Annual Reporting and Disclosure, 64710-64730 [E7-21765]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 72, Number 221 (Friday, November 16, 2007)]
[Rules and Regulations]
[Pages 64710-64730]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21765]



[[Page 64709]]

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Part II





Department of Labor





Employee Benefits Security Administration



29 CFR Part 2520





Department of the Treasury





Internal Revenue Service





Pension Benefit Guaranty Corporation





Annual Reporting and Disclosure; Revision of Annual Information Return/
Reports; Final Rule and Notice

Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / 
Rules and Regulations

[[Page 64710]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2520

RIN 1210-AB06


Annual Reporting and Disclosure

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Final rule.

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SUMMARY: This document contains amendments to Department of Labor 
regulations relating to annual reporting and disclosure requirements 
under Part 1 of Subtitle B of Title I of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA). The amendments contained in 
this document are necessary to conform the annual reporting and 
disclosure regulations to revisions to the Form 5500Annual Return/
Report of Employee Benefit Plan, including a new Form 5500-SF (Short 
Form or Short Form 5500), filed for employee pension and welfare 
benefit plans under ERISA and the Internal Revenue Code of 1986, as 
amended (Code). The changes to the Form 5500 forms and implementing 
regulatory amendments are intended to facilitate the transition to an 
electronic filing system, reduce and streamline annual reporting 
burdens, especially for small businesses, and update the annual 
reporting forms to reflect current issues, agency priorities and new 
requirements under the Pension Protection Act of 2006. Some of the 
forms revisions apply on a transitional basis for the 2008 reporting 
year before all of the form revisions are fully implemented as part of 
the switch under the ERISA Filing Acceptance System (EFAST) to a wholly 
electronic filing system for the 2009 reporting year. The current 
effective date of the electronic filing requirement under 29 CFR 
2520.104a-2 also is being postponed in this document to apply to plan 
years beginning on or after January 1, 2009. The regulatory amendments 
will affect the financial and other information required to be reported 
and disclosed by employee benefit plans filing the Form 5500 Annual 
Return/Report of Employee Benefit Plan, including the Form 5500-SF, 
under Title I of ERISA.

DATES: This rule is effective January 15, 2008.

FOR FURTHER INFORMATION CONTACT: Elizabeth A. Goodman or Michael I. 
Baird, Office of Regulations and Interpretations, Employee Benefits 
Security Administration, U.S. Department of Labor, (202) 693-8523 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

A. Background

    Under Titles I and IV of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA), and the Internal Revenue Code, as 
amended (Code), pension and other employee benefit plans generally are 
required to file annual returns/reports concerning, among other things, 
the financial condition and operations of the plan. Filing the Form 
5500, ``Annual Return/Report of Employee Benefit Plan,'' together with 
any required attachments and schedules (Form 5500 Annual Return/Report) 
through the ERISA Filing Acceptance System (EFAST) generally satisfies 
these annual reporting requirements. The Form 5500 Annual Return/Report 
is the primary source of information concerning the operation, funding, 
assets, and investments of pension and other employee benefit plans. In 
addition to being an important disclosure document for plan 
participants and beneficiaries, the Form 5500 Annual Return/Report is a 
compliance and research tool for the Department of Labor (Department), 
Internal Revenue Service (IRS), and the Pension Benefit Guaranty 
Corporation (PBGC) (collectively, the Agencies) 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.
    On July 21, 2006, the Agencies published a notice of proposed forms 
revisions (July 2006 Proposal) with changes to the Form 5500 Annual 
Return/Report for the 2008 reporting year. 71 FR 41615. The proposed 
form changes were intended to: facilitate the transition to a wholly 
electronic filing system for the 5500 Forms, including removal of IRS-
only schedules; reduce and streamline annual reporting burdens, 
especially for small businesses, with the establishment of a new Short 
Form 5500; and update the annual reporting forms to reflect current 
issues and agency priorities, including enhanced reporting of plan fees 
and expenses. The Department also published a final rule requiring 
electronic filing of the Form 5500 Annual Return/Report for plan years 
beginning January 1, 2008 (Electronic Filing Rule). 71 FR 41359 (July 
21, 2006). On December 11, 2006, the Agencies published a Notice of 
Supplemental Proposed Forms Revisions (Supplemental Notice). The 
Supplemental Notice was necessary to make changes to the Form 5500 
Annual Return/Report required by the Pension Protection Act of 2006, 
Pub. L. 109-280, 120 Stat. 780 (2006), enacted on August 17, 2006 
(PPA). 71 FR 71562.
    The Department received 38 comment letters on the July 2006 
Proposal from representatives of employers, plans, and plan service 
providers.\1\ It received seven comments on the Supplemental Notice. 
Copies of the comments are posted on the Department's Web site at 
https://www.dol.gov/ebsa/regs.
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    \1\ The Department also received a comment letter from the 
United States Department of Commerce, Economic and Statistics 
Administration, Bureau of Economic Analysis (BEA), indicating that 
the BEA relies on the information collected in the Form 5500 to 
prepare certain statistics.
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    The preamble to this Notice outlines the final amendments being 
adopted to the Department's annual reporting regulations to reflect the 
changes being adopted to the Form 5500 Annual Return/Report, the Form 
5500-SF ``Short Form Annual Return/Report of Small Employee Benefits 
Plan'' (Form 5500-SF or Short Form 5500), and the required attachments 
and schedules (collectively, the 5500 Forms) published simultaneously. 
A comprehensive discussion of the changes to the 5500 Forms and 
instructions is in a separate notice of adoption of final revisions to 
the annual report/return forms (Forms Revision Notice) that is being 
published in today's Federal Register. To avoid unnecessary 
duplication, that discussion is incorporated herein by reference and 
only a general summary of the form and instruction changes is included 
in this preamble as background for the required cost/benefit and 
regulatory impact analyses.

B. Discussion of the Revisions to 29 CFR Part 2520

    The public comments generally did not directly address the proposed 
regulations themselves. Rather, the comments were addressed to the 
scope and specifics of the proposed forms and instruction changes. As 
described more fully in the Form Revision Notice, the public comments 
generally approved of the Agencies' streamlining of the annual 
reporting requirements through the adoption of the new Form 5500-SF and 
eliminating the IRS-only schedules from the Form 5500 Annual Return/
Report. The comments also generally supported the objectives of 
updating the annual return/report filing requirements to reflect 
current issues and enhancing transparency and accountability, although 
some commenters expressed concerns about the benefits, feasibility, and 
cost of complying with some of the proposed changes, particularly the

[[Page 64711]]

proposed changes to fee and expense reporting and the extension of the 
normal annual reporting requirements to Code section 403(b) plans. Some 
commenters also suggested postponing implementation of the proposed 
changes to allow filers and service providers more time to implement 
administrative procedures and alter information systems in order to 
comply with the new annual reporting requirements. The comments 
included suggestions for various technical adjustments of the forms and 
instructions to clarify and explain the new annual reporting 
requirements.
    The following sections of this preamble describe the final 
regulations being adopted by the Department to implement the form and 
instruction changes, including a postponement of the current effective 
date of the Electronic Filing Rule to make it applicable one year 
later--for plan and reporting years beginning on or after January 1, 
2009.

1. Section 2520.103-1

    The Department's annual reporting regulations, including 29 CFR 
2520.103-1, generally 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). See also ERISA section 505. To accommodate the form and 
instruction changes set forth in the Forms Revision Notice, regulatory 
amendments to 29 CFR 2520.103-1 are being made to update the references 
in the regulation to the annual return/report as revised.
(a) Short Form 5500 (Eligible Small Plan Filers)
    A new two-page Form 5500-SF is being adopted to streamline the 
reporting requirements for certain small pension and welfare plans 
(generally, plans with fewer than 100 participants) that meet certain 
conditions regarding their investments being held or issued by 
regulated financial institutions and that have a readily determinable 
fair market value as described in the final regulation at section 
2520.103-1(c)(2)(ii)(C). The Form 5500-SF is also being adopted to 
provide a simplified report for plans with fewer than 25 participants 
as required by section 1103(b) of the PPA.\2\ A detailed description of 
the Form 5500-SF, and a facsimile of the form and instructions are in 
the Forms Revision Notice being published in today's Federal Register. 
Substantially all of the information required to be reported by 
employee benefit plans on the Short Form 5500 currently is included in 
the more comprehensive information required to be reported as part of 
the Form 5500 simplified report currently available to small plans. The 
addition of the Short Form 5500 does not eliminate the existing 
simplified report available for small plans but, rather, adds the Short 
Form 5500 as another simplified reporting option for eligible small 
plans.
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    \2\ The PPA's requirement to provide simplified reporting for 
plans with fewer than 25 participants is effective for plan years 
beginning after December 31, 2006. The Short Form 5500 will not be 
available for use, however, until the move to the fully electronic 
filing system for plan years beginning after December 31, 2008. For 
the interim two years, as discussed in more detail in the Forms 
Revision Notice, the Agencies are offering to plans with fewer than 
25 participants that would meet the eligibility requirements for the 
Short Form 5500 a simplified reporting option within the context of 
the existing annual report forms.
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    As more fully described in the Forms Revision Notice, the IRS has 
advised the Department that, although there are no mandatory electronic 
filing requirements for the 5500 Forms under the Code or the 
regulations issued thereunder, the electronic filing of the 5500 Forms, 
in accordance with the instructions and such other guidance as the 
Secretary of the Treasury may provide, will be treated as satisfying 
the annual filing and reporting requirements under Code sections 
6058(a) and 6059(a). In addition, to ease the burdens on plans that are 
not subject to Title I of ERISA that file the Form 5500-EZ to satisfy 
the annual reporting and filing obligations imposed by the Code, the 
IRS has advised that it will permit certain Form 5500-EZ filers to 
satisfy the requirement to file the Form 5500-EZ with the IRS by filing 
the Short Form 5500 electronically through the EFAST processing system. 
Eligible Form 5500-EZ filers thus will have electronic filing and paper 
filing options. The electronic filing option will allow eligible Form 
5500-EZ filers to complete and electronically file with EFAST selected 
information on the Short Form 5500. Those Form 5500-EZ filers will also 
be able to choose instead to file a Form 5500-EZ on paper with the 
IRS.\3\
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    \3\ Under the voluntary electronic filing option, Form 5500-EZ 
filers filing an amended return for a plan year will have to file 
the amended return electronically using the Form 5500-SF if they 
initially filed electronically for the plan year and will have to 
file with the IRS using the paper Form 5500-EZ if they filed for the 
plan year with the IRS on a paper Form 5500-EZ.
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(b) Removal of IRS-Only Schedules from the 5500 Forms Annual Return/
Report
    For plan years beginning after December 31, 2008, the 5500 Forms 
will no longer include any of the schedules that are required only for 
the IRS. This change was made to help effectuate the adoption of a 
wholly electronic filing requirement for the 5500 Forms. Accordingly, 
the Schedule E (ESOP Annual Information) and the Schedule SSA (Annual 
Registration Statement Identifying Separated Participants With Deferred 
Vested Benefits) will no longer be required to be filed as part of the 
5500 Forms.\4\ Three questions on employee stock ownership plan (ESOP) 
information formerly reported on the Schedule E will now be on the 
Schedule R (Retirement Plan Information). The IRS also has advised the 
Department that it intends that plan administrators, employers, and 
certain other entities that are subject to additional filing and 
reporting requirements under the Code will have to continue to satisfy 
any applicable requirements in accordance with IRS revenue procedures, 
regulations, publications, forms, and instructions.
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    \4\ Schedule P (Annual Return of Fiduciary of Employee Benefit 
Trust) was removed from Form 5500 filings beginning with the 2006 
plan year (2005 plan year for Form 5500-EZ) in anticipation of the 
move to electronic filing. See, Announcement 2007-63, 2007-30 I.R.B 
65. In addition, Schedule T (Qualified Pension Plan Coverage 
Information) was removed from Form 5500 filings beginning with the 
2005 plan year. The IRS notes that this change was not intended to 
effect the applicable required or optional nondiscrimination testing 
(including the testing options described in Revenue Procedure 93-
42), 1993-2 C.B. 540.
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(c) Schedule A (Insurance Information)
    Schedule A must be attached to the Form 5500 Annual Return/Report 
for an ERISA-covered plan if any pension or welfare benefits under the 
plan are provided by, or if the plan holds any investment contracts 
with, an insurance company, insurance service or other similar 
organization. As with the proposal, the Schedule A data elements are 
largely unchanged from the current form. The Department adopted in the 
final Schedule A the proposed line item to give administrators a 
specific space on the Schedule A to report a failure by an insurance 
carrier to provide necessary information. Certain other technical 
changes and clarifications were made to the Schedule A and its 
instructions to improve Schedule A as a vehicle for disclosure of 
insurance fees and commissions.

[[Page 64712]]

(d) Schedule SB (Single-Employer Defined Benefit Plan Actuarial 
Information) and Schedule MB (Multiemployer Defined Benefit Plan and 
Certain Money Purchase Plan Actuarial Information) (Formerly Schedule 
B)
    Actuarial schedules are required for defined benefit pension plans 
subject to the minimum funding standards (see Code section 412 and Part 
3 of Title I of ERISA). Schedules SB and MB will be required to be 
filed as a non-standard attachment for the 2008 plan year to meet the 
requirements of the PPA and, for the 2009 plan year and later, will be 
filed in the same manner as the other schedules under the electronic 
filing system.
    The Schedule SB must be filed for single-employer defined benefit 
pension plans (including multiple-employer defined benefit pension 
plans).\5\ The Schedule SB and accompanying attachments will capture 
identifying information about the plan and plan sponsor, the type of 
plan, and prior year plan size. It includes basic information about 
plan assets, number of participants, funding target information, and a 
statement by an enrolled actuary. It consists 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.'' Airlines that have frozen 
pension plans electing the alternate funding schedule and plans for 
which the effective date of the new PPA funding rules is delayed (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.
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    \5\ 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 
organizations and more than one employer, and which must satisfy 
other requirements prescribed in regulations issued by the 
Department at 29 CFR 2510.3-37, multiple-employer plans are plans 
that cover the employees of two or more employers but are treated as 
single-employer plans for various purposes under ERISA.
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    Schedule MB must be filed for all multiemployer defined benefit 
plans and money purchase plans (including target benefit plans) that 
are currently amortizing waivers. Schedule MB is similar to the 
existing Schedule B. New items that have been added include: (1) 
Accrued liability determined using the unit credit cost method; (2) 
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; and (3) information required by PPA section 
503.
(e) Schedule C (Service Provider Information)
    Schedule C generally must be attached to the Form 5500 Annual 
Return/Report filed by large plan filers to report persons who rendered 
services to the plan or in connection with transactions with the plan 
received, directly or indirectly, $5,000 or more in compensation during 
the plan year, and to report terminations of plan accountants or 
enrolled actuaries. Consistent with recommendations of the ERISA 
Advisory Council Working Groups and the Government Accountability 
Office (GAO), EBSA has concluded that more information should be 
disclosed on the Form 5500 Annual Return/Report regarding plan fees and 
expenses. See ERISA Advisory Council Report of the Working Group on 
Plan Fees and Reporting on Form 5500 (November 10, 2004) (available on 
the Internet at: https://www.dol.gov/ebsa/publications); Private 
Pensions: Government Actions Could Improve the Timeliness and Content 
of Form 5500 Pension Information, GAO-05-491 (available on the Internet 
at: https://www.gao.gov).
    Schedule C reporting continues to be limited to large plan filers 
and the $5,000 reporting threshold has been retained. As in the 
proposal, the Schedule C consists of three parts. Part I of the 
Schedule C requires, subject to an alternative reporting option 
described below, the identification of each person who received, 
directly or indirectly, $5,000 or more in total compensation (i.e., 
money or anything else of value) in connection with services rendered 
to the plan or their position with the plan during the plan year. To 
provide more informative disclosures about the types of fees being paid 
to or received by plan service providers, the final Schedule C requires 
direct compensation paid by the plan to be reported on a separate line 
item from indirect compensation received from sources other than the 
plan or plan sponsor. In addition, in light of the fact that particular 
service providers may receive indirect compensation of various types 
from various sources, the final forms revisions expand the codes 
currently required on the Schedule C to better identify the types of 
services provided and to also require codes for types of fees received 
by the service provider.
    As noted above, the final form revisions includes an alternative 
reporting option for service providers whose only compensation in 
relation to the plan is limited to ``eligible indirect compensation'' ( 
certain specified types of common investment related fees) provided 
that written disclosure(s) are furnished to the plan administrator, 
including in electronic form, that disclose the existence of the 
indirect compensation; the services provided for the indirect 
compensation or the purpose for payment of the indirect compensation; 
the amount (or estimate) of the compensation or a description of the 
formula used to calculate or determine the compensation; and the 
identity of the party or parties paying and receiving the compensation. 
Where a particular service provider received only ``eligible indirect 
compensation'' for which the required disclosures were provided, 
instead of providing information on the service provider, the Schedule 
C may report instead identifying information on the person or persons 
who provided the plan with the required written disclosures.
    With respect to service providers required to be listed on the 
Schedule C who received such eligible types of indirect compensation 
for which the written disclosures were not provided or any other 
indirect compensation, the Schedule C requires more detailed 
information on the indirect compensation, including, in the case of 
certain key service providers, information regarding the payor if the 
service provider received during the plan year indirect compensation 
from a single source of $1,000 or more.
    Although filers generally have the option of reporting a formula 
used to calculate indirect compensation received instead of an actual 
dollar amount or estimate, where a formula is used to describe indirect 
compensation received by one of the key service providers, the amount 
of indirect compensation is presumed to meet the reporting thresholds 
for purposes of the Schedule C reporting requirements.

[[Page 64713]]

    As noted above, the final Schedule C includes a new Part II for 
plan administrators to identify each service provider that failed or 
refused to provide the information necessary to complete Part I of the 
Schedule C.
    The third part of the Schedule C (Part III) is the current Part II 
of the Schedule C used for reporting termination information on plan 
accountants and enrolled actuaries.
(f) Schedule R (Retirement Plan Information)
    As noted above, in light of the removal of the Schedule E (ESOP 
Annual Information), selected questions from the Schedule E are being 
incorporated into the Schedule R in order to continue to collect 
certain information regarding ESOPs as part of the Form 5500 Annual 
Return/Report.
    As in the proposal, Schedule R has been modified to include 
additional questions required by section 503 of PPA and to collect 
information the PBGC needs to enable it to properly monitor the plans 
it insures. The new Part V collects PPA-required information on 
multiemployer defined benefit plans and additional information related 
to major contributing employers. Asset allocation questions for large 
defined benefit plans (1,000 or more participants) are included in Part 
VI. Such plans must provide a breakdown of plan assets by type of 
investment (stock, investment-grade debt, high-yield debt, real estate, 
and other). Information on the average duration of combined investment-
grade and high-yield debt is also required. For this purpose, duration 
may be determined using any generally accepted methodology. Although 
the ESOP-related questions will not be on the Schedule R until the 
shift to the wholly electronic filing system effective for the 2009 
plan year, the PPA-related questions and the asset allocation questions 
for the PBGC will be required as a non-standard attachment to the 
Schedule R for the 2008 plan year.
(g) Technical and Conforming Changes for Forms and Instructions
    Various other technical and conforming changes are being adopted as 
part of the final changes to the 5500 Forms. Several of the more 
significant changes include: (1) Revision of the instructions for the 
Form 5500 Annual Return/Report and development of instructions for the 
Short Form 5500 to reflect the new structure of the returns/reports and 
electronic filing requirements; (2) addition of questions regarding 
compliance with the Department's blackout notice regulation in 29 CFR 
2510.101-3; (3) addition of a compliance question on whether the plan 
failed to pay benefits when due under the plan; (4) expansion of the 
use of codes to report plan feature information on pension and welfare 
benefit plans; (5) elimination of the optional entry of the form 
preparer's name and employer identification number (EIN); (6) requiring 
small plans to report administrative expenses separately from other 
expenses on the Schedule I; (7) addition of a question on whether any 
minimum funding amount reported for a pension plan will be met by the 
funding deadline; and (8) adoption of a standard format for use in 
connection with an independent qualified public accountant (IQPA) 
rendering an opinion on the supplemental schedule information on Line 
4a of Schedule H and I relating to delinquent participant 
contributions.
(h) PPA-Required Simplified Reporting for Plans With Fewer Than 25 
Participants
    As noted in the Forms Revision Notice, section 1103(b) of the PPA 
requires a simplified report for plans with fewer than 25 participants 
to be available for 2007 plan year filings, i.e., filings for plan 
years beginning after December 31, 2006. To satisfy this requirement, 
the Agencies proposed giving plans covering fewer than 25 participants 
that would meet the conditions for being eligible to file the Short 
Form 5500--treating those conditions as if they applied for 2007 plan 
year filings--the option of filing an abbreviated version of the 
current Form 5500 Annual Return/Report for ``small plan'' filers. The 
abbreviated version, to a large extent, is an attempt to replicate, 
within the context of the existing Form 5500 Annual Return/Report 
structure, the information that would be required to be reported on the 
Short Form 5500 by allowing certain schedules to be excluded from the 
filing and requiring only certain line items to be completed on any 
required schedules. Although the Department received a comment 
suggesting that the Agencies satisfy the PPA requirement by instituting 
the Form 5500-SF for 2007 plan year filings, the Department concluded 
that approach would not be feasible or appropriate given the costs that 
would have been required to modify the current EFAST system so that it 
could process the Form 5500-SF. Rather, with the additional deferral in 
the implementation of the electronic filing requirement, the proposed 
simplified reporting option using the existing 5500 Forms for eligible 
plans with fewer than 25 participants will be available for both the 
2007 and 2008 plan year filings.
    Thus, for the 2007 and 2008 plan years, plans with fewer than 25 
participants that meet the eligibility requirements for the Short Form 
5500, treating those conditions as if they applied for 2007 and 2008 
plan year filings, will be permitted to satisfy the annual reporting 
requirement by filing on the appropriate year form and schedules: (1) 
The Form 5500; (2) a Schedule A for any insurance contracts for which a 
Schedule A is required under current rules, completing only lines A, B, 
C, D and the insurance fee and commission information in Part I; (3) 
Schedule B for the 2007 plan year, and, for the 2008 plan year, 
Schedule MB for multiemployer defined pension benefit plans and certain 
money purchase plans, and Schedule SB for single employer defined 
benefit pension plans; (4) Schedule I; (5) Schedule R, completing only 
lines A, B, C, D, and Part II; and (6) Schedule SSA. Additional 
detailed guidance regarding this simplified reporting option is 
included in the instructions to the 2007 Form 5500 and the instructions 
to the 2008 Form 5500.
    The Department understands that some eligible small plan filers may 
want to wait until the implementation of the Short Form 5500 for the 
2009 plan year in order to avoid having to make changes to their annual 
reporting systems and procedures for 2007 and 2008 plan year filings 
and then adjust them again to start filing the Short Form for the 2009 
plan year. The above simplified reporting alternative, accordingly, is 
available for plans that voluntarily take advantage of its 
availability. Plans with fewer than 25 participants can instead 
continue to file in accordance with the normal small plan rules for the 
2007 and 2008 plan year.
(i) PPA-Required Actuarial Schedules and Multiemployer Plan Reporting
    The remaining PPA-required changes in the 5500 Forms are the new 
actuarial information schedules (Schedules SB and MB), most of the 
questions on Part V of the Schedule R--Additional Information for 
Multiemployer Defined Benefit Pension Plans, line 18 of the Schedule R 
(certain liabilities to participants and beneficiaries under two or 
more pension plans), and line 7 of the Form 5500 (number of employers 
obligated to contribute to multiemployer defined benefit plans).\6\ To 
comply with

[[Page 64714]]

the PPA, these reporting changes for defined benefit and multiemployer 
pension plans are being implemented on a transitional basis under the 
current EFAST system for 2008 plan year annual reports. Plans required 
to file an actuarial schedule will check the Schedule B box on the 5500 
Forms to indicate that they are filing Schedule SB or MB (for plan 
years beginning with the 2008 plan year) as an attachment to their 
filing. Similarly, as to the new Part V and line 18 on the Schedule R, 
and the Form 5500 question for multiemployer plans on the total number 
of contributing employers, as well as the new financial questions 
needed by the PBGC, filers will be directed in the instructions to 
include answers to those questions as an attachment to the Schedule 
R.\7\
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    \6\ For 2008, only multiemployer defined benefit pension plans 
will be required to answer the new question 7 on the 2009 Form 5500 
(as a nonstandard attachment), as mandated by the PPA, but in 2009 
and following years, all multiemployer plans will be required to 
answer the question as part of the electronic filing of the Form 
5500, as proposed in the July 2006 Proposal.
    \7\ Because the 2007 forms will not include the new PPA required 
questions, a caution was added to the 2007 Form 5500 instructions to 
alert short plan year filers required to complete the Schedule SB, 
Schedule MB or the new Schedule R questions that they will have to 
wait until the 2008 Forms and instructions are publicly available 
for use for filing.
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2. Section 2520.104a-2 Electronic Filing of Annual Reports

    The proposed revisions to the Form 5500 Annual Return/Report, which 
include both those set forth in the Agencies' July 2006 Proposal and 
those in the Supplemental Notice to address changes required by the 
PPA, were part of the Agencies' move to a fully electronic filing and 
processing system to replace the existing largely paper-based EFAST 
system. As part of that initiative, the Department published the 
Electronic Filing Rule, establishing an electronic filing requirement 
for the Form 5500 Annual Return/Report and the Form 5500-SF for plan 
years beginning on or after January 1, 2008. 71 FR 41359. In adopting 
the final Electronic Filing Rule, the Department responded to public 
comments seeking a postponement in the move to a wholly electronic 
filing system by agreeing to a deferral of the electronic filing 
mandate for one year from the 2007 plan year to the 2008 plan year. The 
Department agreed to the deferral in order to ensure an orderly and 
cost-effective migration to an electronic filing system by both the 
Department and annual report filers. Under that deferral, the vast 
majority of filers would have had until at least July 2009 to make any 
necessary adjustments to accommodate the electronic filing of their 
annual report because annual reports generally are not required to be 
filed until the end of the 7th month following the end of the plan 
year. Deferring the implementation date also provided service 
providers, software developers, and the Department additional time to 
work through electronic processing issues.
    A significant percentage of the commenters on the form revision 
proposals, including several large industry groups representing plan 
sponsors and service providers, asked for a further postponement in the 
effective date of the forms changes, and as a consequence, the 
electronic filing requirement. The commenters emphasized that the PPA, 
including its new reporting and disclosure obligations, would require 
many plans and service providers to update existing information 
management and recordkeeping systems. They also pointed out the certain 
of the changes in the July 2006 proposal, especially the enhanced fee 
disclosure requirements in Schedule C and the increased reporting by 
Code section 403(b) plans (described below), would also require changes 
in the way plans collect and keep plan information. They argued that it 
would be particularly burdensome to require plans to transition to the 
new Form 5500 annual reporting obligations, including the move to the 
wholly electronic filing system, at the same time as they were working 
to comply with new PPA requirements. Also, complications with the 
procurement process and delays in completing the 2007 fiscal year 
appropriations impacted the timing of the EFAST2 contract award.
    The Department continues to believe it is important for plans, 
service providers, and the Agencies to have an orderly and cost-
effective migration to the EFAST2 electronic filing system. The 
Department, in conjunction with the other Agencies, has decided to 
defer for an additional one year the implementation of annual reporting 
forms changes not mandated by the PPA. In determining to publish this 
deferral in final form, the Department considered section 553 of the 
Administrative Procedure Act (APA), which requires that an agency 
provide for notice and comments prior to promulgating substantive rules 
does not apply when an agency, for good cause, unless it determines 
that such procedures are impractical, unnecessary or contrary to the 
public interest. 5 U.S.C. 553(b)(A) and (B). The Department has 
determined that in order to effectuate an orderly migration to the 
EFAST2 system, a deferral of the final rule for one additional year is 
warranted without further notice and comment.
    First, the deferral is necessitated by delays in the contracting 
process beyond the Department's control, including the timing of the 
fiscal year 2007 budget appropriations, which prevented a contract 
award in time to build the new system to process 2008 plan year filings 
as contemplated in the original rulemaking. The Agencies now have, 
however, received the budgetary authorization necessary to complete the 
procurement process, have received bids, and are actively pursuing the 
process. As noted in the Department's FY 2008 Detailed Budget 
Documentation, available on the Internet at https://www.dol.gov, the 
Department is on track for implementing EFAST2 system on January 1, 
2010, to process filings for the 2009 plan year.
    Second, when implemented, the elimination of paper filings in favor 
of electronic filing will result not only in significant improvements 
in the timeliness and accuracy of information available to workers, 
regulators and the public about employee benefit plans and result in 
operational improvements and cost savings, a direct goal of the 
President's E-government initiative, but it will also be used to 
fulfill information collection and disclosure requirements of the PPA, 
many of which apply for the 2008 plan year. Thus, additional delays 
would negatively impact orderly and cost-effective integration of the 
new PPA requirements and the new EFAST2 system, in light of the PPA's 
deadlines.
    Third, publishing the deferral of the effective date on an interim 
basis with an opportunity for comment not only could potentially 
interfere with the contracting and budget process, but also could also 
harm plans by leading them to delay preparing for the move to the new 
system, when it is not practical to implement the new system either 
earlier or later.
    Accordingly, under the final regulation, the electronic filing 
requirement and all of the forms changes, except for those mandated by 
the PPA discussed in this Notice and the Forms Revision Notice, will 
become effective for all annual report filings made under Part 1 of 
Title I of ERISA for plan years (reporting years for non-plan filings) 
beginning on or after January 1, 2009. To effectuate the deferral of 
the electronic filing requirement, this final rule includes an 
amendment to the Electronic Filing Rule published in the Federal 
Register on July 21, 2006. Specifically, this final rule amends the 
Department's regulation at 29 CFR 2520.104a-2 to

[[Page 64715]]

provide that the electronic filing requirement is applicable for plan 
years beginning on or after January 1, 2009.
    Under this final rule, the vast majority of filers will now have 
until at least July 2010 to complete any necessary adjustments to 
accommodate the non-PPA required changes to the form and those required 
for electronic filing of their annual report because annual reports 
generally are not required to be filed until the end of the 7th month 
following the end of the plan year.

3. Section 2520.104-44

    Section 2520.104-44 and the current Form 5500 Annual Return/Report 
instructions provide for limited reporting for pension plans that 
exclusively use a tax deferred annuity arrangement under Code section 
403(b)(1), custodial accounts for regulated investment company stock 
under Code section 403(b)(7), or a combination of both. The exemption 
in section 2520.104-4(b)(3) is being eliminated, with the result that 
Code section 403(b) pension plans subject to Title I will now be 
treated the same under the regulations as any other Title I pension 
plan for purposes of the annual reporting requirements under Title I of 
ERISA.

4. Section 2520.104-46

    In accordance with the Department's authority under section 
104(a)(2)(A) and 104(a)(3) of ERISA, the Department has adopted, at 29 
CFR 2520.104-41, simplified annual reporting requirements for pension 
and welfare benefit plans with fewer than 100 participants. In 
addition, the Department, at 29 CFR 2520.104-46, has prescribed for 
such small plans a waiver from the requirements of ERISA section 
103(a)(3)(A) to engage an IQPA and to include the opinion of the IQPA 
as part of the plan's annual report. The waiver of the IQPA 
requirements for pension plans was conditioned, among other 
requirements, on enhanced disclosure in the Summary Annual Report (SAR) 
provided to participants and beneficiaries. In that regard, the 
Department prepared a model notice that plans could use to satisfy the 
enhanced SAR disclosure conditions. That model notice has been 
available at the EBSA's Web site at https://www.dol.gov/ebsa. In order 
to provide plan administrators with additional access to the model 
notice and to facilitate compliance with the audit waiver eligibility 
conditions, the Department has added the model notice as an appendix to 
section 2520.104-46.\8\
---------------------------------------------------------------------------

    \8\ The PPA requires defined benefit plans to provide an Annual 
Funding Notice for plan years beginning after January 1, 2008. Under 
the PPA, plans that provide an Annual Funding Notice will no longer 
have to provide an SAR. The Department has a separate regulatory 
initiative regarding the PPA-required Annual Funding Notice. The 
Department anticipates that rulemaking will provide that the 
enhanced disclosure required to be eligible for the waiver of the 
requirement for an audit by an independent qualified public 
accountant be included in the Annual Funding Notice for small 
pension plans providing that notice instead of an SAR.
---------------------------------------------------------------------------

5. Section 2520.104b-10

    Section 104(b)(3) of ERISA provides in part that, each year, 
administrators must furnish to participants and beneficiaries receiving 
benefits under a plan SAR materials that fairly summarize the plan's 
annual report. Section 2520.104b-10 sets forth the requirements for the 
SAR used to satisfy that requirement and prescribes formats for such 
reports. The regulatory amendments described in this Notice do not 
include any change to the SAR content requirements. In order to 
facilitate compliance with the SAR requirement for Short Form 5500 
filers, however, the Department is updating its cross-reference guide 
to correspond the line items of the SAR to the relevant line items on 
the Form 5500 and Short Form 5500. The cross-reference guide, as 
before, would continue to be an appendix to section 2520.104b-10.

C. Findings on the Revised 5500 Forms as a Limited Exemption and 
Alternative Method of Compliance

    Section 104(a)(2)(A) of the Act 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 Annual Return/Report, 
including the filing by eligible plans of the Short Form 5500, in 
accordance with the instructions and related regulations, generally 
would constitute compliance with the simplified report, limited 
exemption and/or alternative method of compliance in 29 CFR 2520.103-1. 
The findings required under ERISA sections 104(a)(3) and 110 relating 
to the use of the revised 5500 Forms as alternative methods of 
compliance, simplified report, and/or limited exemption from the 
reporting and disclosure requirements of Part 1 of Subtitle B of Title 
I of ERISA are set forth below. In revising the 5500 Forms and making 
the amendments in this rulemaking, the Department has attempted to 
balance the needs of participants and beneficiaries and the Department 
to obtain information necessary to protect ERISA rights and interests 
with the needs of administrators to minimize costs attendant with the 
reporting of information to the federal government. The Department 
makes the following findings under sections 104(a)(3) and 110 of the 
Act with regard to the use of the revised 5500 Forms as a simplified 
report, alternative method of compliance, and/or limited exemption 
pursuant to 29 CFR 2520.103-1(b).
    The use of the revised 5500 Forms 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 5500 Forms deviates, as before, in some respects, from 
that delineated in section 103 of the Act, the information needed for 
adequate disclosure and reporting under Title I is required to be 
included on or as part of the 5500 Forms.
    The use of the 5500 Forms 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 5500 
Forms are intended to reduce further the administrative burdens and 
costs attributable to compliance with the annual reporting 
requirements.

[[Page 64716]]

    Taking into account the above, the Department has determined that 
application of the statutory annual reporting and disclosure 
requirements without the availability of the revised 5500 Forms and the 
new Schedules SB and MB, would be adverse to the interests of 
participants in the aggregate. The revised 5500 Forms provide for the 
reporting and disclosure of basic 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 under section 104(a)(3) of 
ERISA that a strict application of the statutory reporting 
requirements, without taking into account the revisions to the 5500 
Forms would be inappropriate in the context of welfare plans for the 
same reasons discussed above (i.e., the streamlined forms reduce filing 
burdens without impairing enforcement, research, and policy needs, 
while at the same time providing adequate disclosure to participants 
and beneficiaries).

D. 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 review by the Office of 
Management and Budget (OMB). Section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule's (1) having an annual effect on the economy of 
$100 million or more, or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been 
determined that this regulatory action is likely to have an annual 
effect on the economy of approximately $100 million. Therefore, this 
action is being treated as ``economically significant'' and subject to 
OMB review under section 3(f)(1) 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 and provides herein a summary 
discussion of its assessment.
    The amendments contained in this final rule conform the annual 
reporting and disclosure regulations promulgated under Title I of ERISA 
to final revisions to the 5500 Forms and instructions being issued 
simultaneously with this final rule. Inasmuch as the amendments 
contained in this final rule implement the forms revisions contained in 
the Forms Revision Notice being published simultaneously with this 
final rule, the Department's assessment pursuant to the Executive Order 
combines the regulatory amendments and the form revisions, treating 
these changes as a coordinated regulatory action. The Department's 
assessment, described below, takes into account the public comments 
received in response to the July 2006 Proposal and the Supplemental 
Notice, which are discussed in detail in the preamble of the Forms 
Revision Notice. That discussion, to which reference is made throughout 
this assessment, is hereby incorporated into this assessment by 
reference.
    In accordance with OMB Circular A-4 (available at https://
www.whitehouse.gov/omb/circulars/a004/a-4.pdf), Table 1 below depicts 
an accounting statement showing the Department's assessment of the net 
annual cost reduction associated with the provisions of the final rule 
and forms revisions. Over the next ten years, the Department 
anticipates an average annual reduction in costs of $94 million when 
using a 3% discount rate as suggested by OMB Circular A-4.\9\ As 
described more fully below, the Department believes that the impact of 
these changes will affect individual employee benefit plans 
disparately, depending on their individual circumstances. While most 
employee benefit plans are likely to experience a decrease in costs, 
some plans may see an increase in costs due to these rules. Further 
information about the relative increase or decrease in costs likely for 
particular plan types is described below.
---------------------------------------------------------------------------

    \9\ A 7% units discount rate increases the estimate of the 
average annual reduction to $97 million. Both annualized estimates 
are based on aggregate cost savings of $25.6 million in 2007, $30.2 
million in 2008, and $97.4 million, starting in 2009 (all in 2009 
Dollars).

  Table 1.--Accounting Statement: Estimated Cost Reduction From the Current Reporting Requirements to the 2009
                                             Reporting Requirements
                                                  [In millions]
----------------------------------------------------------------------------------------------------------------
                                           Estimates                                  Units
                               ---------------------------------------------------------------------------------
           Category                                                          Discount
                                 Primary      Low        High       Year       rate         Period  covered
                                 estimate   estimate   estimate    dollar   (percent)
----------------------------------------------------------------------------------------------------------------
Benefits:
    Annualized Monetized......       94.3        0.0        0.0       2009          7  2007 and later.
    ($millions/year)..........       97.1        0.0        0.0       2009          3  2007 and later.
    Annualized Quantified.....        0.0        0.0        0.0  .........          7
    Qualitative...............        0.0        0.0        0.0  .........          3
Costs:
    Annualized Monetized......       14.8        0.0        0.0       2009          7  2007 and later.
    ($millions/year)..........       15.4        0.0        0.0       2009          3  2007 and later.
    Annualized Quantified.....        0.0        0.0        0.0  .........          7
    Qualitative...............        0.0        0.0        0.0  .........          3
----------------------------------------------------------------------------------------------------------------


[[Page 64717]]

Need for Regulatory Action

    As described in the preambles to the July 2006 Proposal and the 
Supplemental Notice, the Department is promulgating these amendments of 
the annual reporting regulations, the revision of the Form 5500 Annual 
Return/Report and its instructions, and the creation of the Short Form 
5500 and its instructions, with the goal of reducing the overall burden 
of the statutory reporting requirements and the forms without 
sacrificing the quality of the information collected. This action also 
furthers three specific Departmental initiatives, described earlier in 
this preamble: (1) Creating a fully electronic filing system for 
processing the annual reports filed by employee benefit plans; (2) 
responding to reports from the GAO and the ERISA Advisory Council 
suggesting the need for substantive changes in the information gathered 
through the 5500 Forms, specifically with respect to fees and expenses 
of employee benefit plans; and (3) effectuating new reporting and 
disclosure requirements contained in the PPA.
    The principal reforms contained in this final action include the 
adoption of the Short Form 5500, the revision of reporting requirements 
for Code section 403(b) plans, the creation of separate Schedules SB 
and MB to replace the Schedule B to report actuarial information, the 
elimination of IRS-only schedules, and the expansion of fee reporting 
in Schedule C. Because of the importance of these annual return/reports 
as a source of information for participants and beneficiaries, as an 
enforcement and research tool for the Department, and as 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 final regulatory action increases the amount 
and improves the quality of information that plans must disclose. 
Because of the voluntary nature of the employee benefit system, 
however, the Department, in shaping this regulatory action, has 
carefully balanced the need for increased and improved disclosure and 
plan administrators' and sponsors' interest in minimizing reporting 
costs.
    Specifically, the burden associated with completion of the Form 
5500 Annual Return/Report can be divided into two steps: reading the 
instructions and completing the individual line items. The current 
structure of the Form 5500 Annual Return/Report, even without the 
introduction of the Short Form 5500, in contrast to what filers would 
need to do to comply with the statute in the absence of the Form 5500 
Annual Return/Report, allows filers to answer only relevant line items 
and quickly find the instructions relevant to the line items that they 
are required to complete. In the absence of the Form 5500, filers would 
be required to read and evaluate the statutory requirements and make 
judgments, without carefully targeted instructions, as to how to comply 
with the statutory reporting requirements. The Short Form 5500 requires 
not only less line item information than the Form 5500 itself, but 
eliminates the need to read instructions that are not associated with 
small plan filers. In addition, the elimination of IRS-only schedules 
also streamlines reporting under the new system.
    The filing burden under these regulations thus is not only less 
than under the existing Form 5500 Annual Return/Report without 
revisions, but is less than that under the statute. Moreover, while 
requiring less information than does the statute, the information 
required, especially the new enhanced fee disclosure information, is 
carefully targeted to provide the Agencies, participants and 
beneficiaries, and others using the Form 5500 Annual Return/Report for 
research purposes, more informative data.
    Retaining the existing efficient format of the annual return/
report, with most of the information broken out into separate 
schedules, along with the introduction of the Short Form 5500 for small 
plans invested in assets with a readily determinable market value 
should reduce, relative to reporting in the absence of the Form 5500 
Annual Return/Report, as revised, the time required to read the 
instructions because filers will now be more able to skip over the 
instructions for schedules that do not apply to them. It is, however, 
expected that filers for whom major changes apply (i.e. Short Form 
eligible filers, Schedule SB, MB, and C filers, and Code section 403(b) 
plan administrators) will require additional time in the initial year 
of filing to thoroughly read the instructions and to familiarize 
themselves with the revised Form 5500 Annual Return/Report. It is 
assumed, however, that most filers will not require this additional 
time in subsequent years. Entry of the information required by the Form 
5500 Annual Return/Report, including the Short Form 5500, is made from 
financial and other records maintained by plans. Sound accounting and 
general business practices would generally dictate that all or most of 
these records be maintained even in the absence of a reporting 
requirement.
    As a result, these final changes are anticipated to result in an 
aggregate reduction of reporting costs for filers as compared with the 
reporting costs before promulgation of these changes. As explained 
below, the Department's assessment results in a conclusion that the 
benefits to be derived from this regulatory action justify the costs 
that the action imposes on the public.

Regulatory Alternatives

    Executive Order 12866 directs federal agencies promulgating 
regulations to evaluate regulatory alternatives. The Department and the 
other Agencies have done so in the process of developing this final 
action.\10\ The preambles to the July 2006 Proposal and the 
Supplemental Notice describe the regulatory alternatives that were 
considered in making those proposals, including the possibilities of 
different eligibility criteria for the Short Form 5500; different 
approaches for satisfying the PPA requirements for additional actuarial 
and asset information reporting; and different types of reporting 
requirements for Code section 403(b) plans. In moving from the 
proposals to final action, the Department also considered alternatives 
set forth in public comments, weighing their costs and benefits against 
the initial proposed actions. The final decisions regarding the 
regulatory amendments and forms revisions are set forth and explained 
elsewhere in this document and in the Forms Revision Notice issued 
simultaneously with this document and are assessed further below. The 
following summarizes major alternatives considered but not adopted in 
finalizing these proposals.
---------------------------------------------------------------------------

    \10\ As explained elsewhere in this preamble and in the preamble 
to the Forms Revision Notice, the IRS and the PBGC act jointly with 
the Department in promulgating the 5500 Forms. The assessment under 
E.O. 12866 described in this preamble, therefore, makes reference to 
the three Agencies' decisions in finalizing the forms changes, as 
well as the Department's decisions in finalizing the amendments to 
the reporting regulations under Title I of ERISA.
---------------------------------------------------------------------------

    Eligibility for Short Form 5500 for certain plans with fewer than 
25 participants. In considering public comments in response to both the 
July 2006 Proposal and the Supplemental Notice, several alternatives to 
the proposal regarding eligibility to file the Short Form 5500 were 
considered but not adopted. Specifically, alternatives considered 
included: (1) relaxing the proposed eligibility requirement, applicable 
to all small plans (with fewer than 100 participants), that 100 percent 
of the plan's assets be invested in

[[Page 64718]]

secured, easy to value assets and (2) permitting all plans with fewer 
than 25 participants to file the Short Form 5500, regardless of whether 
the plan's investments were so invested.
    As described more fully in the preamble to the Forms Revision 
Notice, the benefits to be gained through the ability to exercise 
oversight of small plans that invest in other types of assets justifies 
not diminishing the current burden for plans with fewer than 25 
participants by having them continue to file the same information 
currently required on those assets. Permitting plans with employer 
securities or other assets that are difficult to value to file the 
limited information in the Short Form 5500 would be inconsistent with 
important policy objectives, which are underscored by the PPA's 
emphasis on increasing plan transparency, more accurately measuring 
plan assets, increasing participant control over the disposition of 
employer securities in defined contribution plans, and expanding the 
annual reporting requirements for multiemployer plans. Valuation of 
difficult-to-value assets, such as employer securities, may provide an 
opportunity for abuse or mismanagement that is not lessened by a plan's 
smaller size. The additional oversight possible through increased 
reporting responsibilities justifies the additional burden on such 
plans.
    In any event, as described in the Forms Revision Notice, the 
Department estimates that 95 percent of single-employer non-403(b) 
plans will qualify to file the Short Form 5500, about 75 percent of 
which will be plans with fewer than 25 participants. Expanding Short 
Form filing eligibility to the remaining plans with fewer than 25 
participants would only affect about 25,000 additional plans. Further, 
restricting Short Form 5500 eligibility based on the nature of a plan's 
asset investments will not deprive those non-eligible small plans of 
simplified annual filing methods. Those small plans will still be 
entitled to use the other simplified reporting available to them under 
the Form 5500 Annual Return/Report. Taking these other simplified 
options into account, we estimate that this option would only have 
saved filing plans approximately $4.8 million per year, starting in 
2009.\11\ We have concluded that this is a reasonable cost to meet the 
important policy goal of ensuring proper disclosure for small 
multiemployer plans and for plans with difficult-to-value assets.
---------------------------------------------------------------------------

    \11\ Due to the staggered implementation of the form changes, 
the