administrators will be required to
retain this information to meet the recordkeeping requirements of
section 107 of ERISA.
Under this proposal, most Short Form filers would not be required
to file any schedules, although defined benefit pension plans would
continue to be

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required to file Schedule B, where applicable.\7\
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\7\ Short Form 5500 filers would not be required to file
Schedule D, but Direct Filing Entities (DFEs) in which such plans
invest would still be required to list the plan name and Employer
Identification Number (EIN) on Part II of the DFE's Schedule D.
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The Agencies believe that the eligibility conditions for Short Form
filers, especially the requirements relating to security and valuation
of the plan's investments, ensure that the Short Form 5500 will provide
adequate disclosure to the participants and beneficiaries in the plan
and adequate annual reporting to the Agencies.
Small plans that are not eligible to file the Short Form would
continue to be able to file simplified reports as under the current
system. Specifically, small plan Form 5500 filers would file the Form
5500, Schedules A, B, D, I, and R, where applicable. This proposal also
would not change the conditions for the small pension plan audit waiver
in 29 CFR 2520.104-46. Small pension plans will still be able to claim
the audit waiver even if they are not eligible to file the Short Form.
Conversely, small pension plans filing the Short Form would continue to
be required to meet all applicable requirements for the audit waiver,
including the enhanced Summary Annual Report (SAR) and other disclosure
requirements of that regulation. Similarly, all welfare plans that file
the Form 5500 Annual Return/Report and have fewer than 100 participants
are currently exempt from the audit requirement without regard to how
their assets are invested. See 29 CFR 2520.104-46(b)(2). The proposed
Short Form would not change the welfare plan audit waiver conditions.
For a funded welfare plan to be eligible to file the Short Form,
however, the plan would have to meet the Short Form requirements
regarding investment assets.

B. Removal of IRS-Only Components From the Form 5500 Annual Return/
Report

The second category of changes involves the removal of schedules
and information that were filed as part of the Form 5500 Annual Return/
Report to meet various annual reporting requirements under the Code.
The IRS has advised that there are currently no mandatory electronic
filing requirements for a Form 5500 Annual Return/Report under the Code
or the regulations issued thereunder. As described more fully in the
Electronic Filing Rule, the Department has concluded that, taking into
account the costs and inefficiencies inherent in the maintenance of any
form of a paper filing system, it is not in the overall interest of
plan participants and beneficiaries, the Department, and taxpayers
generally to continue to accept and process paper Form 5500 Annual
Returns/Reports filings as part of a new processing system. To
effectuate the electronic filing requirement, the portions of the Form
5500 Annual Return/Report required to satisfy filing obligations
imposed by the Code, but not required under ERISA, had to be removed.
Accordingly, under this proposal, the following schedules will no
longer be required to be filed as part of the Form 5500 Annual Return/
Report: Schedule E (ESOP Annual Information), Schedule P (Annual Return
of Fiduciary of Employee Benefit Trust), and Schedule SSA (Annual
Registration Statement Identifying Separated Participants With Deferred
Vested Benefits). In that regard, the IRS has independently eliminated
the Schedule P (which served as the Trust's information return that is
filed under Code section 6033(a)) from the 2006 Form 5500 in
anticipation of the transition to a wholly electronic filing
environment. Further, as described elsewhere in this document, the
Department is proposing to move to the Schedule R three questions on
ESOP information formerly on the Schedule E, and the IRS has advised
the Department that it does not anticipate requiring separate filings
by ESOPs on the remaining questions from the Schedule E. The IRS is
evaluating the information collected on Schedule SSA, and considering
whether other existing information collections could be used in place
of the Form 5500 Annual Return/Report.
The IRS, however, also advised the Department that it intends that
plan administrators, employers, and certain other entities that are
subject to filing and reporting requirements under the Code will have
to continue to satisfy any applicable requirements in accordance with
IRS revenue procedures, regulations, publications, forms, and
instructions.
The Form 5500 Annual Return/Report would thus be comprised of the
Form 5500, and Schedule A (Insurance Information), Schedule B
(Actuarial Information), Schedule C (Service Provider Information),
Schedule D (DFE/Participating Plan Information), Schedule G (Financial
Transaction Schedules), Schedule H (Financial Information), Schedule I
(Financial Information Small Plan), and Schedule R (Retirement Plan
Information).

C. Elimination of Limited Reporting Option for Code Section 403(b)
Pension Plans

Code section 403(b) pension plans that are subject to Title I of
ERISA generally have had limited reporting obligations under the Form
5500 Annual Return/Report. A pension plan or arrangement using an
annuity contract under Code section 403(b)(1) and/or a custodial
account for regulated investment company stock under Code section
403(b)(7) as the sole funding vehicle for providing pension benefits
currently files only a Form 5500, containing basic plan identification
information. The administrator currently is not required to engage an
independent qualified public accountant (IQPA) to conduct an annual
audit of the plan, attach an accountant's opinion to the Form 5500, or
attach any schedules to the Form 5500. Over the years, the Code has
been amended to give favorable tax treatment to Code section 403(b)
plans similar to that for Code section 401(k) plans, and these
arrangements have grown both in size and number during this time. In
this regard, the IRS promulgated regulations to update the current
regulations under section 403(b) generally to reflect the numerous
legal changes that have been made in section 403(b) since 1964 when the
IRS originally promulgated its section 403(b) regulations. 69 FR 67075,
67076 (Nov. 16, 2004). The IRS's proposed regulations note the
increasing similarity among arrangements that include salary reduction
contributions, i.e., section 401(k), section 403(b), and governmental
section 457(b) plans.
The Department understands that the IRS has found a number of Code
compliance issues with section 403(b) plans. The Department, in its own
reviews, has detected violations of Title I in a high percentage of its
Code section 403(b) plan investigations. The predominant issue has been
the improper handling of employee contributions.
The Department concluded that these developments warrant a
reexamination of the continued reporting exemptions for Code section
403(b) plans. Amending the annual reporting requirements to put Code
section 403(b) plans on par with other pension plans covered by Title I
of ERISA would enhance the Department's oversight capabilities and
improve compliance in this area without substantial additional burden.
For example, the reporting in the proposed Short Form, or on Schedules
H and I, for delinquent participant contributions may help to ensure
that participant contributions are

[[Page 41620]]

transferred to individual investment accounts on a timely basis.
Under the proposal, Code section 403(b) plans that are subject to
Title I of ERISA would be subject to the same annual reporting rules
that apply to other ERISA-covered pension plans, including eligibility
for the proposed Short Form 5500. In this regard, the Department notes
that because Code section 403(b) plans are generally required to be
invested exclusively in annuity contracts or mutual funds, they
generally would be eligible to file the proposed Short Form 5500.
Moreover, under section 107 of ERISA, every person who is required to
file a report under Title I of ERISA, but for an exemption or
simplified reporting requirement under section 104(a)(2) or (3),
already is required to maintain records on which disclosure would be
required but for the simplified reporting requirement.

D. Addition of New Questions to Schedules on Title I Compliance,
Service Provider Compensation, and Pension Plan Funding

Schedule A: Identify Insurers That Fail To Supply Information
It is the view of the Department that compliance with annual
reporting requirements consists both of filing complete, accurate, and
timely annual returns/reports, including disclosing the information
required to be reported on the Schedule A, and maintaining records
regarding the information required to be provided under section 103 of
ERISA. Plan administrators, thus, are required to take reasonable and
prudent steps to secure the necessary Schedule A information. In this
regard, section 103(a)(2) of ERISA provides that, if some or all of the
information necessary to enable the administrator to comply with the
requirements of Title I of ERISA is maintained by an insurance carrier
or other organization that provides some or all of the benefits under a
plan or holds assets of the plan in a separate account, such carrier or
other organization is required to transmit and certify the accuracy of
such information to the administrator within 120 days after the end of
the plan year. The current instructions for the Schedule A state that,
if necessary information is missing because of an insurer's refusal to
provide the information, administrators should, to the extent possible,
complete the Schedule A and file a timely return/report noting the
refusal and any deficiencies in the Schedule A.
The 2004 ERISA Advisory Council Working Group on Health and Welfare
Plan Reporting concluded that many employers have difficulty obtaining
timely Schedule A information from insurers. See 2004 ERISA Advisory
Council Working Group Reports at http://www.dol.gov/ebsa. When the Form

5500 Annual Return/Report was revised in 1988 and 1999, public
commenters had complained about the difficulties administrators
confronted in obtaining timely and complete Schedule A information from
their insurers. See 65 FR 5026 (Feb. 2, 2000) and 54 FR 8631 (Mar. 1,
1989). In light of these continuing difficulties for plan
administrators, the Department proposes to add a check box to the
Schedule A to permit plans to identify situations in which the
insurance company or other organization that provides some or all of
the benefits under a plan has failed to provide Schedule A information.
Space would also be provided for the administrator to indicate the type
of information that was not provided. As a separate Schedule A is
required for each insurance contract, the identity of the insurance
company or organization will be self-evident. This would give the
Department more usable data on insurers that fail to satisfy their
disclosure obligations under section 103(a)(2) of ERISA and the
Department's regulations.
Schedule B: Asset Allocations in Very Large Defined Benefit Pension
Plans
The PBGC believes that it is important to obtain more detailed
information regarding the asset allocations of very large defined
benefit plans in order to help the PBGC assess the financial viability
of those plans. Although the Schedule H collects certain investment
information, the PBGC has found that it needs additional information on
the breakdown of assets held by defined benefit plans. The funding
status of these plans is highly dependent on the level and types of
assets in the plan and the sensitivity of these assets to changes in
market conditions. Readily ascertainable information on asset
distribution information would improve the PBGC's ability to estimate
the impact of economic changes on the financial status of the plans it
insures, and, by extension, on the future financial status of the PBGC.
Under this proposal, new questions would be added to the Schedule B
that are designed to obtain a ''look-through'' allocation of plan
investments in certain pooled investment funds for defined benefit
plans with 1,000 or more participants. The new questions would obtain
the percentage of assets held in each of four categories--Stocks, Debt
Instruments (Bonds), Real Estate, and Other. The debt instrument data
would be further disaggregated into three categories--governmental
debt, investment-grade corporate debt, and high-yield corporate debt.
The new Schedule B questions would also require plans to provide a
measure of the duration of the aggregate debt instruments (``Macaulay
duration'') in order to provide the PBGC with a more accurate basis for
reflecting bond duration for modeling purposes. For this purpose, the
Macaulay duration is a weighted average of the number of years until
each interest payment and the principal are received. The weights are
the amounts of the payments discounted by the yield-to-maturity of the
bond. When calculating the distribution of debt securities, any
corporate debt that has not been rated will have to be included in the
High-Yield Corporate Debt category. Foreign debt will be expected to be
allocated to the appropriate category as if it were debt issued by
United States corporations or governmental entities.
The asset distribution information, other than the Macaulay
duration, should be readily available to single-employer plans because
the Financial Accounting Standards Board (FASB) requires that the
aggregate asset distribution for all employer plans be included as a
part of the sponsor's 10-k filings with the Securities and Exchange
Commission. Multiemployer plans are not currently required to calculate
these distributions, but the data should be readily available from the
plan's investment committee. In addition, data from Section C of EBSA's
Private Pension Plan Bulletin \8\ indicates that multiemployer plans
tend to have a much smaller percentage of assets invested in assets
whose type is difficult to ascertain. Obtaining the overall
distribution of assets should not be overly burdensome for the
administrators of multiemployer plans. The Macaulay duration should be
a simple computation for managers of bond portfolios. Only in rare
instances would this computation be time consuming. For instance,
combining these durations into an aggregate duration could be time
consuming if the plan has several bond portfolio managers.
---------------------------------------------------------------------------

\8\ The Private Pension Bulletin is available on-line at http://www.dol.gov/ebsa/PDF/2000pensionplanbulletin.PDF
.

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Schedule C: Compensation Received by Plan Service Providers
The Department has been examining issues regarding service provider

[[Page 41621]]

compensation from a number of perspectives.\9\ Questions and issues
relating to the appropriate manner and scope of the reporting of
service provider compensation on the Schedule C have been raised by the
ERISA Advisory Council. See ERISA Advisory Council Report of the
Working Group on Plan Fees and Reporting on Form 5500 (Nov. 10, 2004)
and the Government Accountability Office (See Private Pensions:
Government Actions Could Improve the Timeliness and Content of Form
5500 Pension Information, GAO-05-491) (discussing fee disclosure
generally), as well as by Form 5500 Annual Return/Report filers and
service providers. The Department has determined it is appropriate to
modify the Schedule C reporting requirements in an effort both to
clarify the reporting requirements and to ensure that plan officials
obtain the information they need to assess the reasonableness of the
compensation paid for services rendered to the plan, taking into
account revenue sharing and other financial relationships or
arrangements and potential conflicts of interest that might affect the
quality of those services.\10\
---------------------------------------------------------------------------

\9\ In its Spring 2006 Semi-Annual Regulatory Agenda, the
Department indicated that it is considering proposed rulemaking
which would amend the regulation setting forth the standards
applicable to the exemption under ERISA section 408(b)(2) for
contracting or making reasonable arrangements with a party in
interest for office spaces for services (29 CFR 2550.408b-2). The
amendment would ensure that plan fiduciaries are provided or have
access to that information necessary to a determination whether an
arrangement for services is ``reasonable'' within the meaning of the
statutory exemption, as well as the prudence requirements of ERISA
section 404(a)(1)(B). This regulation is needed to eliminate the
current uncertainty as to what information relating to services and
fees plan fiduciaries must obtain and service providers must furnish
for purposes of determining whether a contract for services to be
rendered to a plan is reasonable.
\10\ See Staff Report Concerning Examinations of Select Pension
Consultants, issued on May 16, 2005, by the Office of Compliance
Inspections and Examinations, U.S. Securities and Exchange
Commission.
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As proposed, the Schedule C would consist of three parts. Part I of
the Schedule C would require the identification of each person who
received, directly or indirectly, $5,000 or more in total compensation
(i.e., money or anything else of value) in connection with services
rendered to the plan or their position with the plan during the plan
year. This requirement would no longer be limited to the 40 highest
paid service providers. Filers also would have to indicate for all
service providers whether the service provider received any
compensation attributable to the person's relationship with or services
provided to the plan from a party other than the plan or plan sponsor.
If a fiduciary to the plan or any of an enumerated list of service
providers received, directly or indirectly, $5,000 or more in total
compensation and also received more than $1,000 in compensation from a
person other than the plan or plan sponsor, then the Schedule C would
have to provide information identifying the payor of the compensation,
the relationship or services provided to the plan by the payor, the
amount paid, and the nature of the compensation. The enumerated service
providers are contract administrator, securities brokerage (stock,
bonds, commodities), insurance brokerage or agent, custodial,
consulting, investment advisory (plan or participants), investment or
money management, recordkeeping, trustee, appraisal, or investment
evaluation.
A new Part II for Schedule C would provide a place for plan
administrators to identify each fiduciary or service provider that
failed or refused to provide the information necessary to complete Part
I of the Schedule C.
The proposed Schedule C requirements would raise the threshold for
reporting on non-fiduciary employees of the plan from the current
$1,000 per month to $25,000 per year. It would also revise the current
instructions to make clear that the exception for reporting employees
of the plan sponsor or institutional service providers does not apply
if those employees receive compensation in connection with the plan or
services provided to the plan other than salary from the plan sponsor
or institutional service provider.
The Department is also proposing to update the ``codes'' for
identifying services. It is expanding certain codes and modifying
others to reflect changes in the plan services industry and to provide
greater clarity. It is also eliminating the codes for medical and legal
benefit providers to make clear that self-insured plans need not report
payments to persons who provide medical services or legal services to
participants and beneficiaries. Unlike payments to other service
providers required to be reported on the Schedule C, such payments by
self-insured plans to medical and legal service providers constitute
benefit payments under the plan. The Department notes that insured
plans are not required to report on the Schedule C individual providers
who are paid by the insurance company for medical and legal services
provided to participants and beneficiaries. In the Department's view,
the Schedule C was intended to capture information regarding payment of
plan assets to persons rendering services to plans, and not information
on benefit payments by the plan to participants and beneficiaries.
The proposal would change the Schedule C instructions to make
explicit that, except to the extent not otherwise excluded (e.g., non-
employee compensation of less than $5,000 and plan employee
compensation of less than $25,000 a year), compensation in connection
with services rendered to the plan or their position with the plan
includes ``float'' or similar earnings on plan assets or plan deposits
that are retained by a service provider as part of its compensation
package.
Under the proposal, reportable compensation would include brokerage
commissions and fees charged to the plan on purchase, sale, and
exchange transactions regardless of whether the broker is granted
discretion. As brokerage fees and commissions may constitute a
significant part of a plan's annual expenses, the Department does not
believe that continuing the current exemption from the Schedule C
reporting for such expenses is appropriate. The Department believes
that an annual review of such expenses is part of a plan fiduciary's
on-going obligation to monitor service provider arrangements with the
plan. Requiring the reporting of such information should emphasize that
monitoring obligation.
When a plan acquires a unified package or bundle of services from a
provider, and the amount paid for the package or bundle reflects the
amount paid for all services included within the package or bundle,
direct compensation would include only the aggregate amount paid by the
plan to the provider of the package or bundle of services. In such
cases, it would not be necessary to break out or report amounts on a
service-by-service basis. Similarly, amounts paid by the provider of
the bundled services to other service providers to the plan would not
be reported on Schedule C unless (1) the plan is also paying the
provider directly for services in addition to those included in the
package or bundle, or (2) the recipient of such compensation is a
fiduciary to the plan or one of the other listed service providers from
whom additional information is required to be reported where the
provider receives compensation in excess of $1,000 from a person other
than the plan or plan sponsor.
To address possible burdens associated with allocating such
revenue-sharing income and third-party payments to individual plans,
the Schedule C would provide that

[[Page 41622]]

``indirect'' compensation (i.e., amounts paid by a party other than the
plan or plan sponsor) could be reported as an actual amount or an
estimate of the compensation received during the reporting period. If
any part of the compensation is an estimate, the Schedule C will also
require an explanation of the formula used for calculating the
payments.
The third part of the Schedule C (Part III) would be the current
Part II of the Schedule C, used for reporting termination information
on accountants and enrolled actuaries. The proposal would not alter
these current requirements.
Schedule H and I: Compliance With Blackout Notice Requirements
On January 24, 2003, the Department of Labor published final rules
on the disclosure of blackout periods to participants and
beneficiaries. 68 FR 3716. EBSA proposes adding questions to Schedules
H and I regarding whether a plan has had a blackout period during the
plan year, and if so, whether it has provided the notice required by
statute and regulation. The proposal would require plan administrators
to report on Schedule H or I, or the Short Form 5500, as appropriate,
whether there has been a temporary suspension, limitation, or
restriction lasting more than three consecutive business days of the
rights of participants or beneficiaries to direct or diversify assets
credited to their accounts, to obtain loans from the plan, or to obtain
plan distributions. If so, plan administrators will have to state
whether participants have been provided the required notice of this
suspension period. There are an estimated 655,000 defined contribution
plans, approximately 400,000 of which are wholly or partially
participant-directed. EBSA believes that incorporating a line item in
the fiduciary compliance sections of the Form 5500 financial schedules
regarding blackout periods and compliance with the blackout notice
regulation will promote awareness among the regulated community of the
blackout notice requirements, and will give EBSA an objective tool to
measure its enforcement activities in the area.
Schedules H and I: Failure To Pay Benefits When Due
The proposal would add to the Schedule H and Schedule I, also
included on the new Short Form 5500, a compliance question that would
require plan administrators to answer whether the plan has failed to
pay any benefits when due during the plan year. A similar question on
the Form 5500-C/R had not been carried forward to the Form 5500 Annual
Return/Report as part of the restructuring of the form for the 1999
plan year. The Department has now determined that requiring filers to
respond to a modified version of this question would provide the
Department with important information about plans with potentially
serious management or funding problems. The information would also
provide participants and beneficiaries with information that could
alert them to potentially serious problems with their plan.
Schedule I: Separate Disclosure of Fees Paid to Administrative Service
Providers
The Department is proposing to enhance the disclosure requirements
for direct compensation paid by small plans for administrative
expenses, i.e., professional and administrative salary, fee, and
commission payments. Small plans currently file simplified financial
information on Schedule I without having to file the more detailed
Schedule C information on plan service providers. As described above,
the Agencies developed an even more streamlined Short Form 5500 that
small plans with secure and easily valued investment portfolios may use
as their annual return/report. The proposed Short Form 5500 requires
filers to report administrative service fees separately from other
expenses of operating the plan. The Agencies are making a parallel
change to the Schedule I for those small plans that are not eligible to
file the Short Form 5500. This fee information is currently required to
be reported on the Schedule I as part of an aggregate plan expense line
item. The Agencies believe that having a separate line item for
payments to professional and administrative service providers will
promote better awareness among plan fiduciaries regarding these fee
payments and will provide participants, beneficiaries, and government
regulatory agencies with improved disclosure of these plan expenses.
Schedule R: Contributors to Multiemployer Pension Plans
The PBGC seeks to have plan administrators identify major
contributing employers to multiemployer defined benefit pension plans.
The Form 5500 Annual Return/Report lacks information describing the
basis for employer contributions to multiemployer plans. This
information is needed by the PBGC to assess the financial risk posed to
multiemployer pension plans by the financial collapse or withdrawal of
one or more contributing employers. For a number of plans, one or two
employers are responsible for a large portion of the funding. If these
sponsors go out of business or run into severe financial difficulties,
the plan's funding can deteriorate rapidly, increasing the PBGC's
exposure. As a part of its single-employer monitoring activities (the
Early Warning Program), the PBGC follows the business transactions and
financial conditions of many companies. When certain conditions are
met, the PBGC contacts the company to negotiate protections for plan
participants and the PBGC. Because the PBGC is unable to identify the
major contributors to multiemployer plans, it cannot establish a
similar monitoring program for its multiemployer insurance program.
Over the past several years, the financial condition of many
multiemployer plans has been deteriorating. The PBGC believes it is
prudent to monitor those companies that are major contributors to the
multiemployer plans. To accomplish this, the PBGC must be able to
identify these companies.
The PBGC recognizes that the multiemployer plans most at risk when
a major contributing employer encounters financial difficulties are
those plans that depend upon a few employers for a large portion of the
plan's funding. Accordingly, the new requirement strikes a balance
between the burden that would be imposed on the plan by this
information collection and the benefit to the PBGC by requiring the new
information on contributions by an employer only if that employer's
contributions constitute at least five percent of the total
contributions for the plan year. For these employers, the plan would be
required to report on Schedule R: (1) The name of the contributing
employer; (2) the employer's EIN; (3) the dollar amount contributed;
(4) the contribution rate; (5) the type of base units for the
contribution; and (6) the expiration date for the collective bargaining
agreement pursuant to which contributions are required to be made to
the plan.

E. Other Improvements and Clarifications of Existing Form 5500
Reporting Requirements

The last category of revisions involves proposed amendments to the
Form 5500, individual schedules, and instructions to clarify and
improve existing reporting requirements.
Form 5500: Addition of Question Seeking Total Number of Contributing
Employers to Multiemployer Plans
Currently, the Form 5500 Annual Return/Report does not collect any

[[Page 41623]]

information that identifies the employers participating in the
approximately 10,000 multiemployer plans currently in existence. The
Agencies do not have any information as to the number of individual
employers who provide benefits to their employees through such plans.
Multiemployer plans are currently required by the Department's
regulations to keep information on participating employers on file and
to make such information available to participants on request. See 29
CFR 2520.102-3(b)(4). Accordingly, adding a question to the Form 5500
asking the number of participating employers in a multiemployer plan
would not create new record-keeping requirements. The Agencies believe
this information would be useful to other governmental entities and
private firms that use the Form 5500 data for policy and research
purposes.
Form 5500: Improved Schedule Checklist
The Form 5500 includes a checklist of the various schedules that
may be required to be attached. In addition to revising the checklist
to eliminate the IRS-only Schedules, the Agencies have also made other
cosmetic changes to the presentation of the schedule checklist to
improve it as a disclosure document for participants, beneficiaries,
and others. The Agencies solicit comment on whether and how the clarity
and readability of the schedule checklist or other presentation on the
face of the Form 5500 could be improved.
Form 5500: New Plan Characteristics Code for Pension Plans
Under the current filing requirements, plans must include on the
Form 5500 all of the plan characteristics that apply to the plan from a
list of codes included in the instructions. These ``feature'' codes
allow the Agencies to identify and classify the universe of filers by
their major characteristics. The Agencies do not currently collect any
information as to the number of plans that provide for automatic
enrollment or the number of plans that provide default investments in
the event participants with the ability to direct investments in their
individual accounts fail to provide directions. The Department has
decided to add new plan feature codes for defined contribution pension
plans with automatic enrollment features and default investment
provisions. The Department believes this information would be useful
both to the Department and to other governmental and non-governmental
organizations for policy and research purposes. The Department added
these new feature codes partly in response to the Reports of the ERISA
Advisory Council and the GAO, discussed previously, that noted that the
Form 5500 Annual Return/Report could be updated to better reflect the
current plan and financial universe. The Department seeks comments as
to whether any additional feature codes should be added to better
describe the types of benefit and funding arrangements used for defined
benefit pension plans, defined contribution pension plans, and welfare
benefit plans. The Agencies also have eliminated the feature codes for
certain types of plans that are not subject to Title I of ERISA because
they will not be filing the Form 5500 with EFAST under the proposed
electronic filing system.
Schedules H and I: New Supplemental Schedule for Line 4a of the
Schedule H for Reporting Delinquent Participant Contributions
Beginning with the 2003 Form 5500 Annual Return/Report, information
on delinquent participant contributions must be reported only on
Schedule H, Line 4a, or on Schedule I, Line 4a, and should not be
reported on Schedule H, Line 4d, on Schedule G, Part III, Nonexempt
Transactions, or on Schedule I, Line 4d. This change was made to avoid
double reporting of information on delinquent participant contributions
and otherwise to simplify the reporting requirements. In the case of
employee benefit plans subject to an ERISA audit requirement, the
supplemental schedules referenced in ERISA section 103(a)(3)(A) and 29
CFR 2520.103-1(b) and 2520.103-2(b), including information on nonexempt
prohibited transactions, are subject to the IQPA audit. The IQPA must
express an opinion on whether the scheduled information is presented
fairly in all material respects in relation to the basic financial
statements taken as a whole. In that regard, the instructions state
that delinquent participant contributions reported on Schedule H, Line
4a, should be treated as part of the supplemental schedules for
purposes of the required IQPA audit and opinion. The instructions also
provide that, if the information contained on Schedule H, Line 4a is
not presented in accordance with the Department's regulatory
requirements, the IQPA report must make the appropriate disclosures in
accordance with Generally Accepted Auditing Standards (GAAS). In
response to requests for guidance from some in the accounting
profession, the Department posted on its Web site FAQs about reporting
delinquent participant contributions, including examples of formats for
supplemental schedules that plan administrators and IQPAs could use to
meet those reporting and disclosure obligations.
The Department proposes modifying the Instructions to Schedule H,
Line 4a to require delinquent participant contributions to be presented
on a standardized supplemental schedule. The proposed Schedule H, Line
4a--Schedule of Delinquent Participant Contributions would identify the
total participant contributions transferred late to the plan, the total
that are nonexempt prohibited transactions, and the total contributions
fully corrected under the Voluntary Fiduciary Correction Program (VFCP)
71 FR 20261 and 20135 (Apr. 19, 2006). Those that constitute nonexempt
prohibited transactions would be broken down into contributions not
corrected, contributions corrected outside of the VFCP, and
contributions pending correction in the VFCP. This supplemental
schedule is one of those already published on the Department's Web site
at http://www.dol.gov/ebsa/faqs/faq_compliance_5500.html and can be

viewed as part of the proposed forms mark-ups displayed on the
Department's Web site.\11\ The Department specifically seeks comments
from the accounting profession as to whether this supplemental schedule
should in fact be made mandatory, whether the Department should
continue to allow filers to choose the format in which to present the
required information, or whether a different version of the
supplemental schedule should be made mandatory.
---------------------------------------------------------------------------

\11\ A similar addition would be made to the instructions for
Line 4a of the Schedule I applicable to small plans filers who are
not eligible for the audit waiver.
---------------------------------------------------------------------------

The Schedule H and I instructions for Line 4a would also be revised
to incorporate guidance included in FAQs on the Department's website on
including delinquent forwarding of participant loan repayments on line
4a. In Advisory Opinion 2002-02A (May 17, 2002), the Department stated
that participant loan repayments paid to or withheld by an employer for
purposes of transmittal to an employee benefit plan are sufficiently
similar to participant contributions to justify, in the absence of
regulations providing otherwise, the application of principles similar
to those underlying the participant contribution regulation for
purposes of determining when such repayments become assets of the plan.
Delinquent forwarding of participant loan repayments is eligible for

[[Page 41624]]

correction under the VFCP and PTE 2002-51 on terms similar to those
that apply to delinquent participant contributions. The Department
advised filers in its FAQs that the Department would not reject a Form
5500 Annual Return/Report based solely on the fact that delinquent
forwarding of participant loan repayments are included on Line 4a of
the Schedule H or Schedule I, provided that filers that choose to
include such participant loan repayments on Line 4a use the same
supplemental schedule and IQPA disclosure requirements for the loan
repayments as for delinquent transmittals of participant contributions.
Schedule R: ESOP Questions Moved From Schedule E
In evaluating the consequences of removing the IRS-only schedules
from the Form 5500 Return/Report, the Department determined that ESOP-
filers should continue to be asked the following questions regarding
the operations and investments of the ESOP: (1) Whether any unallocated
employer securities or proceeds from the sale of unallocated securities
were used to repay any exempt loan; (2) whether the ESOP holds any
preferred stock, and if so, whether the ESOP has an exempt loan with
the employer as lender that is part of a ``back-to-back'' loan--the
repayment terms of the employer loan to the ESOP are substantially
similar to the repayment terms of a loan to the employer from a
commercial lender; and (3) whether the ESOP holds any stock that is not
readily tradable on an established securities market. The Department
believes these questions provide important information for
investigators in reviewing the operations and activities of ESOPs and
identifying potential violations of the statute and regulations. Public
disclosure of this information would also serve as a deterrent to non-
compliance with ESOP statutory duties.
Technical and Conforming Changes for Forms and Instructions
Various technical and conforming changes are being proposed to the
forms and instructions. For example, the proposal would delete the
optional line for identifying the principal preparer of the Form 5500.
The Agencies added this line item in 1999. Only a very small number of
filers have provided this optional information, and the Agencies have
not been able to make systematic use of the data. Similarly, Schedule R
currently contains questions regarding minimum required contributions
for the plan year, and the proposal would add a question on whether the
minimum funding amount reported will be met by the funding deadline.
The Agencies generally seek input from the public as to whether other
technical or conforming changes would further clarify or improve
required reporting obligations for the Form 5500 Annual Return/Report.

F. Other Welfare Plan Issues

In developing these proposed revisions, the Department also
considered the ERISA Advisory Council's, Report of the Working Group on
Health and Welfare Form 5500 Requirements (Nov. 10, 2004). The
Department already has addressed several of this Report's
recommendations through improvements in the instructions for the 2005
Form 5500 Annual/Return Report. Others are addressed by the proposed
form and instruction changes discussed above.
While the Department recognizes that the current reporting
framework does not capture information on the entire universe of
welfare plans, the Department believes that generally retaining the
current reporting requirements is important for disclosure purposes for
both the Department and for participants and beneficiaries in the
welfare plans that currently report. One suggestion of this Working
Group was for the Department to consider developing a separate Form
5500 Annual Return/Report just for welfare plans. The Department,
through its restructuring of the Form 5500 Annual Return/Report in
1999, and by providing separate instructions for pension and welfare
plans, already has limited the need to examine the form and schedules
to determine which questions and instructions are required for the type
of plan filing. The Department also believes that considerations for
having a separate form for welfare plans will be less significant in a
system where all filing is electronic. What will be significant in that
type of system is the instructions as they relate to the data
appropriate to each type of plan. In this regard, it should be noted,
as discussed above, that the Department has published the Electronic
Filing Rule requiring that all Form 5500 Annual Return/Reports be filed
electronically. Under any type of electronic system, we anticipate that
filers would need to access the instructions relevant only to their
type of plan, eliminating any potential confusion from determining in a
unified form package which instructions are relevant to the filer.
The Working Group also suggested that the Department consider
limiting certain reporting currently required of welfare plans. The
Department believes that retaining the current requirements as they
relate to funded welfare plans (i.e., those with assets held in trust)
and large fully insured plans, without imposing new reporting burdens
on all welfare plans, best serves to balance the needs of the
Department and participants and beneficiaries and the burden associated
with the reporting requirements. Similarly, the Department believes
that continuing the audit requirement for large funded welfare plans
provides important protections to participants and beneficiaries of
those plans, even when the trust principally serves as a conduit for
the payment of benefits. Accordingly, the Department is not proposing
to change the application of the audit requirement to such plans.
As noted above, the Department already has taken steps to address
some of the issues raised by the Working Groups. It modified the 2005
Form 5500 Annual Return/Report instructions by adding language
regarding how to count participants in a welfare plan, by providing
guidance on how to determine the number of welfare plans a sponsor has
for annual reporting purposes, and by including new language reflecting
a recent advisory opinion on fee and commission reporting by insurance
companies for purposes of Schedule A. The Department invites comments
and suggestions on what, if any, additional steps the Department could
take to clarify reporting rules for welfare plans.

III. Regulations Relating to the Proposed Form

As noted above, certain amendments to the annual reporting
regulations are necessary to accommodate some of the proposed revisions
to the forms. The Department is publishing separately today in the
Federal Register proposed amendments to the Department'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 Department to adopt the Form 5500 Annual Return/
Report, if revised as proposed herein, and the proposed Short Form
5500, 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.

Paperwork Reduction Act Statement

As part of continuing efforts to reduce paperwork and respondent
burden, the general public and Federal agencies are invited to comment
on proposed and/or

[[Page 41625]]

continuing collections of information in accordance with the Paperwork
Reduction Act of 1995 (PRA 95) (44 U.S.C. 3506(c)(2)(A)). This helps to
ensure that requested data will be provided in the desired format,
reporting burden (time and financial resources) will be minimized,
collection instruments will be clearly understood, and the impact of
collection requirements on respondents is properly assessed. Currently,
comments concerning the proposed revision of the Form 5500 Annual
Return/Report, pursuant to Part 1 of Subtitle B of Title I and Title IV
of ERISA and the Internal Revenue Code are being solicited. A copy of
the Information Collection Request (ICR) may be obtained by contacting
the person listed in the PRA Addressee section below.
The Department has submitted a copy of the proposed forms revisions
to the Office of Management and Budget (OMB) in accordance with 44
U.S.C. 3507(d) for its review of the Department's information
collection. The IRS and the PBGC intend to submit separate requests for
OMB review and approval based upon the final forms revisions. Of
particular interest are comments that:
Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the Agencies,
including whether the information will have practical utility;
Evaluate the accuracy of the estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
Comments should be sent to the Office of Information and Regulatory
Affairs, OMB, Room 10235, New Executive Office Building, Washington, DC
20503; Attention: Desk Officer for the Employee Benefits Security
Administration, Department of Labor. Although comments may be submitted
through September 19, 2006, OMB requests that comments be received
within 30 days of publication of the Notice of Proposed Forms Revision
to ensure their consideration.
PRA Addressee: Address requests for copies of the ICR to Gerald B.
Lindrew, Office of Policy and Research, U.S. Department of Labor,
Employee Benefits Security Administration, 200 Constitution Avenue,
NW., Room N-5718, Washington, DC 20210. Telephone: (202) 693-8410; Fax:
(202) 219-4745. These are not toll-free numbers.
Type of Review: Revision of a currently approved collection.
Agencies: Employee Benefits Security Administration (OMB Control
No. 1210-0110); Internal Revenue Service (OMB Control No. 1545-0710);
Pension Benefit Guaranty Corporation (OMB Control No. 1212-0057).
Title: Form 5500 Series.
Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.
Form Number: DOL/IRS/PBGC Form 5500 and Schedules.
Total Respondents: The total number of annual Form 5500 filers will
be approximately 833,000.
Total Responses: See ``Total Respondents'' Above.
Frequency of Response: Annually.
Estimated Total Burden Hours: 2.3 million.
Estimated Time per Response, Estimated Burden Hours, Total Annual
Burden: See below for each Agency.
Total Annualized Capital/Startup Costs: $0.
Total Burden Cost (Operating and Maintenance): $754 million.
Total Annualized Costs: $754 million.
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 Series 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 included in their PRA
calculations a burden for reading the instructions and find there is no
recordkeeping burden attributable to the Form 5500 Annual Return/
Report.
The comments are solicited on whether or not any recordkeeping
beyond that which is usual and customary is necessary to complete the
Form 5500 Annual Return/Report. Comments are 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.

Paperwork and Respondent Burden

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

--------------------------------------------------------------------------------------------------------------------------------------------------------
Pension Welfare
------------------------------------------------------------------------------------------------------------------------
Large Small Large Small
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 5500...................... 1 hr., 55 min................ 1 hr., 7 min................ 1 hr., 38 min............... 1 hr., 5 min.
Sch A.......................... 1 hr., 48 min................ 55 min...................... 8 hr., 31 min............... 2 hr., 17 min.
Sch B.......................... 6 hr., 51 min................ 31 min......................
Sch C.......................... 1 hr., 35 min................ ............................ 56 min......................
Sch D.......................... 10 hr........................ 10 hr.......................
Sch G.......................... 11 hr., 58 min............... ............................ 6 hr., 28 min...............
Sch H.......................... 8 hr., 26 min................ ............................ 3 hr., 35 min...............
Sch I.......................... ............................. 1 hr., 33 min............... ............................ 1 hr., 33 min.

[[Page 41626]]

Sch R.......................... 1 hr., 4 min................. 31 min......................
Short Form..................... ............................. 2 hr., 5 min................ ............................ 2 hr., 5 min.
--------------------------------------------------------------------------------------------------------------------------------------------------------

The aggregate hour burden for the Form 5500 Annual Return/Report
(including schedules and short form) is estimated to be 2.3 million
hours annually. The hour burden reflects filing activities carried out
directly by filers. The cost burden is estimated to be $754 million
annually. The cost burden reflects filing services purchased by filers.
Presented below is a chart showing the total hour and cost burden of
the revised Form 5500 Annual Return/Report separately allocated across
the Department and the IRS. There is no separate PBGC entry on the
chart because, as explained below, its share of the paperwork burden is
very small relative to that of the IRS and the Department.

The paperwork burden allocated to the PBGC includes a portion of
the general instructions, basic plan identification information, a
portion of Schedule B, and a portion of Schedule R. The PBGC's
Estimated Share of Total Form 5500 Annual Return/Report Burden is:
4,000 hours and $5 million dollars per year.
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BILLING CODE 4510-29-C

Appendix C--Description of Changes to Existing Form 5500

General Changes to Form 5500 and Schedules

Appearance of check boxes and line items may be changed in order
to reflect electronic input format. Dates and line numbering will be
changed to reflect plan year and insertions and deletions
throughout. Line titles may be changed to provide for fewer or
additional entries to reflect changed appearance and electronic data
entry on the Form 5500 and all Schedules. Instructions for schedules
and line items being eliminated will also be eliminated. Conforming
changes to titles and line items changed in the forms will be made
in the instructions.
To enable filers to better evaluate the proposed changes, the
Department is making available on its Web site at http://www.dol.gov/ebsa
, handwritten mark-ups of the existing Form 5500 and

Schedules to show the changes proposed. Copies of the mark-ups may
also be obtained by calling the EBSA's Public Disclosure Room at
1.866.444.EBSA (3272).

Specific Changes

Form 5500

Signature lines will be changed to reflect shift to
electronic filing; plan administrators still will be required to
maintain a manually signed copy with the plan's records.
Separate signature line will be added for DFEs.
Line 5 (Preparer information) will be eliminated.
New Line 7 will be added to request total number of
contributing employers to multiemployer plan.
List of Schedules will be modified to eliminate
references to schedules being eliminated.

Schedule A

Minor non-substantive changes will be made to language
of lines to make questions clearer.
Line 2(b) entry will be changed to ``Amount of sales
and base commissions paid''
Line 2 (c) entry will be changed to ``Fees and other
commissions paid''
New Part IV will be added to enable plan administrator
to identify any insurance company that failed to provide the
information necessary to complete Schedule A and the information
that was not provided by the insurance company.

Schedule B

New Line 12 will be added that provides as follows:
12 If the total participant count on Schedule B, line 2(b)(1)(4)
is 1,000 or more, then answer questions 12a and 12b.
a Enter percentage of plan assets held as:
Stock ----% Debt ----% Real Estate ----% Other ----%
b For the debt securities, provide the Macaulay duration for all
debt securities and the percentage held as (see instructions):

Macaulay Duration........................................... ----.----
Government Debt........................................... ----.----
Investment Grade Corporate Debt........................... ----.----
High-Yield Corporate Debt................................. ----.----

Schedule C

Existing Part I will be deleted; new Part II will be added; existing
Part II will be renumbered Part III.
New Part I and II will be as follows:

[[Page 41647]]

Part I--Service Provider Compensation Information (See Instructions)

Line 1. The information required by this Part must be completed, in
accordance with the instructions, for each person receiving,
directly or indirectly, $5,000 or more in total compensation (i.e.,
money or anything else of value) in connection with services
rendered to the plan or their position with the plan during the plan
year.

(a) Name--------------------------------------------------------------
(b) Enter EIN or, if reported person does not have an EIN, address
and telephone number

1. EIN - -

2. Address and Phone Number-------------------------------------------

( ) - Ext.
(c) Enter Code(s) for relationship or services provided to the plan
(see instructions)
(d) Relationship to employer, employee organization, or person known
to be a party-in-interest. ------------
(e) Total amount received (see instructions)
1. $------------------------------------------------------------------
2. Is the amount entered in element (d)(l) an estimate? Yes No
3. If applicable, describe formula for calculating payment(s) ------
--
(f) Did the person identified in element (a) (above) receive during
the plan year compensation (money or anything else of value) from a
source other than the plan or plan sponsor in connection with the
person's position with the plan or services provided to the plan?
Yes No
(g) If the answer to (f) is ``Yes,'' enter the following information
for each source from whom the person identified in element (a)
received $1,000 or more in compensation if the person is a fiduciary
to the plan or provides one or more of the following services to the
plan-- contract administrator, securities brokerage (stock, bonds,
commodities), insurance brokerage or agent, custodial, consulting,
investment advisory (plan or participants), investment or money
management, recordkeeping, trustee, appraisal, or investment
evaluation.
(1) Name and EIN of source from whom compensation was received
(payor)------------ -
(2) Enter Code(s) for relationship or services provided by the payor
to the plan (see instructions)
(3) Amount paid by the payor (see instructions)
(A) $--------
(B) Is the amount entered in element (3)(A) an estimate? Yes No
(C) If applicable, describe formula for calculating payment(s)
-----------------------------------------------------------------------
(4) Describe nature of compensation reported in (g)(3) (see
instructions)
-----------------------------------------------------------------------

Part II. Service Providers Who Fail or Refuse to Provide Information

Line 2. Provide, to the extent possible, the following information
for each fiduciary or service provider who failed or refused to
provide the information necessary to complete Part I of this
Schedule.
(a) Name--------------------------------------------------------------
(b) Enter EIN or, if reported person does not have an EIN, address
and telephone number
1. EIN - -
2. Address and Phone Number------------
( ) - Ext.

Schedule H

Part IV will be changed as follows:
Title will be changed to ``Compliance Questions.''
General instructions will be modified to note that MTIAs, 103-12IEs,
and GIAs will not complete new lines 4m and 4n and that 103-12IEs
and MTIAs also will not complete new Line 4l.
Line 4a will be modified to read as follows: ``Was
there a failure to transmit to the plan any participant
contributions within the time period described in 29 CFR 2510.3-102?
(See Instructions and DOL's Voluntary Fiduciary Correction
Program).'' This will conform the text in Line 4a to the same
question on the new proposed Short Form 5500.
New Lines 4l-4m will be added as follows:

[cir] 4l Has the plan failed to provide any benefit when due under
the plan? Yes-- No-- Amount --.--
[cir] 4m If this is an individual account plan, was there a blackout
period? (see instructions and 29 CFR 2520.101-3) Yes--No --
[cir] 4n If 4m was answered ``Yes,'' did the plan administrator
comply with the blackout period notice requirements in 29 CFR
2520.101-3? Yes-- No--

Schedule I

New Line 2h will be added to conform Schedule I to new
Short Form, and ``total expenses'' description will be modified to
reflect addition of new entry:
[cir] 2h Administrative service providers (salaries, fees, and
commissions).
Part II will be changed as follows:
[cir] Title changed to ``Compliance Questions.''
[cir] New Lines 4l-ndash;4m are added as follows:

4l Has the plan failed to provide any benefit when due
under the plan? Yes-- No--Amount --.--
4m If this is an individual account plan, was there a
blackout period? (see instructions and 29 CFR 2520.101-3) Yes--No --
4n If 4m was answered ``Yes,'' did the plan administrator
comply with the blackout period notice requirements in 29 CFR
2520.101-3? Yes-- No--

Schedule R

New Line 7 will added:
Will the minimum funding amount reported on line 6c be met
by the funding deadline? Yes -- No -- N/A --
Current Part IV Coverage will be deleted.
New Part IV will be added as follows:

Part IV ESOPs (See Instructions) If this is not a plan described
under Section 409(a) or 4975(e)(7) of the Internal Revenue Code,
skip this part.
10 Were unallocated employer securities or proceeds from the sale of
unallocated securities used to repay any exempt loan? [ballot] Yes
[ballot] No
11 a Does the ESOP hold any preferred stock? [ballot] Yes [ballot]
No
b If the ESOP has an outstanding exempt loan with the employer as
lender, is such loan part of a ``back-to-back'' loan? (See
instructions for definition of ``back-to-back'' loan.) [ballot] Yes
[ballot] No
12 Does the ESOP hold any stock that is not readily tradable on an
established securities market? [ballot] Yes [ballot] No
New Part V will be added as follows:

Part V Contributing Employer Information for Multiemployer Defined
Benefit Pension Plans

List each employer required to contribute an annual amount equal to
or greater than 5% of all annual contributions to the plan (measured
in dollars). (See instructions). Complete as many entries as needed
to report all employers required to be listed.

a Name of contributing employer---------------------------------------
b EIN-----------------------------------------------------------------
c Dollar Amount Contributed-------------------------------------------
d Contribution Rate---------------------------------------------------
e Contribution Base Unit Measure (Check Applicable Measure):
Hourly -- Weekly -- Unit of Product -- Other (Specify): --
f CBA Expiration Date (mm/dd/yyyy)------------------------------------

Appendix D--Description of Proposed Changes to Existing Form 5500
Instructions

General Changes

All instructions regarding ``hand print'' and ``machine print''
and paper filings will be eliminated, as will be instructions as to
how to file using the original EFAST system. Instructions will be
updated to describe the mechanics of electronic filing and the
EFAST2 processing system. Appropriate date changes, table of
contents changes, and other non-substantive changes will be made.
Cross-references to the Short Form instructions will be included as
appropriate. Instructions regarding plans that only filed the Form
5500 for Title II purposes, and not Title I purposes will be
eliminated.
To enable filers to better evaluate the proposed changes, the
Department is making available on its Web site at http://www.dol.gov/ebsa
, handwritten mark-ups of the existing Instructions

to the Form 5500 and Schedules to show the changes proposed.

Specific Changes Using Format of Existing Instructions

A new general section describing electronic filing will be
inserted:

Electronic Filing Requirement

Under the computerized ERISA Filing Acceptance System (EFAST),
you must file your 2008 Form 5500 electronically. You may file your
2008 Form 5500 on-line, using EFAST's web-based filing system, or
you may file through an EFAST-approved vendor. Detailed information
on electronic filing is available at (insert web address). For
telephone assistance, call the EFAST Help Line at 1-866-463-3278.
The EFAST Help Line is available Monday through Friday from 8 a.m.
to 8 p.m., Eastern Time.
[CAUTION] Annual reports filed under Title I of ERISA must be
made available by plan administrators to plan participants and by
the Department to the public pursuant to ERISA sections 104 and 106.
Even though the

[[Page 41648]]

Form 5500 must be filed electronically, the administrator must keep
a copy of the Form 5500, including schedules and attachments, with
all required manual signatures on file as part of the plan's records
and must make a paper copy available on request to participants,
beneficiaries, and the Department of Labor as required by section
104 of ERISA and 29 CFR 2520.103-1.
Answer all questions with respect to the plan year unless
otherwise explicitly stated in the instructions or on the form
itself. Therefore, responses usually apply to the year entered at
the top of the first page of the form.
Your entries will be initially screened. Your entries must
satisfy this screening in order to be initially accepted as a
filing. Once initially accepted, your form may be subject to further
detailed review, and your filing may be rejected based upon this
further review. To reduce the possibility of correspondence and
penalties:
Complete all lines on the Form 5500 unless otherwise
specified. Also electronically attach any applicable schedules and
attachments.
Do not enter ``N/A'' or ``Not Applicable'' on the Form
5500 or Schedules unless specifically permitted. ``Yes'' or ``No''
questions on the forms and schedules cannot be left blank, but must
be marked either ``Yes'' or ``No,'' and not both.
The Form 5500, Schedules, and attachments are open to public
inspection, and the contents are public information subject to
publication on the Internet. Do not enter social security numbers in
response to questions asking for an EIN. Because of privacy
concerns, the inclusion of a social security number on the Form 5500
or on a schedule or attachment that is open to public inspection may
result in the rejection of the filing. EINs may be obtained by
applying for one on Form SS-4, Application for Employer
Identification Number. You can obtain Form SS-4 by calling 1-800-
TAX-FORM (1-800-829-3676) or at the IRS Web Site at http://www.irs.gov. The

EBSA does not issue EINs.
Who Must File
[cir] This section will be modified to eliminate paragraph 6,
requiring certain foreign plans to file the Form 5500 based solely
on whether the contributions are deducted on a U.S. tax return.
Do Not File A Form 5500 For A Pension Benefit Plan That
Is Any Of The Following
[cir] This section will be modified to eliminate paragraph 6,
referring to ``qualified foreign plans'' under Code section 404A,
and replacing it with the following: ``A pension benefit plan that
is maintained outside the United States primarily for the benefit of
persons substantially all of whom are nonresident aliens.''
Changes to Line by Line Instructions will be made as follows:

Form 5500

Instructions for the new line 7 will be added:
Line 7. For multiemployer plans, enter the total number of
employers that made contributions to the plan for any part of the
2007 plan year. Any two or more contributing entities (e.g., places
of business with separate collective bargaining agreements) that
have the same nine-digit employer identification number (EIN) must
be aggregated and counted as a single employer for this purpose.
List of plan characteristic codes will be modified as follows:
Codes 2L and 2M--reference to Limited Pension Plan reporting is
eliminated. Codes 3A and 3G are eliminated.
New Codes 2S and 2T are added:
2S Plan provides for automatic enrollment in plan that has
employee contributions deducted from payroll.
2T Total or partial participant-directed account plan--plan uses
default investment account for participants who fail to direct
assets in their account.
The Schedule A Instructions will be changed as follows:
The ``Important Reminder'' regarding the insurance company
obligation to provide information will be deleted.
Instructions for the new proposed Part IV will be added:

Part IV--Provision of Information

The insurer (or similar organization) is required to provide the
plan administrator with the information needed to complete the
return/report, pursuant to ERISA section 103(a)(2). If you do not
receive this information in a timely manner, contact the insurer (or
similar organization). If information is missing on Schedule A (Form
5500) due to a refusal to provide information, check ``Yes'' on line
10 and enter a description of the information not provided on line
11.
The Schedule B Instructions will be changed as follows:
The instructions for Line 1d(2)(a) will be modified to eliminate
discussion of the special rule under Code section 412(l)(7)(C)(i).
Instructions for the new line 12 will be added as follows:
Line 12. Line 12 must be filed by all defined benefit pension
plans (except DFEs) with 1,000 or more participants at the beginning
of the plan year as shown in line 2(b)(1)(4) of the Schedule B.
Line 12a. Show the beginning of year distribution of assets for
the categories shown. These percentages should reflect the total
assets held in stocks, debt instruments (bonds), real estate, or
other asset classes, regardless of how they are listed on the
Schedule H. For example, assets held in master trusts should be
disaggregated into the four asset components and properly
distributed. They should not be listed under ``Other'' unless the
trust contains no stocks, bonds, or real estate holdings. The same
methodology should be used in disaggregating trust assets as are
used when disclosing the allocation of plan assets on the sponsor's
10-K filings to the Securities and Exchange Commission. REITs should
be listed with stocks, while real estate limited partnerships should
be included in the Real Estate category.
Line 12b. Report the Macaulay duration for the entire Debt
portfolio. The Macaulay duration is a weighted average of the number
of years until each interest payment and the principal are received.
The weights are the amounts of the payments discounted by the yield-
to-maturity of the bond.
When calculating the distribution of debt securities, any
corporate debt that has not been rated should be included in the
High-Yield Corporate Debt category. Foreign debt should be allocated
to the appropriate category as if it were debt issued by U.S.
corporations or government entity.
The Instructions for Schedule C will be modified as follows:
The existing general instructions and instructions for Part I
will be eliminated. The proposed new general instructions and
instructions for the revised Part I and new Part II of Schedule C
will be as follows:

Who Must File

Schedule C (Form 5500) must be attached to a Form 5500 filed for
a large pension or welfare benefit plan, a MTIA, 103-12IE, or GIA,
to report information concerning service providers. For more
information on MTIAs, 103-12IEs, and GIAs see the instructions for
Direct Filing Entities on pages xx of the Form 5500 Instructions.
Check the Schedule C box on the form 5500 (Part II, line 10b(4))
if a Schedule C is attached to the Form 5500. Multiple Schedule C
entries must be used (if necessary) to report the required
information.
Lines A, B, C, and D. This information should be the same as
reported in Part II of the Form 5500 to which this Schedule C is
attached. You may abbreviate the plan name (if necessary) to fit in
the space provided.
Do not use a social security number in line D in lieu of an EIN.
The Schedule C and its attachments are open to public inspection,
and the contents are public information and are subject to
publication on the Internet. Because of privacy concerns, the
inclusion of a social security number on this Schedule C or any of
its attachments may result in the rejection of the filing.
EINs may be obtained by applying for one on Form SS-4,
Application for Employer Identification Number. You can obtain Form
SS-4 by calling 1-800-TAX-FORM (1-800-829-3676) or at the IRS Web
Site at http://www.irs.gov. The EBSA does not issue EINs.

Instructions for Part I

Part I must be completed to report all service providers
receiving, directly or indirectly, $5,000 or more in compensation
for all services rendered to the plan, MTIA, 103-12IE, or GIA during
the plan or DFE year except:
1. Employees of the plan whose only compensation in relation to
the plan was less than $25,000 for the plan year;
2. Employees of the plan sponsor or other business entity where
the plan sponsor or business entity was reported on the Schedule C
as a service provider, provided the employee did not separately
receive compensation in relation to the plan; and
3. Persons whose only compensation in relation to the plan
consists of insurance fees and commissions listed in a Schedule A
filed for the plan.
For purposes of this Schedule, reportable compensation includes
money or any other thing of value (for example, gifts, awards,

[[Page 41649]]

trips) received by a person who is a service provider in connection
with that person's position with the plan or services rendered to
the plan. Examples of indirect compensation include: finders' fees,
placement fees, commissions on investment products, transaction-
based commissions, sub-transfer agency fees, shareholder serving
fees, 12b-1 fees, soft-dollar payments, and float income. Also,
brokerage commissions or fees (regardless of whether the broker is
granted discretion) are reportable whether or not they are
capitalized as investment costs.
In the case of service provider arrangements where one person
offers a bundle of services priced to the plan as a package rather
than on a service-by-service basis, generally only the person
offering the bundled service package should be identified in Part I,
except that investment service providers must be separately
identified if their compensation in the bundled fee arrangement is
set on a per transaction basis, e.g., brokerage fees. If, however,
the person providing services is a fiduciary to the plan or provides
one or more of the following services to the plan--contract
administrator, securities brokerage (stock, bonds, commodities),
insurance brokerage or agent, custodial, consulting, investment
advisory (plan or participants), investment or money management,
recordkeeping, trustee, appraisal, or investment evaluation, such
person must be separately identified regardless of whether the
payment received by such service provider is only as part of a
bundle of services priced to the plan as a package. Also, if a
person is providing services directly to the plan, as well as part
of a bundle of services, that person must be separately identified
on Schedule C.
Include in the compensation reported the amount of consideration
received by the service provider attributable to the plan or DFE
filing the Form 5500, not the aggregate amount received in
connection with several plans or DFEs. If, however, reportable
compensation is due to a person's position with or services rendered
to more than one plan or DFE, the total amount of the consideration
received generally should be reported on the Schedule C of each plan
or DFE unless the consideration can reasonably be allocated to
services performed for the separate plans or DFEs. For example, if
an investment advisor working for multiple pension plans and other
non-plan clients receives a gift valued in excess of $1,000 from a
securities broker in whole or in part because of the investment
advisor's relationship with plans as potential brokerage clients,
the full dollar value of the gift would be reported on the Schedule
C of all plans for which the investment advisor performed services.
On the other hand, if a securities broker received incentive
compensation from an investment provider based on amount or volume
of business with the broker's clients, the Schedule C of each plan
could report a proportionate allocation of the incentive
compensation attributable to the plan. In such cases, any reasonable
method of allocation may be used provided that the allocation method
is disclosed to the plan administrator.
The term ``persons'' on the Schedule C instructions includes
individuals, trades and businesses (whether incorporated or
unincorporated). See ERISA section 3(9).
Either the cash or accrual basis may be used for the recognition
of transactions reported on the Schedule C as long as you use one
method consistently.

Specific Instructions

Line 1--Service Provider Compensation Information--List each
person receiving, directly or indirectly, $5,000 or more in total
compensation (i.e., money or any other thing of value) in connection
with services rendered to the plan or their position with the plan
during the plan year. Start with the most highly compensated and end
with the lowest compensated. Enter in element (a) the person's name
and complete elements (b) through (g) as specified below. Use as
many entries as necessary to list all service providers.
Element (b). Enter the EIN for the person. If the name of an
individual is entered in element (a), the EIN to be entered in
element (b) should be the EIN of the individual's employer. If the
person does not have an EIN, you may enter the person's address and
telephone number. Do not use a social security number in lieu of an
EIN. The Schedule C and its attachments are open to public
inspection and are subject to publication on the Internet. Because
of privacy concerns, the inclusion of a social security number on
this Schedule C or any of its attachments may result in the
rejection of the filing.
Element (c). Select from the list below and enter all codes that
describe the nature of services provided to the plan or the position
with the plan. If more than one code applies, enter the primary
codes first. Complete as many entries as necessary to list all
applicable codes. Do not list PBGC or IRS as a service provider on
Part I of Schedule C.

Service Provider Codes

10 Accounting (including auditing)
11 Actuarial
12 Contract Administrator
13 Administration
14 Brokerage (real estate)
15 Brokerage (stocks, bonds, commodities)
16 Computing, tabulating, data processing, etc.
17 Consulting (general)
18 Consulting (pension)
19 Custodial (other than securities)
20 Custodial (securities)
21 Insurance agents and brokers
22 Investment advisory and evaluations (participants)
23 Investment advisory and evaluations (plan)
24 Investment management
25 Money management
26 Legal
27 Named fiduciary
28 Printing and duplicating
29 Recordkeeper
30 Trustee (individual)
31 Trustee (business)
32 Trustee (discretionary)
33 Trustee (directed)
34 Pension insurance advisor
35 Valuation services (appraisals, asset valuations, etc.)
36 Employee (plan)
37 Employee (plan sponsor)
99 (Other)

Element (d). Enter relationship to employer, employee
organization, or person known to be a party-in-interest, for
example, employee of employer, vice-president of employer, union
officer, affiliate of plan recordkeeper, etc.
Element (e). Enter the total amount of direct and indirect
compensation received. Indicate in the boxes provided whether the
amount entered includes an estimate. If the amount or part of the
amount entered includes an estimate, describe the formula used for
calculating the estimated payments.
Caution: Do not report the same compensation twice on the
Schedule C filed for the plan and again on the Schedule C filed for
an MTIA or 103-12IE in which the plan participates. Plan filers must
include in Element (e) the plan's share of compensation paid during
the year to an MTIA trustee or other persons providing services to
the MTIA or 103-12IE, if such compensation is not subtracted from
the total income of the MTIA or 103-12IE in determining the net
income (loss) reported on the MTIA's or 103-12IE's Schedule H, line
2k. MTIA and 103-12IE Schedule C filers must include compensation
for services paid by the MTIA or 103-12IE during its fiscal year to
the MTIA trustee and persons providing services to the MTIA or 103-
12IE if such compensation is subtracted from the total income in
determining the net income (loss) reported by the MTIA or 103-12IE
on Schedule H, line 2k.
Element (f). You must indicate, by checking ``Yes'' or ``No,''
whether the person identified in element (a) received during the
plan year consideration (money or anything else of value) from a
source other than the plan or plan sponsor in connection with the
person's position with the plan or services provided to the plan. Do
not leave element (f) blank.
Element (g). If the answer to (f) is ``Yes,'' and the person
identified in element (a) is a fiduciary to the plan or provides one
or more of the following services to the plan--contract
administrator, securities brokerage (stock, bonds, commodities),
insurance brokerage or agent, custodial, consulting, investment
advisory (plan or participants), investment or money management,
recordkeeping, trustee, appraisal, or investment evaluation--enter
the requested information for each source other than the plan or
plan sponsor from whom the person received $1,000 or more in
consideration.

Part II. Service Providers Who Fail or Refuse To Provide Information

Line 2. Provide, to the extent possible, the requested
identifying information for each fiduciary or service provider who
failed or refused to provide any of the information necessary to
complete Part I of this Schedule.
The Schedule D Instructions will be changed as follows:
A statement will be added to advise that DFEs must complete Part
II to identify participating plans even if those plans are filing
the Form 5500-SF and not the Form 5500 with Schedule D.
The Schedule H Instructions will be changed as follows:

[[Page 41650]]

Line 2i(1) and 2i(4) instructions changed to have
reporting for fees and expenses for corporate trustees and
individual trustees, including reimbursement of expenses associated
with trustees, such as lost time, seminars, travel, meetings, etc.,
on line 2i(1) instead of 2i(4).
General instructions for lines 4a through new line 4n
are modified to indicate that MTIAs, 103-12IEs, and GIAs do not
complete new lines 4m or 4n and MTIAs and 103-12IEs also do not
complete new line 4l.
The Line 4a Instructions are changed to add the
following language permitting reporting delinquent participant loans
on line 4a and requiring filers to use the following supplemental
Schedule if they respond ``yes'' to line 4a:
Participant loan repayments paid to and/or withheld by an
employer for purposes of transmittal to the plan that were not
transmitted to the plan in a timely fashion may be reported on Line
4a in accordance with the reporting requirements that apply to
delinquent participant contributions or they can be reported on Line
4d. See Advisory Opinion 2002-02A, available at http://www.dol.gov/ebsa
.

Line 4a Schedule. Attach a Schedule of Delinquent Participant
Contributions using the format below if you entered ``Yes.'' If you
choose to include participant loan repayments on Line 4a, you must
apply the same supplemental schedule and IQPA disclosure
requirements to the loan repayments as apply to delinquent
transmittals of participant contributions.

2008 Form 5500 Line 4a.--Schedule of Delinquent Participant Contributions
----------------------------------------------------------------------------------------------------------------
Total that constitute nonexempt prohibited transactions
------------------------------------------------------------ Total fully
Participant contributions Contributions Contributions corrected under
transferred late to plan Contributions not corrected outside pending correction VFCP and PTE 2002-
corrected VFCP in VFCP 51
----------------------------------------------------------------------------------------------------------------

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

Instructions will be added for the new lines 4l, 4m,
and 4n as follows:
Line 4l. You must check ``Yes'' if any benefits due under the
plan were not timely paid or not paid in full. Include in this
amount the total of any outstanding amounts that were not paid when
due in previous years that have continued to remain unpaid.
Line 4m. Check ``Yes'' if there was a ``blackout period.'' A
blackout period is a temporary suspension of more than three
consecutive business days during which participants or beneficiaries
of a 401(k) or other individual account pension plan were unable to,
or were limited or restricted in their ability to, direct or
diversify assets credited to their accounts, obtain loans from the
plan, or obtain distributions from the plan. A ``blackout period''
generally does not include a temporary suspension of the right of
participants and beneficiaries to direct or diversify assets
credited to their accounts, obtain loans from the plan, or obtain
distributions from the plan if the temporary suspension is: (1) Part
of the regularly scheduled operations of the plan that has been
disclosed to participants and beneficiaries; (2) due to a qualified
domestic relations order (QDRO) or because of a pending
determination as to whether a domestic relations order is a QDRO;
(3) due to an action or a failure to take action by an individual
participant or because of an action or claim by someone other than
the plan regarding a participant's individual account; or (4) by
application of federal securities laws. For more information, see
the Department of Labor's regulation at 29 CFR 2520.101-3 (available
at http://www.dol.gov/ebsa).

Line 4n. If there was a blackout period, did you provide the
required notice not less than 30 days nor more than 60 days in
advance of restricting the rights of participants and beneficiaries
to change their plan investments, obtain loans from the plan, or
obtain distributions from the plan? See 29 CFR 2520.101-3 for
specific notice requirements and for exceptions from the notice
requirement. Answer ``no'' if notice was not provided even if the
plan met one of the exceptions to the notice requirement.
The Schedule I Instructions will be changed as follows:
The line 2h and 2i Instructions will be changed to
conform to the Instructions for the proposed Form 5500-SF:
Line 2h. Administrative service providers (salaries, fees, and
commissions) include the total fees paid (or in the case of accrual
basis plans, costs incurred during the plan year but not paid as of
the end of the plan year) by the plan for, among others:
1. Salaries to employees of the plan;
2. Fees and expenses for accounting, actuarial, legal and
investment management, investment advice, and securities brokerage
services;
3. Contract administrator fees;
4. Fees and expenses for corporate trustees and individual
trustees, including reimbursement for travel, seminars, and meeting
expenses;
5. Fees and expenses paid for valuations and appraisals of real
estate and closely held securities;
6. Fees for legal services provided to the plan (do not include
legal services as a benefit to plan participants).
Do not include in this line amounts paid to plan employees to
perform administrative services.
Line 2i. Other expenses (paid and/or payable) include other
administrative and miscellaneous expenses paid by or charged to the
plan, including among others, office supplies and equipment,
telephone, postage, rent and expenses associated with the ownership
of a building used in operation of the plan.
The Line 4a Instructions will be changed to add the
following language permitting filers to report delinquent
participant loan repayments on line 4a and to require filers to use
the following supplemental Schedule if they respond ``yes'' to line
4a:
Participant loan repayments paid to and/or withheld by an
employer for purposes of transmittal to the plan that were not
transmitted to the plan in a timely fashion may be reported on Line
4a in accordance with the reporting requirements that apply to
delinquent participant contributions or they can be reported on Line
4d. See Advisory Opinion 2002-02A, available at http://www.dol.gov.ebsa.

Line 4a Schedule. Attach a Schedule of Delinquent Participant
Contributions using the format below if you entered ``Yes'' on Line
4a and you are checking ``No'' on Line 4k because you are not
claiming the audit waiver for the plan. If you choose to include
participant loan repayments on Line 4a, you must apply the same
supplemental schedule and IQPA disclosure requirements to the loan
repayments as apply to delinquent transmittals of participant
contributions.

2008 Form 5500 Line 4a.--Schedule of Delinquent Participant Contributions
----------------------------------------------------------------------------------------------------------------
Total that Constitute Nonexempt Prohibited Transactions
------------------------------------------------------------ Total Fully
Participant Contributions Contributions Contributions Corrected Under
Transferred Late to Plan Contributions Not Corrected Outside Pending Correction VFCP and PTE 2002-
Corrected VFCP in VFCP 51
----------------------------------------------------------------------------------------------------------------

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

[[Page 41651]]

The Instructions for line 4k will be updated to
indicate that a model notice that plans can use to satisfy the
enhanced SAR requirements to be eligible for the audit waiver is
made available as an appendix to 29 CFR 2520.104-46 under the
proposed regulations published simultaneously with this Notice.
Instructions will be added for the new lines 4l, 4m,
and 4n as follows:
Line 4l. You must check ``Yes'' if any benefits due under the
plan were not timely paid or not paid in full. Include in this
amount the total of any outstanding amounts that were not paid when
due in previous years that have continued to remain unpaid.
Line 4m. Check ``Yes'' if there was a ``blackout period.'' A
blackout period is a temporary suspension of more than three
consecutive business days during which participants or beneficiaries
of a 401(k) or other individual account pension plan were unable to,
or were limited or restricted in their ability to, direct or
diversify assets credited to their accounts, obtain loans from the
plan, or obtain distributions from the plan. A ``blackout period''
generally does not include a temporary suspension of the right of
participants and beneficiaries to direct or diversify assets
credited to their accounts, obtain loans from the plan, or obtain
distributions from the plan if the temporary suspension is: (1) Part
of the regularly scheduled operations of the plan that has been
disclosed to participants and beneficiaries; (2) due to a qualified
domestic relations order (QDRO) or because of a pending
determination as to whether a domestic relations order is a QDRO;
(3) due to an action or a failure to take action by an individual
participant or because of an action or claim by someone other than
the plan regarding a participant's individual account; or (4) by
application of federal securities laws. For more information, see
the Department of Labor's regulation at 29 CFR 2520.101-3 (available
at http://www.dol.gov/ebsa).

Part V Contributing Employer Information for Multiemployer Defined
Benefit Pension Plans

Line 13 should be completed only by multiemployer defined
benefit pension plans that are subject to the minimum funding
standards (see Code section 412 and Part 3 of Title I of ERISA).
Enter the information on Lines 13a through 13f for any employer that
contributed five (5) percent or more of the plan's total
contributions for the 2008 plan year. The employers should be listed
in descending order according to the dollar amount of their
contributions to the plan. Complete as many entries as are necessary
to list all employers that contributed five (5) percent or more of
the plan's contributions.
Line 13a. Enter the name of the contributing employer to the
plan.
Line 13b. Enter the EIN number of the contributing employer to
the plan. Do not enter a social security number in lieu of an EIN.
The Form 5500 is open to public inspection, and the contents are
public information and are subject to publication on the Internet.
Because of privacy concerns, the inclusion of a social security
number on this line may result in the rejection of the filing.
EINs may be obtained by applying for one on Form SS-4,
Application for Employer Identification Number. You can obtain Form
SS-4 by calling 1-800-TAX-FORM (1-800-829-3676) or at the IRS Web
Site at http://www.irs.gov. The EBSA does not issue EINs.

Line 13c. Dollar Amounts Contributed. Enter the total dollar
amount contributed to the plan by the employer for all covered
workers in all locations for the plan year. Do not include the
portion of an aggregated contribution that is for another plan, such
as a welfare benefit plan, a defined contribution pension plan or
another defined benefit pension plan.
Line 13d. Contribution Rate. Enter the employer's contribution
rate per contribution base unit (e.g., if the contribution rate is
$xx.xx per covered hour worked, enter $xx.xx). If the employer's
contribution rate changed during the plan year, enter the last
contribution rate in effect for the plan year. If the employer uses
different contribution rates for different classifications of
employees or different places of business, complete separate entries
for each contribution rate.
Line 13e. Contribution Base Units. Check the contribution base
unit on which the contribution rate is based. If the contribution
rate is not measured on an hourly, weekly, or unit-of-production
basis, check ``other'' and indicate the basis of measurement. If you
entered more than one contribution rate for an employer in line 13d,
show the applicable contribution base unit for each contribution
rate.
Line 13f. Collective Bargaining Agreement Expiration Date. Enter
the date on which the employer's collective bargaining agreement
expires. If the employer has more than one collective bargaining
agreement requiring contributions to the plan, enter the expiration
date of the agreement that provided for the largest dollar amount
contributed by the employer for the plan year.

Statutory Authority

Accordingly, pursuant to the authority in sections 101, 103,
104, 109, 110 and 4065 of ERISA and section 6058 of the Code, the
Form 5500 Annual Return/Report and the instructions thereto are
proposed to be amended as set forth herein, including the addition
of the proposed Short Form 5500.

Signed at Washington, DC, this 13th day of July, 2006.
Ann C. Combs,
Assistant Secretary, Employee Benefits Security Administration, U.S.
Department of Labor.
Carol D. Gold,
Director, Employee Plans, Tax Exempt and Government Entities Division,
Internal Revenue Service.
Vincent K. Snowbarger,
Acting Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 06-6329 Filed 7-20-06; 8:45 am]

BILLING CODE 4510-29-P