[Federal Register: December 11, 2006 (Volume 71, Number 237)]
[Notices]
[Page 71562-71579]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11de06-63]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
DEPARTMENT OF THE TREASURY
Internal Revenue Service
PENSION BENEFIT GUARANTY CORPORATION
RIN 1210-AB14
Proposed Revision of Annual Information Return/Reports
AGENCIES: Employee Benefits Security Administration, Labor, Internal
Revenue Service, Treasury, Pension Benefit Guaranty Corporation.
ACTION: Notice of Supplemental Proposed Forms Revisions.
-----------------------------------------------------------------------
SUMMARY: This document contains a proposal to make changes required by
the Pension Protection Act of 2006 (PPA) to the Form 5500 Annual
Return/Report filed for employee benefit plans under the Employee
Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue
Code (Code). The proposed changes supplement proposed revisions to the
Form 5500 Annual Return/Report published, prior to the enactment of the
PPA, by the Department of Labor, the Internal Revenue Service, and the
Pension Benefit Guaranty Corporation (Agencies) in the Federal Register
on July 21, 2006, at 71 FR 41616 (July 2006 Proposal). This
supplemental proposal replaces the Schedule B, ``Actuarial
Information,'' with separate actuarial schedules for single-employer
plans (Schedule SB) and multiemployer plans (Schedule MB) to reflect
PPA changes in funding and annual reporting requirements; adds new
questions to the Schedule R, ``Retirement Plan Information,'' to
collect additional information regarding single and multiemployer
defined benefit pension plans required by the PPA; and proposes having
the Form 5500-SF Annual Return/Report (Short Form 5500) included in the
July 2006 Proposal serve as the simplified report required by the PPA
for plans with fewer than 25 participants. The revisions are being
proposed for 2008 plan year filings and 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 January 10, 2007.
ADDRESSES: Commenters are encouraged to submit comments electronically
to http://www.regulations.gov (follow instructions for submission) or
e-ORI@dol.gov. Comments also may be addressed to the Office of
Regulations and Interpretations, Employee Benefits Security
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210, Attn: Supplemental Form 5500
Revision (RIN 1210-AB14). If comments are submitted electronically,
paper submissions are not necessary.
Comments will be available to the public at http://www.dol.gov/ebsa and http://www.regulations.gov. Comments also will be available for
public inspection at the Public Disclosure Room, N-1513, Employee
Benefits Security Administration, 200 Constitution Avenue, NW.,
Washington, DC 20210.
FOR FURTHER INFORMATION CONTACT: Ann Junkins, Internal Revenue Service
(IRS), (202) 283-0722, for questions relating to Schedules SB, MB, and
Schedule R, as well as general questions relating to reporting under
the Internal Revenue Code; Amy Viener, Pension Benefit Guaranty
Corporation (PBGC), (202) 326-4080 for questions relating to Schedules
SB and MB, and Michael Packard, PBGC, 202 326-4080 for questions
relating to the Schedule R, as well as questions relating to the
general reporting requirements under Title IV of ERISA; Elizabeth A.
Goodman or Yolanda Wartenberg, Employee Benefits Security
Administration (EBSA), U.S. Department of Labor, (202) 693-8523, for
questions relating to the Short Form 5500-SF, as well as general
reporting requirements under Title I of ERISA. The telephone numbers
referenced above are not toll-free numbers.
To enable the public to better evaluate the proposed changes, the
Department is making available on its Web site at http:// www.dol.gov/
ebsa, mock ups of the Schedules SB, MB and R. Copies of the mock ups
may also be obtained by calling the EBSA's Public Disclosure Room at
1.866.444.EBSA (3272).
SUPPLEMENTARY INFORMATION:
A. Background
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
[[Page 71563]]
well as on certain other entities.\1\ The Department of Labor's
(Department) annual reporting regulations, including 29 CFR 2520.103-1,
are promulgated under the provisions of ERISA that authorize the
creation of limited exemptions and simplified reporting and disclosure
for welfare plans under ERISA section 104(a)(3), simplified annual
reports under ERISA section 104(a)(2)(A) for pension plans that cover
fewer than 100 participants, and alternative methods of compliance for
all pension plans under ERISA section 110(a). Plan administrators,
employers, and others generally satisfy these annual reporting
obligations by the filing of the Form 5500 ``Annual Return/Report of
Employee Benefit Plan,'' together with any required attachments and
schedules (Form 5500 Annual Return/Report), in accordance with the
instructions and related regulations.
---------------------------------------------------------------------------
\1\ Other filing requirements not within the scope of this
proposal may apply to certain employee benefit plans and multiple
employer welfare arrangements under ERISA or to other benefit
arrangements under the Code.
---------------------------------------------------------------------------
The Form 5500 Annual Return/Report is the principal source of
information and data available to the Department, the IRS, and the PBGC
(Agencies) 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.
The Pension Protection Act of 2006, Pub. L. 109-280, 120 Stat. 780
(2006) (PPA), enacted on August 17, 2006, changed certain annual
reporting rules under ERISA and funding requirements under ERISA and
the Code for pension plans. The PPA also required the Treasury
Department/IRS and the Department to provide a simplified annual return
for certain retirement plans that cover fewer than 25 participants. The
Form 5500 Annual Return/Report, therefore, needs to be updated to
reflect these PPA changes. The changes proposed in this document are
limited to those needed to reflect the PPA annual reporting
requirements and do not attempt to address comments received in
connection with the July 2006 Proposal.\2\ One exception, however, is
the movement of proposed asset allocation questions for certain large
defined benefit plans to the Schedule R in conjunction with the
proposal to eliminate the existing Schedule B and create two new
Schedules--the Schedule SB and the Schedule MB.
---------------------------------------------------------------------------
\2\ The term ``July 2006 Proposal'' used throughout this Notice
refers to two documents: The Notice of the Proposed Revision of
Annual Information Return/Reports contained at 71 FR 41615 (July 21,
2006) (sometimes referred to as ``July 2006 Notice''); and the
proposed rule regarding Annual Reporting and Disclosure contained at
71 FR 41392 (July 21, 2006) (sometimes referred to as ``July 2006
Proposed Rules''), which were necessary to conform the annual
reporting and disclosure regulations to the proposed revisions.
---------------------------------------------------------------------------
B. Need To Expedite Adoption of Supplemental Proposed Revisions
These supplemental proposed revisions to the Form 5500 Annual
Return/Report, as well as the July 2006 Proposal, are part of the
Agencies' move to a fully electronic filing and processing system to
replace the existing paper-based ERISA Filing Acceptance System
(EFAST). As part of that initiative, the Department published a final
rule in the Federal Register on July 21, 2006, establishing an
electronic filing requirement for the Form 5500 Annual Return/Report
for plan years beginning on or after January 1, 2008 (Electronic Filing
Rule). 71 FR 41359. The Department also published a Request for
Proposal on September 1, 2006, seeking bids to develop the new wholly
electronic system, known as EFAST2, to electronically receive, process,
store, publicly disclose, distribute, and archive the Form 5500 Annual
Return/Report filings that will be submitted electronically starting
with 2008 plan year filings. See Solicitation Number DOL069RP20266 for
EFAST2 at http://www.fedbizopps.gov (FedBizOpps.gov is the single
government point-of-entry for federal government procurement
opportunities over $25,000). In order for supplemental form revisions
to be incorporated into the EFAST2 procurement process in a timely
fashion, the supplemental form changes need to be finalized by the
February 2007 target for finalizing the July 2006 Proposal.
Furthermore, in light of the time constraints, the Agencies are
publishing in this Notice charts listing the line item data elements on
the new actuarial schedules (Schedule SB and Schedule MB) and the new
line item data elements for the Schedule R, as well as an indication of
which items on the Schedule SB and Schedule MB are the same, similar
to, or different from existing Schedule B data items. To enable the
public to better evaluate the proposed changes, the Department is also
making available on its Web site at http://www.dol.gov/ebsa, mock ups
of the Schedules SB, MB and R (copies of the mock ups may also be
obtained by calling the EBSA's Public Disclosure Room at 1.866.444.EBSA
(3272)). The Agencies believe the information being published will
provide an adequate basis for public comments on the supplemental
proposed form changes. The instructions for the new Schedules SB and MB
and the new Schedule R questions will be subject to a later publication
so that they can be developed based on guidance to be issued by the IRS
or PBGC implementing the PPA requirements underlying the Form 5500
Annual Return/Report data elements. For example, guidance may explain
the manner in which the employer makes elections with respect to the
carryover and/or prefunding balances.
C. Discussion of Supplemental Proposed Revisions
1. Replacing Schedule B With Separate Schedules for Single-Employer
Plans (Schedule SB) and Multiemployer Plans (Schedule MB)
The PPA significantly changed the funding requirements applicable
to defined benefit pension plans. These changes rendered the existing
Schedule B largely obsolete, especially for single-employer defined
benefit pension plans. While the PPA changes for multiemployer defined
benefit pension plans allowed for continued use of a reporting scheme
similar to the existing Schedule B, a number of Schedule B changes were
required even for multiemployer plans. The Agencies believe that the
appropriate way to address the PPA changes is to eliminate the existing
Schedule B and create two new Schedules--the Schedule SB, ``Single-
employer Defined Benefit Plan Actuarial Information,'' and the Schedule
MB, ``Multiemployer Defined Benefit Plan and Money Purchase Plan
Actuarial Information.''
a. New Schedule SB ``Actuarial Information Single-Employer Defined
Benefit Plans''
The proposed Schedule SB would be filed by all single-employer
defined benefit plans (including multiple-employer defined benefit
plans).\3\ The
[[Page 71564]]
Schedule SB will capture identifying information about the plan and
plan sponsor, the type of plan, and number of participants. It will
have basic information about plan assets, number of participants, and
funding target information. Like the existing Schedule B, it will have
a statement by an enrolled actuary, modified to reflect that the
enrolled actuary no longer will be certifying as to the reasonableness
of certain actuarial assumptions, which are prescribed by statute or
regulation.
---------------------------------------------------------------------------
\3\ Unlike multiemployer plans within the meaning of ERISA
sections 3(37) and 4001(a)(3) to which more than one employer is
required to contribute, which must be maintained pursuant to one or
more collective bargaining agreements between one or more employee
organization and more than one employer, and which must satisfy
other requirements prescribed in regulations issued by the
Department of Labor at 29 CFR 2510.3-37, multiple-employer plans are
plans that cover the employees of two or more unrelated employers
but are treated as single-employer plans for various purposes under
ERISA.
---------------------------------------------------------------------------
The remaining data elements are to be in a similar format to the
current Schedule B and consist of basic actuarial worksheets designed
to allow the Agencies to evaluate the plan's compliance with the
funding requirements as amended by sections 101, 102, 111, and 112 of
the PPA, and to ensure that the reporting requirements under ERISA, as
amended by section 503 of the PPA, are included on the schedule. The
material is divided into sections consisting of ``Basic Information,''
``Beginning of Year Carryover and Prefunding Balances,'' ``Funding
Percentages,'' ``Contributions and Liquidity Shortfalls,''
``Assumptions Used to Determine Funding Target and Target Normal
Cost,'' ``Miscellaneous Items,'' ``Reconciliation of Unpaid Minimum
Required Contributions for Prior Years,'' and ``Minimum Required
Contribution for Current Year.'' Plans for which the effective date of
the new PPA funding rules is delayed (e.g., airlines that have frozen
pension plans electing the alternate funding schedule, PBGC settlement
plans, certain defense contractors, certain rural electrical
cooperatives, etc.) will not be required to fill out all of these
sections. Instead, additional information related to the applicable
funding rules for such plans will be provided as an attachment. In
addition to the supplemental schedules required in the past, additional
attachments may be required as a result of the PPA. For example, if a
plan is in at-risk status, additional information (e.g., whether the
expense load applies, a breakdown by category of the at-risk funding
target without regard to the five-year phase-in) may be required.
Section 107 of the PPA amended section 103(d)(11) of ERISA to
require disclosure of the ratio of the current value of the assets of
the plan to (A) the plan's funding target (as defined in section
303(d)(1) of the PPA, in the case of a single-employer plan), or (B)
the plan's current liability (as defined in section 304(c)(6)(D) of the
PPA, in the case of a multiemployer plan), if that ratio is less than
70 percent. This requirement is included in Part III, Line 17, of
Schedule SB.\4\ The Agencies also concluded that, although the PPA did
not amend section 103(d)(3) or section 103(d)(7), the proposal would
eliminate the requirement to report ``normal costs,'' ``accrued
liabilities,'' and ``certification of the contribution necessary to
reduce the accumulated funding deficiency to zero'' for single-employer
plans because these terms do not have continued relevance after the PPA
amendments to ERISA. Instead, Schedule SB requires reporting the
``funding target,'' ``target normal cost,'' and the ``amount of unpaid
minimum required contribution,'' which are the post-PPA terms that most
closely relate to the information required by section 103(d)(3) and
103(d)(7).
---------------------------------------------------------------------------
\4\ It is also included on Part I, Line 2c, of Schedule MB.
---------------------------------------------------------------------------
b. New Schedule MB, ``Actuarial Information Multiemployer Defined
Benefit Plans and Money Purchase Plans''
Because the PPA changes to the actuarial information reporting
requirements were less substantial for multiemployer plans and money
purchase plans, the Agencies are proposing to use the existing Schedule
B as the structure for the proposed new Schedule MB, which is to be
used for multiemployer defined benefit pension plans and all money
purchase plans (single-employer and multiemployer). The proposed
Schedule MB would use the same basic identifying information as on the
existing Schedule B, although revising the check boxes for type of
plans and eliminating the check box that in the past was used to
indicate whether the plan had 100 or fewer participants in the prior
year. The statement of the enrolled actuary would be modified to
reflect that the actuarial assumptions must be individually reasonable.
Lines 1 through 3 of the existing Schedule B would remain
essentially the same, except for the addition of a new element 1c(3) to
report accrued liability under the unit credit cost method. To comply
with section 503 of the PPA, the existing line 4 would be deleted and
replaced with a new line 4 to identify information about whether the
plan is in endangered, seriously endangered, or critical status, and,
if so, whether the plan is complying with the applicable requirements
for its funding improvement or rehabilitation plan. The current line 5
identifying the actuarial cost method would be revised to incorporate
alternative methods available only to multiemployer plans, which were
previously reported under item 8b, and to reflect additional
information required by section 503 of the PPA for plans using the
shortfall method. Similarly, the Schedule MB would incorporate most of
Schedule B current lines 6 through 9, but would eliminate information
on the weighted average retirement age and annual withdrawal rates. New
items would be added to Item 8 to reflect information required under
section 503 of the PPA pertaining to extensions of periods to amortize
bases and the use of the shortfall method. In addition, the requirement
to provide a schedule of active participant data would be extended to
multiemployer plans. With respect to Item 9, lines pertaining to
additional interest charges due to late quarterly contributions, and
any adjusted funding charges would be eliminated. Schedule MB would
also revise the questions regarding the bases for which amortization
periods are extended and revise the questions to conform to sections
201, 202, 211, and 212 of the PPA the questions on the reconciliation
account. The Part II of the current Schedule B, which does not relate
to multiemployer plans, would be deleted.
2. Additional Schedule R Questions for Single-employer and
Multiemployer Defined Benefit Pension Plans
Section 503 of the PPA amended ERISA by adding ERISA section
103(f)(2), which requires multiemployer plans to report the amount of
assets transferred in a multiemployer plan merger, information on
withdrawing employers and their withdrawal liability, information on
employers contributing to multiemployer plans, and information on
participants for whom no employers made contributions.
The Agencies' July 2006 Proposal required plan administrators to
identify major contributing employers to multiemployer defined benefit
pension plans so that the PBGC could improve its ability to assess the
financial condition of the plan and the financial risk posed to the
plan by the financial collapse or withdrawal of one or more
contributing employers. For these employers, the plan would be required
to report on Schedule R: (1) Name of the
[[Page 71565]]
contributing employer; (2) the employer identification number (EIN);
(3) dollar amount contributed; (4) contribution rate; (5) type of base
units for the contribution; and (6) expiration date for the collective
bargaining agreement pursuant to which contributions are required to be
made to the plan. These questions are shown here on the new Schedule R
because they are now also required by section 503 of the PPA. To
conform the language of the questions to that of the PPA, the question
now requires identification of those employers contributing more than
five percent, rather than those contributing five percent or more, as
in the July 2006 proposal. In addition, the July 2006 Proposal would
have added a question on the Form 5500 seeking the total number of
contributing employers to multiemployer plans as well as all other
types of plans, a data item now also required by section 503 of the
PPA.
Several additional new questions would be added to the Schedule R
to comply with section 503 of the PPA. The Schedule R, new Part V,
under this proposal, would now be expanded to provide more information
on multiemployer defined benefit plans. It would ask for information
regarding participants for whom no employer contributions were made for
the current plan year and the two preceding plan years and information
regarding the number of employers withdrawing from the plan and the
assessed and estimated withdrawal liability. A new Part VI would be
added to Schedule R to collect funded percentage information for
single-employer and multiemployer defined benefit pension plans with
liabilities arising from mergers or transfers of assets during the plan
year.
This proposal also moves to Part VI of Schedule R the asset
allocation questions for large defined benefit plans (1000 or more
participants) included on the Schedule B in the July 2006 Proposal.
Under this supplemental proposal, the Schedule R would include a new
section requiring such plans to report the percentage of total plan
assets held as stock; debt (with break-outs for government, investment-
grade, and high yield debt); real estate; and other. The plan would
also be required to provide a Macaulay duration of aggregate debt
investments. As part of the development of the new Schedules SB and MB,
the Agencies decided to move these questions to the Schedule R from the
Schedule B (where they appeared in the July 2006 Proposal) because the
Agencies concluded that this essentially financial information should
not be subject to the enrolled actuary certification requirement
applicable to other Schedule SB and MB information. This supplemental
proposal to include these asset distribution questions for certain
large defined benefit plans on the Schedule R should not be construed
as a determination by the Agencies regarding public comments received
in response to the July 2006 Proposal on the substance of the proposed
questions themselves.
3. Simplified Annual Reporting for Plans With Fewer Than 25
Participants
Section 1103(b) of the PPA requires the Secretary of the Treasury/
IRS and the Secretary of Labor to provide for the filing of a
simplified annual return for any retirement plan which covers fewer
than 25 participants on the first day of the plan year and which (1)
meets the minimum coverage requirements of section 410(b) of the Code
without being combined with any other plan of the business that covers
the employees of the business; (2) does not cover a business that is a
member of an affiliated service group, a controlled group of
corporations, or a group of businesses under common control; and (3)
does not cover a business that uses the services of leased employees
(within the meaning of section 414(n) of the Code). The PPA provision
does not include specific requirements as to the form or content of the
simplified filing.
As noted above, the July 2006 Proposal included, among other
changes: (1) The establishment of a Form 5500-SF Annual Return/Report
(Short Form or Short Form 5500) as a new simplified report for certain
small plans. The Short Form is a new two-page form for small plans
(generally, plans with fewer than 100 participants) with secure and
easy to value investment portfolios. As set forth in greater detail in
the July 2006 Proposal, a 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. 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, as proposed, multiemployer
plans were not to be eligible to file the Short Form. Most Short Form
filers would not be required to file any schedules, although defined
benefit pension plans would continue to be required to file Schedule
SB, where applicable. Those small plans not eligible to use the Short
Form could still avail themselves of the current simplified reporting
alternatives for small pension plans.
The Agencies believe that the requirement in the PPA to provide
``simplified'' reporting for plans with fewer than 25 participants is
satisfied by the simplified reporting scheme in the July 2006 Proposal.
The Agencies believe that the Short Form 5500, as proposed, was
targeted to provide a simplified report for plans with fewer than 25
employees because we estimate that approximately 75% of all plans
eligible to file the Short Form cover fewer than 25 participants. The
Agencies propose to continue to prohibit plans that invest in employer
securities or other hard to value assets and multiemployer plans from
being eligible to use the Short Form 5500. The Agencies believe this
conclusion is consistent with the PPA's emphasis on increasing
transparency, accurate measurement of assets, greater participant
control over the disposition of employer securities in defined
contribution plans, and expanding the annual reporting requirements for
multiemployer plans. As under the July 2006 Proposal, small plans not
eligible to use the Short Form 5500 still would be able to avail
themselves of the other simplified reporting options available to small
plans under the Form 5500 Annual Return/Report and its schedules.\5\
---------------------------------------------------------------------------
\5\ The PPA provision requiring a simplified report for plans
that cover fewer than 25 participants only applies to plans that
meet the minimum coverage requirements of Code section 410(b)
without being combined with any other plan that covers business'
employees; does not cover a business that is a member of an
affiliates service group, a controlled group of corporations, or a
group of businesses under common control; and does not cover a
business that uses leased employees (within the meaning of section
414(n) of such Code). Since these PPA conditions focus on tax
qualification rules under the Code, and because the PPA did not
prohibit the Department of providing those plans with a simplified
report pursuant to its general authority under ERISA section
104(a)(2)(A) to establish simplified reports for pension plans that
cover fewer than 100 participants, the Department concluded that it
did not need to restrict the simplified report being proposed under
Title I of ERISA with those conditions. The Department also notes
the elimination of IRS-only schedules from the Form 5500 and from
the Short Form 5500 as a part of the Department's adoption of a
wholly electronic filing requirement under Title I of ERISA
diminishes the relevance of the above PPA conditions to Form 5500
filings under EFAST. However, as explained in the Department's
Electronic Filing Final Rule, 71 FR 41359 (July 21, 2006), the IRS
intends to permit plans that cover only sole proprietors or partners
(and their spouses) that are not subject to Title I of ERISA but
file the Form 5500-EZ to satisfy the annual reporting and filing
obligations imposed by the Code, to satisfy the requirement to file
the Form 5500-EZ with the IRS or by filing the Form 5500-SF
electronically with the EFAST system.
---------------------------------------------------------------------------
[[Page 71566]]
A list of the proposed data elements for the Short Form 5500 and a
mock-up of the Short Form and the instructions were published in the
Federal Register as part of the July 2006 Proposal. The July 2006
Proposal can be viewed on the Department's Web site at http://www.dol.gov/ebsa
.
Section 1103(b) of the PPA requires a simplified report to be
available for 2007 plan year filings, i.e., filings for plan years
beginning after December 31, 2006. This proposal addresses the
simplified report requirement for 2008 plan years, i.e., those
beginning after December 31, 2007. For the 2007 plan year, the Agencies
will allow plans covering fewer than 25 participants that would meet
the conditions for being eligible to file the Short Form 5500 if those
conditions applied to 2007 filings to file an abbreviated version of
the current Form 5500 Annual Return/Report available for ``small plan''
filers. Specifically, the Department anticipates that the simplified
report will to a large extent replicate within the context of the
existing Form 5500 Annual Return/Report structure the information that
would be required to be reported on the proposed Short Form 5500 (Form
5500-SF), possibly by allowing certain schedules to be excluded from
the filing or requiring only certain line items to be completed on
required schedules. The Department understands that some eligible small
plan filers may want to wait until the 2008 plan year to file the Short
Form in order to avoid having to implement changes to their annual
reporting systems and procedures for their 2007 plan year filings and
then adjust them again in 2008 to file the Short Form, and,
accordingly, the Department intends that these plans will have the
option of continuing to file in accordance with the normal rules for
the 2007 plan year. Specific guidance regarding this simplified
reporting option will be included in the instructions to the 2007 Form
5500. The Agencies currently anticipate posting information copies of
the 2007 forms and instructions in July 2007.
4. Electronic Filing and Web Site Display of Form 5500 Information
Section 504 of the PPA requires that, for defined benefit pension
plans, the basic plan identifying information and actuarial information
included in the annual report must be filed with the Department in an
electronic format that accommodates display on the Internet. As noted
above, the Department has an ongoing initiative to move to a wholly
electronic filing and processing system for all Form 5500 reports filed
with the Department starting with reporting years beginning on or after
January 1, 2008. The Department's Request for Proposal on the EFAST2
system published on September 1st already calls for the system to be
capable of electronic public disclosure of all Form 5500 filings. The
Department intends that the new EFAST2 system and the Electronic Filing
Rule will satisfy section 504 of the PPA's requirement regarding
electronic filing with and display of information by the Department.
D. Findings on the Revised Form 5500 Annual Return/Report (Including
Short Form 5500) as a Limited Exemption and Alternative Method of
Compliance
Section 104(a)(2)(A) of ERISA authorizes the Secretary of Labor
(Secretary) to prescribe by regulation simplified reporting for pension
plans that cover fewer than 100 participants. Section 104(a)(3)
authorizes the Secretary to exempt any welfare plan from all or part of
the reporting and disclosure requirements of Title I of ERISA or to
provide simplified reporting and disclosure if the Secretary finds that
such requirements are inappropriate as applied to such plans. Section
110 permits the Secretary to prescribe for pension plans alternative
methods of complying with any of the reporting and disclosure
requirements if the Secretary finds that: (1) The use of the
alternative method is consistent with the purposes of Title I of ERISA,
provides adequate disclosure to plan participants and beneficiaries,
and provides adequate reporting to the Secretary; (2) application of
the statutory reporting and disclosure requirements would increase
costs to the plan or impose unreasonable administrative burdens with
respect to the operation of the plan; and (3) the application of the
statutory reporting and disclosure requirements would be adverse to the
interests of plan participants in the aggregate. For purposes of Title
I of ERISA, the filing of a completed Form 5500 Return/Report,
including the filing of the proposed Short Form 5500, in accordance
with the instructions and related regulations, generally would
constitute compliance with the limited exemption and alternative method
of compliance in 29 CFR 2520.103-1(b).
The Department finds under sections 104(a)(3) and 110 of ERISA that
the use of the proposed Short Form 5500, the Schedule SB and MB to
replace the Schedule B, and the revised Schedule R, along with the
previously proposed revised Form 5500 Annual Return/Report, is
consistent with the purposes of Title I of ERISA and provides adequate
disclosure to participants and beneficiaries and adequate reporting to
the Secretary. While the information that would be required to be
reported on or in connection with the revised Form 5500 Annual Return/
Report and the proposed Short Form 5500 deviates, as before, in some
respects, from that delineated in section 103 of ERISA, the information
essential to ensuring adequate disclosure and reporting under Title I
is required to be included on or as part of the Form 5500 Annual
Return/Report, as proposed to be revised, and the proposed Short Form
5500.
The use of the Form 5500 Annual Return/Report, as revised, or the
proposed Short Form 5500 will relieve plans subject to the annual
reporting requirements from increased costs and unreasonable
administrative burdens by providing a standardized format that
facilitates reporting, eliminates duplicative reporting requirements,
and simplifies the content of the annual report in general. The Form
5500 Annual Return/Report, under the proposed revision, including the
proposed Short Form, is intended to further reduce the administrative
burdens and costs attributable to compliance with the annual reporting
requirements.
Taking into account the above, the Department has determined that
application of the statutory annual reporting and disclosure
requirements without the availability of the Form 5500 Annual Return/
Report, including the proposed Short Form 5500, would be adverse to the
interests of participants in the aggregate. The proposed revised Form
5500 Annual Return/Report provides for the reporting and disclosure of
financial and other plan information described in section 103 of ERISA
in a uniform, efficient, and understandable manner, thereby
facilitating the disclosure of such information to plan participants
and beneficiaries.
Finally, the Department has determined that the use of the Short
Form 5500 is a simplified means of reporting for purposes of the
requirements of section 1103 of the PPA that takes into account the
appropriate balance of reducing filing burdens for plans with fewer
than 25 participants without impairing enforcement, research, and
policy needs, and providing adequate disclosure to participants and
beneficiaries, which balance is required by section 104(a) of ERISA.
[[Page 71567]]
E. Regulatory Impact Analysis
Executive Order 12866 Statement
Under Executive Order 12866, the Department must determine whether
a regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the Office
of Management and Budget (OMB). Section 3(f) of Executive Order 12866
defines a ``significant regulatory action'' as an action that is likely
to result in a rule (1) having an annual effect on the economy of $100
million or more, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
Pursuant to the terms of the Executive Order, it has been
determined that this regulatory action raises novel legal or policy
issues arising out of legal mandates and the President's priorities.
Therefore, this action is a ``significant regulatory action'' and
subject to OMB review under section 3(f)(4) of Executive Order 12866.
The Department accordingly has undertaken to assess the costs and
benefits of this regulatory action in satisfaction of the applicable
requirements of the Executive Order.
In accordance with OMB Circular A-4 (available at http://www.whitehouse.gov/
[fxsp0]omb/circulars/a004/a-4.pdf), Table 1 below
depicts an accounting statement showing the net cost associated with
the provisions of this proposal. The Department believes that some
employee benefit plans will see a decrease in costs (e.g., Short Form
eligible plans and single-employer defined benefit pension plans) and
others might see an increase in costs due to this proposal (e.g.,
multiemployer defined benefit pension plans).\6\ Further information
about the amount of increase and decrease in costs for particular plan
types is displayed in the cost section, below. On aggregate, the
Department estimates a cost reduction of up to $77 million in the first
year.
---------------------------------------------------------------------------
\6\ The reduction in costs shown in Table 1 for plans with fewer
than 25 participants represents a portion of the savings attributed
to the Short Form 5500 for plans with fewer than 100 participants in
the July 2006 Proposal and supporting documents. This analysis uses
the same methodology as used in the July 2006 Proposal to calculate
the savings, although this analysis refines the result by breaking
out the amount of savings attributed to plans with fewer than 25
participants from the total savings.
---------------------------------------------------------------------------
Unless stated otherwise, this analysis describes the increases and
decreases in benefits, costs, and burdens that this proposal alone
would cause as compared to the costs, benefits, and burdens created by
current law. Where this proposal modifies a forms revision included in
the July 2006 Proposal, we attempt to explain the nature of the
modification, but we have not attempted to quantify any differences in
the respective economic analyses.
Table 1.--Accounting Statement: Estimated Cost Reduction From the
Current Reporting Requirements to the Supplemental Proposed Forms
Revisions
------------------------------------------------------------------------
Category Net cost reduction
------------------------------------------------------------------------
Annualized Monetized Benefit............ $77 million.\7\
------------------------------------------------------------------------
Need for Regulatory Action
The Form 5500 Annual Return/Report serves as the primary source of
information concerning the operation, funding, assets, and investments
of pension and other employee benefit plans. The Form 5500 Annual
Return/Report is an important disclosure document for participants and
beneficiaries, an enforcement and research tool for the Department, and
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. To address changes required by the
PPA, the Department has attempted in this supplemental proposal to
balance the interests of participants, beneficiaries, the public, and
the Department in the protection of ERISA rights and in the
availability of information on benefit plans with plan administrators'
and sponsors' interest in minimizing costs attendant with the reporting
of information to the federal government. The Department believes that
the proposed supplemental forms revisions' benefits justify the costs.
The basis for this conclusion is explained below.
---------------------------------------------------------------------------
\7\ The $77 million figure reflects the cost reduction that
would occur if this proposal alone were implemented. The $174
million cost reduction figure from the July 2006 Proposal represents
the cost reduction that would occur if the July 2006 Proposal alone
were implemented. See July 2006 Proposed Rule, 71 FR at 41396.
---------------------------------------------------------------------------
Regulatory Alternatives
Executive Order 12866 directs federal agencies promulgating rules
to evaluate regulatory alternatives. The Department has concluded that
its proposal to substitute separate actuarial schedules for single-
employer plans and multiemployer plans for the existing Schedule B and
to add new questions to the Schedule R is appropriate as a means to
collect additional information as required by the PPA. Further, the
Department has concluded that the July 2006 Proposal to make available
the Short Form 5500 for plans with fewer than 100 participants would be
an appropriate way to simplify reporting and reduce filer burden for
plans with fewer than 25 participants, as required in section 1103 of
the PPA, while still meeting the needs of participants, beneficiaries,
the public, and the Department in full and adequate disclosure.
In developing form revisions and implementing regulatory changes,
as required by the PPA, the Department considered several alternatives.
The Department's consideration included, for example, different
approaches to the Schedule B, R, and H changes as well as the
eligibility criteria for the Short Form 5500.
The public is invited to comment specifically on the decision
points for the proposed revisions and on the adequacy of the models,
assumptions, and data developed to evaluate regulatory burden. In
considering these alternatives, the Department weighed the objective of
reduced regulatory burden against the need for adequate reporting and
disclosure, quantifying impacts where possible.\8\ For example:
---------------------------------------------------------------------------
\8\ The Department will take into account all comments received
in response to both this proposal and the July 2006 Proposal in
connection with finalizing the forms revisions.
---------------------------------------------------------------------------
Change and add new plan funding information on Actuarial
Information Schedule (Currently Schedule B): Schedule B is filed
currently by defined benefit pension plans subject to the minimum
funding schedules. In developing this proposed supplemental revision,
the Department considered how to balance the need for information to
help participants, beneficiaries, and the PBGC evaluate the financial
solvency of both single and multiemployer defined benefit plans with
the potential burden on administrators of those plans of providing the
additional information (see discussion in preamble to the July
[[Page 71568]]
2006 Notice). The Department believes that a cost-effective way to
gather the information required by the PPA is to replace the existing
Schedule B with separate forms specifically tailored for single-
employer and multiemployer plans, Schedules SB and MB respectively.
Providing each type of plan with its own actuarial schedule will
generate cost savings and efficiencies. The Department entertained the
alternative of simply adding the additional questions required by the
PPA for both types of plans to the existing Schedule B instead of
separating the Schedule B into the Schedules SB and MB. However,
differences in the statutory requirements for single-employer and
multiemployer plans would cause some questions to have been filled out
only by single-employer plans and others only by multiemployer plans.
Plan administrators would have had to spend additional time and effort
to distinguish questions relevant for their plans. As can be seen in
Table 2 below, collecting the information on a single Schedule B would
result in a smaller reduction of burden than adopting the proposed
separate Schedules SB and MB.
Table 2.--Change in Burden Between Separate Actuarial Information
Schedules as Proposed in the Supplemental Proposed Forms Revisions and
One Expanded Schedule B
------------------------------------------------------------------------
Change in burden Change in burden
if separate if changes are
Schedule Bs are made to single
established (as Schedule B
proposed) (alternative)
------------------------------------------------------------------------
Total Change in Hours............... -17,000 -10,000
Total Change in Costs (in Millions). -$1.48 -$0.84
------------------------------------------------------------------------
Establishment of a Short Form 5500 for certain plans with
fewer than 25 participants: As discussed in more detail in the preamble
of the July 2006 Notice (under the heading ``A. Short Form 5500 as New
Simplified Report for Certain Small Plans,'' 71 FR at 41618), the
Department determined that most 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 and should be allowed a simplified
annual report filing (i.e., the Short Form 5500). The Department
estimates that 95% of non-403(b) plans would qualify to file the Short
Form 5500, 75% of which are plans with fewer than 25 participants.\9\
In considering how to provide the simplified filing required by the
PPA, the Department considered allowing all plans with fewer than 25
participants, regardless of their investments, to file the Short Form
5500. The Department estimates that this would affect about 29,000
plans.
---------------------------------------------------------------------------
\9\ Previously, in the July 2006 Proposed Rules, the Department
estimated that 90% of non-403(b) plans would be eligible for filing
the Short Form 5500. 71 FR at 41397. The Department has revised this
estimate to conclude that an estimate of 95% eligibility is a more
accurate estimate. These numbers do not include any estimate
regarding 403(b) plans because this RIA, which is limited only to
the changes required by the PPA, is based on current law. Using
proposed forms revisions, 403(b) plans are treated as having only
limited reporting requirements of current law, but this supplemental
notice should not be construed as a substantive determination in
response to the comments received on the July 2006 Proposal. As
noted before, the Department anticipates combining all changes to
the 2008 Form 5500 proposed in the July 2006 Proposal and this
supplement and addressing the comments on both comprehensively into
a final notice.
---------------------------------------------------------------------------
However, the Department continues to believe, as noted in the July
2006 Proposal, that prohibiting use of the Short Form 5500 by plans
with employer securities or other assets that are difficult to value is
consistent with important policy objectives. The importance of those
policies is underscored by the PPA's emphasis on increasing plan
transparency, accurate measurement of assets, greater participant
control over the disposition of employer securities in defined
contribution plans, and expanding the annual reporting requirements for
multiemployer plans. All plans with fewer than 25 participants will be
able to file a simplified annual return. In most cases that simplified
return will be the Short Form 5500, but as under the July 2006
Proposal, small plans not eligible to use the Short Form 5500 still
will be able to avail themselves of the other simplified reporting
options available to small plans under the Form 5500 Annual Return/
Report and its schedules.
Additional data elements reported on Schedule R: Moving
the asset distribution questions to Part VI of Schedule R presents an
alternative to the treatment of these items in the July 2006 Proposal,
which placed them on Schedule B (now Schedules SB and MB). As noted
earlier in the preamble, this proposal's placement of these items on
the Schedule R should not be construed as a determination by the
Agencies regarding public comments on the substance of the questions
received in response to the July 2006 Proposal.
Benefits and Costs
Benefits--The use of the Short Form 5500 for eligible plans to
satisfy the simplified reporting requirement in the PPA and of the Form
5500, Schedules SB and MB, and Annual Return/Report and Schedule R, as
modified, to obtain the additional annual reporting required by the
PPA, will provide a standardized, streamlined alternative means of
compliance with applicable statutory reporting requirements, as well as
providing appropriate simplified annual reports and exemptions under
section 104(a)(2) and (3) of ERISA. In so doing, they will both ease
plan administrators' burden of compliance with reporting requirements
and enhance the utility and accessibility of information reported to
the government, participants and beneficiaries, and others. In
particular, the regulations and forms, together with the Department's
planned program for assisting filers in the preparation and electronic
submission of filings, will give plan administrators clear guidance and
a supportive, routine mechanism for satisfying the new reporting
obligations. They also will make it possible to efficiently capture and
assemble the information into an electronic data system, as also
required by the PPA. The data will then be processed and analyzed in
the service of many beneficial activities. These include monitoring
compliance with ERISA's reporting and other requirements; targeting and
carrying out prompt and effective enforcement actions; informing
participants and beneficiaries of the characteristics, operations, and
financial status of their benefit plans; producing statistics on the
employee benefit system, monitoring
[[Page 71569]]
trends therein, and informing the public; and assembling information
and conducting research that advances knowledge and fosters the
formulation of sound public policies toward employee benefits. The
Department believes that the benefits of the proposed supplemental
revisions justify the costs as further detailed below.
Separate actuarial schedules for single-employer plans and
multiemployer plans to reflect PPA changes in funding and annual
reporting requirements: As noted below, this revision is expected to
decrease reporting costs for single-employer plans and increase
reporting costs for multiemployer plans. The Agencies believe, however,
that the cost increases for multiemployer plans are justified by the
need to better monitor plan funding. This information is needed by
participants, beneficiaries, and the PBGC to improve their ability to
assess the financial condition of the plan.
Additional data elements reported on Schedule R: As noted below,
this revision will increase reporting costs for affected plans. The PPA
requires Multiemployer defined benefit plans to report additional
information that is needed by participants, beneficiaries, and the PBGC
to assess the financial risk posed to the plan by a financial collapse
or withdrawal of one or more contributing employers. Some of the
additional data elements are already included in the July 2006 Proposal
and, as further described in the July 2006 Proposed Rule (see
discussion in preamble to the July 2006 Proposed Rule under the heading
``Adding Multiemployer Plan Contributing Employer Information,'' 71 FR
at 41398), where it was stated that the PBGC believes that it is
prudent to begin monitoring companies that are major contributors to
multiemployer plans, especially because the financial conditions of
many multiemployer plans have been deteriorating. Similarly,
multiemployer plan mergers, information on withdrawing employers and
their withdrawal liability, and information on participants for whom no
employer makes contributions are important. Identification of companies
and plans affected by such changes and gathering additional information
on their impact is essential to making accurate assessments of the
potential risks to which these plans are exposed.
Establishment of a Short Form 5500 for certain small plans: The
Agencies estimate that this change will result in a reduced burden on
the affected small plans. As noted in the July 2006 Proposal and as
further described in the July 2006 Proposed Rule (see discussion in the
preamble to the July 2006 Proposed Rule under the heading
``Establishment of a Short Form 5500 for certain small plans,'' 71 FR
at 41397), the Short Form 5500 was being developed with the specific
intent of reducing reporting costs while still collecting sufficient
information to preserve ERISA protections and satisfying the
enforcement, research, and regulatory needs of the Agencies, and the
disclosure needs of participants and beneficiaries. The Agencies
determined that less information is needed in the case of small plans
that invest in secure assets issued by regulated financial institutions
and having a fair market value that is easily determined. The Agencies
believe that the eligibility conditions for Short Form 5500 filers,
including 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 5500 would continue to be able to file
simplified reports as under the current system.
Electronic Filing and Web site Display of Form 5500 Information:
This will give participants and beneficiaries an additional option on
how to monitor the financial status of their pension plans. They will
be able to access important information instantaneously and without any
additional costs involved, as plans must be capable of electronic
public disclosure beginning with the 2008 reporting years.
Costs--The Supplemental Proposed Forms Revisions will reduce the
burden for small plans eligible to file the Short Form 5500, but
increase the burden for plans that must report additional information
on Schedules SB or MB, R and H. As shown in Table 3, the aggregate cost
of reporting under the existing rules is estimated to be $775 million
annually,\10\ shared across the 780,000 filers subject to the filing
requirement. The Department estimates that the supplemental proposed
forms revisions, however, reduce the annual cost burden by $77
million.\11\
---------------------------------------------------------------------------
\10\ For reasons explained in footnote 20 and in the technical
appendix, the cost of current reporting requirements contained int
his proosal is different from the cost calculated for the July 2006
Proposal.
\11\ These cost estimates take only the PPA changes into
account. They take the changes included in the July 2006 Proposal
into account only to the extent that the PPA also requires them. As
noted before, the Department intends to consolidate all changes into
the final revisions expected to be published in 2007.
Table 3.--Summary of Costs: Current Requirements vs. Requirements Under
the Supplemental Proposed Revision
------------------------------------------------------------------------
Total burden
Total costs (in hours (in
millions) millions)
------------------------------------------------------------------------
Current Reporting Requirements..... $774.8 9.42
Change due to the Supplemental -77 -0.94
Proposed Revision.................
Requirements under the Supplemental 698 8.48
Proposed Revision.................
------------------------------------------------------------------------
Note: Number of affected plans: 445,000.
The Requirements under the Supplemental Proposed Revision do not include
the reporting requirements that are included in the July 2006 Proposal
but not in the Supplemental Proposed Revisions.
Similar to the July 2006 Proposal, the Department assumes that
substantial revisions to the existing reporting requirements will
entail some one-time transition costs, but that such costs are
generally loaded into the prices paid by plans for affected services
and products, spread both across plans and across the expected life of
the service and product changes. The Department's estimates provided
here are therefore intended to reflect such spreading and loading of
these transaction costs.
In addition to estimating the total impact of the proposed
revisions on aggregate costs, the Department has broken down the change
in costs by individual revisions in the following way:
[[Page 71570]]
1. Separate actuarial schedules for single-employer plans and
multiemployer plans to reflect PPA changes in funding and annual
reporting requirements. Under the Supplemental Proposed Forms Revisions
the Schedule B will be separated into a Schedule SB for single-employer
and multiple-employer defined benefit plans and a Schedule MB for
multiemployer defined benefit and money purchase plans. Relative to the
current filing requirement, the establishment of Schedule SB will
reduce the total annual burden for 43,000 affected filers by a little
more than 18,000 hours. Applying an hourly labor rate of $88 for
service providers and $61 for plan sponsors, the Department estimates
that this will lower the annual reporting cost by an estimated $1.59
million.\12\ On the other hand, the establishment of Schedule MB will
increase the total annual burden for 1,500 affected filers by 1,200
hours. Applying an hourly labor rate of $88 for service providers and
$61 for plan sponsors, the Department estimates that this will increase
the annual reporting cost by an estimated $105,000. On aggregate, the
separation of the Schedule B will decrease the aggregate total annual
burden by 17,000 hours, or by an estimated $1.48 million.
---------------------------------------------------------------------------
\12\ For purpose of the burden analysis, the Department assumes
that 4% to 8% of the burden hours of Schedule B are incurred by the
plan sponsors and 92% to 96% by service providers. The displayed
numbers in the text might not multiply to the totals due to
rounding. The labor rates were updated from the rates used in the
July 2006 Proposed Notice. See 71 FR at 41399. Please see the
Technical Appendix for details.
---------------------------------------------------------------------------
2. Additional Data Elements on Schedule R. The provision of this
information is anticipated to add an estimated additional annual cost
of $1.07 million (13,000 hours) for 20,000 affected filers when
applying an hourly rate of $88 for service providers and $61 for plan
sponsors.\13\
---------------------------------------------------------------------------
\13\ For purpose of the burden analysis, the Department assumes
that 29% to 32% of the burden hours of Schedule R are incurred by
the plan sponsors and 68% to 71% by service providers. The displayed
numbers in the text might not multiply to the totals due to
rounding.
---------------------------------------------------------------------------
3. Establishment of a Short Form 5500 for certain small plans. A
large majority of small plans, or 425,000 of the 629,000 total small
plan filers, are estimated to be eligible to use the Short Form 5500,
thereby saving an estimated $77 million (942,000 hours) annually.
Again, the Department is applying an hourly rate of $88 for service
providers and $61 for plan sponsors.\14\
---------------------------------------------------------------------------
\14\ For purpose of the burden analysis, the Department assumes
that 19% to 24% of the burden hours of the Short Form 5500 are
incurred by the plan sponsors and 76% to 81% by service providers.
The displayed numbers in the text might not multiply to the totals
due to rounding.
---------------------------------------------------------------------------
4. Electronic Filing and Web site Display of Form 5500 Information.
This requirement is not anticipated to add any additional costs, as
plans must be capable of electronic public disclosure beginning with
the 2008 reporting year due to the Electronic Filing Rule.
A summary of the changes in costs and burden hours that were
allocated to the groups of proposed supplemental changes as outlined
above, as well as the number of affected employee benefit plans, can be
found in Table 4 below.
Table 4.--Summary of Supplemental Proposed Changes to the Reporting Requirements: Costs, Burden, and Affected
Plans
----------------------------------------------------------------------------------------------------------------
Change in Change in Number of
Supplemental proposed revisions for 2008 costs (in burden hours affected plans
millions) \1\ \1\ 1 2
----------------------------------------------------------------------------------------------------------------
Separate Schedule Bs............................................ -$1.48 -17,000 44,500
Short Form 5500................................................. -76.75 -942,000 425,000
Schedule R...................................................... +1.07 +13,000 20,000
-----------------------------------------------
Total....................................................... -77.17 -944,000 445,000
----------------------------------------------------------------------------------------------------------------
\1\ Note: The displayed numbers might not sum up to the totals due to rounding.
\2\ Some plans are affected by more than one individual revision. Consequently, the total number of affected
plans is lower than the summation of the number of plans affected by the three individual revisions.
Assumptions, Methodology, and Uncertainty
The cost and burden associated with the annual requirement for any
given plan will vary according to a variety of factors, including the
plan's characteristics, practices, and operations, which in turn
determine what information must be provided. A small, single-employer
defined contribution pension plan filing a new Short Form 5500
generally will incur far lower costs than a large, multiemployer
defined benefit plan that merges with another multiemployer plan and
invests in employer securities or other hard to value assets.
Therefore, as in the July 2006 Proposal, in arriving at its aggregate
cost estimates the Department separately considered the cost to
different types of plans of providing different types of information.
The basis for the Department's estimates is the methodology designed
and peer reviewed for the July 2006 Proposal and repeated below.
Assumptions Underlying This Analysis--The Department's analysis of
the costs and benefits of these supplemental proposed revisions assumes
that all benefits and costs will be realized in the first year of the
reporting cycle to which the amendments apply and within each year
thereafter. This assumption is based on the nature of the statutory
reporting provisions, which require that each plan complete a filing
within a yearly period. The Department has used a ``status quo''
baseline for this analysis, assuming that the world absent this
proposal and absent the July 2006 Proposal will resemble the
present.\15\
---------------------------------------------------------------------------
\15\ Further detail can be found in the Technical Appendix.
---------------------------------------------------------------------------
Methodology--The underlying cost data was developed by Mathematica
Policy Research, Inc. (MPR), and has been used by the Agencies in
various burden estimates related to the Form 5500 Annual Return/Report
during recent years. See, 65 FR 21068, 21077-78 (April 19, 2000);
Borden, William S., ``Estimates of the Burden for Filing Form 5500: The
Change in Burden from the 1997 to the 1999 Forms,'' Mathematica Policy
Research, submitted to the U.S. Dept. of Labor May 25, 1999.\16\ It is
grounded in surveys of filers and their service providers, which
measured the unit cost burden of providing various types of
information. Aggregate estimates were produced by interacting these
unit cost measures
[[Page 71571]]
with historical counts of Form 5500 Annual Return/Report filers.
---------------------------------------------------------------------------
\16\ The Mathematica report can be accessed at the Department's
Web site at http://www.dol.gov/ebsa. Further detail can be found in
the Technical Appendix.
---------------------------------------------------------------------------
A new burden estimating model, based on the Form 5500 Burden Model
that MPR most recently used for estimating burdens in October 2004, was
assembled by Actuarial Research Corporation (ARC) for the July 2006
Proposal and subsequent burden estimates. ARC assembled a simplified
model, drawing on implied burdens associated with subsets of filer
groups represented in the MPR model. The model used the level of detail
consistent with reflecting burden differences associated with the
various proposed forms revisions. In the following, the ARC model is
described in broad terms. Further details about the model are explained
in the Technical Appendix that can be accessed at the Department's Web
site at http://www.dol.gov/ebsa.
To estimate aggregate burdens, the types of plans that have similar
reporting requirements were grouped together. Thus, calculations were
prepared for different subsets of types of plans as appropriate based
on the specifics of the supplemental revisions to the reporting
requirements. Table 5 below shows the particular types of plans
considered, the number of plans affected by the proposed revisions, as
well as the aggregate costs under current and supplemental proposed
requirements. As can be seen from the Total line in Table 5, aggregate
cost under current and proposed regulations add up to $775 million and
$698 million, respectively. The universe of filers was divided into
three basic plan types: defined benefit pension plans, defined
contribution pension plans, and welfare plans, and each of these major
plan types was further subdivided into multiemployer and single-
employer plans. Defined contribution Code section 403(b) plans were
treated separately from other defined contribution plans. Since the
filing requirements differ substantially for small and large plans, the
plan types were also divided by plan size. For large plans (100 or more
participants), the defined benefit plans were further divided between
very large (1000 or more participants) and other large plans (at least
100 participants, but less than 1000 participants). Small plans were
divided into very small (less than 25 participants) and small (at least
25 participants, but less than 100 participants). For each of these
sets of respondents, burden hours per respondent were estimated for the
Form 5500 Annual Return/Report itself and for up to eight schedules.
Table 5.--Number of Affected Filers and Cost Under Current vs. Supplemental Proposed Requirements
----------------------------------------------------------------------------------------------------------------
Aggregate cost
Aggregate cost under
Number under current supplemental
Type of plan affected requirements proposed
(in millions) requirements
(in millions)
----------------------------------------------------------------------------------------------------------------
5500 Large Plans (> = 100 participants)...................... 151,800
DB, ME, 100-1,000 participants........................... 600 $4.67 $4.78
DB, ME, > 1,000 participants............................. 900 6.53 6.84
DB, SE, 100-1,000 participants........................... 7,000 51.91 51.54
DB, SE, > 1,000 participants............................. 3,400 25.00 25.49
DC, ME, non-403(b)....................................... 1,700 8.15 8.15
DC, ME, 403(b)........................................... 100 0.0035 0.0035
DC, SE, non-403(b)....................................... 57,400 261.97 261.96
DC, SE, 403(b)........................................... 7,200 0.31 0.31
Welfare, ME.............................................. 4,100 7.78 7.78
Welfare, SE.............................................. 69,200 92.60 92.60
5500 Very Small Short Form Eligible (< 25 participants).. 428,700
DB....................................................... 28,600 33.40 17.84
DC, non-403(b)........................................... 396,200 145.18 83.28
5500 Small Short Form Ineligible......................... 200,000
DB....................................................... 7,700 9.91 9.80
DC, non-403(b)........................................... 180,500 123.68 123.68
DC, 403(b)............................................... 8,900 0.39 0.39
Welfare.................................................. 6,800 3.30 3.30
--------------------------------------------------
Total................................................ 780,450 774.8 697.74
----------------------------------------------------------------------------------------------------------------
Note: The displayed numbers might not sum up to the totals due to rounding.
DB--defined benefit plans.
DC--defined contribution plans.
SE--single-employer plans.
ME--multi employer plans.
Large plans--100 participants or more.
Small plans--less than 100 participants.
In addition to separating plans by type and size, costs were
estimated separately for the form and for each schedule. When items on
a Form 5500 Annual Return/Report schedule are required by more than one
Agency, the estimated burden associated with that schedule is allocated
among the Agencies. This allocation is based on whether only a single
item on a schedule is required by more than one agency or whether
several or all of the items are required by more than one agency.
Filers must read not only the instructions for particular items but
also instructions pertaining to the general filing requirements, and
the burden associated with reading the instructions is tallied and
allocated accordingly.
A plan's reporting burden is estimated in light of the specific
items and schedules it must complete as well as its size, funding
method, and investment structures. For example, the annual report for a
large fully insured welfare plan would consist of only a few questions
on the Form 5500, Schedule A, and Schedules C and G, where applicable.
The requirement that this
[[Page 71572]]
plan provide very limited information on the Form 5500 Annual Return/
Report is reflected in the estimates of reporting burden time. By
contrast, a large defined benefit pension plan that is intended to be
tax-qualified and that uses a trust fund and invests in insurance
contracts would be required to submit an annual report completing
almost all the line items of the Form 5500, plus Schedule A (Insurance
Information), Schedule SB or MB (Actuarial Information), Schedule C
(Service Provider Information), Schedule D (DFE/Participating Plan
Information), Schedule G where applicable, Schedule H (Financial
Information), and Schedule R (Retirement Plan Information), and would
be required to submit an IQPA's report and opinion. The Agencies'
methodology attempts to capture, through its categorization, these
different reporting burdens, thereby providing meaningful estimates of
significant differences in the burdens placed on different categories
of filers.
Burden estimates for each schedule were adjusted for the proposed
revisions, reflecting the numbers of items added or deleted in each
schedule, and the average burden currently attributable to items on
each of the corresponding current schedules. The burden for the
proposed Short Form 5500 was built from the estimated current burden
associated with the various line items included in it.
The Department has not attributed a recordkeeping burden to the
Form 5500 Annual Return/Report either here or in its Paperwork
Reduction Act analysis because it believes that plan administrators'
practice of keeping financial records necessary to complete the Form
5500 Annual Return/Report arises from usual and customary management
practices that would be used by any financial entity, and does not
result from ERISA or Code annual reporting and filing requirements.
The aggregate baseline burden is the sum of the burden per form and
schedule filed multiplied by the estimated aggregate number of forms
and schedules. The simplified model draws on Form 5500 Annual Return/
Report data representing each plan's filing for plan year 2003 (the
most recent year for which complete data is available), both for
estimating the impact of changes in the numbers of filings associated
with the introduction of the Short Form 5500 for most small filers as
well as for estimating the impact of changes in filing obligations
associated with other schedules.\17\ In summary, the model estimates
that due to $77 million in cost reductions the proposed revisions would
lead to aggregate costs of $698 million. While there is a net reduction
in costs, the Department estimates that some large plans might
experience cost increases, while small plans will experience cost
reductions. The total burden estimates, as well as the burden broken
out by type of plan can be found in Table 5 above.
---------------------------------------------------------------------------
\17\ While the July 2006 Proposal used burden estimates drawing
from 2002 Form 5500 data, 2003 Form 5500 data has become recently
available and is used for making burden estimates for the
Supplemental Proposed Revisions.
---------------------------------------------------------------------------
Uncertainty within Estimates--The Department acknowledges that
there are several areas of uncertainty that might affect the estimates,
in particular the unit cost estimates. While the Department has a good
sense for the filing universe and for the number of filers that file
the different schedules of the Form 5500, the unit costs under the
current requirements as well as the way they would change due to the
proposed revisions are more uncertain. The Department has no direct
measure for the unit costs, but rather uses a proxy adapted from the
existing MPR model, which was developed in the late 1990s. Additional
uncertainty is added due to the supplemental proposed revisions. Some
of the revisions just move items from the current Schedule B to the
single-employer or multiemployer schedule. The impact of these changes
can be estimated more accurately than the impact of the revisions that
require the reporting of new items. Consequently, the unit cost
estimates would benefit from updated information and the Department
welcomes comments that would provide information on this matter.
Peer Review
In December 2004, OMB issued a Final Information Quality Bulletin
for Peer Review, 70 FR 2664 (January 14, 2005) (Peer Review Bulletin),
establishing that important scientific information shall be peer
reviewed before it is disseminated by the Federal government. The Peer
Review Bulletin applies to original data and formal analytic models
used by the Department in Regulatory Impact Analyses. The Department
determined that the data and methods employed in the regulatory
analysis of the July 2006 Proposal constituted ``influential scientific
information'' as defined in the Peer Review Bulletin. Accordingly, a
peer review was conducted under Section II of the Bulletin. The peer
review report concluded that the methodology and data generally were
sound and produced plausible estimates. The current proposal uses the
same methodology and, accordingly, the Department is relying on the
Peer Review Report prepared in connection with the July 2006 Proposal
for its proposed use of the Short Form 5500 to satisfy the simplified
reporting requirement and additional reporting requirements for defined
benefit pension plans contained in the PPA.\18\ The Peer Review Report
can be accessed at the Department's Web site at http://www.dol.gov/ebsa
.
---------------------------------------------------------------------------
\18\ The current analysis uses the same methodology as was used
in the July 2006 Proposal, except that the Department slightly
updated some components. Information about the updates was included
in the material given to the peer reviewer. The Department also used
a newer data set (2003 Form 5500 data, rather than 2002 data) to
estimate the burden. Further information about these updates can be
found in the section ``Costs'' above.
---------------------------------------------------------------------------
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a proposed rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities, section 603 of the RFA requires that the agency
present an initial regulatory flexibility analysis at the time of the
publication of the notice of proposed rulemaking describing the impact
of the rule on small entities and seeking public comment on such
impact. Small entities include small businesses, organizations, and
governmental jurisdictions.
For purposes of analysis under the RFA, EBSA proposes to continue
to consider a small entity to be an employee benefit plan with fewer
than 100 participants. The basis of this definition is found in section
104(a)(2) of ERISA, which permits the Secretary to prescribe simplified
annual reports for pension plans that cover fewer than 100
participants. Under ERISA section 104(a)(3), the Secretary may also
provide for exemptions or for simplified reporting and disclosure for
welfare benefit plans. Pursuant to the authority of ERISA section
104(a)(3), the Department has previously issued at 29 CFR 2520.104-20,
2520.104-21, 2520.104-41, 2520.104-46, and 2520.104b-10 certain
simplified reporting provisions and limited exemptions from reporting
and disclosure requirements for small plans,
[[Page 71573]]
including unfunded or insured welfare plans, that cover fewer than 100
participants and satisfy certain other requirements.
Further, while some large employers may have small plans, in
general small employers maintain most small plans. Thus, EBSA believes
that assessing the impact of this proposal on small plans is an
appropriate substitute for evaluating the effect on small entities. The
definition of small entity considered appropriate for this purpose
differs, however, from a definition of small business that is based on
size standards promulgated by the Small Business Administration (SBA)
(13 CFR 121.201) pursuant to the Small Business Act (15 U.S.C. 631 et
seq.). EBSA therefore requests comments on the appropriateness of the
size standard used in evaluating the impact of this proposal on small
entities. EBSA has consulted with the SBA Office of Advocacy concerning
use of this participant count standard for RFA purposes. See 13 CFR
121.902(b)(4). The following seven subsections address specific
requirements of the RFA.
(1) The Department is proposing to revise the forms relating to the
annual reporting and disclosure requirements of section 103 of ERISA to
satisfy requirements of the PPA.
The Department continually strives to tailor reporting requirements
to minimize reporting costs while ensuring that the information
necessary to secure ERISA rights is adequately available. The optimal
design for reporting requirements to satisfy these objectives changes
over time. Benefit plan designs and practices evolve over time in
response to market trends, including trends in labor markets, financial
markets, health care and insurance markets, and markets for various
services used by plans. Partly as a result of those changes, the nature
and mix of compliance issues and risks to ERISA rights change over
time. Frequent amendments to ERISA, the Code, and to associated
regulations also change the parameters of ERISA rights and the methods
needed to protect those rights. In addition, the technologies available
to manage and transmit information continually advance. It is incumbent
on the Department to revise its reporting requirements from time to
time to keep pace with such changes. The Department is proposing these
forms revisions to readjust its reporting requirements to take into
account the PPA as well as certain recent changes in markets, the law,
and technology, many of which are referenced above in this preamble.
(2) Section 103 of ERISA requires every employee benefit plan
covered under part 1 of Subtitle B of Title I of ERISA to publish and
file an annual report concerning, among other things, the financial
conditions and operations of the plan. Section 109 of ERISA authorizes
the Secretary to prescribe forms for the reporting of information that
is required to be included in the annual report. Section 104(a)(2)(A)
of ERISA authorizes the Secretary to prescribe by regulation simplified
annual reporting for pension plans that cover fewer than 100
participants. Section 104(a)(3) of ERISA authorizes the Secretary to
exempt any welfare plan from all or part of the reporting and
disclosure requirements of Title I of ERISA or to provide simplified
reporting and disclosure if the Secretary finds that such requirements
are inappropriate as applied to such plans. Section 110 of ERISA
permits the Secretary to prescribe for pension plans alternative
methods of complying with any of the reporting and disclosure
requirements if the Secretary finds that: (1) The use of the
alternative method is consistent with the purposes of Title I of ERISA,
and it provides adequate disclosure to plan participants and
beneficiaries and adequate reporting to the Secretary; (2) application
of the statutory reporting and disclosure requirements would increase
costs to the plan or impose unreasonable administrative burdens with
respect to the operation of the plan; and (3) the application of the
statutory reporting and disclosure requirements would be adverse to the
interests of plan participants in the aggregate.
The Department proposes to find that use of the Form 5500 Annual
Return/Report, as revised, along with the proposed Short Form 5500,
constitutes an alternative method of compliance, an exemption, and/or a
simplified report, as applicable, consistent with these conditions.
Generally, the Department believes that use of the revised Form 5500
Annual Return/Report and the proposed Short Form 5500 would relieve
plans of all sizes of increased costs and burdens by providing a
standard format that facilitates reporting required by the statute,
eliminating duplicative reporting requirements, and streamlining the
content of the annual return/report.
The objectives of these proposed supplemental forms revisions are
to implement applicable provisions of the PPA, as well as to streamline
reporting and reduce aggregate reporting costs, particularly for small
plans, while preserving and enhancing protection of ERISA rights. These
purposes are detailed above in this preamble.
(3) These supplemental proposed forms revisions do not alter the
number of small plans required to comply with the annual reporting
requirements, but do implement a new Short Form 5500, which is designed
specifically to further streamline the limited reporting requirements
presently applicable to small plans. The Department estimates that more
than six million small, private-sector employee pension and welfare
benefit plans are covered under Title I of ERISA. However, a large
majority of these are fully insured or unfunded welfare benefit plans,
which currently are exempt from annual reporting requirements and will
continue to be exempt under these proposed forms revisions.
Approximately 629,000 small plans, including small pension plans and
small funded welfare plans, currently are required to file annual
reports and will continue to be so required under these supplemental
forms revisions. Of these, under the supplemental forms revisions an
estimated 425,000 small pension plans will be eligible to use the
proposed new Short Form 5500. Use of the Short Form 5500 is expected to
reduce these plans' reporting costs while preserving or enhancing the
protection of their participants' ERISA rights.
(4) The proposed reporting requirements applicable to small plans
are detailed above. For a large majority of the 629,000 small plans
subject to annual reporting requirements, or an estimated 396,000
pension plans, submission of the Short Form 5500 alone will fully
satisfy their annual reporting requirements. All of these plans are
eligible for the waiver of audit requirements, and none are defined
benefit pension plans. Therefore, for such plans satisfaction of their
applicable annual reporting requirements is not expected to require the
services of an IQPA or auditor, but will require the use of a mix of
clerical and professional administrative skills. For an additional
29,000 small defined benefit pension plans that would be eligible to
use the streamlined Short Form 5500, satisfaction of the reporting
requirements also will require services of an actuary and submission of
Schedule SB. The remaining 204,000 small plans will not be eligible to
use the Short Form 5500 under the PPA and will continue to be required
to file the Form 5500 Annual Return/Report. Of these, 8,000 are defined
benefit plans that must use an actuary and file Schedule SB or MB. All
will require a mix of clerical and professional
[[Page 71574]]
administrative skills to satisfy their reporting requirements.
Satisfaction of annual reporting requirements under these proposed
forms revisions is not expected to require any additional recordkeeping
that would not otherwise be part of normal business practices.
The Table 6 below compares the Department's estimates of small
plans' reporting costs under the current requirements with those under
the supplemental proposed requirements for various classes of affected
plans. As shown, costs under the supplemental proposed requirements
will be lower on aggregate and for most classes of plans. These
estimates take account of the quantity and mix of clerical and
professional skills required to satisfy the reporting requirements for
various classes of plans.
Table 6.--Small Plan Reporting Costs Under Current vs. Supplemental Proposed Requirements
----------------------------------------------------------------------------------------------------------------
Aggregate cost
Aggregate cost under
under current supplemental
Class of plan Number affected requirements (in proposed
millions) requirements (in
millions)
----------------------------------------------------------------------------------------------------------------
Defined Benefit Pension, Short Form eligible........... 29,000 $33.40 $17.84
Defined Benefit Pension, Short Form ineligible......... 8,000 9.91 9.80
Code Section 403(b), Short Form ineligible............. 9,000 0.39 0.39
Other Defined Contribution, Short Form eligible........ 393,000 145.18 83.28
Other Defined Contribution Pension, Short Form 180,000 123.68 123.68
ineligible............................................
Funded Welfare......................................... 7,000 3.30 3.30
--------------------------------------------------------
Total for all affected small plans................. 629,000 315.85 238.28
----------------------------------------------------------------------------------------------------------------
Note: The displayed numbers might not sum up to the totals due to rounding.
The Department notes that the estimated reporting costs amount to
less than $400 on average for each of the 629,000 small plans subject
to annual reporting requirements. This compares with roughly $3,000 on
average for each of the 152,000 affected large filers.
(5) Except for the July 2006 Proposal, the Department is unaware of
any relevant federal rules for small plans that duplicate, overlap, or
conflict with these proposed forms revisions. The July 2006 Proposal
includes provisions that overlap and duplicate with some of the form
changes proposed in this notice of supplemental proposed forms
revisions. For example, the July 2006 Proposal proposes the Short Form
5500 not only for certain small pension plans with less than 25
participants, but also for certain small pension and welfare plans with
less than 100 participants. As noted above, the Department anticipates
combining the forms revisions under the July 2006 Proposal and the
supplemental proposed forms revisions when it finalizes the forms
revisions.
(6) In developing the forms revisions, the Department considered a
number of alternative provisions directed at small plans. For example,
as discussed in the July 2006 Proposal, the Department considered both
narrower and broader eligibility criteria for use of the Short Form
5500, settling on criteria that limit eligibility to plans holding
relatively safe and protected assets, which nonetheless includes a
large majority of small plans. The Department also considered the
inclusion of more or fewer of the items of information formerly
collected from small plans in the Form 5500 Annual Return/Report,
retaining only those items it believes to be necessary and adequate to
the protection of small plan participants' ERISA rights.
(7) The Department invites interested persons to submit comments
regarding the impact on small plans of these Supplemental Proposed
Forms Revisions, and on the Department's assessment thereof. The
Department also requests comments on the alternatives it considered and
its conclusions regarding those alternatives; on any additional
alternatives it should have considered; on what, if any, special
problems small plans might encounter if the proposal were to be
adopted; and what changes, if any, could be made to minimize those
problems.
Paperwork Reduction Act Statement
As part of continuing efforts to reduce paperwork and respondent
burden, the general public and Federal agencies are generally invited
to comment on proposed and/or continuing collections of information in
accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C.
3506(c)(2)(A)). This helps to ensure that requested data 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
can be properly assessed. Concurrent with publication of the July 2006
Proposal, the Department submitted an information collection request
(ICR) to OMB, in accordance with 44 U.S.C. 3507(d), for its review of
the Department's proposed revisions to the information collections
previously approved by OMB under OMB Control No. 1210-0110.
On August 29, 2006, OMB issued a notice indicating that it would
continue its approval of the information collections under Control No.
1210-0110 as currently in effect, but would not approve the
Department's request for approval of the proposed revisions until after
the Department considers public comment and promulgates a final rule
describing and explaining any changes. The IRS and the PBGC indicated,
in the July 2006 Proposal, that they intend to submit separate requests
for OMB review and approval based upon the final forms revisions, and
the Department now indicates its intention to do so as well. The
Department solicits comments on any information collection burdens
described in this Notice of Supplemental Proposed Forms Revisions.
Congressional Review Act
The notice of proposed forms revisions being issued here is subject
to the Congressional Review Act provisions of the Small Business
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and,
if finalized, will be transmitted to the Congress and the Comptroller
General for review.
[[Page 71575]]
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), as well as Executive Order 12875, the proposal does not include
any Federal mandate that may result in expenditures by state, local, or
tribal governments in the aggregate of more than $100 million, or
increased expenditures by the private sector of more than $100 million.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires adherence to specific criteria by
federal agencies in the process of their formulation and implementation
of policies that have substantial direct effects on the States, the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. This proposal does not have federalism implications because
they would have no substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. Section 514 of ERISA provides, with certain exceptions
specifically enumerated, that the provisions of Titles I and IV of
ERISA supersede any and all laws of the States as they relate to any
employee benefit plan covered under ERISA. The requirements implemented
in this proposal does not alter the fundamental provisions of the
statute with respect to employee benefit plans, and as such would have
no implications for the States or the relationship or distribution of
power between the national government and the States.
Appendix A
Data Items for 2008 (and Later) Schedule SB (Single-Employer Defined
Benefit Plan Actuarial Information)
------------------------------------------------------------------------
Comparison with 2006
Item Schedule B
------------------------------------------------------------------------
Identifying Information
------------------------------------------------------------------------
Plan year
A. Name of plan................................. Same.
B. Plan number.................................. Same.
C. Plan sponsor's name.......................... Same.
D. EIN.......................................... Same.
E. Type of plan (Single-Employer, Multiple- Similar.
Employer).
F. Prior year plan size (100 or fewer, 101-500, Similar.
More than 500).
------------------------------------------------------------------------
Part I--Basic Information
------------------------------------------------------------------------
1. Valuation date............................... Same.
2. Assets
a. Market value............................. Same.
b. Actuarial value.......................... Similar.
3. Funding target and participant count
breakdown (separate participant count and
funding target figures for: retired
participants and beneficiaries receiving
payment; terminated vested participants; active
participants by nonvested benefits, vested
benefits, and total active; and totals.
a. Number of participants column............ Same.
b. Funding target column.................... Similar.
4. Additional information for plans that are at-
risk
a. Funding target disregarding prescribed at- New.
risk assumptions.
b. Funding target reflecting at-risk New.
assumptions, but disregarding transition
rule for plans that have been at risk for
fewer than five consecutive years.
5. Effective interest rate...................... New.
6. Target normal cost........................... Similar.
Statement by Enrolled Actuary--To the best of my Similar.
knowledge, the information supplied in this
schedule and accompanying schedules, statements
and attachments, if any, is complete and
accurate. Each prescribed assumption was
applied in accordance with applicable law and
regulations. In my opinion, each other
assumption is reasonable (taking into account
the experience of the plan and reasonable
expectations) and such other assumptions, in
combination, offer my best estimate of
anticipated experience under the plan.
Signature, Name, Date, Most recent enrolled Similar.
actuary number, Firm name, Telephone number,
Address of firm, and check box to indicate if
actuary has not fully reflected any regulation
or ruling promulgated under the statute in
completing the schedule.
------------------------------------------------------------------------
Part II--Beginning of Year Carryover/Prefunding Balance Reconciliation
------------------------------------------------------------------------
7. Balance at beginning of prior plan year after Similar.
applicable adjustments (carryover balance and
prefunding balance).
8. Portion used to satisfy prior year's funding New.
requirement (carryover balance and prefunding
balance).
9. Remaining amount (carryover balance and New.
prefunding balance).
10. Interest earned during prior year (carryover New.
balance and prefunding balance).
11. Prior year's excess contributions to be New.
added to prefunding balance (carryover balance
and prefunding balance).
a. Excess contributions..................... New.
b. Interest on (a) using prior year's New.
effective rate.
c. Total available at beginning of current New.
plan year to add to prefunding balance.
d. Portion of (c) to be added to prefunding New.
balance.
12. Voluntary reduction (carryover balance and New.
prefunding balance).
13. Balance at beginning of current year = Item New.
9 + item 10 + item 11 - item 12 (carryover
balance and prefunding balance).
------------------------------------------------------------------------
[[Page 71576]]
Part III--Funding Percentages
------------------------------------------------------------------------
14. Funding Target Attainment Percentage........ New.
15. Adjusted Funding Target Attainment New.
Percentage.
16. Prior year's funding percentage for purposes New.
of determining whether carryover/prefunding
balance may be used to reduce current year's
funding requirement.
17. If the current value of the assets of the Similar.
plan is less than 70 percent of the funding
target, enter such percentage..
------------------------------------------------------------------------
Part IV--Contributions and Liquidity Shortfalls
------------------------------------------------------------------------
18. Contributions made to the plan for the plan Same.
year by employer(s) and employees by (a) date,
(b) amount paid by employer, and (c) amount
paid by employees.
19. Discounted plan contributions............... New.
a. Contributions allocated toward unpaid New.
minimum required contribution from prior
years.
b. Contributions made to avoid restrictions New.
adjusted to valuation date.
c. Contributions allocated toward minimum New.
required contribution for current year
adjusted to valuation date.
20. Quarterly contributions and liquidity
information
a. Did the plan have a ``funding shortfall'' New.
for the prior year?.
b. If 20a is yes, were required quarterly New.
installments for the current year made in
timely manner.
c. If 20a is yes, complete table showing Same.
liquidity shortfall as of the end of each
quarter of the plan year.
------------------------------------------------------------------------
Part V--Assumptions
------------------------------------------------------------------------
21. Discount rate
a. Segment rate(s) for 1st, 2nd and 3rd New.
segments or indicate that full yield curve
is used.
b. Applicable month......................... New.
22. Weighted average retirement age............. Same.
23. Mortality table--indicate whether prescribed New.
table(s) or substitute table used.
------------------------------------------------------------------------
Part VI--Miscellaneous items
------------------------------------------------------------------------
24. Has a change been made in the non-prescribed Same.
actuarial assumptions for the current plan
year? If yes, see instructions for required
attachment.
25. Has a method change been made for the Same.
current plan year? If yes, see instructions for
required attachment.
26. Is the plan required to provide a Schedule Same.
of Active Participants? If yes, see
instructions for required attachment.
27. If the plan is eligible for (and is using) New.
alternative funding rules, enter applicable
code. If yes, see instructions for required
attachment.
------------------------------------------------------------------------
Part VII--Reconciliation of Unpaid Minimum Required Contributions for
Prior Years
------------------------------------------------------------------------
28. Unpaid minimum required contribution for all New.
prior years.
29. Discounted employer contributions allocated New.
toward unpaid minimum required contribution
from prior years (Item 19a).
30. Remaining amount of unpaid minimum required New.
contributions (item 28 minus item 29).
------------------------------------------------------------------------
Part VII--Minimum Required Contribution for Current Year
------------------------------------------------------------------------
31. Target normal cost (item 6)................. Similar.
32. Amortization charges
a. Net Shortfall amortization charges (and Similar.
outstanding balance).
b. Waiver amortization charges (and Similar.
outstanding balance).
33. If a waiver has been approved for this plan Similar.
year, enter the date of the ruling letter
granting the approval and the waived amount.
34. Total funding requirement before reflecting New.
carryover and prefunding balances (Item 31 +
item 32a + item 32b - item 33).
35. Enter Carryover and prefunding balance used New.
to offset funding requirement.
36. Additional cash requirement after reflecting New.
carryover and prefunding balances (item 34
minus item 35).
37. Contributions allocated toward minimum New.
required contribution for current year adjusted
to valuation date (item 19c).
38. Excess contributions for current year New.
(excess, if any, of item 37 over item 36).
39. Unpaid minimum required contribution for New.
current year (excess, if any, of item 36 over
item 37).
40. Unpaid minimum required contribution for all New.
years.
------------------------------------------------------------------------
Appendix B
[[Page 71577]]
Data Items for 2008 (and Later) Schedule MB (Multiemployer Defined
Benefit Plan and Money Purchase Plan Actuarial Information)
------------------------------------------------------------------------
Comparison with 2006
Item Schedule B
------------------------------------------------------------------------
Plan year.................................... Same.
A. Plan name................................. Same as item A.
B. Plan number............................... Same as item B.
C. Plan sponsor's name....................... Same as item C.
D. Employer identification number............ Same as item D.
E. Type of plan (multiemployer DB plan, money Similar to item E (item F
purchase plan). deleted).
1a Valuation date............................ Same as line 1a.
1b Assets:
(1) Current value of assets.............. Same as line 1b(1).
(2) Actuarial value of assets............ Same as line 1b(2).
1c Accrued liability information:
(1) Accrued liability for plans using Same as line 1c(1).
immediate gain methods.
(2) Information for plans using spread Same as line 1c(2).
gain methods.
(3) Accrued liability under unit credit New.
method.
1d Information on current liabilities:
(1) Amount excluded attributable to pre- Same as line 1d(1).
participation service.
(2) ``RPA `94'' information
(a) Current liability................ Same as line 1d(2)(a).
(b) Expexted increase in current Same as line 1d(2)(b).
liability due to benefits accuring
during the plan year.
(c) Expexted release from ``RPA '94'' Same as line 1d(2)(d)
current liability for the plan year. (line 1d(20(c) deleted).
(3) Expected release from ``RPA '94'' Same as line 1d(3).
current liability for the plan year.
Statement by Enrolled Actuary--To the best of Similar.
my knowledge, the information supplied in
this schedule and accompanying schedules,
statements and attachments, if any, is
complete and accurate. Each prescribed
assumption was applied in accordance with
applicable law and regulations. In my
opinion, each other assumption is reasonable
(taking into account the experience of the
plan and reasonable expectations) and such
other assumptions in combination, offer my
best estimate of anticipated experience
under the plan.
2 Operational information as of beginning of
the plan year
2a Current value of assets............... Same as line 2a.
2b (column 1). Participant count Same information as line
breakdown by category (terminated 2b, column 1 except for
vested, retired, active). amended format.
2b (column 2). ``RPA `94'' current Amended to incorporate
liability. information from line
2b, columns 2 and 3
(column 3 deleted).
2c Current liability funded percentage... Same as line 2c.
3 Contributions (employer(s) and employees).. Same as item 3.
4 Plan status--Code to indicate plan's status New (replaces existing
in accordance with instructions for item 4).
attachment of supporting evidence of plan's
status. For certain codes, the rest of line
4 is skipped. Funded percentage for
monitoring plan's status. Whether the plan
is making the schedule progress with any
applicable funding improvement or
rehabilitation plan. If the plan is in
critical status, whether any adjustable
benefits were reduced, and if so, the
reduction in liability resulting from the
reduction in adjustable benefits, measured
as of the valuation date.
5 Information on actuarial cost method
5a-g Actuarial cost method used--Check Similar to lines 5a-g.
boxes to identify the actuarial cost Note that multiple boxes
method(s) used as the basis for this may be checked.
plan year's funding standard account
computations: Attained age normal, entry
age normal, accrued benefit (unit
credit), aggregate, frozen initial
liability, individual level premium,
individual aggregate, shortfall,
reorganization, other (specify).
5h Shortfall method...................... New--previously addressed
in line 8b and
attachments for
multiemployer plans.
5i Reorganization........................ New--previously addressed
in line 8b and
attachments for
multiemployer plans.
5j Other (specify)....................... Same as line 5h.
5k Period of use, shortfall method....... New, required under ERISA
section 103(f) (2)(F).
5l-n Change in funding method--Must state Same as lines 5i-k except
if there was a change in funding method for updated line
for the plan year, and if so, whether it references.
was made pursuant to Revenue Procedure
2000-40. If there was a change in
funding method, but it was not made
pursuant to Revenue Procedure 2000-40,
then the date of the ruling letter
(individual or class) approving the
change in funding method must be entered.
6 Actuarial assumptions
6a Interest rate for current liability... Same as line 6a (line 6b
deleted).
6b Rates specified in insurance or Same as line 6c.
annuity contracts.
6c Mortality table (males, females)...... Same as line 6d.
6d Valuation liability interest rate..... Same as line 6e.
6e Expense loading....................... Same as line 6f (line 6g
deleted).
6f Salary scale.......................... Same as line 6h.
6g-h Estimated investment return on Same as lines 6i-j.
assets.
7 Information on new amortization bases--(1) Same as item 7.
type of base (2) initial balance (3)
amortization charge/credit.
[[Page 71578]]
8 Miscellaneous information
8a Funding waiver--If a waiver of a Similar to line 8a,
funding deficiency has been approved for amended to apply only to
this plan year, enter the date of the funding waivers (line 8b
ruling letter granting the approval.. deleted; information
reflected in lines 5h-
i).
8b Schedule of Active Participant Data... New for multiemployer
plans, same as line 8c
for single-employer
plans.
8c Amortization extension under 304(d)-- New.
Are any of the plan's amortization bases
operating under an extension of time
under section 412(e) (as in effect prior
to 2008) or section 431(d)(1) of the
Code?
8d(1)-(2) Automatically-approved New.
extensions--If yes, was an extension
granted automatic approval under section
431(d)(1) of the Code? If yes, enter the
number of years by which the
amortization period was extended.
8d(3)-(5) IRS-approved extensions--Was an New.
extension approved by the Internal
Revenue Service under section 412(e) (as
in effect prior to 2008) or 431(d) of
the Code? If yes, enter the number of
years by which the amortization period
was extended (not including the number
of years granted automatic approval
under section 431(d)(1) of the Code),
the date of the ruling letter approving
the extension.
8d(6) Pre-PPA extensions--the New.
amortization base eligible for
amortization using interest rates
applicable under section 6621(b) of the
Code for years beginning after 2007.
8e Effect of shortfall method or New--required under
amortization extension--If the shortfall 103(f)(2) (E) and (F).
method is used as the basis for this
year's funding standard account
computations or any of the plan's
amortization bases are operating under
an extension of time under section
412(e) (as in effect prior to 2008) or
section 431(d)(1) of the Code, enter the
difference between the minimum required
contribution for the year and the
minimum that would have been required
without using the shortfall method or
extending the amortization base(s).
9 Funding standard account
9a Prior year funding deficiency......... Same as line 9a.
9b Normal cost........................... Same as line 9b.
9c Amortization charges.................. Similar to line 9c, but
amended to distinguish
between funding waivers
and extended bases using
the valuation interest
rate versus the rate
under section 6621(b) of
the Code.
9d Interest.............................. Same (lines 9e-f
deleted).
9e-n Funding standard account items...... Same as lines 9g-p except
for updated line
references.
9o Accumulated reconciliation account
9o(1) Due to waived funding Based on line 9o(3), but
deficiencies and extended amended to distinguish
amortization bases, accumulated between funding waivers
prior to the 2008 plan year. (pre-PPA) and extended
amortization bases
(lines 9o(1) and (2)
deleted).
9o(2) Adjustments for extended Similar to line 9o(3),
amortization bases. but amended to apply to
extended amortization
bases only.
9o(3) Total accumulated Similar to line 9o(4).
reconciliation account.
10 Contribution necessary to avoid an Similar to line 10.
accumulated funding deficiency.
11 Change in assumptions check box........... Same as line 11.
Part II--Additional information for plans Deleted in its entirety.
other than multiemployer plans.
------------------------------------------------------------------------
Appendix C
Additional Information for 2008 (and Later) Schedule R (Retirement Plan
Information)
[Parts I-IV remain as proposed on July 21, 2006. Part V expanded and
Part VI added]
------------------------------------------------------------------------
-------------------------------------------------------------------------
Part V--Additional Information for Multiemployer Defined Benefit Pension
Plans
------------------------------------------------------------------------
13. Enter the following information for each employer who contributed
more than 5% of total contributions to the plan during the plan year
(measured in dollars). See instructions: Name of contributing employer,
EIN, date collective bargaining agreement expires, dollar amount
contributed, contribution rate, contribution base unit measure as
hourly, weekly, unit of product or other (specify). Complete as many
entries as needed to report all applicable employers.
14. Enter the number of participants on whose behalf no contributions
were made by an employer for: 14a current year, 14b the plan year
immediately preceding the current plan year, and 14c the second
preceding plan year.
15. Provide the ratio of (a) item 14a to item 14b and (b) item 14a to
item 14c.
16. Information with respect to any employers who withdrew from the plan
during the preceding plan year:
a. Enter the number of employers who withdrew during the preceding
plan year.
b. If item 16a is greater than 0, enter the aggregate amount of
withdrawal liability assessed or estimated to be assessed against
such withdrawn employers.
[[Page 71579]]
17. If assets and liabilities from another plan have been transferred to
or merged with this plan during the plan year, check box and see
instructions regarding supplemental information to be included as an
attachment.
------------------------------------------------------------------------
Part VI--Additional Information for Single-Employer and Multiemployer
Defined Benefit Pension Plans
------------------------------------------------------------------------
18. If any liabilities to participants or their beneficiaries under the
plan as of the end of the plan year consist (in whole or in part) of
liabilities to such participants and beneficiaries under two or more
pension plans as of immediately before such plan year, check box and
see instructions regarding supplemental information to be included as
an attachment.
19. If the total number of participants is 1,000 or more, complete items
(a) through (c).
a. Enter the percentage of plan assets held as Stock, Debt, Real
Estate, Other.
b. Provide the percentage held of each type of debt security:
Government debt, Investment Grade Corporate Debt, and High-Yield
Corporate Debt.
c. Provide the Macaulay Duration for the total portfolio.
------------------------------------------------------------------------
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 6th day of December 2006.
Bradford P. Campbell,
Acting Assistant Secretary, Employee Benefits Security Administration,
U.S. Department of Labor.
Joseph H. Grant,
Director, Employee Plans, Tax Exempt and Government Entities Division,
Internal Revenue Service.
Vincent K. Snowbarger,
Interim Director, Pension Benefit Guaranty Corporation.
[FR Doc. 06-9633 Filed 12-8-06; 8:45 am]
BILLING CODE 4510-29-P