Annual Reporting and Disclosure, 47495-47532 [2016-14892]
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Vol. 81
Thursday,
No. 140
July 21, 2016
Part II
Department of Labor
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Employee Benefits Security Administration
29 CFR Parts 2520 and 2590
Annual Reporting and Disclosure; Proposed Rule
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Parts 2520 and 2590
RIN 1210–AB63
Annual Reporting and Disclosure
Employee Benefits Security
Administration, Labor.
ACTION: Proposed rule.
AGENCY:
This document contains
proposed amendments to Department of
Labor (DOL) regulations relating to
annual reporting requirements under
Part 1 of Subtitle B of Title I of the
Employee Retirement Income Security
Act of 1974, as amended (ERISA). The
proposed amendments contained in this
document would conform the DOL’s
reporting regulations to proposed
revisions to the Form 5500 Annual
Return/Report of Employee Benefit Plan
and Form 5500–SF Short Form Annual
Return/Report of Small Employee
Benefit Plan, which are being published
concurrently in today’s Federal Register
in a separate Notice of Proposed Forms
Revisions (NPFR) prepared jointly by
the Department of Labor (DOL), the
Internal Revenue Service (IRS), and the
Pension Benefit Guaranty Corporation
(PBGC) (collectively the Agencies). The
proposed regulation, and related forms
revisions, would improve employee
benefit plan reporting for filers, the
public, and the Agencies. The revision
is necessary because the annual return/
report forms have not kept pace with
market developments and changes in
the laws covering employee benefit
plans, presenting problems with
outdated and missing information that
negatively impact the Agencies’
effective and efficient protection of
employee retirement and health
benefits. The proposed revisions would
affect employee pension and welfare
benefit plans, plan sponsors,
administrators, and service providers.
DATES: Written comments must be
received by the Department of Labor on
or before October 4, 2016.
ADDRESSES: To facilitate the receipt and
processing of written comment letters
on the proposed regulation, EBSA
encourages interested persons to submit
their comments electronically. You may
submit comments, identified by RIN
1210–AB63, by any of the following
methods:
Federal eRulemaking Portal: https://
www.regulations.gov.
Follow instructions for submitting
comments.
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SUMMARY:
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Email: e-ORI@dol.gov. Include RIN
1210–AB63 in the subject line of the
message.
Mail: Office of Regulations and
Interpretations, Employee Benefits
Security Administration, Attn: RIN
1210–AB63; Annual Reporting and
Disclosure, Room N–5655, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210.
Hand Delivery/Courier: Office of
Regulations and Interpretations,
Employee Benefits Security
Administration, Attn: RIN 1210–AB63;
Annual Reporting and Disclosure, Room
N–5655, U.S. Department of Labor, 200
Constitution Avenue NW., Washington,
DC 20210.
Instructions: All comments received
must include the agency name and
Regulatory Identifier Number (RIN) for
this rulemaking (RIN 1210–AB63).
Persons submitting comments
electronically are encouraged not to
submit paper copies. All comments
received will be made available to the
public, posted without change to https://
www.regulations.gov and https://
www.dol.gov/ebsa, and made available
for public inspection at the Public
Disclosure Room, N–1513, Employee
Benefits Security Administration, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210,
including any personal information
provided.
FOR FURTHER INFORMATION CONTACT:
Mara S. Blumenthal, Office of
Regulations and Interpretations,
Employee Benefits Security
Administration, U.S. Department of
Labor, (202) 693–8523 (not a toll-free
number) for all changes other than
group health plan information; Suzanne
Adelman, EBSA, U.S. Department of
Labor, 202–693–8383 (not a toll-free
number), for questions relating to the
collection of group health plan
information.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
A. Purpose of the Regulatory Action
Under Titles I and IV of ERISA and
the Internal Revenue Code (Code),
pension and other employee benefit
plans are generally required to file
annual returns/reports concerning,
among other things, the financial
condition and operations of the plan.
Filing a Form 5500 Annual Return/
Report of Employee Benefit Plan (Form
5500 Annual Return/Report), or a Form
5500–SF Short Form Annual Return/
Report of Small Employee Benefit Plan
(Form 5500–SF) (depending on certain
plan characteristics), together with any
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required schedules and attachments
(together ‘‘the Form 5500 Annual
Return/Report’’), in accordance with
their instructions, generally satisfies
these annual reporting requirements. In
addition to being an important
disclosure document for plan
participants and beneficiaries, the Form
5500 Annual Return/Report is a critical
enforcement, compliance, and research
tool for the DOL, IRS, and the PBGC
(together ‘‘Agencies’’). It is also an
important source of information and
data for use by other federal agencies,
Congress, and the private sector in
assessing employee benefit, tax, and
economic trends and policies. In the
United States, there are an estimated 2.3
million health plans, a similar number
of other welfare plans, and nearly
681,000 private pension plans. These
plans cover roughly 143 million private
sector workers, retirees, and
dependents, and have estimated assets
of $8.7 trillion. The Form 5500 Annual
Return/Report is the principal source of
information and data concerning the
operations, funding, and investments of
more than 806,000 of these pension and
welfare benefit plans.
Generally, the Agencies have
conducted notice and comment
rulemaking before making significant
changes to the forms and schedules.
This proposed revision to the DOL’s
reporting regulations is needed to
implement the forms revisions proposed
in the three-agency (DOL, IRS, and the
PBGC) Notice of Proposed Forms
Revisions (NPFR), which is being
published separately in today’s Federal
Register.
As noted above and discussed in
detail below, because the Form 5500
Annual Return/Report has not kept pace
with market developments and changes
in the laws covering employee benefit
plans, problems with outdated and
missing information negatively impact
the Agencies’ effective and efficient
protection of employee retirement and
group health benefits. That fact is
reflected in the more than 15 reports
that have been issued since the
publication of the last major forms
revisions from the Government
Accountability Office (GAO), the DOL’s
Office of Inspector General (DOL–OIG),
the United States Treasury Inspector
General for Tax Administration (the
TIGTA), and the ERISA Advisory
Council that all call for expanded
annual reporting by employee benefit
plans and improvements in the Form
5500 Annual Return/Report.1 In
1 See, e.g., U.S. Gov’t Accountability Office, GAO–
10–54, Private Pensions: Additional Changes Could
Improve Employee Benefit Plan Financial Reporting
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developing these proposed updates to
the Form 5500 Annual Return/Report,
the DOL, along with IRS and PBGC,
carefully considered those reports in
determining where changes are needed.
In addition, a significant update being
made to the Form 5500 Annual Return/
Report is the introduction of basic
reporting requirements for all plans that
provide group health benefits that have
fewer than 100 participants and are
covered by Title I of ERISA, most of
which are currently exempt from
(2009) (available at www.gao.gov/assets/300/
298052.pdf); U.S. Gov’t Accountability Office,
GAO–14–441, Private Pensions: Targeted Revisions
Could Improve Usefulness of Form 5500
Information (2014) (available at www.gao.gov/
products/GAO-14-441); 2013 ERISA Advisory
Council Report: Private Sector Pension De-risking
and Participant Protections, Dep’t of Labor,
www.dol.gov/ebsa/publications/
2013ACreport2.html); Dep’t of Labor Office Of
Inspector Gen., 05–14–003–12–12, EBSA Could
Improve Its Usage of Form 5500 Data (2014)
(available at www.oig.dol.gov/public/reports/oa/
2014/05-14-003-12-121.pdf); U.S. Gov’t
Accountability Office, GAO–14–92, Private
Pensions: Clarity of Required Reports and
Disclosures Could Be Improved (2013) (available at
www.gao.gov/assets/660/659211.pdf); U.S. Gov’t
Accountability Office, GAO–14–92, Private
Pensions: Clarity Of Required Reports And
Disclosures Could Be Improved, Report to
Congressional Requesters (2013) (available at
www.gao.gov/assets/660/659211.pdf); U.S. Dep’t of
Labor Office of Inspector Gen., 09–13–001–12–121,
Employee Benefits Security Administration Needs
to Provide Additional Guidance And Oversight to
ERISA Plans Holding Hard-to-Value Alternative
Investments (2013) (available at www.oig.dol.gov/
public/reports/oa/2013/09-13-001-12-121.pdf); U.S.
Gov’t Accountability Office, GAO–12–665, Private
Sector Pensions: Federal Agencies Should Collect
Data and Coordinate Oversight of Multiple
Employer Plans (2012) (available at www.gao.gov/
assets/650/648285.pdf); U.S. Dep’t of Labor Office
Of Inspector Gen., 09–12–002–12–121, Changes Are
Still Needed In The ERISA Audit Process To
Increase Protections For Employee Benefit Plan
Participants (2012) (available at www.oig.dol.gov/
public/reports/oa/2012/09-12-002-12-121.pdf); U.S.
Gov’t Accountability Office, GAO–12–325, 401(K)
Plans: Increased Educational Outreach and Broader
Oversight May Help Reduce Plan Fees (2012)
(available at www.gao.gov/products/GAO-12-325);
U.S. Gov’t Accountability Office, GAO–08–692,
Defined Benefit Plans: Guidance Needed to Better
Inform Plans of the Challenges and Risks of
Investing in Hedge Funds and Private Equity (2012)
(available at www.gao.gov/products/GAO-08-692);
Treasury Inspector Gen. for Tax Administration,
The Employee Plans Function Should Continue Its
Efforts to Obtain Needed Retirement Plan
Information (2011) (available at www.treasury.gov/
tigta/auditreports/2011reports/201110108fr.pdf);
2011 ERISA Advisory Council Report: Hedge Funds
and Private Equity Investments, Dep’t of Labor,
www.dol.gov/ebsa/publications/
2011ACreport3.html); 2013 ERISA Advisory
Council Report: Locating Missing and Lost
Participants, Dep’t of Labor, www.dol.gov/ebsa/
publications/2013ACreport3.html#2; 2010 ERISA
Advisory Council Report: Employee Benefit Plan
Auditing and Financial Reporting Models, Dep’t of
Labor, www.dol.gov/ebsa/publications/
2010ACreport2.html; 2008 ERISA Advisory Council
Report: Working Group on Hard-to-Value Assets
and Target Date Funds, Dep’t of Labor,
www.dol.gov/ebsa/publications/
2008ACreport1.html.
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reporting requirements, and the
addition of a new schedule (Schedule J)
proposed to be required for all group
health plans. This reflects a new
emphasis on transparency under the
Affordable Care Act 2 and a desire to
offer plan sponsors the opportunity to
satisfy certain Affordable Care Act
reporting requirements addressed in this
proposal by a more robust Form 5500
Annual Return/Report filing for those
group health plans currently required to
file and by elimination of the current
exemption for plans that provide group
health benefits that have fewer than 100
participants that are fully insured,
unfunded, or a combination. Once
finalized, these proposed changes will
result in annual return/report forms that
are a more effective policy, enforcement,
and research tool, and one that will
increase transparency, accountability,
and confidence in the employee benefit
plan system.
The Agencies’ proposed changes to
the Form 5500 Annual Return/Report
also should be viewed in light of the fact
that the last two major revisions of the
Form 5500 Annual Return/Report 3
occurred in 1999 and 2009 in
connection with a major shift from a
paper-based filing system to the current
internet-based wholly electronic filing
and electronic data processing system
(EFAST and now EFAST2), which is
operated by a private sector contractor.
For the last two major form revision
cycles, the Agencies were focused on
moving filers to new technologies for
filing Form 5500 Annual Return/Report
data. In recognition of the burden and
challenges that filers would face in
migrating to new filing technologies, the
Agencies’ generally deferred proposing
major form changes that would add
substantial new burdens. In fact, by
deferring our current proposals until
now, the new EFAST2 capabilities are
making more feasible and efficient
processing of both the existing and the
expanded data we are proposing to
collect.
2 The Patient Protection and Affordable Care Act,
Public Law 111–148, was enacted on March 23,
2010, and the Health Care and Education
Reconciliation Act of 2010, Public Law 111–152,
was enacted on March 30, 2010. These statutes
generally are collectively known as the ‘‘Affordable
Care Act.’’
3 The Agencies’ last tri-agency major revision to
the Form 5500 Annual Return/Report series was
effective for the 2009 plan year forms. Before that,
the last major revision was effective for the 1999
plan year forms and was implemented together with
the initial implementation of EFAST. In interim
years, the Agencies have made other focused
changes, which are set forth annually in the
‘‘Changes to Note’’ section in the instructions.
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B. Summary of the Major Revisions of
the Regulatory Action
The proposed forms revisions and the
DOL implementing regulations are
intended to address changes in
applicable laws and the employee
benefit plan and financial markets, and
corresponding shifts in agency priorities
and needs since the last major revision.
The proposed revisions are also
expected ultimately to make filing and
processing more efficient and accurate
and to restore a greater level of
transparency in the employee benefit
plan market.4 The proposed forms
revisions fall under the following
general categories:
1. Modernize Financial and Investment
Reporting by Pension Plans
A key component of the proposal
would expand and modernize financial
and investment information reported by
pension plans. Reporting on the
financial operations and integrity of
U.S. private pension plans (both defined
benefit and defined contribution) is
critical given the ongoing importance of
such plans to the retirement security of
America’s workforce. Moreover,
improved transparency of financial
products and investments acquired by
plans is critical to the ability of the
Agencies to fulfill their statutory
oversight role. It is also important for
ongoing monitoring of retirement plans
by employers, plans, participants and
beneficiaries, and policy makers. These
proposed changes to financial reporting
are specifically designed to improve
reporting of alternative investments,
hard-to-value assets, and investments
through collective investment vehicles
and participant-directed brokerage
accounts.
An overriding objective of these
proposed revisions to the financial
4 In addition, this rulemaking and forms revisions
are being coordinated generally with a re-bid and
updating of the ERISA Filing Acceptance System
(EFAST2)—the wholly electronic Form 5500
Annual Return/Report filing and processing system.
Unlike the 1999 and 2009 forms revisions, the rebid of EFAST2 does not involve major changes in
the EFAST2 key system requirements, capabilities,
and functions. Rather, although there are some
changes to the system, the re-bid process is largely
being undertaken in response to Federal
Acquisition Regulation (FAR) requirements on
periodic re-bidding of longer term contracts. Under
these circumstances, there may be opportunities to
implement various form changes either before or
after the re-bid EFAST2 contract is awarded. The
timing of the re-bid of EFAST2 and implementation
of form changes may also be affected by whether
funds necessary for the re-bid or form
implementation are appropriated as part of the
Agencies’ respective budgets. Accordingly,
although the overall objective is to implement these
proposed form changes as part of a re-bid EFAST2
contract, rulemaking and budget issues may require
the Agencies to consider a more staged approach.
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information collected as part of the
annual return/report is to present plan
financial and balance sheet information,
including the currently required
schedules of assets, in a way that better
reflects the investment portfolios and
asset management practices of employee
benefit plans. The basic objective of
ERISA’s mandatory financial reporting
is to provide information about the
reporting entity for the Agencies’
enforcement, research, and policy
formulation programs; for other federal
agencies, Congress, and the private
sector to assist them in assessing
employee benefit, tax, and economic
trends and policies; and for plan
participants and beneficiaries and the
general public to understand and
monitor better the activities and
investments of employee benefit plans.
As reflected in the various reports from
the GAO, the DOL–OIG, the ERISA
Advisory Council, and the TIGTA, the
current information collected on the
Form 5500 Annual Return/Report and
Form 5500–SF is insufficient to satisfy
those objectives.
The financial statements contained in
the current Schedule H (Large Plan
Financial Information) and Schedule I
(Small Plan Financial Information) are
based on data elements that have
remained largely unchanged since the
Form 5500 Annual Return/Report was
established in 1975. Over the past four
decades, the U.S. private pension
system has shifted from defined benefit
(defined benefit or DB) pension plans
toward defined contribution (defined
contribution or DC) pension plans, often
participant-directed 401(k)-type DC
pension plans. The financing of
retirement benefits has changed
dramatically coincident with the shift
from DB to DC pension plans. In 1978,
when legislation was enacted
authorizing 401(k) plans that allow
employees to contribute to their own
retirement plan on a pre-tax basis,
participants contributed only 29 percent
of the contributions to DC pension plans
and only 11 percent of total
contributions to both DB and DC
pension plans. ‘‘In the years following
1978, employee contributions to DC
pension plans steadily rose to a peak of
approximately 60 percent in 1999,
where it has remained.’’ See Dep’t of
Labor, Private Pension Plan Bulletin
Abstract of 2012 Form 5500 Annual
Reports, at 1 (2015). Simultaneously, the
number of single-employer DB pension
plans has decreased from 92,000 in 1990
to just under 29,000 single-employer
pension plans in 2009. See U.S. Gov’t
Accountability Office, GAO–09–291,
Defined Benefit Pensions: Survey
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Results of the Nation’s Largest Private
Defined Benefit Plan Sponsors
Highlights (2009) (available at https://
www.gao.gov/new.items/d09291.pdf).
The shift from DB pension plans to
DC pension plans—and the
corresponding increase of participants’
own contributions to those plans as
opposed to employer contributions—has
led to increased responsibility for
participants to manage their own
retirement savings, which includes
having to select among investment
options in their retirement plans. See
Private Pension Plan Bulletin Abstract
Of 2012 Form 5500 Annual Reports, at
2 (Of the 516,000 section 401(k)-type
plans in 2012, 87.8 percent allowed
participants to direct investment of all
of their assets, and 3.1 percent allowed
participants to direct investment of a
portion of their assets.) The need for
more relevant and comparable financial
information is not limited to 401(k) and
other DC pension plans; it also extends
to DB pension plans. Reports cited
above from GAO, the DOL–OIG, the
TIGTA, and the ERISA Advisory
Council also have focused on the need
for increased transparency and
accountability generally in connection
with employee benefit plan investments
in hard-to-value and alternative assets,
as well as assets held through pooled
investment vehicles.
Further, the Agencies need better
information to effectively oversee and
enforce existing rules and regulations.
For example, as part of the 1999 and
2009 forms revisions, the Agencies
stopped collecting a variety of
information regarding ESOPs. ESOPs,
however, continue to be a significant
enforcement focus and concern for both
DOL and the Department of Treasury
(Treasury)/IRS. Under the proposal,
ESOPs would be required to again
report information, on the Schedule E,
about their employer stock acquisitions.
Plan investment in hard-to-value and
other alternative investments, such as
derivatives, limited partnerships, hedge
funds, private equity, and real estate,
was highlighted as an oversight risk by
both GAO and the DOL–OIG. Plans
invested in derivatives, limited
partnerships, hedge funds, private
equity, real estate, and other alternative
investments would be required under
the proposal to identify such
investments specifically. Having plans
and direct filing entities (DFEs) report
this information would be a significant
improvement; the Agencies would no
longer be limited to identifying issues
involving investments in derivatives
and other hard-to-value assets by
opening investigations on a plan-byplan basis. For example, regulators
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would be able to search the data base for
particular investments or managers
where there were indications that there
were problems with such investment or
manager for all plans that made such
investments. The improved financial
transparency in the proposed revisions
to the Form 5500 Annual Return/Report
data collection in general would better
enable public and private data users to
identify patterns and trends in plan
investments and behavior.
For defined contribution pension
plans, especially participant-directed
plans, the proposal also would provide
better information on employee
participation rates in 401(k)-type plans
and more relevant information on the
types of investment alternatives
available in such plans (including
information on each designated
investment alternative in the plan,
information on qualified default
investment alternatives, and
information on whether the investment
alternatives are actively managed or
passively managed index funds). As
Form 5500 Annual Return/Report
information is required by Title I of
ERISA to be publicly available, not only
would expanded data collection assist
in the Agencies’ research and
policymaking objectives, public access
to this information would enable
interested private sector and other
governmental stakeholders to perform
data-based research or help plan
sponsors, fiduciaries, and participants
and beneficiaries better understand their
plan and plan investments. For
example, it would be more feasible to
compare performance of plans based on
types of investments, and get
information on how certain plan
investment options and structures might
correlate to participation, overall
performance, or best preparation of
workers for retirement.
2. Support Oversight of Group Health
Plans and Ongoing Implementation of
the Affordable Care Act
The proposed forms revisions and
DOL implementing regulations would
expand Form 5500 reporting by group
health plans 5 by eliminating obsolete
5 Under the proposed changes, all ‘‘group health
plans’’ that meet the definition in 733(a) of the Act,
including plans that claim ‘‘grandfathered’’ status
under 29 CFR 2950.715–1251, are required to file
some or all of the Form 5500 Annual Return/Report
and applicable schedules, including the Schedule J,
regardless of whether such plans are exempt from
certain market reform requirements under ERISA
§ 732(a) (exemption for certain small group health
plans that have less than two participants who are
current employees) or ERISA § 733(c) (group health
plans consisting solely of excepted benefits).
Employee welfare benefit plans as defined in ERISA
§ 3(1) that do not meet the definition of ‘‘group
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exemptions for certain plans from Form
5500 reporting. Specifically, most
private employer-sponsored group
health plans with fewer than 100
participants that are fully insured,
unfunded, or a combination of the two,
currently do not file the Form 5500
Annual Return/Report under the terms
of the current DOL exemptions. As a
result, for policy formulation, research,
and regulatory impact analyses, the DOL
must rely on surveys, instead of Form
5500 Annual Return/Report data, to
generate even basic estimates of the size
of the ERISA group health plan universe
that is a major part of the nation’s health
care delivery system. The current lack of
information collected on the Form 5500
Annual Return/Report from group
health plans impairs the effectiveness of
EBSA’s ability to develop health care
regulations and complicates the DOL’s
ability to enforce such regulations and
educate plan administrators regarding
compliance.
In addition, section 1253 of the
Affordable Care Act requires the
Secretary of Labor to prepare an annual
report that includes certain general
information on self-insured group
health plans using data collected from
the Form 5500 Annual Return/Report
(the ‘‘Self-Insured Health Plan Report’’).
Current Form 5500 Annual Return/
Report data provides the basis only for
an incomplete assessment of selfinsured plans. For example, information
about the amount of outstanding claims
for a self-insured plan, a proposed new
data element on the Schedule J, would
be a critical flag that would identify the
need for further inquiry or investigation
of a group health plan that may be
unable to pay outstanding claims. Early
intervention by EBSA could prevent a
participant from facing bankruptcy over
unpaid medical expenses that otherwise
would have been covered had the group
health plan been properly funded.
We expect more group health plan
filings will help the DOL allocate
enforcement resources and streamline
enforcement actions. For example, these
additional filings will enable the DOL to
correlate information reported by
different group health plans to help
identify widespread noncompliance
perpetuated by a common service
provider rather than relying on multiple
investigations of client plans to detect a
pattern of non-compliance by a single
service provider. Obtaining a correction
by going directly to the service provider
makes the correction process more
health plan’’ under 733 of the Act (i.e., they do not
provide benefits for medical care) are not subject to
the proposed enhanced reporting requirements
applicable to group health plans.
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efficient for the service provider and the
Department and results in uniform and
efficient corrective action for
participating plans. EBSA anticipates
that Form 5500 Annual Return/Report
data may similarly be used in future
versions of the biennial Paul Wellstone
and Pete Domenici Mental Health Parity
and Addiction Equity Act (MHPAEA)
Report to Congress on the compliance of
group health plans and health insurance
coverage offered in connection with
such plans with the requirements of
MHPAEA. The proposed changes to
group health plan reporting thus are
important to the government’s ability to
accomplish oversight obligations under
the Affordable Care Act and other
federal laws governing group health
plans, to more effectively monitor
health policy issues as they pertain to
ERISA-covered plans, and to provide
Congress with accurate information
about self-insured plans and whether
the plan is complying with the
protections of MHPAEA.
3. Reporting To Satisfy Public Health
Service Act Sections 2715A and 2717
Sections 2715A and 2717 of the
Public Health Service Act (PHS Act), as
added by the Affordable Care Act and
incorporated into ERISA section 715,6
include important new reporting
requirements for group health plans and
health insurance issuers in the group
and individual markets. Specifically,
section 2715A of the PHS Act
incorporates the transparency
provisions of section 1311(e)(3) of the
Affordable Care Act to require nongrandfathered group health plans and
health insurance issuers offering nongrandfathered group or individual
health insurance coverage to make
available to the DOL, the Department of
Health and Human Services (HHS),
Treasury, State insurance commissioner,
and the public a host of information on
health plan enrollment and claims.7
6 Sections 2715A and 2717 of the PHS Act are
also incorporated into section 9815(a)(1) of the
Code.
7 Information required under sections 2715A and
2717 of the PHS Act that is provided as part of a
Form 5500 Annual Return/Report would be made
available to the public and to the plan’s participants
and beneficiaries. Section 104(b)(4) of ERISA
requires the plan administrator, on written request
of a participant or beneficiary, to furnish among
other documents, a copy of the latest annual report.
See also 29 CFR 2520.104b–1(b)(2). The DOL’s
regulation at 29 CFR 2520.104b–30 provides that
the plan administrator of an employee benefit plan
may impose a reasonable charge that is not to
exceed 25 cents per page to cover the cost of
furnishing the latest annual report, but also
provides that participants and beneficiaries must be
provided at no charge a copy of the statement of the
assets and liabilities of the plan and accompanying
notes, and the statement of income and expenses of
PO 00000
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47499
This includes: (1) Claims payment
policies and practices; (2) periodic
financial disclosures; (3) data on
enrollment and disenrollment; (4) data
on the number of denied claims; (5) data
on rating practices; (6) information on
cost-sharing and payments with respect
to any out-of-network coverage; (7)
information on enrollee and
participation rights; and (8) other
information as determined by the
Secretary. Moreover, section 2717 of the
PHS Act generally requires nongrandfathered group health plans and
health insurance issuers offering nongrandfathered group or individual
health insurance coverage to report
annually to the DOL, HHS and the
Treasury and to enrollees under the
plan whether the benefits under the
plan: (A) Improve health outcomes
through the implementation of activities
such as quality reporting, effective case
management, care coordination, chronic
disease management, and medication
and care compliance initiatives,
including through the use of the
medical homes model as defined for
purposes of section 3602 of the
Affordable Care Act, for treatment or
services under the plan or coverage; (B)
implement activities to prevent hospital
readmissions through a comprehensive
program for hospital discharge that
includes patient-centered education and
counseling, comprehensive discharge
planning, and post discharge
reinforcement by an appropriate health
care professional; (C) implement
activities to improve patient safety and
reduce medical errors through the
appropriate use of best clinical
practices, evidence based medicine, and
health information technology under the
plan or coverage; and (D) implement
wellness and health promotion
activities.
These regulations propose conforming
amendments in 29 CFR 2590.715–
2715A and 29 CFR 2590.715–2717 to
clarify that compliance with the
reporting requirements in 29 CFR
2520.103–1 (including filing any
required schedules to the annual report)
by plans subject to ERISA would satisfy
the reporting requirements of PHS Act
sections 2715A and 2717, incorporated
in ERISA through ERISA section
715(a)(1).8 As explained in FAQs issued
the plan and accompanying notes. See also 29 CFR
2520.104b–10(d)(3) and (4).
8 The Treasury Department and the IRS intend to
publish proposed regulations in 26 CFR 54.9815–
2715A and 54.9815–2717 clarifying that group
health plans required to file an annual report
pursuant to section 104 of ERISA that comply with
the reporting requirements in 29 CFR 2520.103–1
(including filing any required schedules to the
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
August 11, 2015,9 HHS proposed an
information collection for public
comment in connection with the
transparency provisions of section
1311(e)(3) of the Affordable Care Act.
The proposed data collection would
collect certain information from
Qualified Health Plan (QHP) issuers in
Federally-facilitated Exchanges and
State-based Exchanges that use the
federal eligibility and enrollment
platform. The HHS proposal explained
that other reporting requirements would
be proposed at a later time, through a
separate rulemaking with respect to
non-Exchange coverage, including those
that extend to health insurance issuers
offering non-grandfathered group or
individual health insurance coverage
outside of the Exchanges and nongrandfathered group health plans
(including large group and self-insured
health plans).10
This rulemaking proposes
transparency and quality reporting for
non-grandfathered group health plans
under PHS Act sections 2715A and
2717, as incorporated in ERISA. It takes
into account differences in markets and
other relevant factors to streamline
reporting under multiple reporting
provisions and reduce unnecessary
duplication. The DOL is proposing to
collect and provide high-value data to
participants, beneficiaries, and
regulators, such as information about
benefits and plan design characteristics,
funding, grandfathered plan status,
rebates received by the plan (such as
medical loss ratio rebates), service
provider information (including
information regarding any third party
administrators, pharmacy benefit
managers, mental health benefit
annual report) would satisfy the reporting
requirements of sections 2715A and 2717 of the
PHS Act, as incorporated in the Code. Group health
plans that are not required to file an annual report
pursuant to section 104 of ERISA but that are
subject to sections 2715A and 2717 of the PHS Act
as incorporated in the Code, will not be required
to do any reporting to comply with sections 2715A
and 2717 of the PHS Act, as incorporated in the
Code, unless and until the Treasury Department
and the IRS issue subsequent further guidance or
rulemaking regarding any such reporting by such
plans.
9 See FAQs about Affordable Care Act
Implementation (Part XXVIII), available at https://
www.dol.gov/ebsa/faqs/faq-aca28.html and https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/Downloads/ACA-FAQ-Part-XXVIIItransparency-reporting-final-8-11-15.pdf.
10 Nonfederal governmental plans (as defined in
PHS Act section 2791(d)(8)(C)) and health
insurance issuers (as defined in PHS Act section
2791(b)(2) and ERISA section 733(b)(2)) are not
required to file annual reports pursuant to ERISA
sections 103 or 104. Accordingly, any reporting
required of such plans and issuers to satisfy PHS
Act sections 2715A and 2717 will be addressed
separately by HHS in future rulemakings and/or
guidance.
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18:13 Jul 20, 2016
Jkt 238001
managers, and independent review
organizations), information on any stop
loss insurance, claims processing and
payment information (including number
of claims filed, paid, appealed and
denied), wellness program information,
and other compliance information. In
addition to improving DOL’s oversight
and enforcement activities, the
collection of high-value data will lead to
greater transparency for consumers,
which may assist them in making a
decision whether to elect the coverage
or opt for another plan such as through
their spouse’s employer, with the caveat
that these data will be collected a
number of months after the end of the
plan year they describe and thus will
not be timely for use in concurrent
oversight, enforcement, or consumer
choice activities. The DOL may propose
collecting additional data in the future.
The DOL requests comments regarding
other plan characteristics that may be
helpful for participants to have
information on in evaluating their plan.
Further, as noted above, this document
includes proposed conforming
amendments in 29 CFR 2590.715–
2715A and 29 CFR 2590.715–2717 to
clarify that compliance with the
proposed annual reporting requirements
by plans subject to ERISA that provide
group health benefits would satisfy the
ACA reporting requirements under PHS
Act sections 2715A and 2717
incorporated in ERISA through ERISA
section 715(a)(1). The Department is
specifically seeking public comments on
those conforming amendments and the
proposed annual reporting requirements
for plans that provide group health
benefits, including the new Schedule J,
in light of the Supreme Court’s recent
decision in Gobeille v. Liberty Mutual
Insurance Co., 136 S. Ct. 936 (2016).
4. Modernize Data Collection and
Usability
This project would standardize and
structure the Form 5500 Annual Return/
Report to make key retirement and
health and welfare benefit data,
including information on assets held for
investment, more available and usable
in the electronic filing and data
environment. Modernization is
consistent with the Administration’s
‘‘Smart Disclosure’’ effort. Executive
Office of the President of the United
States, Nat’l Science and Technology
Council, Smart Disclosure and
Consumer Decision-making: Report of
the Task Force on Smart Disclosure
(2013). The proposed changes would
enable private sector data users to
develop more individualized tools for
employers to evaluate both their
retirement and welfare plans and for
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Frm 00006
Fmt 4701
Sfmt 4702
employees to manage their retirement
savings and welfare plan choices.
5. Updating and Improving Reporting of
Service Provider Fee and Expense
Information
The DOL has been engaged in a long
term initiative focused on transparency
and oversight of service provider and
investment fees and expenses. The fee
initiative has focused on reporting
indirect compensation received by
service providers (2009 Form 5500
Annual Return/Report revisions),
disclosures about service provider
compensation to plan fiduciaries (DOL’s
regulation, effective in 2012, at 29 CFR
2550.408b–2), and plan disclosures to
participants and beneficiaries
particularly in 401(k)-type plans (DOL’s
regulation, effective in 2012, at 29 CFR
2550.404a–5).
The fee disclosure regulations were
finalized after the publication of the
2009 forms changes. The 2009 indirect
compensation reporting requirements
permitted filers to disclose rather than
report most indirect compensation. This
was in response to commenters
concerns about potentially inconsistent
requirements in Form 5500 reporting
and disclosure under the then proposed
disclosure regulations. Accordingly, the
21st Century initiative includes
proposed revisions that are designed to
harmonize Form 5500 reporting
requirements with the now final
disclosure regulations, especially the
ERISA section 408b–2 regulation. The
GAO, in particular, recommended that
the DOL require plans to report all
indirect compensation received by
certain of their service providers and to
harmonize the ERISA section 408b–2
regulation disclosure and annual
reporting requirements. U.S. Gov’t
Accountability Office, GAO–14–441,
Private Pensions: Targeted Revisions
Could Improve Usefulness of Form 5500
Information (2014) (available at
www.gao.gov/products/GAO–14–441).
A key purpose of the required fee
disclosures in the ERISA section 408b–
2 regulation is to help make sure that
pension plan fiduciaries can more
effectively negotiate service provider
fees based on a better understanding of
compensation that the service provider
expects to receive, including from thirdparty sources that might represent a
conflict of interest. We believe that
annually reporting compensation
received by a service provider and its
sources on the Form 5500 Annual
Return/Report will provide a powerful
tool and economic basis for improved
evaluation of investment,
recordkeeping, and administrative
service arrangements. We have already
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21JYP2
Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
seen innovative uses of Form 5500
Annual Return/Report data by private
sector companies that have created tools
for evaluating and benchmarking
employee benefit plans. Further, service
provider failures to disclose indirect
compensation as required under the
ERISA section 408b–2 regulation have
resulted in EBSA obtaining corrective
monetary recoveries to plans.
Comparing disclosures of anticipated
compensation under the ERISA section
408b–2 regulation to compensation
received as reported on the Form 5500
Annual Return/Report may uncover
disparities between anticipated and
actual compensation, which may
provide the basis for improved targeting
of our enforcement actions.
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
6. Improving Employee Benefit Plan
General Compliance With ERISA and
the Code
The Form 5500 Annual Return/Report
and related financial audit requirements
historically have served to establish
discipline for plan fiduciaries by
requiring an annual examination of the
employee benefit plan’s financial and
administrative operations. The proposed
forms revisions and DOL implementing
regulations would add selected new
questions regarding plan operations,
service provider relationships, and
financial management of plans. These
questions are intended to compel
fiduciaries to evaluate plan compliance
with important requirements under
ERISA and the Code and to provide the
Agencies with improved tools to focus
oversight and enforcement resources.
The proposed regulations would also
update the requirements for
certifications for limited scope audits
under 29 CFR 2520.103–8.
C. Costs and Benefits
The regulatory impact analysis
includes a qualitative discussion of the
benefits associated with the proposed
rules’ five primary objectives. Under the
current regulations and forms, the Form
5500 Annual Return/Report annually
collects data from approximately
816,000 large and small plan filers—
pension and all types of welfare plans,
including group health—and DFEs with
an aggregate annual cost of $488.1
million. The Form 5500 Annual Return/
Report is a central part of the Agencies’
enforcement programs, but the benefits
of an updated Form 5500 Annual
Return/Report would extend beyond the
value of enhanced enforcement. A
modernized Form 5500 Annual Return/
Report that is more aligned with current
investment practices and reflects the
requirements of current law also has
benefits for plan sponsors, plan
VerDate Sep<11>2014
18:13 Jul 20, 2016
Jkt 238001
participants, Congress, academics, and
others, as explained in more detail
below.
As with the current reporting scheme,
the proposed revisions are crafted to
limit burden increases for small plans,
both pension and welfare, including
group health plans. The burden increase
for small pension plans that are eligible
to file the Form 5500–SF is much less
than it is for those pension plans filing
the Form 5500 Annual Return/Report
that have complex portfolios that
include alternative and hard-to-value
assets or are employee stock ownership
plans, which plans are of greater
concern with respect to retirement
security of their participants. Similarly,
the burden increase for fully insured
welfare plans that provide group health
benefits with fewer than 100
participants, is much less than it is for
welfare plans that provide group health
benefits and are fully or partially selfinsured, which are at greater risk for
non-payment of benefit claims. As is
discussed in more detail below, the
burden increase for small pension plans
that are invested in simple, Form 5500–
SF eligible portfolios is very modest,
and the changes that apply to those
plans (which will mostly apply to all
filers) will provide much needed
information about the operations,
compliance, and asset allocations of
such plans. Similarly, welfare plans that
provide group health benefits with
fewer than 100 participants and that are
fully insured, which are currently
exempt from filing any Form 5500
Annual Return/Report, would file
limited identifying and coverage
information. The changes were
intentionally limited in order that the
burden would be as minimal as
possible, while still getting the crucial
information about that significant
component of the nation’s healthcare
delivery system and reinforcing for the
fiduciaries responsible for many of
those plans the need to satisfy important
consumer protections required by Title
I of ERISA and the Affordable Care Actrelated health care benefits. The
proposed changes involve only a
nominal burden increase for welfare
plans other than group health.
Under the proposed regulations and
revised forms, the Form 5500 Annual
Return/Report would collect data from
approximately 2.97 million filers with
an aggregate annual cost of $817.0
million. New reporting requirements for
the 2.15 million welfare plans that
provide group health benefits that we
estimate are currently covered under
Title I of ERISA, but exempt under
current Form 5500 annual reporting
rules, represent over 73 percent of the
PO 00000
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Fmt 4701
Sfmt 4702
47501
increased burden for the entire
proposal. That increase is largely due to
the number of new filers and not the per
plan cost. Other than the initial filing
year burden for learning the new
reporting requirements, the burden per
plan for even these new filers, almost all
of which are fully insured plans with
fewer than 100 participants, is very
limited because they are only required
to provide registration-type and other
nominal benefit coverage information.
This expansion in the number of firsttime filers that are plans that provide
group health benefits that have fewer
than 100 participants represents new
data on group health care issues that is
otherwise unavailable or not gathered in
a way that is readily usable for ERISA
compliance, policy, and enforcement
purposes. From a compliance
perspective, requiring reporting will be
useful to educate plan sponsors and
fiduciaries of their obligations with
respect to group health plans. Getting
first time information on the full
breadth of plans providing health
benefits that are subject to ERISA will
be key data for policy-making regarding
such plans and their participants. From
an enforcement perspective, data
analysis could lead to detection and
intervention in a distressed health plan,
which could help minimize financial
harm suffered by participants when
medical claims are unpaid by such
plans. Medical bills contribute to a large
and increasing share of personal
bankruptcies in the United States.11
Moreover, the potential burden for new
filers is expected to be overcome by
satisfying, to some extent, data
collections required by Congress in the
Affordable Care Act. Sections 2715A
and 2717 of the PHS Act, as added by
the Affordable Care Act, significantly
expand reporting requirements for
group health plans subject to ERISA.
EBSA is coordinating with HHS on
using the Form 5500 Annual Return/
Report as an alternative mechanism to
satisfy these reporting requirements.12
11 David U. Himmelstein, M.D., Deborah Thorne,
Ph.D., Elizabeth Warren, JD, and Steffie
Woolhandler: The American Journal of Medicine,
Medical Bankruptcy in the United States, 2007:
Results of a National Study. Available online at
https://www.amjmed.com/article/S0002–9343(09)
00404–5/abstract?cc=y=.
12 Section 2715A of the PHS Act extends the
transparency reporting provisions set forth in
section 1311(e)(3) of the Affordable Care Act
(applicable to issuers of ‘‘qualified health plans’’
offered on Exchanges) to non-grandfathered group
health plans and non-grandfathered group or
individual health insurance coverage offered
through or outside of Exchanges. As more fully
described on pages 13–14 herein, section 2717 of
the PHS Act generally requires non-grandfathered
group health plans and health insurance issuers
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
Revisions to the financial schedules
(Schedule H and related investment
asset reporting changes) and service
provider reporting (Schedule C changes)
impact predominantly large plans with
complex investment portfolios (often
involving alternate investments, hardto-value assets and employer securities).
These changes comprise the second and
third largest shares of the burden
increase, respectively, adding $57.6
million and $12.9 million. Small
pension plans that are subject to
expanded reporting under these
proposed revisions are a small
percentage of total small pension plan
filers and the additional burdens are
generally limited to those plans that
choose to invest in alternative and hardto-value assets, which present more risk
and demand more transparency.
Revisions to Schedule D and DFE
reporting represent the largest burden
reduction within the proposed changes.
These changes affect all DFEs and those
plans that invest in DFEs and reduce
aggregate burden by $10.1 million.
In addition, it is important to note
that the total burden associated with the
Form 5500 Annual Return/Report has
risen from $327.98 million to $488.1
million since the last rulemaking in
November 2007 primarily due to the
increase in wage rates and the number
of plan filers over the last eight years
under the current rule. In other words,
approximately 90 percent of the $160.1
million increase to the baseline burden
since the last RIA was prepared is
simply due to changes in the broader
economy over the past decade, not this
rulemaking.
Estimated Burden Change
Estimated Total Burden Change
Annual costs
(millions)
Total for current reporting requirements .................................................................................................................
Change due to proposed GHP requirements .........................................................................................................
Change due to all other Proposed Requirements ..................................................................................................
Total for Proposed Reporting Requirements ..........................................................................................................
Increase in baseline since 2007 due to update in wage rates ...............................................................................
Increase in baseline since 2007 due to update in number of plans (not including plans subject to new GHP reporting).
$488.1
241.6
87.2
817.0
127.0
16.9
Annual burden
hours 13
4.4 million.
2.2 million.
798,000.
7.2 million.
0.
149,000.
Estimated Burden Change by Type of
Filer
Number of
filers under
current
(thousands)
Type of filer
Number of
filers under
proposed
(thousands)
Aggregate
annual cost
under current
requirements
(millions)
Aggregate
annual cost
under
proposed
requirements
(millions)
Aggregate
annual cost
change
(millions)
Form 5500 Large Plans .......................................................
Pension/Large ...............................................................
Welfare/Large Health ....................................................
Welfare/Large Non-Health ............................................
Form 5500 Small Pension and Non-Health Plans ..............
Pension ESOP ..............................................................
Pension Non-ESOP ......................................................
Welfare/Non-Health ......................................................
Form 5500–SF Small Pension and Non-Health Plans ........
Pension .........................................................................
Non-Health Welfare ......................................................
Form 5500 Small Health ......................................................
Fully Insured Health ......................................................
Other Health .................................................................
DFEs ....................................................................................
148.5
75.1
47.9
25.6
29.7
3.8
22.6
3.3
622.4
621.8
0.7
6.2
0.0
6.2
9.4
148.5
75.1
47.9
25.6
29.7
3.8
22.6
3.3
622.4
621.8
0.7
2,158.0
1,869.0
289.0
8.9
$252.4
141.2
91.7
19.6
14.4
1.8
11.1
1.5
205.8
205.6
0.2
4.1
0.0
4.1
11.4
$309.3
174.6
114.2
20.5
38.3
5.8
29.9
2.5
227.3
227.0
0.2
227.9
69.6
158.2
14.2
$56.9
33.5
22.5
1.0
23.9
4.1
18.8
1.0
21.5
21.4
0.0
223.86
69.6
154.2
2.8
Overall Total .................................................................
816.3
2,967.5
488.1
817.0
328.8
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Note: Some displayed numbers do not sum up to the totals due to rounding.
Large plans—100 participants or more.
Small plans—generally fewer than 100 participants.
Estimated Burden Change by Form
Revision
offering non-grandfathered group or individual
health insurance coverage to submit annual reports
to the DOL, HHS and the Treasury regarding quality
of care programs offered by the plan.
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18:13 Jul 20, 2016
Jkt 238001
13 The Burden Hours column shows the amount
of time necessary to fulfill filing requirements,
whether that burden is incurred by the plans
themselves or by outside service providers hired by
PO 00000
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Fmt 4701
Sfmt 4702
the plans. The Cost column shows the monetized
version of those burden hours.
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
Change in
annual costs
(millions)
Revisions
Changes in Schedule H (Including changes to Schedules
of Assets and Reportable Transactions) and Eliminate
Schedule I ........................................................................
Schedule C ..........................................................................
DFE Reporting Changes (Including changes to Schedule
D) ......................................................................................
Schedule E ...........................................................................
Completion of lines 1–5 on Form 5500 and lines 1–8 on
Schedule J by fully insured GHPs with fewer than 100
participants .......................................................................
Completion of Form 5500 by GHPs with fewer than 100
participants that are unfunded, combination unfunded/
fully insured, or funded with a trust and GHPs with 100
or more participants .........................................................
Completion of Schedule J by GHPs with fewer than 100
participants that are unfunded, combination unfunded/
fully insured, or funded with a trust and GHPs with 100
or more participants .........................................................
All Other Revisions ..............................................................
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
II. Discussion of the Proposed Revisions
to 29 CFR Part 2520
ERISA section 103 broadly sets out
annual financial reporting requirements
for employee benefit plans. The Form
5500 Annual Return/Report and the
DOL’s related regulations generally are
promulgated under the ERISA
provisions authorizing limited
exemptions to these requirements and
simplified reporting and disclosure for
welfare plans under ERISA section
104(a)(3), simplified annual reports
under ERISA section 104(a)(2)(A) for
pension plans that cover fewer than 100
participants, and alternative methods of
compliance for all pension plans under
ERISA section 110. The forms,
instructions, and related regulations are
also promulgated under the DOL’s
general regulatory authority in ERISA
sections 109 and 505.
The forms, schedules, and
instructions, in addition to providing an
alternative method of compliance under
ERISA section 110 for the mandatory
reporting requirements under section
103, also serve to help the DOL carry
out its statutory directives under
sections 506 and 513 of ERISA.
Specifically, section 506(a) of ERISA
authorizes the Secretary of Labor to
coordinate with other Agencies to avoid
unnecessary expense and duplication of
functions among Government agencies;
14 The elimination of the concept of Master Trust
Investment Account reporting and requiring
reporting by a master trust instead, whose burden
change is accounted for in the DFE Reporting
Changes row, results in a reduction in the number
of schedules attached. These reductions are
reflected in the rows specific to the schedule
affected.
VerDate Sep<11>2014
18:13 Jul 20, 2016
Jkt 238001
Change in
annual burden
hours
(thousands)
Frm 00009
Filers under
proposed
requirements
(thousands) 14
Annual cost
per affected
filer
$57.6
12.9
535.4
116.6
115.1
82.4
114.6
100.2
$502
128
¥10.1
2.5
¥94.2
22.0
61.1
0.0
8.9
6.7
¥1,137
374
69.6
623.0
0.0
1,869
37
39.0
349.1
54.1
336.9
116
133.0
24.4
1,179.2
217.9
0.0
1,076.7
336.9
1,024.2
395
24
the Form 5500 Annual Return/Report is
designed to simultaneously satisfy
annual reporting requirements for each
of the three Agencies and help the
Agencies more effectively and
efficiently (from both an Agency and a
public perspective) enforce the
provisions of ERISA and the Code.
Section 506(b) gives the DOL
responsibility for detecting and
investigating civil and criminal
violations of Title I of ERISA. The Form
5500 Annual Return/Report is one of the
important tools the DOL uses to
effectuate its responsibility to detect and
investigate such violations. Section
513(b)(2) of ERISA specifically directs
DOL to undertake research studies
relating to pension plans, including but
not limited to (A) the effects of this
subchapter upon the provisions and
costs of pension plans, (B) the role of
private pensions in meeting the
economic security needs of the Nation,
and (C) the operation of private pension
plans including types and levels of
benefits, degree of reciprocity or
portability, and financial and actuarial
characteristics and practices, and
methods of encouraging the growth of
the private pension system. The Form
5500 Annual Return/Report is the most
important overall tool DOL has to fulfill
this statutory imperative, and the
changes in the proposal are essential for
required research, as well as
enforcement.
The proposed changes to the Form
5500 Annual Return/Report and
regulations are designed to: (1)
Modernize financial information filed
regarding plans; (2) harmonize
information on fees and expenses that
plans pay to service providers with the
PO 00000
Filers under
current
requirements
(thousands)
Fmt 4701
Sfmt 4702
information that service providers
disclose to plans under 29 CFR
2550.408b–2; (3) enhance mineability of
data filed on the Form 5500 Annual
Return/Report; (4) require reporting by
all plans covered by Title I of ERISA
that provide health benefits, including
adding a new Schedule J (Group Health
Plan Information); and (5) focus filers on
compliance with certain ERISA and
Code provisions through new questions
on plan operations, service provider
relationships, and financial
management. If adopted, the changes
generally would apply for plan years
beginning on or after January 1, 2019.
See the regulatory impact analysis in
this document for a discussion of how
the proposed amendments and the
proposed form revision address these
goals. These revisions are being
proposed in conjunction with
recompeting the contract for operation
of the ERISA Filing and Acceptance
System (EFAST2), which is expected to
begin processing Plan Year 2019 forms,
beginning January 1, 2020. Certain
changes may be made earlier,
particularly those changes collecting
information under the Code or Title IV
of ERISA that do not require
amendment to DOL regulations to
implement (but not those related to
group health plans). The Notice of
Proposed Forms Revisions published
concurrently in today’s Federal Register
sets forth a comprehensive discussion of
form and instruction changes that relate
to this proposed regulation.
1. Section 2520.103–1
Section 2520.103–1 generally
describes the content of the Form 5500
Annual Return/Report as a limited
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exemption and alternative method of
compliance for ERISA-covered
employee benefit plans to satisfy annual
reporting requirements under Title I. To
accommodate the form, schedule, and
instruction changes in the Notice of
Proposed Forms Revisions, the
proposed regulatory amendments in this
document would update form and
schedule references in § 2520.103–1.
The proposal would also require all
plans that provide group health benefits,
regardless of size, to file the Form 5500
Annual Return/Report in accordance
with the instructions. Group health
plans, regardless of size, would not be
eligible to file the Form 5500–SF.15 The
proposal would also require pension
benefit plans with fewer than 100
participants that are required to file the
Form 5500 Annual Return/Report to file
the Schedule C (Service Provider
Information). It would also generally
require both large and small employee
stock ownership plans to file the
Schedule E (ESOP Information). Under
the proposal, only DFEs would be
required to complete the Schedule D to
report participating plan information;
plans would no longer be required to
file Schedule D because they would be
reporting detailed information about the
collective investment vehicles in which
they invest, including DFEs, on the
Schedule of Assets Held for Investment
and the Schedule of Assets Disposed of
During Plan Year. In order to improve
the transparency of reporting for plans
that participate in a master trust, the
proposal would require that master
trusts operate either on a calendar year
basis or on the same fiscal year as all the
plans that participate in the master
trust. In general, a master trust is a trust
maintained by a bank or similar
institution to hold the assets of more
than one plan sponsored by a single
employer or by a group of employers
under common control.
2. Section 2520.103–2
Section 2520.103–2 describes the
content of the Form 5500 Annual
Return/Report for a group insurance
arrangement (GIA) that files an annual
report under § 2520.104–43. The
amendments proposed in this document
include the requirement to file the
proposed new Schedule J. Group health
plans that are part of a GIA would
continue to be exempt from filing a
Form 5500 Annual Return/Report under
29 CFR 2520.104–43. For plans to be
eligible for this exemption, the GIA
would have to file a separate Schedule
15 The details of the limited reporting that would
be required for small fully insured group health
plans would be set forth in the instructions.
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J for each group health plan
participating in the GIA.
3. Section 2520.103–3, 2520.103–4, and
2520.103–1(e)
Section 2520.103–3 provides an
exemption for employee benefit plans
from certain annual reporting
requirements for plan assets held in a
common collective trust (CCT)
maintained by a bank, trust company, or
similar institution. Section 2520.103–4
provides a similar exemption for plan
assets held in a pooled separate account
(PSA) maintained by an insurance
carrier. Section 2520.103–1(e) provides
for special reporting rules for plans that
participate in a master trust. The Notice
of Proposed Forms Revisions would
alter the annual reporting requirements
for plans investing in CCTs, PSAs and
master trusts in significant ways to
increase the transparency of plan
investments in such pooled investment
vehicles. The DOL proposes revising
language to 29 CFR 2520.103–3, 29 CFR
2520.103–4, and 29 CFR 103–1(e) to
reflect those changes.
4. Section 2520.103–6
Section 2520.103–6 sets forth the
contents of the Schedule of Reportable
Transactions that is part of the Form
5500 Annual Return/Report. The
Schedule of Reportable Transactions is
required to be filed by plans and DFEs
that file their own Form 5500 Annual
Return/Report. This schedule is used to
report, subject to conditions and
exceptions, individual transactions or
series of transactions that involve more
than five percent of the current value of
the assets of the plan or DFE. The
existing rules require the schedule to
include the name of each party to a
‘‘reportable transaction.’’ The form and
instructions changes being published
concurrently with this document
include certain additions and
clarifications of the content of the
Schedule of Reportable Transactions
designed to improve the information
regarding parties involved in these
significant plan transactions or series of
transactions. 29 CFR 2520.103–6(d)(1)
sets forth the content requirements for
the Schedule of Reportable
Transactions. Rather than list all the
schedules’ content requirements, the
proposed amendment to paragraph
(d)(1) would simply reference the
schedules’ contents in the relevant Form
5500 Annual Return/Report
instructions.
5. Section 2520.103–8
Section 2520.103–8 implements the
limited-scope audit exemption
described in ERISA section 103(a)(3)(c).
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Specifically, this exemption allows a
plan to exclude from the examination
and report of an independent qualified
public accountant (IQPA) any statement
or information regarding plan assets
held by banks, similar institutions, or
insurance carriers if the statement or
information is prepared and certified by
the bank, similar institution, or
insurance carrier. The GAO and the
DOL’s Inspector General (DOL–OIG)
have recommended that the Department
revise section 2520.103–8 to improve
the information being reported by plan
administrators electing a limited scope
audit. The DOL agrees that better
information is needed by plan
administrators in connection with
limited scope audits. To address
concerns it has observed, as well as to
respond to the GAO and the DOL–OIG
recommendations,16 the DOL proposes
amending section 2520.103–8.
Currently, section 2520.103–8 requires
the bank or insurance company to
certify the accuracy and completeness of
the information being provided by a
written declaration which is signed by
a person authorized to represent the
bank or insurance carrier. The DOL
proposes to amend the requirements
under section 2520.103–8 to require that
the certification:
(1) Appear on a separate document
from the list of plan assets covered by
the certification;
(2) Identify the bank or insurance
company holding those plan assets that
are the subject of the certification;
(3) Describe the manner in which the
bank or insurance company is holding
the assets covered by the certification;
(4) State whether the bank or
insurance company is providing current
value information regarding the assets
covered by the certification, and if so,
state that the assets for which current
value is being certified are separately
identified in the list of assets covered by
the certification;
(5) If current value is not being
certified for all of the assets covered by
the certification, include a caution that
the certification is not certifying current
value information and the asset values
provided by the bank or insurance
company may not be suitable for use in
satisfying the plan’s obligation to report
current value information on the Form
5500 Annual Return/Report; and
(6) If the certification is being
provided by an agent on behalf of the
bank or insurance company, a statement
16 The Agencies discuss various GAO and DOL–
OIG recommendations with respect to the Form
5500 Annual Return/Report and the steps the
Agencies are taking that are consistent with the
recommendations in the Notice of Proposed Forms
Revisions published today in the Federal Register.
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certifying that the person providing the
certification is an authorized agent
acting on behalf of the bank or
insurance company and affirming that
the bank or insurance company is taking
responsibility for the accuracy and
completeness of the certification and the
underlying records used as a basis for
the information being certified.
6. Section 2520.103–10
Section 2520.103–10 identifies the
financial schedules that are required to
be included as part of the Form 5500
Annual Return/Report, which include
the ‘‘Schedule of Assets Held for
Investment’’ and ‘‘Schedule of Assets
Acquired and Disposed within the Plan
Year.’’ Paragraph (b)(1)(i) of § 2520.103–
10 sets forth the content requirements
for the Schedule of Assets Held for
Investment. The Notice of Proposed
Forms Revisions proposes certain
additions and clarifications to the
content of the Schedule of Assets Held
for Investment that are designed to
improve the information regarding
parties and assets involved in these
significant plan investments. Rather
than list all the required contents of this
schedule, the proposed amendment to
paragraph (b)(1)(i) of § 2520.103–10
would simply reference the contents of
the schedule listed in the relevant Form
5500 Annual Return/Report
instructions.
Paragraph (b)(2)(i) of § 2520.103–10
sets forth the content requirements for
the ‘‘Schedule of Assets Acquired and
Disposed of During the Plan Year.’’ This
proposed amendment reflects the
Agencies’ proposal to revise and rename
the current ‘‘Schedule of Assets
Acquired and Disposed of Within the
Plan Year.’’ Filers would be required to
report information on the disposal of
certain assets, regardless of when the
assets were acquired. The Notice of
Proposed Forms Revisions also includes
certain proposed additions and
clarifications of the content of the
Schedule of Assets Disposed of During
the Plan Year that are designed to
improve the information regarding
parties and assets involved in these plan
transactions. Rather than list the
required contents of the Schedule of
Assets Disposed of During the Plan
Year, the proposed amendment to
paragraph (b)(2)(i) of § 2520.103–10
would reference the contents of the
schedule listed in the relevant Form
5500 Annual Return/Report
instructions.
7. Section 2520.104–20 and 2520.104–
26
Section 2520.104–20 provides an
exemption from certain annual
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reporting and disclosure provisions of
ERISA for certain welfare plans that
cover fewer than 100 participants at the
beginning of the plan year and for
which benefits are paid exclusively
from the general assets of the employer
or employee organization sponsoring
the plan, exclusively through insurance,
or a combination of both. An expansion
of the annual reporting of information
regarding plans that provide group
health benefits is described in detail in
the Notice of Proposed Forms Revisions.
To implement those changes, the DOL
proposes eliminating the existing
regulatory exemption for welfare plans
that provide group health benefits (the
exemption will continue to apply to
other small welfare plans). Thus, small
plans that provide group health benefits
that are unfunded, or a combination of
unfunded and fully insured, will be
required to file an annual return/report,
including the new Schedule J, in
accordance with the requirements in the
proposed instructions. Under the
proposal, small fully insured plans will
only be required to answer basic
identifying and plan characteristic
information on the Form 5500 and
limited health plan benefit, insurance,
and participant information on the
Schedule J. Similarly, the limited
exception in § 2520.104–26 for certain
unfunded dues-financed welfare plans
maintained by employee organizations
would be amended to further limit the
exemption to those unfunded duesfinanced welfare plans that do not
provide health benefits.
8. Section 2520.104b–10
Section 104(b)(3) of ERISA provides
in part that, each year, administrators
must furnish to participants and
beneficiaries receiving benefits under a
plan materials that fairly summarize the
plan’s annual report. Section
2520.104b–10 sets forth the
requirements for the Summary Annual
Report (SAR) and prescribes formats for
such reports. The amendments being
proposed do not include any change to
the SAR requirements. However, in
order to facilitate compliance with the
SAR requirement, the DOL is updating
its cross-reference guide to correspond
to the line items of the Form 5500
Annual Return/Report and Form 5500–
SF. The cross-reference guide has also
been updated to reflect that defined
benefit pension plans that furnish an
annual funding notice to participants
and beneficiaries, pursuant to 29 CFR
2520.101–4, are not required to furnish
a SAR. This update reflects statutory
changes enacted as part of the Pension
Protection Act of 2006 extending the
annual funding notice requirements of
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47505
section 101(f) of ERISA. The crossreference guide, as before, would
continue to be an appendix to 29 CFR
2520.104b–10.
9. Technical and Conforming Changes
for Forms and Instructions
Various other technical and
conforming changes are being proposed
as part of the restructuring of the Form
5500 Annual Return/Report.
III. Regulatory Impact Analysis
Executive Order 12866 and 13563
Statement
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, and public health and
safety effects; distributive impacts; and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits,
reducing costs, harmonizing rules, and
promoting flexibility.
Under Executive Order 12866, it must
be determined whether a regulatory
action is ‘‘significant’’ and therefore
subject to the requirements of the
Executive Order and review by the
Office of Management and Budget
(OMB). Section 3(f) of Executive Order
12866 defines a ‘‘significant regulatory
action’’ as an action that is likely to
result in a rule’s (1) having an annual
effect on the economy of $100 million
or more, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs, or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order.
Pursuant to the terms of the Executive
Order, it has been determined that this
regulatory action is likely to have an
annual effect on the economy of $100
million or more. Therefore, this action
is being treated as ‘‘economically
significant’’ and subject to OMB review
under section 3(f)(1) of Executive Order
12866. The DOL accordingly has
undertaken to assess the costs and
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benefits of this regulatory action in
satisfaction of the applicable
requirements of the Executive Order and
provides herein a summary discussion
of its assessment.
TABLE 1—ACCOUNTING STATEMENT: ESTIMATED COSTS FROM CURRENT REPORTING REQUIREMENTS TO 2019
REPORTING REQUIREMENTS
[In millions]
Estimates
Category
Primary
estimate
Benefits:
Annualized Monetized ......................
($millions/year) .................................
Annualized Quantified ......................
Qualitative ................................................
Costs:
Annualized Monetized ......................
($millions/year) .................................
Annualized Quantified ......................
Qualitative .........................................
Low
estimate
High
estimate
Year
dollar
Discount
rate
(percent)
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
372.6
366.2
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The Form 5500 Annual Return/Report
is the principal source of information
and data available to the Agencies
concerning the operations, funding, and
investments of pension and welfare
benefit plans covered by ERISA and the
Code. Accordingly, the Form 5500
Annual Return/Report is essential to
each Agency’s enforcement, research,
and policy formulation programs and is
a source of information and data for use
by other federal agencies, Congress, and
the private sector in assessing employee
benefit, tax, and economic trends and
policies. The Form 5500 Annual Return/
Report also serves as the primary means
by which the operations of plans can be
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Period
covered
The proposal pursues five main objectives: (1) Improve reliability of reporting and transparency of financial products and investments acquired by plans, especially alternative investments, hard-tovalue assets, and investments through collective investment vehicles; foster ongoing monitoring
of retirement plans by employers, plans, participants and beneficiaries, and policymakers; and
better leverage the ability of the Agencies to fulfill their statutory oversight role. (2) Establish better compliance awareness and education, provide critical data for Agency oversight, collect information needed for Congressionally mandated reports on group health plans, and satisfy certain
reporting requirements under sections 2715A and 2717 of the PHS Act as added by the Affordable Care Act and incorporated into ERISA section 715. (3) Standardize and structure the Form
5500 Annual Return/Report to make key retirement and health and welfare benefit data, including information on assets held for investment, more available and usable in the electronic filing
and data environment, which, consistent with the Administration’s ‘‘Smart Disclosure’’ effort, to
enable private sector data users to develop more individualized tools for employers to evaluate
their retirement plans and for employees to manage their retirement savings. (4) By harmonizing
reporting on Schedule C of the Form 5500 Annual Return/Report with the now final disclosure requirements in DOL’s regulation at 29 CFR 2550.408b–2, provide a powerful tool and economic
basis for improved evaluation of investment, recordkeeping, and administrative service arrangements, including potential innovative uses of Form 5500 Annual Return/Report data by private
sector companies that have created tools for evaluating and benchmarking employee benefit
plans, provide tools to benefit participants where failures to disclose indirect compensation received by a service provider have resulted in corrective monetary recoveries to plans, as well as
minimize filer confusion with the harmonization of reporting and disclosure requirements. (5) Enhance reporting on plan compliance to improve plan operations, protect participants and beneficiaries and their retirement benefits, and educate and provide annual discipline for plan fiduciaries.
Background and Need for Regulatory
Action
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Units
........................
........................
........................
........................
........................
........................
........................
........................
2016
2016
........................
........................
monitored by plan participants and
beneficiaries and the general public.
As discussed in the Notice of
Proposed Forms Revisions published
concurrently with this document and
below, the DOL has received several
reports from the GAO, the DOL–OIG,
and the ERISA Advisory Council
indicating the need for substantive
changes to annual reporting forms and
regulations. TIGTA has also suggested to
the IRS that substantive changes are
needed. In response to these reports, the
continued shift from DB to DC plans,
and legislative and regulatory changes
that have been issued since the last
major revision to the Form 5500 Annual
Return/Report, the DOL has determined
that the substantial revisions to the
reporting scheme discussed earlier in
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7
3
........................
........................
2019 and later.
2019 and later.
this preamble and in the Notice of
Proposed Forms Revisions, published
concurrently, are necessary and
appropriate. These changes will ensure
that the Agencies, plan participants and
beneficiaries and the general public can
monitor the operations of employee
benefit plans. With their help, the Form
5500 Annual Return/Report will
continue to serve its essential functions.
As described earlier in this document,
the proposed revisions to the Form 5500
Annual Return/Report reflect priorities
of and efforts by the Agencies to
improve the quality of the information
collected, while limiting wherever
possible, especially for small pension
plans invested in easy to value assets
and plans that provide group health
benefits that have fewer than 100
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participants that are fully insured, the
overall burden of the statutory reporting
requirements and the forms. To
accomplish this goal, the Agencies have
pursued five objectives. The need for
regulatory action to achieve these
objectives is discussed below.
(1) Modernizing financial
information.
Modernizing the Schedule H Balance
Sheet and Income Statement: The
financial statements contained in the
current Schedule H (Large Plan
Financial Information) and Schedule I
(Small Plan Financial Information) are
based on data elements that have
remained largely unchanged since the
Form 5500 Annual Return/Report was
established in 1975. Many investments
in alternative and hard-to-value assets
and those held through collective
investment funds that are frequently
held by plans and the investment
industry today were not as prevalent in
1975. Thus, they do not fit squarely into
any of the existing Schedule H reporting
categories. Further, some of these
investments in alternative and hard-tovalue assets, including those held
through collective investment funds, are
sufficiently complex that plan
administrators and plan accountants
may not completely understand how
they fit into the balance sheet reporting
on the Form 5500 Annual Return/
Report. This results in inconsistent
financial reporting by filers because
certain types of investments may
arguably fall into one or more
categories. For example, a ‘‘hedge’’ fund
could potentially be reported as a
limited partnership or some other type
of collective investment entity, or could
be reported in a different reporting
category based on the primary assets
held through a particular type of
collective investment vehicle.
Additionally, many filers simply
report investments that do not readily fit
into one of the existing categories in
‘‘Other.’’ For example, large retirement
plans reported having $153 billion in
assets that they categorized as ‘‘Other’’
on the Schedule H balance sheet for
2013. DFEs reported an additional
approximately $407 billion in assets as
‘‘Other’’ for the 2013 plan year. In order
to determine why there is a substantial
amount in ‘‘Other,’’ the Agencies now
have to rely on the current, unstructured
Schedule H Line 4i Schedules of Assets,
which might not specifically indicate
the necessary details, or the Agencies
would need to contact the filer for the
information. The types of alternative
and hard-to-value assets that might be
reported in ‘‘Other’’ include: Options,
index futures, state and municipal
securities, hedge funds, and private
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equity. Some of these asset types can be
fairly complex and merit more rather
than less transparency in order to
determine the overall financial health of
the plan. The inability to distinguish
these types of assets on the Form 5500
Annual Return/Report reduces the
form’s usefulness for policy analysis
and research as well for monitoring
plans for enforcement purposes.
A recent GAO report stated, for
example, that, ‘‘while hedge funds and
private equity have very different risk,
return, and disclosure considerations
from state and municipal securities, all
of these investments could be included
in the ‘‘other plan asset’’ category.’’ 17
GAO also noted that the plan asset
categories on the Schedule H are not
representative of current plan
investments, and provide little insight
into the investments themselves, the
level of associated risk, or structures of
the investments.18 The DOL–OIG also
recommended that the Agencies revise
the Form 5500 Annual Return/Report to
improve reporting of hard-to-value
assets and alternative investments.19
Based on their own assessment and
experience in research and enforcement
and the use of the Form 5500 Annual
Return/Report to support these critical
agency functions and responsibilities, as
well as in response to these
recommendations, as discussed in detail
earlier in this document, the Agencies
are proposing to make changes to the
Schedule H balance sheet and income
statement.
Modernizing the Schedule H, Line 4i
Schedules of Assets: As discussed in
detail in the Notice of Proposed Forms
Revisions published simultaneously
with this document, the Agencies are
proposing structural, data element and
instruction changes to the current
Schedule H, Line 4i(1) Schedule of
Assets Held for Investment and Line
4i(2) Schedule of Assets Acquired and
Disposed of Within Year. These
schedules are filed by plans required to
file the Schedule H and by certain DFEs.
The Schedules of Assets are a central
element of the financial disclosure
structure of ERISA. They are the only
place on the Form 5500 Annual Return/
Report where plans are required to list
individual plan investments identified
by major characteristics, such as issue,
maturity date, interest rate, cost and
current value. As such, they are the only
part of the Form 5500 Annual Return/
17 GAO, Private Pensions: Targeted Revisions
Could Improve Usefulness of Form 5500
Information, at 12.
18 Id. at 11–12.
19 EBSA Needs to Provide Additional Guidance
and Oversight to ERISA Plans Holding Hard-ToValue Alternative Investments, at 4, 18, and 19.
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Report that can be used to evaluate the
year-to-year performance, liquidity, and
risk characteristics of a plan’s
individual investments.
The current reported information,
however, suffers from several
shortcomings. First, this information is
not reported in a data-capturable format.
Only an image or picture of the
attachments that are currently filed as
non-standard attachments to filers’
electronic Form 5500 Annual Return/
Report filings is available through the
EFAST2 public disclosure function.
Second, the Line 4i Schedules of Assets
are not always found in the same place
in each annual return/report. For
example, the Line 4i Schedules of
Assets are often incorporated in the
larger audit report of the plan’s IQPA
that itself is filed as a nonstandard
attachment to the Form 5500 Annual
Return/Report. Third, the schedules do
not require a standardized method for
identifying and describing assets on the
Line 4i Schedules. Therefore, under the
current reporting rules, the same stock
or mutual fund may be identified with
various different names or
abbreviations.
The creation of more detailed and
structured Schedules of Assets is a
specific recommendation of the DOL–
OIG and the GAO.20 The proposed
changes to the Schedules of Assets are
designed to remedy the shortcomings
described above. In addition, data
capturability of the Line 4i Schedules of
Assets will make it much easier and
more efficient to monitor plan holdings
as computer programs can read and
analyze the data much more efficiently.
It will allow the Agencies and the
interested public to monitor a larger
number of pension plans and their asset
allocations. The existence of a group of
private companies that are transforming
the Line 4i Schedule of Assets Held for
Investment of the larger pension plans
into data-capturable information and
using it to compare plan investment
menus and investment allocations is a
clear indication that plans sponsors and
their service providers also are
interested in having access to these data.
For example, one of these companies
sent a letter to DOL stating that they
believe that the information on the Form
5500 Annual Return/Report is very
useful in ‘‘helping the agency
understand the performance and design
of retirement plans in the market place’’
and that the data availability fosters
‘‘third party data collection and
20 See EBSA Needs to Provide Additional
Guidance and Oversight to ERISA Plans Holding
Hard-to-Value Alternative Investments, at 17;
Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 37.
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evaluation efforts that in turn help
protect retirement plan participants.’’ 21
Plan sponsors can use this information
to see how their investment menus
compare to similarly situated plans and
service providers often use this
information to identify plans with
underperforming investments in order
to attract new business. This can lead to
more competition and improved plan
performance, which will ultimately
benefit participants.
Changes to DFE Reporting: Under the
current reporting rules, DFEs are
permitted, or in some cases required, to
file their own Form 5500 Annual
Return/Report. Generally, pension plans
that invest in DFEs only are required to
report their interest in the DFE but do
not have to report detailed information
regarding the underlying investments in
the DFE. Such plans are required to file
a Schedule D on which the plans
identify each DFE in which they invest
and the year-end values of the plans’
interests. Although DFEs file their own
Form 5500 Annual Return/Report, only
Master Trust Investment Accounts
(MTIAs) and entities meeting the
conditions of DOL regulation 29 CFR
103–12 (103–12 IEs) are required to
include as part of their own Form 5500
Annual Return/Report, detailed asset
holdings on the Schedule H, Line 4i
Schedules of Assets. Insurance company
pooled separate accounts (PSAs) and
bank common/collective trusts (CCTs),
which together account for 32 percent of
large plans’ reported DFE holdings, do
not report such information, nor are the
investing plans required to report it,
although the information is required by
regulation to be provided by PSAs and
CCTs to investing plans on an annual
basis.
The Agencies have encountered, and
researchers have reported to the DOL,22
difficulties matching plans’ investments
in DFEs reported by investing plans and
DFEs in which the plans and other DFEs
are participating. Some of this stems
from incomplete, unreliable, or
inconsistent data on Schedule D filings.
For example, for 2013, about 57 percent
of plans and 17 percent of DFEs that
filed a Schedule D and reported nonzero amounts of interest in DFEs on
Schedule H have at least one
discrepancy in reporting of more than
$1,000 between the value of the
21 See August 23, 2010 Comment Letter from
Ryan Alfred, President, BrightScope, Inc. Re:
Proposed Extension of Information Collection, Form
5500 https://www.reginfo.gov/public/do/
PRAViewDocument?ref_nbr=201009-1210-002).
22 See ‘‘Invisible Pension Investments,’’ Peter J.
Wiedenbeck, Rachael K. Hinkle & Andrew D.
Martin (https://sites.lsa.umich.edu/admart/wpcontent/uploads/sites/127/2014/08/vatr13.pdf).
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investment in a DFE on their Schedule
D and their Schedule H. There might be
some legitimate reasons for these
discrepancies, e.g. different plan year
dates, but these discrepancies make it
difficult to verify filing accuracy.
Another more troubling issue is that
there are more than 7,000 plan filings
for 2013 that report investments in DFEs
that cannot be directly linked to any
applicable DFE filings. This problem
primarily involves CCTs and PSAs.
Investments in these unlinked DFEs
account for more than $382 billion in
assets. A serious consequence of not
being able to link these plan filings and
assets to DFE filings is that the Agencies
and participants do not get information
on their plan investments and thus are
not able to monitor these investments.
GAO has recommended that the
Agencies take steps to address the
problem of incomplete or inaccurate
matching between plan and DFE
filings.23 Therefore, as discussed in
detail earlier in this document, the
Agencies are proposing to revise the
reporting structure of both Schedule H
and the Line 4i Schedules of Assets,
with corresponding changes to Schedule
D, that are intended to ensure that the
Agencies, plan fiduciaries, plan service
providers, and other users of data have
the tools to create a more complete
picture of plans’ investment in pooled
investment vehicles.
Changes to Financial Information
Reporting for Small Plans: Small
pension plans that are invested in
‘‘eligible’’ plan assets and otherwise
meet certain requirements are eligible to
file Form 5500–SF, which was
established in part to comply with
provisions of the PPA requiring a
simplified form of reporting for plans
with fewer than 25 participants.24
Currently, the Form 5500–SF does not
require filers to breakout assets on the
balance sheet into specific categories.
Small plans that are not eligible to file
the Form 5500–SF because they are
invested in hard-to-value and
alternative investments currently file
Schedule I, but the Schedule I does not
require small plan filers to provide
detailed plan asset information and does
not provide significantly more useful
financial information than the Form
5500–SF with respect to alternative and
hard-to-value assets.
The lack of specific questions on the
investment activity of small pension
plans, which comprise over 80 percent
23 See, GAO Private Pensions: Targeted Revisions
Could Improve Usefulness of Form 5500, at 14–15.
24 See section 1103(b) of the Pension Protection
Act of 1996, Public Law 109–280, 120 Stat. 780
(2006).
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of filers, impairs the usefulness of the
Form 5500 Annual Return/Report as a
tool to obtain a meaningful picture of
small plan investments, especially
investments in hard-to-value and
alternative investments. As the GAO has
noted, the limited financial information
provided on the Schedule I creates a
challenge for participants, beneficiaries,
oversight agencies, researchers, and
other users of the Form 5500 Annual
Return/Report or Form 5500 Annual
Return/Report data.25 Therefore, as
discussed in detail in the Notice of
Proposed Forms Revisions published
today, under the proposal, Form 5500–
SF filers would be required to provide
a modest additional breakout of plan
investments on the balance sheet. The
proposal also would eliminate the
Schedule I for small plans that are not
eligible to file the Form 5500–SF,
predominantly because they are
invested in hard-to-value and
alternative investments, including
employer securities. Under the
proposal, such plans instead would be
required to complete Schedule H and
the Line 4i Schedules of Assets. These
changes are designed to ensure that the
Agencies are able to collect critical
information regarding small plan
investments in hard-to-value and
alternative investments.
Although the proposed elimination of
Schedule I and the addition of basic
investment category information to the
Form 5500–SF balance sheet would
result in additional reporting for those
small plans invested in hard-to-value
and alternative investments, those small
plans with simple investment portfolios
would not see a significant increase in
their annual reporting burden. In light
of changes in the financial environment
and increasing concern about
investments in hard-to-value assets and
alternative investments, however, the
Agencies believe that requiring the more
detailed financial information regarding
hard-to-value investments on the
Schedule H is important for regulatory,
enforcement, and disclosure purposes
for those small plans with more
complex portfolios that include hard-tovalue or alternative investments. The
inherent increased risk posed by hardto-value or alternative investments
affects participants in small plans as
well as large plans, but without these
proposed revisions, the participants in
small plans are left without the
protection afforded participants in large
plans that comes from the reporting that
large plans are already required to do.
Although such small plans would be
25 GAO Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 18.
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required to complete the Schedule H
instead of the Schedule I, including the
Schedule H Line 4i(1) and 4i(2)
Schedules of Assets, eligible small
plans, as under the current rules, would
still be eligible for a waiver of the
annual examination and report of an
IQPA under 29 CFR 2520.104–46, and
the number count required to determine
eligibility would be changed from the
number of participants at the beginning
of the plan year to the number of
participants with account balances at
the beginning of the plan year.
(2) Updating fee and expense
information on plan service providers
with a focus on harmonizing annual
reporting requirements on Schedule C
with DOL’s final disclosure
requirements at 29 CFR 2550.408b–2.
The current rules for reporting
indirect compensation on the Schedule
C as part of the Form 5500 Annual
Return/Report, including the limited
reporting option for ‘‘eligible indirect
compensation,’’ were implemented
starting with the 2009 forms.26 Those
changes were part of a three-pronged
regulatory initiative that included the
DOL’s regulations under 29 CFR
2550.408b–2 and participant-level
disclosure regulations under 29 CFR
2550.404a–5. At the time the 2009
Schedule C rules were finalized, neither
the ERISA section 408b–2 regulation nor
the ERISA section 404a–5 regulation
had been promulgated. Some elements
of the 2009 Schedule C, for example, the
eligible indirect compensation
provisions, were adopted in light of the
fact that it was not certain at the time
what the ERISA section 408b–2 final
rule would require. Those provisions
were also meant to respond to concerns
from the regulated community,
especially large plan service providers,
about having to create two different
record-keeping systems to meet the
various requirements of the Form 5500
Annual Return/Report and disclosures
required under 408b–2 should the later
promulgated provisions differ from the
Form 5500 reporting requirements on
indirect compensation.
Now that EBSA has promulgated the
ERISA sections 408b–2 and 404a–5 final
regulations, there is a need to harmonize
fee reporting under the Schedule C and
ERISA section 408b–2 regulations to: (1)
Make it easier to understand the
disclosure and reporting rules regarding
indirect compensation; (2) improve
quality of data by minimizing any filer
confusion that might result from
differences in the two requirements and
having all the compensation required to
be disclosed to be reported on the
26 See
72 FR 74731 (Nov. 16, 2007).
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Schedule C; (3) reduce burden by
synchronizing the record-keeping that
would be required for ERISA section
408b–2 regulations before-the-fact
disclosure with Schedule C’s after-thefact reporting; and (4) make the
information easier to understand for end
users of the forms by bringing
consistency between the service
provider fees disclosed to the plan
fiduciaries and the service provider fees
reported to the Agencies and made
public. In this regard, a recent GAO
report stated that some filers advised
that there was confusion over what
Schedule C requires to be reported,
including in comparison to what is
required under the ERISA section 408b–
2 regulations disclosure scheme.27
Therefore, as discussed in detail earlier
in this document, the Agencies are
proposing various changes to the
Schedule C to better harmonize it with
the disclosure requirements under the
final ERISA section 408b–2 regulation.
Among other changes, the Agencies are
proposing to eliminate the concept of
‘‘eligible indirect compensation’’ on
Schedule C in part because ‘‘eligible
indirect compensation’’ was created
prior to the finalization of ERISA
section 408b–2 rules to address
concerns about possible future
inconsistencies that are no longer
applicable. Instead of being able to rely
on the construct of ‘‘eligible indirect
compensation’’ to report only the name
of the person providing the disclosures
to the plan administrator, the proposal
would require filers to report all types
of compensation for ERISA section
408b–2 ‘‘covered’’ service providers.
This change will also help address
concerns raised by other data sources on
service provider compensation about
the completeness of Schedule C
compensation data. A recent survey by
Deloitte Consulting LLP for the
Investment Company Institute reported
fees paid by 401(k) plans that greatly
exceeded fees reported on the Schedule
C at every asset level.28
The proposed forms revisions, and
implementing DOL regulations, would
also require small pension plans that are
not eligible to file the Form 5500–SF
and welfare plans that are funded with
a trust with fewer than 100 participants
to file the Schedule C. Currently, only
large pension plans and large welfare
plans that are not unfunded or insured
(e.g., funded using a trust) must file the
27 See GAO Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 22.
28 Deloitte Consulting LLP (2014, August). Inside
the Structure of Defined Contribution/401(k) Plan
Fees, 2013: A Study Assessing the Mechanics of the
‘all-in’ Fee. (Available at https://www.ici.org/pdf/
rpt_14_dc_401k_fee_study.pdf).
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47509
Schedule C, thus excluding almost 90
percent of current pension plan filers
and over 80 percent of current welfare
plan filers from having to disclose
service provider fees. The DOL
recognizes the burdens small plans face
in complying with reporting obligations,
but must weigh them against the market
efficiencies that can be gained through
improved transparency and fee
disclosure. The DOL therefore proposes
to require small pension plans to file
Schedule C only if they do not meet the
eligibility conditions for filing the Form
5500–SF, which predominantly are
those pension plans that are invested in
alternative or hard-to-value assets. The
DOL proposes to require welfare plans
that offer group health benefits with
fewer than 100 participants to file
Schedule C only if they are not
unfunded or insured (e.g., funded with
a trust), because those plans are most
likely to experience financial
difficulties. Defined contribution
pension plan Form 5500–SF filers, as
well as defined contribution pension
plan Form 5500 Annual Return/Report
filers required to complete the Schedule
H, would also have to attach the
comparison chart that is required to be
furnished to participants under the
DOL’s regulation at 29 CFR 2550.404a–
5. Although the comparison chart would
not be attached in a ‘‘structured’’ format,
it would provide, with a minimal
burden increase, a picture of the
investment earnings and fees for defined
contribution pension plans, which
constitute the majority of small plan
filers.
Requiring those small pension plans
that are not eligible to file the Form
5500–SF and welfare plans that include
group health benefits with fewer than
100 participants that are not unfunded
or insured (e.g., funded with a trust) to
complete the Schedule C as part of their
Form 5500 Annual Return/Report filing,
and requiring Form 5500–SF defined
contribution pension plan filers to
include the 404a–5 comparison chart
should address some of the GAO’s
concerns that service provider fee
information is incomplete because plans
with fewer than 100 participants are not
currently required to file information
about indirect compensation received
by the plans’ service providers.29 Both
the proposed Schedule C information
for small plans not eligible to file the
Form 5500–SF and the 404a–5
information would also enable sponsors
of small plans to more easily compare
fee information between their plans and
increase competition for these services.
29 See GAO Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 25.
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In addition, financial information
reporting could be better aligned with
recently adopted disclosure rules to
ensure that all fees are reported by the
plans.30
(3) Enhancing usability of data filed
on the annual return/report.
E-filing, as well as advances in
information technology, have changed
both the regulated community’s and
government’s ability to use the Form
5500 Annual Return/Report data. The
government can now provide the data in
a much more timely and comprehensive
manner. As a result, the Form 5500
Annual Return/Report data sets are
posted on the Internet, updated
monthly, and the images of the
individual filings and attachments are
made available at no cost to the
requester.31 This has allowed the public
as well as the Agencies to monitor plan
investments and trends more efficiently.
Several private companies have started
to build data sets and applications using
the Form 5500 Annual Return/Report
data to compare plans and service
providers and make these services
available to plan sponsors and service
providers. These developments can lead
to better review of plan investments and
increased competition, ultimately
benefiting plans and participants.
The usefulness of the Form 5500
Annual Return/Report data for
comprehensive plan monitoring is
dependent on comparable data being
available for all or most plans and on
the data being available in datacapturable formats. The current
financial reporting structures and
requirements, however, do not allow the
data to be utilized to the fullest extent.
As stated above, the Schedule H Line 4i,
Schedules of Assets, and the Line 4j,
Schedule of Reportable Transactions, as
well as other attachments to various
schedules (including Schedules MB and
SB) are not filed in a standardized
electronic format and therefore cannot
be searched and analyzed electronically.
As a result, the Agencies, other
governmental users, including
policymakers, and the public have
difficulty accessing and making most
effective use of key information about
pension plan investments.
The proposed requirement for filers to
complete a standardized Schedule H
Line 4i(1), Schedule of Assets Held for
Investment and Line 4i(2) Schedule of
Assets Disposed of by End of Plan Year,
30 Id.
at 50.
31 Requests
for individual filings and attachments
are available at no cost to the requester. Bulk
requests are available at a minimal cost to the
requester. See Guide to Submitting Requests Under
the Freedom of Information Act, Section VIII
(https://www.dol.gov/dol/foia/guide6.htm).
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in a data-capturable format would
address some of the critical gaps in
available data on pension plan
investing, which accounts for over $7.87
trillion of United States savings. The
Agencies’ proposal to standardize the
Schedule H, Line 4i Schedules of
Investments also is responsive to the
DOL–OIG’s recommendation that the
Agencies create a searchable reporting
format for the Schedule H, Line 4i
Schedules of Assets and otherwise
increase the accessibility of Form 5500
Annual Return/Report data, particularly
information on hard-to value assets and
multiple-employer plans.32
In addition, this proposal would
enhance the usability of data by
replacing some of the attachments to the
various schedules (including some
attachments to Schedules MB and SB) 33
with text fields and having filers report
required information in text fields on
the face of the forms and on schedules
instead of requiring this information to
be filed as non-standard attachments.
The Agencies took into account the size
and complexity of the attachments in
determining which should be text fields
and which should continue to be
attachments, despite the overarching
goal of improving data usability for the
complete form. In a few cases,
especially for detailed actuarial charts,
the Agencies determined that requiring
standardized attachments or requiring
the information to be provided on the
face of the forms and schedules could
potentially be overly difficult, costly,
and complex, and therefore the costs
would outweigh the benefits.
Further improvements would be
realized from the proposal’s
requirement that other currently
unstructured data or new elements
would also be collected as structured
data. These include the lists of
employers participating in multipleemployer and controlled group plans
required to be attached to the Form 5500
Annual Return/Report or Form 5500–
SF; the Schedule H, Line 4a Schedule of
Delinquent Contributions, and Schedule
H, Line 4j Schedule of Reportable
Transactions. Having information on
delinquent participant contributions
and reportable transactions in a
‘‘structured’’ data format would benefit
32 See EBSA Needs to Provide Additional
Guidance and Oversight to ERISA Plans Holding
Hard-to-Value Alternative Investments, at 17; see
also GAO Private Pensions: Targeted Revisions
Could Improve Usefulness of Form 5500
Information, at 37; GAO, Federal Agencies Should
Collect Data and Coordinate Oversight of Multiple
Employer Plans, at 30.
33 The proposed Schedule E, which is based in
large part on the Schedule E from 2008 and earlier,
would use text fields rather than attachments for
some of the previously asked questions.
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the Agencies by allowing them to
identify common types of violations
across plans, more quickly respond to
any identified issues, and better
determine areas where more
enforcement and encouragement of
compliance and education is needed.
Having this data reported in a structured
format would also benefit the Agencies
and the general public by identifying
the universe of employers that
participate in multiple-employer and
controlled group plans and allowing
them to quickly identify plan sponsors
that might be affected by adverse market
conditions or financial distress.
In summary, advances and
developments in technology allow data
users to run increasingly sophisticated
analyses using the existing Form 5500
Annual Return/Report data, but this is
dependent on the availability of these
data in a data-capturable format. In
addition to researchers interested in
studying trends in the employee
benefits industry, some companies have
reached out to the DOL to request that
Form 5500 Annual Return/Report data
be collected in a more standardized and
consistent format.34 If these data were
available in such a format, researchers,
businesses and plan professionals could
use the data more efficiently to inform
employers and participants on plan
structures, operations, and finances.
Particularly important in a constrained
federal budgetary environment, such
data will allow EBSA’s enforcement
staff to monitor many more employee
benefit plans in a systematic and
efficient way, producing more fruitful
investigations and reducing the
inefficiencies and disruptions resulting
from unnecessary investigations.
(4) Requiring reporting by all group
health plans covered by Title I of ERISA,
including adding a new Schedule J
(Group Health Plan Information).
The enactment of the Affordable Care
Act expanded DOL’s already growing
oversight and regulatory responsibilities
with respect to the provision of group
health benefits to workers in private
sector employer-sponsored group health
plans. Generally most welfare plans that
include group health benefits that have
fewer than 100 participants do not
currently file the Form 5500 Annual
Return/Report. The current regulation
exempts small plans from the
requirement to file if they are unfunded,
fully insured or combination unfunded/
fully insured.35 The current lack of
information collected on the Form 5500
34 See August 23, 2010 Comment Letter from
BrightScope Re: Proposed Extension of Information
Collection, Form 5500 (https://www.dol.gov/EBSA).
35 29 CFR 2520.104–20.
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Annual Return/Report from group
health plans diminishes the
effectiveness of EBSA’s ability to
develop health care regulations and
complicates the DOL’s ability to enforce
such regulations and educate plan
administrators regarding compliance.
Congress, DOL, other governmental
users, private researchers, service
providers, and other members of the
regulated community currently are not
able to confidently estimate even the
most basic information regarding group
health plans, such as the total number
of plans that exist or trends that are
occurring in the marketplace.
The Affordable Care Act requires the
Secretary of Labor to provide Congress
with an annual report containing
general information on self-insured
employee health benefit plans and
financial information regarding
employers that sponsor such plans. This
‘‘Annual Report on Self-Insured Group
Health Plans,’’ by the terms of the
statute, must use data from the Form
5500 Annual Return/Report. However,
as noted above, those small plans that
are self-insured and do not use a trust
are not required to file the Form 5500
Annual Return/Report with the DOL
and the Form 5500 Annual Return/
Report only collects limited information
from self-insured plans that do file.36
Also, as the 2015 Report states, ‘‘health
benefits may be reported together with
certain other benefits, such as disability
or life insurance benefits, on a single
Form 5500 Annual Return/Report. This
makes it difficult to distinguish how the
different benefits are financed.’’ 37 To
fulfill its responsibility to Congress, the
DOL has developed an algorithm to try
to infer the funding method for plans
that file. This methodology, however,
may not accurately identify self-insured
plans and can only draw information
from the Form 5500 Annual Returns/
Reports filed, which are a limited
sample, and the methodology may
compromise the validity of any
conclusions drawn from the report and
any resulting policy prescriptions.
In addition, sections 2715A and 2717
of the PHS Act, as added by the
Affordable Care Act and incorporated
into ERISA section 715, include
important new reporting requirements
for group health plans subject to ERISA.
Specifically, section 2715A of the PHS
Act incorporates the transparency
36 Only a little over 20,000 self-insured and
approximately 4,000 mixed self-insured health
plans file annually with the DOL under the current
reporting scheme. See ‘‘Report to Congress: Annual
Report on Self-Insured Group Health Plans,’’ March
2015, page iii (available at https://www.dol.gov/ebsa/
pdf/ACAReportToCongress2015.pdf).
37 Id. at v.
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provisions of section 1311(e)(3) of the
Affordable Care Act to require nongrandfathered group health plans and
health insurance issuers offering nongrandfathered group or individual
health insurance coverage to make
available to the public, and the
government a host of information on
health plan enrollment and claims,
including: (1) Claims payment policies
and procedures; (2) periodic financial
disclosures; (3) data on enrollment and
disenrollment; (4) data on the number of
denied claims; (5) data on rating
practices; (6) information on costsharing and payments with respect to
any out-of-network coverage; (7)
information on enrollee and participant
rights; and (8) other information as
determined by the Secretary. Moreover,
section 2717 of the PHS Act generally
requires non-grandfathered group health
plans and health insurance issuers
offering non-grandfathered group or
individual health insurance coverage to
report annually whether the benefits
under the plan: (A) Improve health
outcomes through the implementation
of activities such as quality reporting,
effective case management, care
coordination, chronic disease
management, and medication and care
compliance initiatives, including
through the use of the medical homes
model as defined for purposes of section
3602 of the Affordable Care Act, for
treatment or services under the plan or
coverage; (B) implement activities to
prevent hospital readmissions through a
comprehensive program for hospital
discharge that includes patient-centered
education and counseling,
comprehensive discharge planning, and
post discharge reinforcement by an
appropriate health care professional; (C)
implement activities to improve patient
safety and reduce medical errors
through the appropriate use of best
clinical practices, evidence based
medicine, and health information
technology under the plan or coverage;
and (D) implement wellness and health
promotion activities.
These regulations propose conforming
amendments in 29 CFR 2590.715–
2715A and 29 CFR 2590.715–2717 to
clarify that compliance with the
reporting requirements in 29 CFR
2520.103–1 (including filing any
required schedules to the annual report)
by plans subject to ERISA would satisfy
the reporting requirements of PHS Act
section 2715A and 2717,38 incorporated
38 The Treasury Department and the IRS intend to
publish proposed regulations in 26 CFR 54.9815–
2715A and 54.9815–2717 clarifying that group
health plans required to file an annual report
pursuant to section 104 of ERISA that comply with
the reporting requirements in 29 CFR 2520.103–1
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47511
in ERISA through ERISA section
715(a)(1).39 As explained in FAQs
issued August 11, 2015,40 HHS
proposed an information collection for
public comment in connection with the
transparency provisions of section
1311(e)(3) of the Affordable Care Act.
The proposed data collection would
collect certain information from
Qualified Health Plan (QHP) issuers in
Federally-facilitated Exchanges and
State-based Exchanges using the federal
eligibility and enrollment platform. The
HHS proposal explained that other
reporting requirements would be
proposed at a later time, through a
separate rulemaking with respect to
non-Exchange coverage, including those
that extend to health insurance issuers
offering non-grandfathered group and
individual health insurance coverage
outside of Exchanges and nongrandfathered group health plans
(including large group and self-insured
health plans).
This rulemaking proposes
transparency and quality reporting for
non-grandfathered group health plans
under PHS Act sections 2715A and
2717, as incorporated in ERISA. It takes
into account differences in markets and
other relevant factors and reduces
unnecessary duplication. The DOL is
proposing to collect and provide highvalue data to participants, beneficiaries,
and regulators, such as information
about benefits and plan design
characteristics, funding, grandfathered
plan status, rebates received by the plan
(such as medical loss ratio rebates),
service provider information (including
information regarding any third party
administrators, pharmacy benefit
managers, mental health benefit
(including filing any required schedules to the
annual report) would satisfy the reporting
requirements of sections 2715A and 2717 of the
PHS Act, as incorporated in the Code. Group health
plans that are not required to file an annual report
pursuant to section 104 of ERISA but that are
subject to sections 2715A and 2717 of the PHS Act
as incorporated in the Code, will not be required
to do any reporting to comply with sections 2715A
and 2717 of the PHS Act, as incorporated in the
Code, unless and until the Treasury Department
and the IRS issue subsequent further guidance or
rulemaking regarding any such reporting by such
plans.
39 Nonfederal governmental plans (as defined in
PHS Act section 2791(d)(8)(C)) and health
insurance issuers (as defined in PHS Act section
2791(b)(2) and ERISA section 733(b)(2)) are not
required to file annual reports pursuant to ERISA
section 103. Accordingly, any reporting required of
such plans and issuers to satisfy PHS Act sections
2715A and 2717 will be addressed separately by
HHS in future rulemakings and/or guidance.
40 See FAQs about Affordable Care Act
Implementation (Part XXVIII), available at
www.dol.gov/ebsa/faqs/faq-aca28.html and
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/Downloads/ACA-FAQ-Part-XXVIIItransparency-reporting-final-8-11-15.pdf.
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managers, and independent review
organizations), information on any stop
loss insurance, claims processing and
payment information (including number
of claims filed, paid, appealed and
denied), wellness program information,
and other compliance information. The
collection of high-value data will lead to
greater transparency for consumers and
assist in their decision-making process.
As discussed in detail in the Notice of
Proposed Form Revision, the proposal
would make significant changes to
group health plan reporting. First, the
proposal would add a new Schedule J
(Group Health Plan Information). Plans
that provide group health benefits that
have 100 or more participants, all of
which are currently required to file a
Form 5500 Annual Return/Report,
would have to include the new
Schedule J in their annual report, with
the remaining reporting requirements
generally unchanged, except as
proposed to be changed for all filers.
Plans that provide group health benefits
with fewer than 100 participants that
are funded using a trust would generally
be required to report the same
information as plans that provide group
health benefits with 100 or more
participants that are funded using a
trust; they would no longer be permitted
to file the Form 5500–SF. Although this
would require such plans to complete
the Schedule C and the Schedule H, for
plans with simple investments, there
should only be a modest burden
increase over completing the Form
5500–SF. Small welfare plans funded
with a trust that are invested in assets
that are not ‘‘eligible plan assets’’ for
purposes of Form 5500–SF filing, are
already required to file the Form 5500
Annual Return/Report, along with the
Schedule I, and if applicable, Schedule
A.
Group health plans that have fewer
than 100 participants currently exempt
from filing an annual report under 29
CFR 2520.104–20 because they are
completely unfunded or combination
unfunded/fully insured now would be
required to file a Form 5500, a Schedule
J, and, if applicable, a Schedule A. Plans
that are unfunded pay some or all of
their benefits out of the plan sponsors’
general assets, which exempts them
from state insurance regulation, making
the DOL their sole regulatory agency.
Because such small plans are not
currently required to file the Form 5500
Annual Return/Report, there is no
comprehensive and direct source of data
about the number and characteristics of
these plans. Further, because these
plans are small, they are more
susceptible to financial difficulties.
Because of these concerns, the DOL
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believes that it is important to have
more detailed benefit, financial, and
compliance information for ‘‘unfunded’’
plans that are self-insured or partially
self-insured than for those small plans
that are fully insured. These plans
would be required under the proposal to
file the complete Form 5500 and
Schedule J and, if applicable, Schedule
A.
Plans that provide group health
benefits that have fewer than 100
participants that are fully insured would
be required to answer only limited
questions on both the Form 5500 and
Schedule J, and would not be required
to file any other schedules or
attachments. Collecting this limited data
on fully insured plans providing group
health benefits that have fewer than 100
participants would give the DOL basic
information to identify health insurance
plans they regulate and allow them to
better monitor plan trends and
activities, but minimize the reporting
burden from more detailed reporting
that is more generally required on the
Form 5500, Schedule A, Schedule J, and
any other applicable schedules that
comprise the Form 5500 Annual Return/
Report.
(5) Improving compliance under
ERISA and the Code through selected
new questions regarding plan
operations, service provider
relationships, and financial
management of the plan.
In an era of limited financial
resources, the Agencies must pursue
new and creative ways to maximize the
efficacy of their enforcement budgets.
Improving compliance under ERISA and
the Code reduces the need for costly
enforcement actions. Focusing filer
compliance through selected new
questions regarding plan operations,
service provider relationships, and
financial management of the plan under
ERISA and the Code can also have the
effect of allowing the Agencies’
enforcement staff to work more
efficiently, and therefore better protect
plan participants and beneficiaries.
Analysis of Benefits and Costs
The DOL believes that the benefits to
be derived from this proposal, including
the amendments to the reporting
regulations and the forms revisions,
would justify their costs. The DOL
further believes that these revisions to
the existing reporting requirements will
enhance protection of ERISA rights by
improving the effectiveness of
enforcement actions and by improving
the quality of data used for research and
policymaking purposes. The DOL
conducted a detailed assessment of the
costs and benefits of these changes.
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Benefits
As stated previously, the proposal
pursues five main objectives. The
various changes to the forms, schedules,
instructions, and DOL regulatory
exemptions and requirements are
together intended to integrate these
various objectives, and all of the other
goals together are proposed with the
intention of supporting the move
towards fuller transparency and data
mineability overall. Fuller transparency
could increase participant trust levels,
which could encourage pension plan
participants to increase their retirement
savings and welfare plan participants to
use benefits when needed, resulting in
strengthened retirement security and
improved public health. The benefits of
each of the five main objectives are
discussed below.
(1) Modernizing financial
information.
As stated previously, the financial
information, particularly the asset/
liability statement, contained in the
current Schedule H (Large Plan
Financial Information), Schedule I
(Small Plan Financial Information), as
well as the more recently established
Form 5500–SF, is based on data
elements that have remained largely
unchanged since the Form 5500 Annual
Return/Report was established in 1975.
Many investments in alternative and
hard-to-value assets and held in
collective investment funds do not fit
squarely into any of the existing
reporting categories on Schedule H. As
discussed previously, the GAO has
expressed concerns that many
investments with widely varying risk,
return, and disclosure considerations
are often reported in the catch-all ‘‘other
plan asset’’ category.41 GAO also noted
that the plan asset categories on the
Schedule H are not representative of
current plan investments, and provide
little insight into the investments
themselves, the level of associated risk,
or structures of the investments.42 The
DOL–OIG also recommended that the
Agencies revise the Form 5500 Annual
Return/Report to improve reporting of
hard-to-value assets and alternative
investments.43
As part of their overall evaluation of
how best to restructure financial
reporting to maximize usable data while
limiting burden increases, the Agencies
also concluded that research and
41 GAO Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 12.
42 Id. at 11–12.
43 EBSA Needs to Provide Additional Guidance
and Oversight to ERISA Plans Holding Hard-ToValue Alternative Investments, Department of Labor
Office of Inspector General Report Number: 09–13–
001–12–121 at 4, 18, and 19.
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enforcement efforts could be enhanced
by updating the asset reporting
categories and by standardizing
Schedule H Line 4i attachments.
Accordingly, the changes the Agencies
are proposing to make to the asset
breakouts on the balance sheet and
income statement components of
Schedule H would make the asset
reporting more consistent with the
current financial marketplace and
enable the Agencies, plan sponsors, and
participants and beneficiaries to
develop a more accurate and detailed
picture of the types of assets held by
plans, including hard-to-value assets
and alternative investments and
investment held through collective
investment vehicles. The proposed
changes take into account many of the
sophisticated and complex investments
that do not fit neatly into any of the
existing program categories, which
would lead to consistent reporting by
filers and more transparency by limiting
the consolidation of many diverse
investments into the catch-all ‘‘Other’’
category on the balance sheet on the
Schedule H.
The Agencies also opted to revise the
Schedule H Line 4i Schedules of Assets
attachment into two, distinct structured
data attachments. Doing so will produce
more consistent data, reduce confusion
over the proper format to provide
required data, and enable data
mineability. Moreover, as discussed in
detail earlier in this document and the
Notice of Proposed Forms Revisions
published simultaneously, the
structural, data element and instruction
changes to the Schedule H, Line 4i
Schedule of Assets Held for Investment
the Agencies are proposing will allow
the Form 5500 Annual Return/Report to
be better used as a tool to evaluate the
year-to-year performance of a plan’s
individual investments. The creation of
more detailed and structured Schedule
H, Line 4i Schedules of Assets is a
specific recommendation of the DOL–
OIG and the GAO.44 The proposed
changes to the Schedule H Line 4i
Schedules of Assets, in addition to
better meeting the needs of the
Agencies, other government users, and
other end users of the data, should also
serve to address the shortcomings
identified in these reports.
The proposed changes made to DFE
reporting would ensure that the
Agencies, plan fiduciaries, plan service
providers, and other users of data have
the tools to create a more complete
44 See EBSA Needs to Provide Additional
Guidance and Oversight to ERISA Plans Holding
Hard-to-Value Alternative Investments, at 17;
Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 37.
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picture of plans’ investments in pooled
investment vehicles. Similarly, the
proposed changes to the financial
information reported by small plans
would improve the utility of the Form
5500 Annual Return/Report as a tool to
obtain a meaningful picture of small
plan investments in hard-to-value and
alternative investments as suggested by
GAO and other government oversight
and advisory bodies.45
Although these changes would result
in additional reporting for certain small
plans, the Agencies do not expect that
small plans with simple investment
portfolios would experience a
significant increase in their annual
reporting burden. Small plans with
complex portfolios that include hard-tovalue or alternative investments should
have more transparent financial
statements which may require
somewhat more complex financial
reporting obligations. In light of changes
in the financial environment and
increasing concern about investments in
hard-to-value assets and alternative
investments, the Agencies believe that
requiring separate financial information
regarding hard-to-value investments is
important for regulatory, enforcement,
and disclosure purposes.46
A major overriding objective of these
proposed forms revisions is to
modernize the Form 5500 Annual
Return/Report information collection so
that the presentation of plan trust
financial and balance sheet information
is a more transparent and detailed
reflection of the investment portfolios
and asset management practices of
employee benefit plans. The basic
objective of general financial reporting
is to provide information about the
reporting entity for the Agencies’
enforcement, research, and policy
formulation programs, for other federal
agencies, Congress, and the private
sector in assessing employee benefit,
tax, and economic trends and policies;
and for plan participants and
beneficiaries and the general public in
monitoring employee benefit plans.
Modernizing the financial reporting
instruments will bring greater
transparency to plan transactions,
which will enhance the efficiency of the
Agencies’ enforcement efforts.
Specifically, the Agencies will be better
able to target their enforcement efforts,
which will reduce the number of
45 Id.
46 Although such small plans would be required
to complete the Schedule H instead of the Schedule
I, including the Schedule H Line 4i(1) and 4i(2)
Schedules of Assets, eligible small plans, as they
can under the current rules, would still be eligible
for a waiver of the annual examination and report
of an IQPA under 29 CFR 2520.104–46.
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investigations involving plans that are
not engaging in problematic activities.
Additionally, ERISA Section 513(a)
authorizes and directs the Secretary of
Labor and EBSA to conduct a robust
research program on employee benefits.
The Form 5500 Annual Return/Report is
one of the leading sources of data used
in this research program. Modernizing
the financial information reported on
the Form 5500 Annual Return/Report
will improve the quality of the research
conducted by internal and external
researchers. This improved research
will, in turn, improve the quality of
policy decisions made by DOL and
other governmental policymakers that
rely on the Form 5500 Annual Return/
Report data.
(2) Updating fee and expense
information on plan service providers
with a focus on harmonizing annual
reporting requirements on Schedule C
with DOL’s final disclosure
requirements at 29 CFR 2550.408b–2.
As previously discussed, the proposal
would harmonize the Schedule C rules
with the DOL’s regulations at 29 CFR
2550.408b–2. The Agencies believe that
requiring reporting of all indirect
compensation (rather than continuing
the exemption from reporting for
‘‘eligible indirect compensation’’), but
limiting indirect compensation
reporting to the service providers and
types of compensation that are required
to be disclosed under the ERISA section
408b–2 regulation will provide a
particular benefit to plan record
keepers. The information required to be
reported would be an after the fact
reporting of fees that should have been
disclosed in advance under the ERISA
section 408b–2 regulation. Because the
ERISA section 408b–2 regulation
requires covered service providers to
provide plan administrators the
information they need to satisfy their
Form 5500 Annual Return/Report
obligations with respect to
compensation information, the
additional burden should be limited to
entering the data on the Form 5500
Annual Return/Report.47
Currently, given that some significant
component of indirect compensation is
not reported because it is permitted to
be treated as ‘‘eligible indirect
compensation,’’ and the fact that some
filers report formulas instead of dollar
amounts, the Agencies and public only
have limited information regarding the
total compensation that service
providers receive and that affects plans’
finances and potentially involves
conflicts of interests among service
providers. Almost 90 percent of 2013
47 See
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Schedule C filers reported at least one
service provider receiving some amount
of eligible indirect compensation, and
nearly 70 percent of 2013 Schedule C
filers reported at least one provider
receiving only eligible indirect
compensation. Filers identifying at least
one service provider as receiving some
amount of eligible indirect
compensation on their Schedules C,
according to the overall Form 5500 data,
report holding roughly two-thirds of all
pension assets. Thus, the limited
‘‘eligible indirect compensation’’
reporting impacts the data relating to
service provider fees in connection with
the servicing and management of a
significant amount of assets. In addition,
analysis of these data also indicates that
almost 50 percent of Schedule C filers
report at least one service provider who
provides a formula instead of an explicit
or estimated amount of compensation.
These filers report holding almost 40
percent of all pension assets. Providing
only a formula without an actual or
estimated dollar amount of the
compensation makes it very hard for
plan sponsors or participants to identify
the exact amount of compensation.
The proposed rules and the
subsequent reported information would
make it possible to get a much better
understanding on the fees that were
transferred between service providers in
the form of indirect compensation,
therefore allowing plan sponsors and
participants to assess the fees that they
are incurring. The Agencies anticipate
that the increased transparency under
the proposal would likely lead to
increased competition in the service
provider market.
Aligning the Schedule C with ERISA
section 408b–2 disclosure should
benefit the regulated community by
clarifying and streamlining the
information reported on the Schedule C,
which should reduce filer confusion,
and in turn reduce any filer burden
caused by the confusion. The updated
service provider information will also
improve targeting in the Agencies’
enforcement efforts, be a resource for
independent researchers to identify fee
trends, and help policymakers identify
opportunities to make regulatory
adjustments.
The proposed rule would also require
small pension plans that are not eligible
to file the Form 5500–SF and welfare
plans that provide group health benefits
that are not unfunded or insured (e.g.,
funded using a trust) and have fewer
than 100 participants to file Schedule C.
Currently, only large plans (for welfare
plans, only large plans that are not
unfunded or insured) must file a
Schedule C, thus a large portion of plans
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do not disclose service provider
compensation, except total
administrative expenses, which
includes direct compensation to service
providers.48 The Agencies believe that
the ideal solution for enforcement,
research, policymaking, and participant
monitoring purposes would be for all
indirect compensation to be required to
be reported, but recognize the burdens
small plans face in complying with
disclosure obligations. The Agencies
therefore propose to require small
pension plans to file Schedule C only if
they do not meet the eligibility
conditions for filing the Form 5500–SF,
which generally would be those pension
plans that are invested in alternative or
hard-to-value assets. The Agencies
propose to require welfare plans that
offer group health benefits with fewer
than 100 participants to file Schedule C
only if they are funded using a trust.
This makes the reporting requirements
consistent with those for other welfare
plans that are funded using a trust that
are required to file the Form 5500. Selfinsured plans are more susceptible to
experience financial difficulties than
fully insured plans. Requiring these
small plans to file a Schedule C would
address some of the GAO’s concerns
that not all critical information on
indirect compensation is being reported
to the Agencies.49
(3) Enhancing mineability of the data
filed on the Form 5500 Annual Return/
Report.
As stated previously, a key
component of the proposal is to make it
easier and more efficient to use the data
from the Form 5500 Annual Return/
Report for research, policy analysis, and
enforcement purposes. The primary way
the Agencies propose to enhance the
mineability of Form 5500 Annual
Return/Report data is by structuring and
standardizing the questions on the
forms and schedules and structuring
certain information currently required
to be reported in the form of a
nonstandard attachment to the filing.
This will improve the integrity of the
collected data and allow the Agencies
and others to compare, aggregate, and
analyze these data.
48 ‘‘Direct’’ compensation is included as an
administrative expense item on both the Form
5500–SF and on Schedule H, but it is a total and
is not linked to payments to specific service
provider. Because it is not a ‘‘balance sheet’’ item,
indirect compensation is not reported as part of the
financial statements.
49 See GAO Targeted Revisions Could Improve
Usefulness of Form 5500 Information at 25–26
(‘‘Given these various exceptions to fee reporting
requirements, Schedule C may not provide
participants, the government, or the public with
information about a significant portion of plan
expenses and limits the ability to identify fees that
may be questionable.’’)
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The Agencies have identified a
number of areas where the current
method of reporting information
impedes data usability and are
proposing several changes to facilitate
the efficient use of Form 5500 Annual
Return/Report data. Data from Schedule
H Line 4i (Schedule of Assets), for
example, is currently not available in a
standardized electronic format and
would be very useful for monitoring the
performance of plan investments. The
proposed rules would require the
Schedule H Line 4i, Schedules of
Assets, to be filed in a standardized
electronic format, which will allow
them to be searched and matched to
performance data through common
software programs. As a result, the
Agencies and the public would have
much less difficulty accessing key
information about the plan’s
investments. Additional improvements
in data mineability and plan monitoring
also would be realized from the
proposal’s requirement that other
currently unstructured data or new
elements also be collected as structured
data under the proposal, including the
lists of employers participating in
multiple-employer and controlled group
plans required to be attached to the
Form 5500 Annual Return/Report or
Form 5500–SF, the Schedule H, Line 4a
Schedule of Delinquent Contributions,
and Schedule H Line 4j Schedule of
Reportable Transactions.
Data mineability also would be
improved by the proposal’s requirement
that some data would be reported as text
fields instead of as attachments. This
would increase the accessibility of data.
Similar to the proposed specific data
elements for the Schedule H Line 4i
Schedules, which replace a suggested
format for an unstructured attachment,
the Agencies believe, based on their
own use of the data to support the
research, policy, and oversight efforts of
the Agencies, and input from other end
users, that data mineability will be
enhanced by requiring the use of text
fields on the face of the schedules
instead of having information filed as
non-standard attachments.
Another limitation on data
mineability and usability of the current
Form 5500 Annual Return/Report is that
actuarial information is reported in the
form of PDF attachments to the
Schedules MB and SB, rather than on
the face of the actuarial schedules.
Therefore, as discussed above, the
proposal would expand data elements
on actuarial schedules including
information previously reported on
unstructured attachments. If questions
are directly answered on structured
forms and schedules, like the Form 5500
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Annual Return/Report and the listed
schedules (as opposed to non-standard
attachments) the data are ‘‘machinereadable’’ in the 5500 data base, and
computer programs can be written to
read the data sets created by DOL. This
would make more readily searchable
and usable actuarial information
essential to the Agencies’ enforcement
efforts and in their ability to target plans
with likely compliance issues.
Furthermore, the availability of the data
would enhance the ability of privatesector auditors using the information to
validate a plan actuary’s calculations.
The data would also provide new
opportunities for research. There is no
source of system-wide data on defined
benefit pension plan participants with
age, service, and average benefit levels.
The availability of such data would
allow for more refined projections of
future coverage and benefits adequacy
for plan participants and beneficiaries.
As more of these data are collected over
the years, trends in plan coverages and
benefits could more easily be analyzed
and identified.
The proposed rules make an
additional change to reporting
requirements that is expected to make
filing some of the plan characteristics
easier and more reliable. Instead of
having to report all applicable plan
characteristic codes under one line item,
the proposal would ask for this
information grouped by topic.
Currently, some filers report an
incomplete picture of their plan
characteristics. For example, some filers
have characteristics that should warrant
supplying five or more codes, but
instead they only supply two or three.
It is expected that the new questions
will be easier for filers to respond to and
that the data reported will be more
accurate.
In summary, these improvements in
data mineability will make it more
efficient to conduct Form 5500 Annual
Return/Report data analysis and to use
the data to monitor plans, and identify
trends.
(4) Requiring reporting by all group
health plans covered by Title I of ERISA,
including adding a new Schedule J
(Group Health Plan Information).
As discussed above, the proposal
would eliminate the current exemption
from reporting for certain group health
plans covered by Title I of ERISA so that
all group health plans covered by Title
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I of ERISA will be required to file a
Form 5500 Annual Return/Report.
Currently, generally most plans that
provide group health benefits with
fewer than 100 participants that meet
the conditions of existing regulations
are exempt from filing the Form 5500
Annual Return/Report, because they are
unfunded, fully insured, or a
combination of unfunded/fully insured.
Requiring such plans to file would fill
an information gap, which would allow
the DOL to effectively meet its statutory
obligation to enforce the ERISA
requirements that apply to group health
plans. Currently, the DOL must rely on
complaints from plan participants as its
primary source to uncover ERISA
violations in small plans that are
exempt from annual reporting.
Eliminating this exemption would
provide the DOL with the information
necessary to be more proactive and
systematic in identifying violations and
in providing compliance assistance. The
DOL would be able to track total health
plan counts and coordinate its
enforcement efforts relating to plans
providing benefits through common
issuers. For example, fully-insured
plans using the same insurance provider
often contain provisions that are similar.
By requiring plans providing group
health benefits, that are unfunded, fully
insured, or combination unfunded/fully
insured and have fewer than 100
participants to identify themselves and
the insurance carrier through which
they are insured, the DOL should be
able to better determine which plans
might be affected by noncompliant plan
provisions. The DOL also could better
coordinate its enforcement efforts with
affected service providers and other
Federal and State agencies.
This information also would enhance
the DOL’s ability to develop health care
regulations, conduct policy analysis and
research with respect to participant
trends, and comply with the Affordable
Care Act requirement to report to
Congress annually regarding selfinsured plans.
(5) Improving compliance under
ERISA and the Code through selected
new questions regarding plan
operations, service provider
relationships, and financial
management of the plan.
Improving compliance under ERISA
and the Code through selected new
questions will bring two main benefits.
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First, these compliance questions will
serve as a form of education for plan
administrators and a self-compliance
check. The Agencies believe that the
new compliance questions under the
proposal, as is true of the existing
compliance questions, would help plan
administrators better understand and
monitor required plan behavior and
would remind plan administrators to
comply with requirements under ERISA
and the Code, and thus will improve
protections for participants and
beneficiaries.
Second, these compliance questions
will allow the Agencies, with their
limited enforcement budgets, to engage
in more sophisticated targeting and
compliance assistance. Improvements in
data management technology now
enable the Agencies to create plan risk
profiles to improve the effectiveness of
investigations. These compliance
questions, including questions on audit
and oversight requirements,
nondiscrimination, administrative
expenses, participant contributions, and
automatic enrollment, will improve the
risk profiles, which will further enable
the Agencies to use their enforcement
resources in the most efficient way
possible.
Costs
The costs for plans to satisfy their
annual reporting obligations would
increase under these proposed
regulations relative to the current
regime.50 As shown in Table 2 below,
the aggregate annual cost of such
reporting under the current regulations
and forms is estimated to be $488.1
million annually, shared across the
816,000 filers subject to the filing
requirement. The DOL estimates that the
regulations and forms revisions
proposed today will impose an annual
burden of $817.0 million on 2.97
million filers, for a total increase of
$328.8 million annually.
50 The DOL believes that the annual cost burden
on filers would be higher still in the absence of the
proposed regulations enabling use of the Form 5500
Annual Return/Report in lieu of the statutory
requirements. Without the Form 5500 Annual
Return/Report, filers would not have the benefits of
any regulatory exceptions, simplified reporting, or
alternative methods of compliance, and
standardized and electronic filing methods.
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TABLE 2—SUMMARY OF ANNUAL COSTS: CURRENT REQUIREMENTS VS. PROPOSED REQUIREMENTS
Total annual costs
(millions)
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Current reporting requirements ...............................................................................................................
Change due to Revisions ........................................................................................................................
Proposed Reporting Requirements .........................................................................................................
Because this proposal makes
substantial changes to the requirements
currently in effect, filers also will
experience some one-time transition
costs. The DOL estimates that plans will
require twice as long to supply the new
data elements during the first year,
relative to subsequent years, and will
therefore encounter one-time transition
costs of $328.8 million.
The DOL has analyzed the cost impact
of the individual revisions. In doing so,
the DOL took account of the fact that
various types of plans would be affected
by more than one revision and that the
sequence of multiple revisions would
create an interaction in the cumulative
burden on those plans. For example,
nearly all pension plans that are
required to file the Form 5500 and
related schedules, including ESOPs,
would be affected by the changes to the
Schedule H. ESOPs, however, would be
affected not only by the proposed
Schedule H changes, but also by the
proposed restoration of Schedule E. The
DOL quantified the individual revisions
as described below and shown in Table
3.
(1) Revised financial reporting on the
Schedule H and elimination of the
Schedule I.
Revising the Schedule H, including
the revisions to the Schedule H Line 4i
Schedules of Assets, and eliminating the
Schedule I will increase net costs. The
DOL estimates that the net effect of
these changes will be to increase the
total burden by 535,400 hours. These
changes, in conjunction with revisions
to the reporting requirements for DFEs,
discussed below, will decrease the
number of filers reporting on Schedule
H and/or Schedule I from 115,100 to
114,600. Applying an hourly labor rate
of $114.95 for service providers and
$98.25 for plan sponsors, the DOL
estimates that this revision will increase
the aggregate annual reporting cost by
an estimated $57.6 million.51
(2) Required reporting by all group
health plans covered by Title I of ERISA,
including addition of a new Schedule J
(Group Health Plan Information).
51 The appropriateness of the labor rates used in
the calculations and assumptions are discussed in
the Technical Appendix, which can be accessed at
the DOL’s Web site at www.dol.gov/ebsa.
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Currently, about 54,000 welfare plans
that provide group health benefits file
the Form 5500 Annual Return/Report
and applicable schedules. Of these
54,000 filers, approximately 48,000 are
welfare plans that provide group health
benefits with 100 or more participants
and the rest are welfare plans that
provide group health benefits with
fewer than 100 participants. We
estimate that this proposed change will
increase the number of welfare plan
with group health benefit filers to
approximately 2.2 million. Of these 2.2
million welfare plans with group health
benefits, 1.9 million welfare plans with
group health benefits are expected to be
fully insured plans with fewer than 100
participants, while 289,000 welfare
plans with group health benefits are
expected to be unfunded, combination
unfunded/fully insured, or funded with
a trust with fewer than 100 participants,
and approximately 48,000 welfare plans
with group health benefits are expected
to have 100 or more participants.
The 1.9 million plans that provide
group health benefits, have fewer than
100 participants, and are fully insured
would be required to complete lines 1–
5 on Form 5500 and lines 1–8 on
Schedule J. The 289,000 plans that
provide group health benefits, have
fewer than 100 participants, and are
unfunded, combination unfunded/fully
insured, or funded with a trust would be
required to file a Form 5500, Schedule
J, and Schedule A, if applicable, and if
they were already required to file a
Form 5500 Annual Return/Report (i.e.,
funded with a trust), they would be
required to attach any other applicable
schedules. The 48,000 plans that
provide group health benefits and have
100 or more participants that already are
required to file a Form 5500 Annual
Return/Report would be required to
attach a Schedule J in addition to any
other forms and schedules that they are
currently required to submit.
The DOL estimates that requiring
plans that provide group health benefits,
have fewer than 100 participants, and
are fully insured to complete only lines
1–5 of the Form 5500 and lines 1–8 of
the Schedule J will increase total burden
by 623,000 hours and increase the
aggregate annual reporting cost by $69.6
PO 00000
Frm 00022
Fmt 4701
Sfmt 4702
$488.1
328.8
817.0
Total annual
burden hours
(thousands)
4,378.5
2,949.0
7,327.5
million. Requiring all other plans that
provide group health benefits and have
fewer than 100 participants (unfunded,
combination unfunded/fully insured, or
funded with a trust) and all plans that
provide group health benefits and have
100 or more participants to file a Form
5500 Annual Return/Report, Schedule J,
and any other required schedules and
attachments will increase the total
burden by 349,100 hours for the Form
5500 Annual Return/Report and 1.2
million hours for the Schedule J. The
aggregate annual reporting cost
associated with requiring all other group
health plans with fewer than 100
participants (unfunded, combination
unfunded/fully insured, or funded with
a trust) and all group health plans with
100 or more participants to file a Form
5500 Annual Return/Report, Schedule J,
and any other required schedules and
attachments is $39.0 million for the
Form 5500 Annual Return/Report and
$133.0 million for the Schedule J.
Based on the foregoing, the DOL
estimates that, in total, group health
plan annual reporting burden will
increase by approximately 2.2 million
hours and the aggregate annual
reporting cost will increase by $241.6
million.
(3) Restored Schedule E.
Approximately 6,700 employee stock
ownership plans (ESOPs) will be subject
to increased reporting on the restored
Schedule E. As discussed above, the
Schedule E is intended to provide
increased reporting related to areas of
concern specific to ESOPs. The DOL
estimates that the restored Schedule E
will add approximately 22,000 hours of
burden and an additional $2.5 million
of aggregate annual reporting cost.
(4) Revised Schedule C.
As discussed above, Schedule C
revisions are intended to harmonize the
Schedule C reporting of indirect
compensation with the disclosures
required under the DOL’s final rules on
service provider compensation at 29
CFR 2550.408b–2, expand the Schedule
C reporting requirement to all pension
plans required to file the Form 5500
regardless of size, expand the Schedule
C reporting requirement to welfare plans
that offer group health benefits with
fewer than 100 participants if they are
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
funded with a trust, clarify the indirect
compensation reporting requirements,
and improve the information plan
officials receive regarding amounts
received by plan service providers. The
expanded reporting requirements are
expected to increase the number of
Schedule C filers from approximately
82,400 to approximately 100,200.
Reporting burden for Schedule C filers
is expected to increase by 116,600
hours, i.e. roughly an hour per filer,
which will produce an additional $12.9
million of annual aggregate reporting
cost. Of this $12.9 million increase, $5.3
million is borne by existing filers and is
attributable to eliminating the ‘‘eligible
indirect compensation’’ reporting
relief; 52 $7.2 million is borne by filers
newly required to attach a Schedule
C; 53 and $0.4 million is borne by
existing filers and is attributable to all
other changes to the Schedule C.54
As indicated in the regulatory impact
analysis in the final publication of the
regulation at 29 CFR 2550.408b–2, the
DOL believes that more transparency of
service provider compensation serves to
discourage harmful conflicts, reduce
information gaps, improve fiduciary
decision-making about plan services,
enhance value for plan participants, and
increase the DOL’s ability to redress
abuses committed by service providers.
77 FR 5632, 5650 (Feb. 3, 2012). As is
true with the improved disclosure
required under the DOL’s regulation at
29 CFR 2550.404a–5, increased
transparency and ability to compare fees
(and, on the improved balance sheet and
schedules of assets) are expected to
reduce participants’ time otherwise
used for searching for fee and other
investment information and to produce
substantial additional benefits, in the
form of improved investment decisions,
although the DOL has not been able to
quantify this effect. 75 FR 64910, 64928
(Oct. 20, 2010).
(5) Changes to reporting requirements
and methods for direct filing entities
(DFEs), added compliance questions,
and all other changes.
As discussed earlier in the preamble,
the rule proposes to make several
changes to the DFE filing requirements.
For example, the Agencies propose
eliminating the concept of Master Trust
Investment Accounts (MTIA) reporting
and require reporting by a master trust
instead. The proposal also would
change the filing requirements for a CCT
or PSA in which the plan invests by
requiring the plan to report the interests
in the CCT or PSA on the Schedule H
balance sheet (Part I, Line 1b) regardless
of whether the PSA or CCT in which the
plan invests files a Form 5500 Annual
Return/Report as a DFE, changing how
assets held through DFEs are reported
on the proposed Schedule H Line 4i(1)
Schedule of Assets Held for Investment,
and eliminate the requirement for plans
to file the Schedule D, since the DFE
information that had been on Schedule
D would now be on plans’ Schedule H
Line 4i(1) Schedule of Assets Held for
Investment. The net effect of these
changes to DFE reporting is to reduce
the number of Schedule D filers from
61,100 to 8,900, with smaller reductions
in the filing of other schedules
discussed elsewhere. Reporting burden
associated with DFEs is expected to fall
by 94,200 hours, which will produce a
$10.1 million reduction in aggregate
reporting cost.
Additionally, the DOL proposes a
series of compliance questions primarily
on the Form 5500, Form 5500–SF, and
Schedule R. Other miscellaneous
changes throughout the forms and
schedules include requiring new
information on employer matching
contributions, employee participation
rates and plan design for defined
contribution plans, and changes to the
reporting on Schedule G.
Some of these compliance questions
and other miscellaneous changes add
burden, while others reduce burden.
Together, the DOL estimates that the net
effect of these various changes would
add approximately 219,300 hours of
aggregate reporting burden, which will
produce an additional $21.5 million in
aggregate reporting cost. In combination
with the changes to DFE reporting
discussed above, these changes will
reduce the aggregate number of forms
and schedules filed by 52,500.
Table 3 contains a summary of the
changes in costs, expressed both in
dollars and in hours, allocated to the
changes outlined above and the number
of affected filings.
TABLE 3—SUMMARY OF CHANGES TO THE REPORTING REQUIREMENTS
Change in
costs
(millions)
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Revisions
Elimination of Schedule I & Change in Schedule H ............
Schedule C ..........................................................................
DFE Reporting Changes (Including changes to Schedule
D) ......................................................................................
Schedule E ...........................................................................
Completion of lines 1–5 on Form 5500 and lines 1–8 on
Schedule J by fully insured GHPs with fewer than 100
participants .......................................................................
Completion of Form 5500 by GHPs with fewer than 100
participants that are unfunded, combination unfunded/
fully insured, or funded with a trust and GHPs with 100
or more participants .........................................................
Completion of Schedule J by GHPs with fewer than 100
participants that are unfunded, combination unfunded/
fully insured, or funded with a trust and GHPs with 100
or more participants .........................................................
52 As discussed previously, the DOL is
eliminating the limited reporting option for
‘‘eligible indirect compensation.’’ The DOL believes
that many of the costs associated with gathering and
organizing data necessary for expanded service
provider reporting, to the extent that the
information was not already required to be
provided to and kept by the plan administrator for
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Jkt 238001
Change in
burden hours
(thousands)
Frm 00023
Number of
filers under
proposed
requirements
(thousands) 55
D Cost per
affected filer
by proposed
requirements
$57.6
12.9
535.4
116.6
115.1
82.4
114.6
100.2
$502
128
¥10.1
2.5
¥94.2
22.0
61.1
0.0
8.9
6.7
¥1,137
374
69.6
623.0
0.0
1,869
37
39.0
349.1
54.1
336.9
116
133.0
1,179.2
0.0
336.9
395
‘‘eligible indirect compensation’’ that did not have
to be reported, have already been accounted for as
part of the RIA for the ERISA section 408b–2 rule.
Therefore, these costs reflect only the incremental
increase of reporting service provider compensation
to the Agencies. Under the proposal, indirect
compensation reporting would be limited to the
types of service providers and compensation under
PO 00000
Number of
filers under
current
requirements
(thousands)
Fmt 4701
Sfmt 4702
ERISA section 408b–2, in contrast to all service
providers currently having to report on the
Schedule C receipt of indirect compensation.
53 For new filers, this includes the costs of all
other changes to the Schedule C.
54 Costs may not add up to the total due to
rounding.
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
TABLE 3—SUMMARY OF CHANGES TO THE REPORTING REQUIREMENTS—Continued
Change in
costs
(millions)
Revisions
Change in
burden hours
(thousands)
Number of
filers under
current
requirements
(thousands)
Number of
filers under
proposed
requirements
(thousands) 55
D Cost per
affected filer
by proposed
requirements
All Other Revisions 56 ..........................................................
24.4
217.9
1,076.7
1,024.2
24
Total (Unique Filers) .....................................................
328.8
2,949.0
816.3
2,967.5
111
The proposal does not otherwise alter
reporting costs. With the exception of
most welfare plans that provide group
health benefits, plans currently exempt
from annual reporting requirements
(such as certain simplified employee
pensions (SEPs) and small unfunded,
fully insured, or combination unfunded/
fully insured welfare plans that do not
provide group health benefits) would
remain exempt. Also, plans eligible for
limited reporting options (such as
certain IRA-based pension plans) would
continue to be eligible. The revised
Form 5500 Annual Return/Report
would retain the structure that is
familiar to individual and corporate
taxpayers—the form would continue to
contain basic identifying information,
participant counts, and plan
characteristics, along with a checklist of
the schedules being filed.
Assumptions, Methodology, and
Uncertainty
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
The cost and burden associated with
the annual reporting requirement for
any given plan will depend upon the
specific information that must be
provided, given the plan’s
characteristics, practices, operations,
and other factors. For example, a small,
single-employer defined contribution
pension plan eligible to file the Form
5500–SF should incur far lower costs
than a large, multiemployer defined
benefit pension plan that holds multiple
insurance contracts, engages in
reportable transactions, and has many
service providers that each received
over $5,000 in compensation. The DOL
separately considered the cost to
different types of plans in arriving at its
aggregate cost estimates. The DOL’s
55 The proposed change eliminating the concept
of MTIA reporting and requiring reporting by a
master trust instead, whose burden change is taken
into account in the DFE Reporting Changes row,
produces a reduction in the number of schedules
included in filings. The change in the number of
schedules filed is taken into accounted in the row
specific to the schedule affected.
56 The number of filers in this row exceeds the
total number of filers because an individual filer
counts more than once when it is affected by more
than one revision included in the ‘‘All Other
Revisions’’ category.
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18:13 Jul 20, 2016
Jkt 238001
basis for these estimates is described
below.
Assumptions Underlying this
Analysis: The DOL’s analysis assumes
that all benefits and costs will be
realized in the first year of the reporting
cycle to which the changes apply and
within each year thereafter. This
assumption is premised on the
requirement that each plan will be
required to file the Form 5500 Annual
Return/Report. The DOL has used a
‘‘status quo’’ baseline for this analysis,
assuming that the world absent the
proposed regulations will resemble the
present.57
Methodology: Mathematica Policy
Research, Inc. (MPR) developed the
underlying cost data, which has been
used by the Agencies in estimating
burden related to the Form 5500 Annual
Return/Report since 1999. See 65 FR
21068, 21077–78 (Apr. 19, 2000);
Borden, William S., Estimates of the
Burden for Filing Form 5500: The
Change in Burden from the 1997 to the
1999 Forms, Mathematica Policy
Research, submitted to DOL May 25,
1999.58 The cost information was
derived from surveys of filers and their
service providers, as modified due to
comments, which were used to measure
the unit cost burden of providing
various types of information. The DOL
has adjusted these unit costs since 1999
to account for changes to the forms and
schedules and increases in the cost of
labor and service providers since MPR
developed the initial data.
For this forms revision, the DOL used
the adjusted MPR unit cost data for
pension and non-health welfare plans.
The DOL developed the unit cost data
for group health plans using the best
available data. To develop unit costs for
DFEs, the DOL created weighted
averages of the unit costs for plans.
To obtain filer counts for pension
plans, non-health welfare plans, and
DFEs, the DOL used historical counts of
Form 5500 Annual Return/Report filers
57 Further detail can be found in the Technical
Appendix, which can be accessed at www.dol.gov/
ebsa.
58 The MPR report can be accessed at the DOL’s
Web site at www.dol.gov/ebsa.
PO 00000
Frm 00024
Fmt 4701
Sfmt 4702
tabulated by type and reported
characteristics. For counts of group
health plan filers, the DOL used data
from the Medical Expenditure Panel
Survey, Insurance Component (MEPS–
IC) and Census of Business data.
The MEPS–IC is an annual survey of
establishments collected by the Agency
for Healthcare Research and Quality
(AHRQ) about employer sponsored
health insurance. AHRQ uses two
sources to draw their data: (1) A random
sample, from the Census Bureau, of
private-sector business establishments
with annual payroll greater than zero;
and (2) a list of employers or other
insurance providers identified by the
Medical Expenditure Panel Survey,
Household Component respondents
who report having private health
insurance. In 2013, approximately
39,000 private-sector establishments
were surveyed.
In 2003, DOL began using the MEPS–
IC as a basis for estimating the number
of health plans. The number of plans
was based on the share of the total
number of establishments that offer
health insurance by size. DOL then
attempted to correct for establishments
that offer multiple health plans by
making a reasonable assumption that
the share of establishments that reported
that they ‘‘offer 2 or more plans’’ offered
two distinct plans. Finally, DOL
attempted to control for multiple
establishments covered by the same
plan sponsor by using the Census of
Business ratio of establishment-to-firms
and dividing the total number of
establishment plans by this ratio to
produce an estimate of the number of
health ‘‘plans’’ which has been
consistently around 2.5 million over the
years.
The DOL modeled its approach to
calculating burden on the approach
used during the 2009 forms revision.
Aggregate burden estimates were
produced in both revisions by
multiplying the unit cost measures by
the filer count estimates. The
methodology is described in broad
terms below.59
59 Further details about the approach are
explained in the Technical Appendix, which can be
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Federal Register / Vol. 81, No. 140 / Thursday, July 21, 2016 / Proposed Rules
To estimate aggregate burdens, types
of plans with similar reporting
requirements were grouped together in
various groups and subgroups. As
shown in Table 4 below, calculations of
aggregate cost were prepared for each of
the various subgroups both under
requirements in effect prior to this
action and under the forms as revised.
Table 4 also shows the number of plans
within each subgroup affected by the
revisions. The universe of filers was
divided into four basic types: Defined
benefit pension plans, defined
contribution pension plans, welfare
plans, and DFEs. For the plans, each of
these major plan types was further
subdivided into multiemployer and
single-employer plans.60 Since the filing
requirements differ substantially for
small and large plans, the plan types
were also divided by plan size. For large
plans (100 or more participants), the
defined benefit plans were further
divided between very large (1,000 or
more participants) and other large plans
(at least 100 participants, but fewer than
1,000 participants). Small plans (less
than 100 participants) were divided
similarly, except that they were divided
into Form 5500–SF eligible and Form
5500–SF ineligible plans, as applicable.
Welfare plans were divided into group
health plans and plans that do not
provide any group health benefits, while
plans that provide group health benefits
and have fewer than 100 participants
were divided into fully insured group
health plans and unfunded,
combination unfunded/fully insured
plans, or funded with a trust group
health plans. DFEs were divided into
Master Trusts/MTIAs, CCTs, PSAs, 103–
12 IEs, and GIAs. For each of these sets
of respondents, burden hours per
respondent were estimated for the Form
5500 Annual Return/Report itself and
up to seven schedules or the Form
5500–SF (and the Schedule SB, for
Form 5500–SF eligible defined benefit
pension plans).
We also separately estimated the costs
for each of the forms and for each
schedule that is part of the Form 5500
Annual Return/Report. When items on a
schedule are required by more than one
Agency, the estimated burden
associated with that schedule is
allocated among the Agencies. This
allocation is based on how many items
are required by each agency. The burden
associated with reading the instructions
for each item also is tallied and
allocated accordingly.
The reporting burden for each type of
plan is estimated in light of the
circumstances that are known to apply
or that are generally expected to apply
to such plans, including plan size,
funding method, usual investment
structures, and the specific items and
schedules such plans ordinarily
complete. For example, under the
proposal, a small, fully insured group
health plan would be required to file
only basic questions on the Form 5500
and the proposed Schedule J. By
contrast, a large single-employer defined
benefit pension plan that is intended to
be tax-qualified that has insurance
products among its investments and
whose service providers received
compensation above the Schedule C
reporting thresholds would be required
to submit an annual report completing
almost all the line items of the Form
5500, plus Schedule A (Insurance
Information), Schedule SB (SingleEmployer Defined Benefit Plan
Actuarial Information), Schedule C
47519
(Service Provider Information), possibly
the Schedule G (Financial Transaction
Schedules), Schedule H (Financial
Information), and Schedule R
(Retirement Plan Information), and
would be required to submit an IQPA
report. In this way, the Agencies intend
meaningfully to estimate the relative
burdens placed on different categories
of filers.
Burden estimates were adjusted for
the proposed revisions to each schedule,
including items added or deleted in
each schedule and items moved from
one schedule to another.
The DOL has not attributed a
recordkeeping burden to the 5500 Forms
in this analysis or in the Paperwork
Reduction Act analysis because it
believes that plan administrators’
practice of keeping financial records
necessary to complete the 5500 Forms
arises from usual and customary
management practices that would be
used by any financial entity and does
not result from ERISA or Code annual
reporting and filing requirements.
The aggregate baseline burden is the
sum of the burden per form and
schedule as filed prior to this action
multiplied by the estimated aggregate
number of forms and schedules filed.61
The DOL estimated the burden impact
of changes in the numbers of filings and
of changes made to the form and the
various schedules. The burden estimates
use data from the Form 5500 Annual
Return/Report for plan year 2013, which
is the most recent year for which
complete data is available. The Overall
Total line in Table 4 shows that the
aggregate cost under the current and
proposed requirements, respectively,
add up to $488.1 million and $817.0
million.
TABLE 4—NUMBER OF AFFECTED FILERS AND COSTS UNDER PRIOR AND NEW REQUIREMENTS
Number of
filers under
current
requirements
(thousands)
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Type of filer
Overall Total ....................................................................................................
Large Plans ......................................................................................................
DB/ME/100–1,000 LARGE (Non-ESOP) ..................................................
DB/ME/1,000+ LARGE (Non-ESOP) ........................................................
DB/SE/100–1,000 LARGE (Non-ESOP) ..................................................
DB/SE/1,000+ LARGE (Non-ESOP) ........................................................
DC/ME/LARGE (100+ Participants) (Non-ESOP) ....................................
DC/SE/LARGE (100+ Partic.) (ESOP) .....................................................
DC/SE/LARGE (100+ Partic.) (Non-ESOP) .............................................
Welfare/LARGE (Health) ..........................................................................
accessed at the DOL’s Web site at www.dol.gov/
ebsa.
60 For purposes of this analysis, multiple
employer plans were treated as single employer
plans.
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18:13 Jul 20, 2016
Jkt 238001
816.3
148.5
0.5
0.8
4.8
2.8
1.1
2.9
62.2
47.9
61 Some filers are eligible to file the Form 5500–
SF, but choose to file a Form 5500 and attach
Schedule I and/or other schedules because they
find it less burdensome to do so in their particular
situation. In an effort to be conservative in
PO 00000
Frm 00025
Fmt 4701
Sfmt 4702
Number of
filers under
proposed
requirements
(thousands)
2,967.5
148.5
0.5
0.8
4.8
2.8
1.1
2.9
62.2
47.9
Aggregate
annual cost
under current
requirements
(millions)
$488.1
252.4
1.6
2.8
13.0
8.5
2.1
4.0
109.2
91.7
Aggregate
annual cost
under
proposed
requirements
(millions)
$817.0
309.3
1.9
3.1
15.2
9.6
2.5
6.4
135.9
114.2
estimating burden, counts of these filings are
adjusted to reflect what they would have filed if
they had chosen to file the Form 5500–SF.
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TABLE 4—NUMBER OF AFFECTED FILERS AND COSTS UNDER PRIOR AND NEW REQUIREMENTS—Continued
Number of
filers under
current
requirements
(thousands)
Type of filer
Welfare/ME/LARGE (Non-Health) ............................................................
Welfare/SE/LARGE (Non-Health) .............................................................
Small Plans Eligible for 5500–SF ....................................................................
DB/Eligible for 5500–SF/SMALL (Non-ESOP) .........................................
DC/Eligible for 5500–SF/SMALL (Non-ESOP) .........................................
Welfare/Eligible for 5500–SF/SMALL (Non-Health) .................................
Small Plans Not Eligible for 5500–SF .............................................................
DB/ME/Not Eligible for 5500–SF/SMALL (Non-ESOP) ............................
DB/SE/Not Eligible for 5500–SF/SMALL (Non-ESOP) ............................
DC/ME/Not Eligible for 5500–SF/SMALL (ESOP) ...................................
DC/ME/Not Eligible for 5500–SF/SMALL (Non-ESOP) ...........................
DC/SE/Not Eligible for 5500–SF/SMALL (ESOP) ....................................
DC/SE/Not Eligible for 5500–SF/SMALL (Non-ESOP) ............................
Welfare/Not Eligible for 5500–SF/SMALL (Fully Insured Health) ............
Welfare/Not Eligible for 5500–SF/SMALL (Unfunded, Combination Unfunded/Fully Insured, or Funded with a Trust Health) ..........................
Welfare/ME/Not Eligible for 5500–SF/SMALL (Non-Health) ....................
Welfare/SE/Not Eligible for 5500–SF/SMALL (Non-Health) .....................
DFEs ................................................................................................................
Master Trust Investment Accounts and Master Trusts ............................
Common Collective Trusts .......................................................................
Pooled Separate Accounts .......................................................................
103–12 Investment Entities ......................................................................
Group Insurance Arrangements ...............................................................
Number of
filers under
proposed
requirements
(thousands)
Aggregate
annual cost
under current
requirements
(millions)
Aggregate
annual cost
under
proposed
requirements
(millions)
0.8
24.8
622.4
41.1
580.7
0.7
35.9
0.05
0.9
0.001
0.1
3.8
21.5
0.0
0.8
24.8
622.4
41.1
580.7
0.7
2,187.7
0.05
0.9
0.001
0.1
3.8
21.5
1,869.0
1.1
18.5
205.8
37.6
168.0
0.2
18.4
0.06
1.0
0.0004
0.1
1.8
10.0
0.0
1.4
19.1
227.3
39.0
188.0
0.2
266.1
0.1
1.8
0.002
0.2
5.8
27.9
69.6
6.2
0.1
3.2
9.4
1.6
4.0
3.2
0.5
0.1
289.0
0.1
3.2
8.9
1.0
4.0
3.2
0.5
0.1
4.1
0.1
1.5
11.4
2.7
4.3
3.3
0.7
0.4
158.2
0.2
2.4
14.2
2.2
6.0
4.7
0.9
0.4
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Note: Some displayed numbers do not sum up to the totals due to rounding.
DB—defined benefit plans.
DC—defined contribution plans.
SE—single-employer plans.
ME—multiemployer plans.
Large plans—100 participants or more.
Small plans—generally fewer than 100 participants.
Uncertainty Within Estimates:
Because the DOL has access to the
historical Form 5500 Annual Return/
Report filing information, the DOL has
good data for the number of pension
plans, large welfare plans, including
group health plan filers that file the
various schedules, and DFEs, and the
types of plans those filers represent.
However, there is some uncertainty
regarding the number of welfare plans
that provide group health benefits and
have fewer than 100 participants filing.
There is also some uncertainty in the
unit cost estimates.
There are two main issues with the
methodology for counting welfare plans
that provide group health benefits. First,
MEPS does not differentiate between
establishments offering single or
multiemployer plans, which implies
EBSA over-counts health plans (i.e., a
firm offering health insurance is
counted as providing benefits to their
employees when in fact one
multiemployer plan may cover several
firms). Second, MEPS–IC respondents
that ‘‘offer 2 or more plans’’ are
generally referencing plan types (i.e.
HMO vs PPO) or types of employees
(part-time plan vs executive plan) which
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would likely be included on a single
Form 5500 Annual Return/Report with
a single plan number on the form,
which again would over-count the
EBSA estimate.
With regard to the unit cost estimates,
the DOL has no direct measure for the
unit costs and uses a proxy adapted
from the MPR model, which was
developed in the late 1990s. In addition,
some uncertainty is inherent in any
proposed revision to the existing form,
and the level of uncertainty increases
where the proposal adds a new
requirement, such as the proposed new
group health plan filing requirements,
rather than revising, deleting, or moving
existing items from one schedule to
another.
Regulatory Alternatives
Executive Order 12866 directs federal
agencies promulgating regulations to
evaluate regulatory alternatives. The
DOL and the other Agencies have done
so in the process of developing this
proposal. The following summarizes
major alternatives considered, but not
proposed.
(1) Alternative approaches for
modernizing financial information
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besides revising the Schedule H and
eliminating the Schedule I.
Most of the changes that are being
proposed to modernize the financial
information that is reported on the form
respond to recommendations from GAO,
DOL–OIG, TIGTA, ERISA Advisory
Council and other advisory groups.
Early in the regulatory process, the
Agencies considered revising the
Schedule I instead of eliminating it, but
the Agencies determined that reporting
on alternative and hard-to-value assets,
which is not required on the current
Schedule I, is just as vital for
enforcement purposes for small plans as
for large plans. Adding reporting on
alternative and hard-to-value assets to
the financial statement on Schedule I in
a meaningful way would have made
Schedule H and Schedule I substantially
similar. Therefore, to best effectuate the
goal of providing more transparency on
plan investments in alternative and
hard-to-value assets, which is important
for understanding the risks to
participants in small plans as well as
large, the Agencies concluded that
eliminating the Schedule I and requiring
small plans with alternative and hard-
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to-value assets to file the Schedule H
was the most appropriate alternative.
(2) Alternative approaches for group
health plan reporting.
In addition to the proposed annual
reporting regime described in detail
earlier in this preamble, the DOL
considered a variety of other reporting
options for group health plans. Among
the options considered were (a) using
existing IRS data or entering into a data
sharing agreement with HHS; (b)
requiring all group health plans,
including small, fully insured plans to
file a complete Form 5500 and Schedule
J, along with the other schedules
required to be filed currently by group
health plans that are not exempt from
filing under the existing regulations;
and (c) requiring small, fully insured
plans to file a Form 5500 and Schedule
J every second or third year and
requiring those plans to file a
registration form in all other years,
similar to the Form 5500–C/R structure
used prior to 1999.
In an effort to minimize burden and
reporting duplication, the DOL
reviewed existing IRS health plan data
to determine if any of these data would
be usable. The DOL concluded that all
data collected by the IRS about health
plans, such as premium information,
minimum essential coverage
information, and information on the
number of employees covered, is
collected specifically to assess
Affordable Care Act-related excise taxes
and penalties and is subject to a higher
threshold for information sharing than
most other data collected by federal
agencies. Therefore, the DOL concluded
that its enforcement, policymaking, and
research needs would not rise to the
threshold to enable the IRS to share
data. The DOL also consulted with HHS
to determine whether any of their data
might be appropriate; however, HHS
does not collect any data on the ‘‘plan’’
level, which is the level of detail needed
by the DOL to inform oversight,
Congressional reporting, and policy
obligations under Title I of ERISA.
The DOL considered requiring welfare
plans that offer group health benefits
with fewer than 100 participants that
are fully insured to file the complete
Form 5500 and Schedule J, as would
now be required of welfare plans that
offer group health benefits with fewer
than 100 participants that are unfunded,
combination unfunded/fully insured, or
funded with a trust. The DOL also
considered requiring welfare plans that
offer group health benefits with fewer
than 100 participants that are fully
insured to attach a Schedule A (in
addition to the Form 5500 and Schedule
J). The DOL decided against both of
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these options after weighing the benefits
of getting additional data and the likely
burdens. DOL also took into account
that that the data of most benefit is the
proposed new reporting to provide
identity, number, and basic funding and
benefit structures and types for these
plans, which is currently unavailable
due to the Form 5500 filing exemption
from filing for these plans. More
information than that would provide the
DOL with somewhat more robust data,
but it would not merit the burden of
requiring the estimated nearly 2 million
small, fully insured plans to report such
information, particularly since much of
the information is directed towards
pension plans and welfare plans that are
funded with a trust. For comparison, the
DOL estimates that a plan that provides
group health benefits with fewer than
100 participants filing a complete Form
5500 Annual Return/Report and a
complete Schedule J will incur 5 hours
and 14 minutes of burden, while one
with fewer than 100 participants
answering only limited questions on the
Form 5500 and Schedule J will incur
only 30 minutes of burden. If the DOL
were to require these plans to file a
complete Form 5500 and a complete
Schedule J, then each of the estimated
2 million welfare plans that offer group
health benefits with fewer than 100
participants that are fully insured would
incur an additional 4 hours and 44
minutes of burden, at an additional
aggregate annual reporting cost of
$927.6 million. Attaching a Schedule A
requires 2 hours and 45 minutes of
burden for welfare plans that offer group
health benefits with fewer than 100
participants. If the DOL were to require
welfare plans that offer group health
benefits with fewer than 100
participants that are fully insured to
attach Schedule A, the additional
aggregate annual reporting cost would
be $583.4 million. The DOL concluded
that requiring these fully insured plans
to file a complete Form 5500 and
Schedule J, as well as potentially
Schedule A would grant the DOL
slightly more robust data in a
significantly more burdensome fashion
compared with the chosen option.
The DOL decided, however, that
plans that provide group health benefits
and have fewer than 100 participants
that are not fully insured, i.e., some or
all of the funding comes from the
general assets of the employer or funded
through a trust, would have to complete
the full Form 5500 Annual Return/
Report and the full Schedule J, as well
as the Schedule A, if applicable. The
filings for plans that provide group
health benefits and have fewer than 100
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47521
participants that are unfunded,
combination unfunded/fully insured, or
funded with a trust would generally be
similar to those for plans that provide
group health benefits and have 100 or
more participants that are funded in the
same way. Group health plans that are
unfunded, combination unfunded/fully
insured, or funded with a trust, by
definition, are fully or partially selfinsured, and the DOL believes that the
additional Schedule J information, in
particular, is important for the DOL’s
role with regard to oversight and to
development of the self-insured report.
Relatedly, the DOL also considered
not requiring plans that provide group
health benefits and have fewer than 100
participants that are funded with a trust
to file the more detailed financial and
service provider information required of
large plans that are funded with a trust,
in particular the Schedule C and
Schedule H. Small welfare plans that
provide group health benefits that are
funded with a trust are already filing
either the Form 5500–SF or the Form
5500 Annual Return/Report and the
Schedule I. If a small welfare plan
funded with a trust is required to file a
Form M–1 or is invested in alternative
or hard-to-value assets, it currently
would have to file the Form 5500 with
a Schedule I, and, if applicable,
Schedule A. As with small pension
plans required to file the Form 5500
Annual Return/Report, in general, the
proposal would have plans that provide
group health benefits and have fewer
than 100 participants that are funded
using a trust file in the same manner as
plans that provide group health benefits
that have 100 or more participants that
are funded using a trust.
With respect to requiring filing of the
Schedule C by plans that provide group
health benefits and have fewer than 100
participants that are currently not
subject to any filing requirement (i.e.,
unfunded, fully insured, or combination
unfunded/fully insured), the Agencies
took into account that the existing
408b–2 regulation only applies to
pension plans. Large welfare plans that
are funded with a trust are already
required to file a Schedule C with
service provider compensation
information, and the difference in
information reporting should not be
significant. Moreover, small plans that
are funded with a trust would already
be required to keep as part of their
records information on direct
compensation, because direct expenses
are reported as administrative expenses
of the plan. With respect to indirect
compensation, given that the class of
service providers for whom indirect
compensation must be reported is
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limited to those identified in 408b–2, a
small plan should not have many
service providers that would be required
to be reported, and so the burden should
be minimal. Just as the Agencies believe
that it is important to have improved
information on small pension plans that
invest in alternative and hard-to-value
assets, so too, they believe that is
important to have the information for
small welfare plans that are funded with
a trust that invest in such assets. To the
extent that small plans funded with a
trust are the plans most likely to
experience financial difficulties, having
this information should help the
Agencies and participants and
beneficiaries better monitor the
financial stability. Additionally, the
Form 5500 Annual Return/Report
together with the proposed Schedule J
would give basic contribution, claims,
benefit structure, and group health
compliance information. For these
reasons, the DOL concluded that the
burden of requiring plans that provide
group health benefits and have fewer
than 100 participants, other than those
funded with a trust, to also file the
Schedule C and Schedule H would
outweigh the benefits of requiring that
these schedules be filed; therefore, those
plans are not required to do so.
Finally, the DOL considered requiring
small, fully insured plans to file a Form
5500 Annual Return/Report and
Schedule J every second or third year
and requiring those same plans to file a
registration form in alternate years. This
option was ruled out due to public
comments made during the 1999 Form
5500 Annual Return/Report revisions.
Prior to the 1999 revisions, some filers
were eligible to file the Form 5500–C/
R, which included robust reporting
during one year and more limited
reporting during the second and third
years of a three year cycle. Commenters
responding to the proposed 1999
revisions were supportive of the DOL’s
plan to eliminate Form 5500–C/R, and
accordingly eliminate the multi-year
cycle of reporting, because they felt that
it was difficult to keep track of the
schedule.62 In an effort to take those
comments into account, the DOL
decided not to propose a reporting
scheme for small, fully insured group
health plans that required filing a
registration statement in certain years
and more expansive information in
other years because DOL thought it
would likely be confusing, lead to filer
error, and inconsistent reporting. The
proposal to have the currently exempt
plans that provide group health benefits
with fewer than 100 participants
62 See
65 FR 5026.
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complete some or all of the Form 5500
Annual Return/Report and Schedule J
was designed to get the minimal amount
of information needed for research,
policy, and oversight purposes, with the
simplest and least amount of reporting.
(3) Alternative approaches for ESOPspecific reporting.
In addition to the proposed
restoration of the Schedule E, the
Agencies also considered whether to
add only certain additional ESOP
questions to existing schedules, such as
the Schedule R, which currently has
ESOP questions that were moved to the
Schedule R from the Schedule E when
the Schedule E was eliminated for 2009
and later filings. As discussed above,
before 2009, the Schedule E (ESOP
Annual Information) was an IRS-only
component of the Form 5500 Annual
Return/Report used to collect data on
ESOPs. As with other ‘‘IRS-only’’
schedules that were part of the Form
5500 Annual Return/Report, when the
DOL mandated electronic filing of the
Form 5500 Annual Return/Report as
part of EFAST2, the Schedule E was
removed from the Form 5500 Annual
Return/Report in 2009 due to the
statutory limits on the IRS’s authority to
mandate electronic filing of such
information.
The DOL believes that many of the
ESOP questions that were eliminated in
2009 because they were ‘‘IRS-only’’ are
useful for DOL’s enforcement and
research programs of DOL, as well as for
participants and beneficiaries in ESOPs.
In addition, several new questions have
been included to provide a more
comprehensive view of ESOPs. With the
increase in ESOP-specific questions, the
use of a single schedule for all ESOP
questions would be a more effective and
efficient information collection tool for
the Agencies than having some
questions on the Schedule R and some
questions on the Schedule E.
(4) Alternative approaches for service
provider reporting.
Most of the changes that are being
proposed to revise the service provider
information that is reported on the form
respond to recommendations from GAO,
DOL–OIG, TIGTA, and other advisory
groups. As discussed previously, the
Agencies evaluated whether to require
welfare plans that offer group health
benefits with fewer than 100
participants to complete the Schedule C.
The Agencies also evaluated whether or
not to require small pension plans that
are required to file the Form 5500
Annual Return/Report to complete the
Schedule C, but decided that due to the
importance of the information for
participants and beneficiaries, plan
officials responsible for understanding
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compensation arrangements, and the
Agencies, the benefit outweighed the
burden. Because the majority of pension
plan filers are small plans that are
eligible to file the Form 5500–SF, the
Agencies considered whether to add
questions to the Form 5500–SF
requiring filers to provide indirect
compensation information. The
Agencies determined that to minimize
burden, rather than adding new
questions that were a subset or total of
those on the Schedule C, they would
simply require defined contribution
pension plan Form 5500–SF filers to file
the comparison chart under the DOL’s
regulation at 29 CFR 404a–5. This
would provide some information
(though not in the form of structured
data) regarding service provider
compensation with only minimal
burden.
(5) Alternative approaches for DFE
reporting.
Most of the changes that are being
proposed to revise DFE reporting
respond to recommendations from GAO,
DOL–OIG, TIGTA, and others. The
Agencies considered a variety of
alternative ways to improve DFE
reporting. Included in those alternatives
was expanding Schedule D reporting to
require plans to provide the date of the
most recent Form 5500 Annual Return/
Report filing of the DFEs in which a
plan or investing DFE was invested. The
Agencies also considered having both
plans and CCTs, PSAs, and 103–12 IEs
identify on the Schedule H, Line 4i
Schedules of Assets the underlying
assets of those DFEs. To minimize
burden and duplicative reporting, the
Agencies instead chose to eliminate the
requirement for plans to complete the
Schedule D, and have plans and filing
DFE’s identify on the plan or filing DFEs
Line 4i Schedule of Assets underlying
assets by category where the DFE has
filed a Form 5500 Annual Return/
Report. The assets would be broken out
by the plan only if a CCT or PSA did
not file a Form 5500 Annual Return/
Report. The Agencies also considered
whether to require plans that file the
Form 5500–SF that participate in DFEs
to provide more detailed information on
those DFEs to help provide a more
complete crosswalk between DFE and
plan filings. The Agencies determined
that the burden would outweigh the
benefit in that regard. In addition, the
Agencies considered, but decided
against, requiring CCTs and PSAs that
file the Form 5500 Annual Return/
Report and 103–12 IEs to complete both
Schedule H, Line 4i Schedules of
Assets. The Agencies determined that
having such entities complete just the
Line 4i(1) Schedule of Assets Held for
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Investment, and not the Line 4i(2)
Schedule of Assets Disposed During
Plan Year, would adequately address
concerns with quality and usefulness of
data, while minimizing burden.
Regulatory Flexibility Act—Initial
Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. In accordance
with section 603 of the RFA, the
following reflects EBSA’s Initial
Regulatory Flexibility Analysis (IRFA)
describing the impact of the rule on
small entities and seeking public
comment on such impact.
For purposes of this IRFA, the DOL
continues to consider a small entity to
be an employee benefit plan with fewer
than 100 participants, as it has in many
previous IRFAs measuring the impact of
proposed regulatory actions on small
employee benefit plans. The definition
of small entity considered appropriate
for this purpose differs, however, from
a definition of small business that is
based on size standards promulgated by
the Small Business Administration
(SBA) (13 CFR 121.201) pursuant to the
Small Business Act (15 U.S.C. 631 et
seq.). The basis of EBSA’s definition of
a small entity for this IRFA is found in
section 104(a)(2) of ERISA, which
permits the Secretary to prescribe
simplified annual reports for pension
plans that cover fewer than 100
participants. While some large
employers may have small plans, in
general small employers maintain most
small plans. The Form 5500 Annual
Return/Report impacts any employer in
any private sector industry who chooses
to sponsor a plan. The DOL is unable to
locate any data linking employer
revenue to plans to determine the
relationship between small plans and
small employers in industries whose
SBA size standard is revenue-based. For
a separate project, the DOL purchased
data on ESOPs that file the Form 5500
and on defined contribution pension
plans that file the Form 5500–SF from
Experian Information Solutions, Inc.
The Experian dataset provides the
number of employees for the plan
sponsor. By merging these data with
internal DOL data sources, the DOL
determined the relationship between
small plans and small employers in
industries whose SBA size standard is
based on a threshold number of
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employees that varies from 100 to 1,500
employees. Based on these data, the
DOL estimates that over 97 percent of
small retirement plans and over 80
percent of small health plans are
sponsored by employers with less than
100 employees. The DOL estimates that
over 99 percent of small retirement
plans and over 97 percent of small
health plans are sponsored by
employers with less than 1,500
employees. Thus, the DOL believes that
assessing the impact of these proposed
rules on small plans is an appropriate
substitute for evaluating the effect on
small entities. In previous regulations,
the DOL has consulted with the SBA
Office of Advocacy concerning use of
this participant count standard for RFA
purposes, see 13 CFR 121.902(b)(4), and
the DOL received no comments
suggesting use of a different size
standard. The Department solicits
public comments on the
appropriateness of continuing to use
this size standard.
The following subsections address
specific components of an IRFA, as
required by the RFA.
Need for the rule and its objectives:
The DOL is publishing this proposal to
amend the regulations relating to the
annual reporting and disclosure
requirements of section 103 of ERISA
simultaneously with the publication of
the Notice of Proposed Forms Revisions.
The DOL continually strives to tailor
reporting requirements to minimize
reporting costs, while ensuring that the
information necessary to secure ERISA
rights is adequately available. The
optimal design of reporting
requirements in order to satisfy these
objectives changes over time. As
discussed in the Need for Regulatory
Action section above, the Form 5500
and the financial statements contained
in the current Schedule H (Large Plan
Financial Information) and Schedule I
(Small Plan Financial Information) are
based on data elements that have
remained largely unchanged since the
Form 5500 Annual Return/Report was
established in 1975. Meanwhile, benefit
plan designs and practices have evolved
over time in response to market trends
in labor, financial, health care, and
insurance markets, and markets for
various services used by plans. In
addition, the technologies available to
manage and transmit information
continually advance. Therefore, it is
incumbent on the Agencies to revise
their reporting requirements from time
to time to keep pace with such changes.
The proposed forms revisions, and
associated DOL regulatory amendments
in the proposal, are intended to calibrate
reporting requirements to take into
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47523
account certain recent changes in
markets, the law (including the
Affordable Care Act), and technology,
many of which are referred to above in
this document.
Description and estimate of number of
small entities to which rule will apply:
This proposal increases the number of
small plans required to comply with
annual reporting requirements by
requiring approximately 1.9 million
welfare plans that provide group health
benefits with fewer than 100
participants that previously were
exempt from annual reporting to file a
Form 5500 Annual Return/Report,
completing lines 1–5 on Form 5500 and
lines 1–8 on Schedule J. This proposal
also requires approximately 289,000
plans that provide group health benefits
and have fewer than 100 participants
that are unfunded, combination
unfunded/fully insured, or funded with
a trust to file a Form 5500 Annual
Return/Report, where previously
roughly 6,000 were required to do so. In
total, approximately 2.81 million small
pension plans and plans that provide
group health benefits covering fewer
than 100 participants would be required
to comply with annual reporting
requirements, where previously
approximately 658,000 were required to
do so. As described previously,
estimates of the number of small
pension plans and small welfare plans
that do not offer group health benefits
are based on 2013 Form 5500 filing data.
Estimates of the number of plans that
provide group health benefits and have
fewer than 100 participants are based on
MEPS–IC and Census of Business data.
Description of projected reporting,
recordkeeping, and other compliance
requirements of the rule: The reporting
requirements applicable to small plans
are detailed above and in the associated
Notice of Proposed Forms Revision.
Almost 89 percent of the 2.81 million
small plans subject to the proposed
annual reporting requirements can
satisfy the requirements through
streamlined options.
The 1.9 million welfare plans that
provide group health benefits with
fewer than 100 participants can fulfill
the proposed reporting requirements
answering lines 1–5 of the Form 5500
and line 1–8 of the Schedule J. For these
plans, annual reporting will require the
use of a mix of clerical and professional
administrative skills.
Over 581,000 small defined
contribution pension plans and small
welfare plans that do not provide group
health benefits can fulfill the proposed
reporting requirements with the Form
5500–SF with no schedules required to
be attached. All of these plans are
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eligible for the waiver of audit
requirements. For such plans, therefore,
satisfaction of the applicable proposed
annual reporting requirements is not
expected to require the services of an
IQPA or auditor, but, like the small,
fully insured group health plans, will
require the use of a mix of clerical and
professional administrative skills.
Another 41,000 small defined benefit
pension plans and money purchase
plans will continue to be eligible to use
the streamlined 5500–SF; satisfaction of
the proposed reporting requirements
will require additional services of an
actuary and submission of the Schedule
SB or Schedule MB, as applicable, and
no other schedules.
The remaining 319,000 small pension
and welfare plans will not be eligible to
use the Form 5500–SF or any other
streamlined reporting option. These
plans will be required to file the Form
5500 Annual Return/Report, along with
any other schedules required for
pension plans or welfare plans that are
not fully insured group health plans.63
Of these plans, approximately 289,000
are welfare plans that provide group
health benefits and are unfunded,
combination unfunded/fully insured, or
funded with a trust, 25,000 are defined
contribution pension plans, and over
3,000 are welfare plans that do not
provide group health benefits. All will
require a mix of clerical and
professional administrative skills to
satisfy the proposed reporting
requirements. Fewer than 1,000 small
pension plans that are not eligible to use
the Form 5500–SF are defined benefit
pension plans that will be required to
use an actuary and file Schedule MB or
Schedule SB in addition to needing a
mix of clerical and professional
administrative skills to satisfy the
proposed reporting requirements.
Satisfaction of the proposed annual
reporting requirements under these
regulations is not expected to require
any additional recordkeeping that
would not otherwise be part of normal
business practices.
Table 5 below compares the DOL’s
estimates of small plans’ reporting costs
under the requirements in effect prior to
this action with those under the new
requirements for various classes of
affected plans. As shown, costs under
the new requirements will be slightly
higher for small pension plans and
small welfare plans that are eligible to
file the Form 5500–SF and significantly
higher for small pension and welfare
plans that are not eligible to file the
Form 5500–SF (including group health
plans). As discussed above, the
significant increase for group health
plans reflects the elimination of prior
reporting exemptions for most plans
that provide group health benefits and
have fewer than 100 participants. The
significant increase for small pension
plans and small welfare plans that do
not offer group health benefits that are
not eligible to file the Form 5500–SF
results primarily from the changes to
financial and service provider reporting.
The DOL notes that for the over 90
percent of plans that are eligible for
annual reporting under streamlined
options, the per-filer cost under the
proposed requirements increases by
$35–37 annually relative to the current
requirements.64 These estimates take
account of the quantity and mix of
clerical and professional skills required
to satisfy the reporting requirements for
various classes of plans.
TABLE 5—SMALL PLAN REPORTING COSTS UNDER PRIOR AND NEW REQUIREMENTS
Number of
filers under
current
requirements
(thousands)
Class of small plan
Defined Benefit Pension—Eligible for
5500–SF ...............................................
Defined Benefit Pension—Not Eligible for
5500–SF ...............................................
Defined Contribution Pension—Eligible
for 5500–SF ..........................................
Defined Contribution Pension—Not Eligible for 5500–SF ....................................
Welfare—Non-Health—Eligible for 5500–
SF .........................................................
Welfare—Non-Health—Not Eligible for
5500–SF ...............................................
Welfare—Fully Insured Health .................
Welfare—Unfunded, Combination Unfunded/Insured, or Funded with a Trust
Health ...................................................
Aggregate
annual cost
under current
requirements
(millions)
Aggregate
annual cost
under
proposed
requirements
(millions)
Annual per
filer cost under
current
requirements
Annual per
filer cost under
proposed
requirements
41.1
41.1
$37.6
$39.0
$916
$951
1.0
1.0
1.1
1.9
1,150
1,970
580.7
580.7
168.0
188.0
289
324
25.4
25.4
11.8
33.9
484
1,335
0.7
0.7
0.2
0.2
289
324
3.3
0.0
3.3
1,869.0
1.5
0.0
2.5
69.6
455
0
758
37
6.2
289.0
4.1
158.2
654
547
658.3
Total for All Small Plans ...................
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Number of
filers under
proposed
requirements
(thousands)
2,810.1
224.3
493.4
341
176
In comparison to the costs per filer
described in Table 5, the 75,000 large
pension plans will incur an average cost
of $2,326 under the proposed
requirements and the almost 74,000
large welfare plans subject to annual
reporting requirements will incur an
average cost of $1,833 each year.65
Table 6 below compares the DOL’s
estimates of small plans’ reporting costs
under the requirements in effect prior to
this action with those under the new
requirements as a percentage of plan
assets for pension plans and welfare
plans that do not offer group health
benefits and as a percentage of annual
health insurance premiums for welfare
plans that offer group health benefits to
show the impact of the reporting
requirement on small plans of differing
63 The exact schedules that these plans are
required to attach vary based on the plans’ specific
facts and circumstances.
64 In the case of the 2.0 million small, fully
insured group health plans, the increase in per filer
cost is from no cost to $37 per year.
65 Average costs for large plans do not include the
costs of obtaining the report of an IQPA or an
actuarial report, if such a report is required for the
plan’s specific situation.
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sizes.66 As shown, group health plans
with five or fewer participants that are
unfunded, combination unfunded/fully
insured, or funded with a trust incur the
highest costs as a result of the proposed
reporting requirements, incurring an
annual reporting cost of 0.998 percent of
their annual health insurance
premiums. Non-health welfare plans
that are eligible to file Form 5500–SF
47525
and have between 6 and 10 participants
incur the second highest costs under the
proposed reporting requirements. These
plans’ annual reporting cost is 0.561
percent of their plan assets.
TABLE 6—SMALL PLAN REPORTING COSTS UNDER PRIOR AND NEW REQUIREMENTS AS A PERCENTAGE OF PLAN ASSETS
OR AGGREGATE ANNUAL HEALTH INSURANCE PREMIUMS
Annual per filer
cost under current
requirements as a
percentage of plan
assets or aggregate
annual health
insurance
premiums
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Class of small plan
(participants)
Defined Benefit Pension—Eligible for 5500–SF:
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Defined Benefit Pension—Not Eligible for 5500–SF:
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Defined Contribution Pension—Eligible for 5500–SF:
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Defined Contribution Pension—Not Eligible for 5500–SF:
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Welfare—Non-Health—Eligible for 5500–SF:
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Welfare—Non-Health—Not Eligible for 5500–SF:
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Welfare—Fully Insured Health .............................................................................
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
66 Plan asset data reflects data reported on 2013
Form 5500 filings. Because so few plans that
provide group health benefits and have fewer than
100 participants are currently subject to annual
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Annual per filer
cost under
proposed
requirements as a
percentage of plan
assets or
aggregate annual
health insurance
premiums
Number of plans
subject to proposed
filing requirements
0.088
0.084
0.067
0.040
0.022
0.018
0.016
0.091
0.087
0.070
0.041
0.023
0.018
0.016
178,694
105,458
139,971
86,936
38,822
14,491
6,341
0.002
0.050
0.041
0.016
0.017
0.016
0.020
0.003
0.086
0.069
0.027
0.028
0.027
0.034
566
82
60
40
46
66
90
0.045
0.036
0.024
0.014
0.010
0.008
0.007
0.050
0.040
0.027
0.016
0.011
0.009
0.008
178,694
105,458
139,971
86,936
38,822
14,491
6,341
0.011
0.040
0.021
0.012
0.009
0.009
0.008
0.033
0.115
0.062
0.033
0.026
0.026
0.024
15,650
1,856
1,989
1,888
1,362
990
1,086
0.135
0.501
0.269
0.124
0.036
0.057
0.134
0.151
0.561
0.301
0.139
0.041
0.064
0.150
263
61
124
91
58
32
23
0.019
0.197
0.172
0.038
0.073
0.028
0.150
................................
0.000
0.000
0.000
0.000
0.032
0.328
0.287
0.064
0.123
0.047
0.250
................................
0.068
0.034
0.014
0.007
1,917
51
117
218
310
323
404
1,869,000
................................
................................
................................
................................
reporting requirements and many group health
plans do not hold assets in trusts, the DOL
concluded that annual health insurance premium
data reported by the Kaiser Family Foundation was
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a more appropriate metric for comparison of group
health plans.
E:\FR\FM\21JYP2.SGM
21JYP2
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TABLE 6—SMALL PLAN REPORTING COSTS UNDER PRIOR AND NEW REQUIREMENTS AS A PERCENTAGE OF PLAN ASSETS
OR AGGREGATE ANNUAL HEALTH INSURANCE PREMIUMS—Continued
Annual per filer
cost under current
requirements as a
percentage of plan
assets or aggregate
annual health
insurance premiums
Class of small plan
(participants)
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Welfare—Unfunded, Combination Unfunded/Fully Insured, or Funded with a
Trust Health ......................................................................................................
5 or Fewer ....................................................................................................
6–10 ..............................................................................................................
11–25 ............................................................................................................
26–50 ............................................................................................................
51–75 ............................................................................................................
76–90 ............................................................................................................
90–99 ............................................................................................................
Annual per filer
cost under
proposed
requirements as a
percentage of plan
assets or
aggregate annual
health insurance
premiums
Number of plans
subject to proposed
filing requirements
0.000
0.000
0.000
0.005
0.004
0.003
................................
................................
................................
................................
1.192
0.596
0.238
0.119
0.079
0.066
0.060
................................
0.988
0.496
0.199
0.100
0.066
0.055
0.050
289,000
................................
................................
................................
................................
................................
................................
................................
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Note: Due to data constraints, the DOL is unable to break out smaller subgroup plan counts for welfare plans that provide group health benefits with fewer than 100 participants. Instead, the DOL has provided the total number of welfare plans that provide group health benefits with
fewer than 100 participants.
The DOL is unaware of any relevant
federal rules for small plans that
duplicate, overlap, or conflict with these
regulations.
Description of steps the DOL has
taken to minimize impact on small
entities: In developing these regulations
and the associated forms revisions, the
Agencies considered a number of
alternative provisions directed at small
plans, many of which are discussed
elsewhere in this preamble and in the
Notice of Proposed Forms Revision. The
DOL believes that the proposed changes
to the reporting requirements impose
the least amount of burden on small
plans, while allowing the DOL to collect
sufficient information for it to fulfill its
statutory responsibilities. Any efforts to
further reduce reporting burden would
have had a detrimental impact on the
DOL’s ability to protect plan
participants and beneficiaries.
The new reporting requirements for
welfare plans that offer group health
benefits with fewer than 100
participants comprise over 83 percent of
the increased burden on small plans.
The subset of these welfare plans that
are fully insured comprises almost 87
percent of welfare plans that offer group
health benefits with fewer than 100
participants. As discussed previously,
the DOL considered requiring welfare
plans that offer fully insured group
health benefits with fewer than 100
participants to file a Form 5500 Annual
Return/Report and Schedule J annually,
or alternatively, on a two or three year
cycle. The DOL opted instead to have
those plans file only limited information
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on the Form 5500 Annual Return/Report
and Schedule J. Requiring those plans to
file a complete Form 5500 Annual
Return/Report and Schedule J annually
would have added $927.6 million in
annual reporting costs relative to the
chosen alternative. The DOL also
considered requiring welfare plans that
offer group health benefits with fewer
than 100 participants that are fully
insured to attach a Schedule A (in
addition to the Form 5500 and Schedule
J). If the DOL were to require welfare
plans that offer group health benefits
with fewer than 100 participants that
are fully insured to attach Schedule A,
the additional aggregate annual
reporting cost would be $583.4 million
relative to the option chosen. The DOL
rejected both of these options because
they added significant cost ($1.5 billion
total) with limited additional benefit.
As discussed above, the Schedule I is
being eliminated for small plans that are
not eligible to file Form 5500–SF
because the Schedule I does not require
small plans to provide detailed plan
asset information. This shortcoming
impairs the utility of the Form 5500
Annual Return/Report as a tool to obtain
a meaningful picture of small plan
investments in hard-to-value and other
assets. As the GAO has noted, the
limited financial information provided
on the Schedule I creates a challenge for
participants, beneficiaries, oversight
agencies, researchers, and other users of
the Form 5500 Annual Return/Report or
its data.67 Accordingly, under the
67 GAO Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 18.
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proposed change, approximately 27,000
small plans that are not eligible to file
the Form 5500–SF and currently are
required to file the Schedule I would be
required to complete the Schedule H
and the applicable schedules of assets.
Although this would result in additional
reporting details for certain small plans,
the Agencies do not expect that small
plans with simple investment portfolios
would see a significant increase in their
annual reporting burden. Small plans
with complex portfolios that include
hard-to-value or alternative investments
should have more transparent financial
statements which may require
somewhat more complex financial
reporting obligations. In light of changes
in the financial environment and
increasing concerns about investments
in hard-to-value assets and alternative
investments, the Agencies continue to
believe that requiring separate financial
information regarding hard-to-value
investments is important for regulatory,
enforcement, and disclosure purposes.
The DOL notes that although the
proposal would require such small
plans to complete the Schedule H
instead of the Schedule I, including the
Schedule H Line 4i(1) and 4i(2)
Schedules of Assets, small plans that are
eligible for a waiver of the annual
examination and report of an IQPA
under current rules would still be
eligible for this waiver under the
proposal.68
The proposed rule would also require
approximately 18,200 small plans that
68 29
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asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
are not eligible to file the Form 5500–
SF to file Schedule C. Currently, only
large plans must file a Schedule C, thus
excluding a large portion of plans from
having to disclose service provider fees.
The Agencies recognize the burdens
small plans face in complying with
disclosure obligations. The Agencies
therefore propose to require small
pension plans to file Schedule C only if
they do not meet the eligibility
conditions for filing the Form 5500–SF,
which generally would be those pension
plans that are invested in alternative or
hard-to-value assets. Small welfare
plans that provide group health benefits
(which are not eligible to file the Form
5500–SF) would also be required to file
the Schedule C if they are not unfunded
or insured (e.g., funded using a trust).
This would continue to emphasize
sensitivity to reporting burden for small
plans with simple investment portfolios,
while addressing some of the GAO’s
concerns that not all critical information
on indirect compensations is being
reported to the Agencies. See GAO
Targeted Revisions Could Improve
Usefulness of Form 5500 Information at
25–26 (‘‘Given these various exceptions
to fee reporting requirements, Schedule
C may not provide participants, the
government, or the public with
information about a significant portion
of plan expenses and limits the ability
to identify fees that may be
questionable.’’) In addition, the rule
would align financial information
reporting with recently adopted
disclosure rules to ensure that all fees
are reported by the plans.69
Paperwork Reduction Act Statement
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3506(c)(2)), the DOL
requests comments on the information
collections included in the proposed
amendments to the DOL’s regulations
relating to annual reporting and
disclosure requirements under Part 1 of
Subtitle B of Title I of ERISA and in the
proposed revision of the Form 5500
Annual Return/Report pursuant to Part
1 of Subtitle B of Title I and Title IV of
ERISA and the Code. The DOL has
submitted an information collection
request (ICR) to OMB in accordance
with 44 U.S.C. 3507(d), for OMB’s
review of the DOL’s information
collections previously approved under
OMB Control No. 1210–0110.
A copy of the ICR can be obtained by
contacting the U.S. Department of
Labor, Employee Benefits Security
Administration, Office of Policy and
Research, 200 Constitution Avenue
69 Id.
at 50.
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NW., Room N–5718, Washington, DC
20210, Telephone: (202) 693–8410; Fax:
(202) 219–4745 or at www.RegInfo.gov.
These are not toll-free numbers.
OMB asks that comments about
information collections in this NPRM be
submitted by mail or courier to the
Office of Information and Regulatory
Affairs, Attn: OMB Desk Officer for
DOL–EBSA, Office of Management and
Budget, Room 10235, 725 17th Street
NW., Washington, DC 20503; by Fax:
202–395–6881 (this is not a toll-free
number); or by email: OIRAsubmission@
omb.eop.gov. Commenters are
encouraged, but not required, to send a
courtesy copy of any comments to the
party identified in the ADDRESSES
section of this NPRM. OMB requests
that comments be received within 75
days of publication of the proposed rule
to ensure their consideration. Comments
submitted in response to this request
become a matter of public record. The
Department and OMB are particularly
interested in comments that:
• Evaluate whether the collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
• Evaluate the accuracy of the DOL’s
estimate of the burden of the collection
of information, including the validity of
the methodology and assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submission of
responses.
Congressional Review Act
The proposed rules being issued here
are subject to the Congressional Review
Act provisions of the Small Business
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and, if
finalized, will be transmitted to the
Congress and the Comptroller General
for review. The proposed rule is a
‘‘major rule’’ as that term is defined in
5 U.S.C. 804, because it is likely to
result in an annual effect on the
economy of $100 million or more.
Unfunded Mandates Reform Act
Statement and Summary
Title II of the Unfunded Mandates
Reform Act of 1995, 2 U.S.C. 1531–1538
requires each Federal agency to prepare
a written statement assessing the effects
of any Federal mandate in a proposed or
PO 00000
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47527
final agency rule that may result in an
expenditure of $100 million or more
(adjusted annually for inflation with the
base year 1995) in any one year by State,
local, and tribal governments, in the
aggregate, or by the private sector. Such
a mandate is deemed to be a ‘‘significant
regulatory action.’’ The current proposal
is expected to have such an impact on
the private sector, and the DOL
therefore hereby provides such an
assessment. The DOL’s written
statement as required by this act
follows:
The DOL is issuing the current
proposed regulations and forms
revisions under Sections 103, 104, 110
and 505 of ERISA (29 U.S.C. 1023, 1024,
1030, and 1135). Under Titles I and IV
of ERISA and the Code, pension and
other employee benefit plans are
generally required to file annual
returns/reports concerning, among other
things, the financial condition and
operations of the plan. Filing a Form
5500 Annual Return/Report of
Employee Benefit Plan or Form 5500–SF
Short Form Annual Return/Report of
Small Employee Benefit Plan, together
with any required schedules and
attachments, generally satisfies these
annual reporting requirements. The
current proposal would amend current
reporting regulations and update the
existing forms and schedules as
explained in the summary information
provided above in this document.
The DOL assessed the anticipated
benefits and costs of the current
proposal pursuant to Executive Order
12866 in the Regulatory Impact Analysis
for the current proposal, above, and
concluded that its benefits would justify
its costs. The current proposal’s material
benefits and costs generally would be
largely confined to the private sector,
where plans would incur increased
costs from expanded reporting
requirements, while participants and
beneficiaries and other end-users of the
Form 5500 Annual Return/Report data
would benefit from improved reporting.
The DOL itself, as well as IRS, PBGC,
and other governmental users would
benefit from increased efficiency in
enforcement activity and improved
quality in research and policy decisions
resulting from reporting data that more
accurately reflect the current plan
marketplace.
Some employee benefit plans
sponsored by tribal governments that
are subject to ERISA because they cover
employees who are involved in
performing commercial activities
(whether or not such activities are
essential government functions) may be
affected by the Federal mandate
contained in this rule, if it is adopted as
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asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
proposed. The DOL does not have
sufficient data to estimate the amount of
the increase in future compliance costs
that would be imposed on tribal
governments that sponsor these plans,
but it believes such costs would be
similar to those imposed on private
sector employers that are discussed in
the regulatory impact analysis. Such
increased costs would not be paid with
Federal financial assistance (or
otherwise paid for by the government).
The DOL is not aware of any available
Federal resources to carry out this
mandate on tribal governments. The
budgetary impact of the mandate will
fall on tribal governments that maintain
certain employee benefit plans. Apart
from this, the DOL does not believe that
the mandate will cause any
disproportionate budgetary effects on
any particular regions of the nation or
particular tribal governments, urban,
rural or other types of communities, or
particular segments of the private sector.
The DOL has not consulted with
elected representatives of tribal
governments, but will do so after the
proposed regulations and forms
revisions are published.
In summary, the DOL believes the
benefits of this proposed rule are
significant, and will result in a
modernized annual return/report that
has substantially more utility for the
agencies, the regulated community, and
the public. The proposed rule would
also impose increased costs on
employee benefit plan sponsors. Tribal
governments that sponsor ERISAcovered plans will incur increased costs
as will all other sponsors of ERISAcovered plans. The DOL lacks sufficient
information to quantify the number of
tribal governments impacted by this
proposed rule, but believes that the
costs imposed on tribal governments
will be consistent with the costs
imposed on all other sponsors of ERISAcovered plans. Finally, the DOL does
not believe that the costs imposed by
this proposed rule will have any
disproportionate budgetary effects based
on any particular regions of the nation
or particular tribal governments, urban,
rural or other types of communities, or
particular segments of the private sector.
Federalism Statement
Executive Order 13132 (August 4,
1999) outlines fundamental principles
of federalism and requires adherence to
specific criteria by federal agencies in
the process of their formulation and
implementation of policies that have
substantial direct effects on the States,
the relationship between the national
government and the States, or on the
distribution of power and
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Jkt 238001
responsibilities among the various
levels of government. These proposed
rules do not have federalism
implications because they would have
no substantial direct effect on the States,
on the relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. Section 514 of
ERISA provides, with certain exceptions
specifically enumerated, that the
provisions of Titles I and IV of ERISA
supersede any and all laws of the States
as they relate to any employee benefit
plan covered under ERISA. The
requirements implemented in these
rules do not alter the fundamental
provisions of the statute with respect to
employee benefit plans, and as such
would have no implications for the
States or the relationship or distribution
of power between the national
government and the States.
List of Subjects
29 CFR Part 2520
Accounting, Employee benefit plans,
Pensions, Reporting and recordkeeping
requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
For the reasons set forth in the
preamble, the Department proposes to
amend Subchapter C, parts 2520 and
2590 of Title 29 of the Code of Federal
Regulations as follows:
PART 2520—RULES AND
REGULATIONS FOR REPORTING AND
DISCLOSURE
1. The authority section for part 2520
continues to read as follows:
■
Authority: 29 U.S.C. 1021–1025, 1027,
1029–31, 1059, 1134, and 1135; and
Secretary of Labor’s Order 1–2011, 77 FR
1088 (Jan. 9, 2012). Sec. 2520.101–2 also
issued under 29 U.S.C. 1132, 1181–1183,
1181 note, 1185, 1185a–b, 1191, and 1191a–
c. Secs. 2520.102–3, 2520.104b–1, and
2520.104b–3 also issued under 29 U.S.C.
1003, 1181–1183, 1181 note, 1185, 1185a–b,
1191, and 1191a–c. Secs. 2520.104b–1 and
2520.107 also issued under 26 U.S.C. 401
note, 111 Stat. 788.
2. In § 2520.103–1, revise paragraphs
(b)(1), (c)(1), (c)(2)(i), (c)(2)(ii)(D), (E),
and (e), and add paragraphs (c)(2)(ii)(F)
and (c)(2)(iii) to read as follows:
■
§ 2520.103–1
report.
*
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*
Frm 00034
*
Contents of the annual
*
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*
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(b) * * *
(1) A Form 5500 ‘‘Annual Return/
Report of Employee Benefit Plan’’ and
any statements or schedules required to
be attached to the form, completed in
accordance with the instructions for the
form, including Schedule A (Insurance
Information), Schedule C (Service
Provider Information), Schedule E
(ESOP Annual Information), Schedule G
(Financial Transaction Schedules),
Schedule H (Financial Information),
Schedule J (Group Health Plan
Information), Schedule MB
(Multiemployer Defined Benefit Plan
and Certain Money Purchase Plan
Actuarial Information), Schedule R
(Retirement Plan Information), Schedule
SB (Single-Employer Defined Benefit
Plan Actuarial Information), and other
financial schedules described in Sec.
2520.103–10. See the instructions for
this form.
*
*
*
*
*
(c) * * *
(1) Except as provided in paragraphs
(c)(2), (d), (e), and (f) of this section, and
in §§ 2520.104–43, 2520.104a-6 and
2520.104–44, the annual report of an
employee benefit plan that covers fewer
than 100 participants at the beginning of
the plan year shall include a Form 5500
‘‘Annual Return/Report of Employee
Benefit Plan’’ and any statements or
schedules required to be attached to the
form, completed in accordance with the
instructions for the form, including
Schedule A (Insurance Information),
Schedule C (Service Provider
Information), Schedule E (ESOP Annual
Information), Schedule G (Financial
Transactions), Schedule H (Financial
Information), Schedule J (Group Health
Plan Information), Schedule MB
(Multiemployer Defined Benefit Plan
and Certain Money Purchase Plan
Actuarial Information), Schedule R
(Retirement Plan Information), and
Schedule SB (Single Employer Defined
Benefit Plan Actuarial Information),
completed in accordance with the
instructions for the form. See the
instructions for this form.
(2)(i) The annual report of an
employee pension benefit plan or
employee welfare benefit plan that does
not provide group health benefits and
that covers fewer than 100 participants
at the beginning of the plan year and
that meets the conditions in paragraph
(c)(2)(ii) of this section with respect to
a plan year may, as an alternative to the
requirements of paragraph (c)(1) of this
section, meet its annual reporting
requirements by filing the Form 5500–
SF ‘‘Short Form Annual Return/Report
of Small Employee Benefit Plan’’ and
any statements or schedules required to
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be attached to the form, including
Schedule SB (Single Employer Defined
Benefit Plan Actuarial Information) and
Schedule MB (Multiemployer Defined
Benefit Plan and Certain Money
Purchase Plan Actuarial Information),
completed in accordance with the
instructions for the form. See the
instructions for this form.
(ii) * * *
(D) Is not a multiemployer plan;
(E) Is not a plan subject to the Form
M–1 requirements under § 2520.101–2
(Filing by Multiple-employer Welfare
Arrangements and Certain Other Related
Entities); and
(F) Is not a group health plan as
defined in section 733(a) of the Act.
(iii) The annual report of an employee
benefit plan that meets the definition of
a group health plan as defined in
section 733(a) of the Act that covers
fewer than 100 participants at the
beginning of the plan year shall include
a Form 5500 ‘‘Annual Return/Report of
Employee Benefit Plan’’ and any
statements or schedules required to be
attached to the form, completed in
accordance with the instructions for the
form, including Schedule A (Insurance
Information), Schedule C (Service
Provider Information), Schedule H
(Financial Information), and Schedule J
(Group Health Plan Information). See
the instructions for this form.
*
*
*
*
*
(e) Plans that participate in a master
trust. The plan administrator of a plan
which participates in a master trust
shall file a Form 5500 Annual Return/
Report in accordance with the
instructions for the form relating to
master trusts. For purposes of annual
reporting, a master trust is a trust for
which a regulated financial institution
serves as trustee or custodian (regardless
of whether such institution exercises
discretionary authority or control
respecting the management of assets
held in the trust) and in which assets of
more than one plan sponsored by a
single employer or by a group of
employers under common control are
held. A master trust must operate either
on a calendar year basis or on the same
fiscal year as all of the plans that are
participating in the master trust. For
purpose of this paragraph, a regulated
financial institution is a bank, trust
company, or similar financial institution
regulated, supervised, and subject to
periodic examination by a State or
Federal agency. Common control is
determined on the basis of all relevant
facts and circumstances (whether or not
such employers are incorporated).
■ 3. In § 2520.103–2, revise paragraph
(b)(1) to read as follows:
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§ 2520.103–2 Contents of the annual report
for group insurance arrangement.
*
*
*
*
*
(b) Contents. (1) A Form 5500
‘‘Annual Return/Report of Employee
Benefit Plan’’ and any statements or
schedules required to be attached to the
form, completed in accordance with the
instructions for the form, including
Schedule A (Insurance Information),
Schedule C (Service Provider
Information), Schedule D (DFE/
Participating Plan Information),
Schedule G (Financial Transaction
Schedules), Schedule H (Financial
Information), a separate Schedule J
(Group Health Plan Information) for
each participating plan, and the other
financial schedules described in
§ 2520.103–10. See the instructions for
this form.
*
*
*
*
*
■ 4. In § 2520.103–3, revise paragraph
(c) to read as follows:
§ 2520.103–3 Exemption from certain
annual reporting requirements for assets
held in a common or collective trust.
*
*
*
*
*
(c) Contents. (1) A plan that meets the
requirements of paragraph (b) of this
section, and that invests in a common
or collective trust that files a Form 5500
report in accordance with § 2520.103–9,
shall include in its annual report:
information required by the instructions
to Schedule H (Financial Information)
about the current value of and net
investment gain or loss relating to the
units of participation in the common or
collective trust held by the plan;
identifying information in the common
or collective trust including its name,
employer identification number, and
any other information required by the
instructions to the Schedule of Assets
Held for Investment Purposes and
Schedule of Assets Disposed of During
Plan Year; and such other information
as is required in the separate statements
and schedules of the annual report
about the value of the plan’s units of
participation in the common or
collective trust and transactions
involving the acquisition and
disposition by the plan of units of
participation in the common or
collective trust.
(2) A plan that meets the requirements
of paragraph (b) of this section and that
invests in a common or collective trust
that does not file a Form 5500 report in
accordance with § 2520.103–9, shall
include in its annual report: Information
required by the instructions to Schedule
H (Financial Information) about the
current value of and the net investment
gain or loss relating to the units of
participation in the common or
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47529
collective trust held by the plan;
information required by the
accompanying instructions to the
‘‘Schedule of Assets Held for
Investment’’ about the current value of
the plan’s allocable portion of the
underlying assets and liabilities of the
common or collective trust; identifying
information about the common or
collective trust including its name,
employer identification number, and
any other information required by the
instructions to the Schedule of Assets
Held for Investment Purposes and
Schedule of Assets Disposed of During
Plan Year; and such other information
as is required in the separate statements
and schedules of the annual report
about the value of the plan’s units of
participation in the common or
collective trust and transactions
involving the acquisition and
disposition by the plan of units of
participation in the common or
collective trust.
■ 5. In § 2520.103–4, revise paragraph
(c) as follows:
§ 2520.103–4 Exemption from certain
annual reporting requirements for assets
held in an insurance company pooled
separate account.
*
*
*
*
*
(c) Contents. (1) A plan that meets the
requirements of paragraph (b) of this
section, and which invests in a pooled
separate account that files a Form 5500
report in accordance with § 2520.103–9,
shall include in its annual report:
Information required by the instructions
to Schedule H (Financial Information)
about the current value of and net
investment gain or loss relating to the
units of participation in the pooled
separate account held by the plan;
identifying information about the
pooled separate account including its
name, employer identification number,
and any other information required by
the instructions to the Schedule of
Assets Held for Investment Purposes
and Schedule of Assets Disposed of
During Plan Year; and such other
information as is required in the
separate statements and schedules of the
annual report about the value of the
plan’s units of participation in the
pooled separate account and
transactions involving the acquisition
and disposition by the plan of units of
participation in the pooled separate
account.
(2) A plan that meets the requirements
of paragraph (b) of this section and
which invests in a pooled separate
account that does not file a Form 5500
report in accordance with § 2520.103–9,
shall include in its annual report:
Information required by the instructions
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to Schedule H (Financial Information)
about the current value of and the net
investment gain or loss relating to the
units of participation in the pooled
separate account held by the plan;
information required by the
accompanying instructions to the
‘‘Schedule of Assets Held for
Investment’’ about the current value of
the plan’s allocable portion of the
underlying assets and liabilities of the
pooled separate account; identifying
information about the pooled separate
account including its name, employer
identification number, and any other
information required by the instructions
to the Schedule of Assets Held for
Investment Purposes and Schedule of
Assets Disposed of During Plan Year;
and such other information as is
required in the separate statements and
schedules of the annual report about the
value of the plan’s units of participation
in the pooled separate account and
transactions involving the acquisition
and disposition by the plan of units of
participation in the pooled separate
account.
■ 6. In § 2520.103–6, revise paragraph
(d) to read as follows:
§ 2520.103–6 Definition of reportable
transaction for annual return/report.
*
*
*
*
*
(d) Contents. (1) The schedule of
reportable transactions shall be filed in
the format and include information as
described in the instructions for the
Form 5500 Annual Return/Report of
Employee Benefit Plan.
(2) [Removed]
■ 7. In § 2520.103–8, revise paragraphs
(a) and (c) and add new paragraphs (d)
and (e) to read as follows:
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§ 2520.103–8 Limitation on scope of
accountant’s examination.
(a) General. Under the authority of
section 103(a)(3)(C) of the Act, the
examination and report of an
independent qualified public
accountant need not extend to any
statement or information prepared and
certified by a bank or similar institution
or insurance carrier provided the
certification meets the requirements of
paragraph (d) of this section.
*
*
*
*
*
(c) Excluded information. Any
statements or information certified to by
a bank or similar institution or
insurance carrier described in paragraph
(b) of this section, provided that the
statements or information regarding
assets so held are prepared and certified
to by the bank or insurance carrier in
accordance with the requirements of (d)
of this section and § 2520.103–5.
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(d) Contents and manner. The
certification described in paragraph (a)
of this section shall:
(1) Appear on a separate document
from the list of plan assets covered by
the certification;
(2) Identify the bank or insurance
company holding the plan’s assets;
(3) Describe the manner in which the
bank or insurance company is holding
the assets covered by the certification;
(4) State whether the bank or
insurance company is providing current
value information regarding the assets
covered by the certification in
accordance with 2520.103–5, and if so,
state that the assets for which current
value is being certified are separately
identified in the list of assets covered by
the certification;
(5) If current value is not being
certified for all of the assets covered by
the certification, include a caution that
the certification is not certifying current
value information and the asset values
provided by the bank or insurance
company may not be suitable for use in
satisfying the plan’s obligation to report
current value information on the Form
5500 Annual Return/Report; and
(6) If the certification is being
provided by an agent on behalf of the
bank or insurance company, a statement
certifying that the person providing the
certification is an authorized agent
acting on behalf of the bank or
insurance company and affirming that
the bank or insurance company is taking
responsibility for the accuracy and
completeness of the certification and the
underlying records used as a basis for
the information being certified.
(e) The administrator of a plan which
meets the requirements of paragraph (b)
of this section, and which is not
required to have covered by the
accountant’s examination or report any
of the information described in
paragraph (c) of this section shall attach
to the Form 5500 Annual Return/Report
of Employee Benefit Plan the
certification of investment information
created by certain banks or insurance
companies in accordance with the
requirements of paragraph (d) of this
section to comply with the limited
scope audit requirements.
■ 8. In § 2520.103–10, revise paragraphs
(b)(1)(i) and (2)(i) to read as follows:
§ 2520.103–10
schedules.
Annual report financial
*
*
*
*
*
(b) * * *
(1) * * *
(i) A schedule of all assets held for
investment purposes at the end of the
plan year (see § 2520.103–11) with
assets aggregated and identified as
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described in the instructions to the
Form 5500 Annual Return/Report of
Employee Benefit Plan.
*
*
*
*
*
(2) Assets disposed of during the plan
year. (i) A schedule of all assets
disposed of during the plan year (see
§ 2520.103–11) with assets aggregated
and identified as described in the
instructions to the Form 5500 Annual
Return/Report of Employee Benefit
Plan.
*
*
*
*
*
■ 9. In § 2520.104–20, revise paragraph
(b)(1) to read as follows:
§ 2520.104–20 Limited exemption for
certain small welfare plans.
*
*
*
*
*
(b) * * *
(1) Which have fewer than 100
participants at the beginning of the plan
year, and do not provide benefits
consisting of medical care as defined in
section 733(a)(2) of the Act;
*
*
*
*
*
■ 10. In § 2520.104–26, revise paragraph
(b) to read as follows:
§ 2520.104–26 Limited exemption for
certain unfunded dues financed welfare
plans maintained by employee
organizations.
*
*
*
*
*
(b) Application. This exemption
applies only to welfare benefit plans
that do not provide benefits consisting
of medical care as defined in section
733(a)(2) of the Act that are maintained
by an employee organization, as that
term is defined in section 3(4) of the
Act, paid out of the employee
organization’s general assets, which are
derived wholly or partly from
membership dues, and which cover
employee organization members and
their families.
*
*
*
*
*
■ 11. Revise § 2520.104–42 to read as
follows:
§ 2520.104–42 Waiver of certain actuarial
information in the annual report.
Under the authority of section
104(a)(2)(A) of ERISA, the requirement
of section 103(d)(6) of ERISA that the
annual report include as part of the
actuarial statement (Schedule SB) the
present value of all of the plan’s
liabilities for nonforfeitable pension
benefits allocated by termination
priority categories, as set forth in section
4044 of title IV of ERISA, and the
actuarial assumptions used in these
computations, is waived.
■ 12. In § 2520.104b–10, revise the
Appendix to § 2520.104b–10 to read as
follows:
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§ 2520.104b–10
*
*
*
47531
Summary annual report.
*
*
APPENDIX TO § 2520.104B–10—THE SUMMARY ANNUAL REPORT (SAR) UNDER ERISA: A CROSS-REFERENCE TO THE
ANNUAL REPORT
SAR Item
Form 5500 line items
Form 5500–SF line items
A. Pension Plan (defined contribution pension benefit plans and defined benefit pension plans that do not furnish the annual funding
notice under 29 CFR 2520.101–4)
1.
2.
3.
4.
5.
Funding arrangement .....................................
Total plan expenses .......................................
Administrative expenses ................................
Benefits paid ..................................................
Other Expenses .............................................
6. Total Participants at end of plan year ............
7. Value of plan assets (net):
a. end of plan year ......................................
b. beginning of plan year ............................
8. Changes in Net Assets ..................................
9. Total Income ..................................................
a. Employer contributions ............................
b. Employee contributions ...........................
c. Gains (losses) from sale of assets .........
d. Earnings from investments .....................
10. Name of insurance carriers ..........................
11. Total insurance premiums ............................
12. Unpaid minimum required contribution (S–E
plans or Defined contribution plans) or Funding deficiency (ME plans):
a. S–E Defined benefit plans ......................
b. ME Defined benefit plans ........................
c. Defined contribution plans .......................
Form 5500–10a ................................................
Sch. H—2j ........................................................
Sch. H—2i(12)(C) ............................................
Sch. H—2e(4) ..................................................
Sch. H—Subtract the sum of 2e(4) &
2i(12)(C) from 2j.
Form 5500—7f .................................................
Line
Line
Line
Line
Line
13a.
10h.
10f.
10d.
10g.
Sch. H—1l [Col. (b)] .........................................
Sch. H—1l [Col. (a)] .........................................
Sch. H—Subtract 1l [Col. a] from 11 [Col. b] ..
Sch. H—2d .......................................................
Sch. H—2a(1)(A, & 2a(2) if applicable ............
Sch. H—2a(1)(B), & 2a(2) if applicable ...........
Sch. H—2c(4)(C) .............................................
Sch. H—Subtract the sum of 2a(3) and
2c(4)(C) from 2d.
Schs. A—1a .....................................................
Sch. A—5b (total of all contracts) ....................
Line 9c [Col. (b)].
Line 9c [Col. (a)].
Line 9c–Subtract [Col. a] from [Col. b].
Line 10c.
Line 10a(1)(A).
Line 10a(1)(B).
Not applicable.
Line 10b.
Sch. SB—43 ....................................................
Sch. MB—10 ....................................................
Sch. R—7c, if not zero ....................................
Same.
Not applicable.
Line 16b.
Line 7f.
Not applicable.
Not applicable.
B. Welfare Plan
1. Name of insurance carriers ............................
2. Total (experience rated and non-experienced
rated) insurance premiums.
3. Experience rated premiums ...........................
4. Experience rated claims .................................
5. Value of plan assets (net) ..............................
a. end of plan year ......................................
b. beginning of plan year ............................
6. Changes in Net Assets ..................................
7. Total Income ..................................................
a. Employer contributions ............................
b. Employee contributions ...........................
c. Gains (losses) from sale of assets .........
d. Earnings from investments .....................
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8. Total plan expenses .......................................
9. Administrative expenses ................................
10. Benefits paid ................................................
11. Other Expenses ...........................................
PART 2590 —RULES AND
REGULATIONS FOR GROUP HEALTH
PLANS
13. The authority citation for Part
2590 continues to read as follows:
Schs. A—1a .....................................................
Schs. A—Sum of 9a(1) and 10a (total of all
contracts).
Schs. A—9a(1) (total of all contracts) .............
Schs. A—9b(4) (total of all contracts) .............
Not applicable.
Not applicable.
Sch. H—1l [Col. (b)] .........................................
Sch. H—1l [Col. (a)] .........................................
Sch. H—Subtract 1l [Col. a] from [Col. b] .......
Sch. H—2d .......................................................
Sch. H—2a(1)(A) & 2a(2) if applicable ............
Sch. H—2a(1)(B) & 2a(2) if applicable ............
Sch. H—2c(4)(C) .............................................
Sch. H—Subtract the sum of 2a(3) and
2c(4)(C) from 2d.
Sch. H—2j ........................................................
Sch. H—2i(12)(C) ............................................
Sch. H—2e(4) ..................................................
Sch. H—Subtract the sum of 2e(4) &
2i(12)(C) from 2j.
Line 9c [Col. (b)].
Line 9c [Col. (a)].
Line 9c—Subtract [Col. a] from [Col. b].
Line 10c.
Line 10a(1)(A) if applicable.
Line 10a(1)(B) if applicable.
Not applicable.
Line 10b.
1562(e), Pub. L. 111–148, 124 Stat. 119, as
amended by Pub. L. 111–152, 124 Stat. 1029;
Secretary of Labor’s Order 1–2011, 77 FR
1088 (Jan. 9, 2012).
■
Subpart C—Other Requirements
Authority: 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Pub. L.104–191, 110 Stat.
1936; sec. 401(b), Pub. L. 105–200, 112 Stat.
645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110–343, 122 Stat. 3881; sec. 1001, 1201, and
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14. Add §§ 2590.715–2715A and
2590.715–2717 to Subpart C to read as
follows:
■
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Not applicable.
Not applicable.
Line
Line
Line
Line
10h.
10f.
10d.
10g.
§ 2590.715–2715A
information.
Provision of additional
A group health plan that complies
with the requirements of § 2520.103–1
of this Chapter and any implementing
guidance (including filing any required
schedules to the annual report required
by § 2520.103–1) satisfies the
requirements of PHS Act section 2715A,
as incorporated in ERISA.
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§ 2590.715–2717
care.
Ensuring the quality of
A group health plan that complies
with the requirements of § 2520.103–1
of this Chapter and any implementing
guidance (including filing any required
schedules to the annual report required
by § 2520.103–1) satisfies the
requirements of PHS Act section 2717,
as incorporated in ERISA.
Signed at Washington, DC, this 20th day of
June 2016.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.
[FR Doc. 2016–14892 Filed 7–11–16; 4:15 pm]
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]]>Agencies
[Federal Register Volume 81, Number 140 (Thursday, July 21, 2016)]
[Proposed Rules]
[Pages 47495-47532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14892]
[[Page 47495]]
Vol. 81
Thursday,
No. 140
July 21, 2016
Part II
Department of Labor
-----------------------------------------------------------------------
Employee Benefits Security Administration
-----------------------------------------------------------------------
29 CFR Parts 2520 and 2590
Annual Reporting and Disclosure; Proposed Rule
Federal Register / Vol. 81 , No. 140 / Thursday, July 21, 2016 /
Proposed Rules
[[Page 47496]]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Parts 2520 and 2590
RIN 1210-AB63
Annual Reporting and Disclosure
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed amendments to Department of
Labor (DOL) regulations relating to annual reporting requirements under
Part 1 of Subtitle B of Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). The proposed amendments
contained in this document would conform the DOL's reporting
regulations to proposed revisions to the Form 5500 Annual Return/Report
of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/
Report of Small Employee Benefit Plan, which are being published
concurrently in today's Federal Register in a separate Notice of
Proposed Forms Revisions (NPFR) prepared jointly by the Department of
Labor (DOL), the Internal Revenue Service (IRS), and the Pension
Benefit Guaranty Corporation (PBGC) (collectively the Agencies). The
proposed regulation, and related forms revisions, would improve
employee benefit plan reporting for filers, the public, and the
Agencies. The revision is necessary because the annual return/report
forms have not kept pace with market developments and changes in the
laws covering employee benefit plans, presenting problems with outdated
and missing information that negatively impact the Agencies' effective
and efficient protection of employee retirement and health benefits.
The proposed revisions would affect employee pension and welfare
benefit plans, plan sponsors, administrators, and service providers.
DATES: Written comments must be received by the Department of Labor on
or before October 4, 2016.
ADDRESSES: To facilitate the receipt and processing of written comment
letters on the proposed regulation, EBSA encourages interested persons
to submit their comments electronically. You may submit comments,
identified by RIN 1210-AB63, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow instructions for submitting comments.
Email: e-ORI@dol.gov. Include RIN 1210-AB63 in the subject line of
the message.
Mail: Office of Regulations and Interpretations, Employee Benefits
Security Administration, Attn: RIN 1210-AB63; Annual Reporting and
Disclosure, Room N-5655, U.S. Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210.
Hand Delivery/Courier: Office of Regulations and Interpretations,
Employee Benefits Security Administration, Attn: RIN 1210-AB63; Annual
Reporting and Disclosure, Room N-5655, U.S. Department of Labor, 200
Constitution Avenue NW., Washington, DC 20210.
Instructions: All comments received must include the agency name
and Regulatory Identifier Number (RIN) for this rulemaking (RIN 1210-
AB63). Persons submitting comments electronically are encouraged not to
submit paper copies. All comments received will be made available to
the public, posted without change to https://www.regulations.gov and
https://www.dol.gov/ebsa, and made available for public inspection at
the Public Disclosure Room, N-1513, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Mara S. Blumenthal, Office of
Regulations and Interpretations, Employee Benefits Security
Administration, U.S. Department of Labor, (202) 693-8523 (not a toll-
free number) for all changes other than group health plan information;
Suzanne Adelman, EBSA, U.S. Department of Labor, 202-693-8383 (not a
toll-free number), for questions relating to the collection of group
health plan information.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
A. Purpose of the Regulatory Action
Under Titles I and IV of ERISA and the Internal Revenue Code
(Code), pension and other employee benefit plans are generally required
to file annual returns/reports concerning, among other things, the
financial condition and operations of the plan. Filing a Form 5500
Annual Return/Report of Employee Benefit Plan (Form 5500 Annual Return/
Report), or a Form 5500-SF Short Form Annual Return/Report of Small
Employee Benefit Plan (Form 5500-SF) (depending on certain plan
characteristics), together with any required schedules and attachments
(together ``the Form 5500 Annual Return/Report''), in accordance with
their instructions, generally satisfies these annual reporting
requirements. In addition to being an important disclosure document for
plan participants and beneficiaries, the Form 5500 Annual Return/Report
is a critical enforcement, compliance, and research tool for the DOL,
IRS, and the PBGC (together ``Agencies''). It is also an important
source of information and data for use by other federal agencies,
Congress, and the private sector in assessing employee benefit, tax,
and economic trends and policies. In the United States, there are an
estimated 2.3 million health plans, a similar number of other welfare
plans, and nearly 681,000 private pension plans. These plans cover
roughly 143 million private sector workers, retirees, and dependents,
and have estimated assets of $8.7 trillion. The Form 5500 Annual
Return/Report is the principal source of information and data
concerning the operations, funding, and investments of more than
806,000 of these pension and welfare benefit plans.
Generally, the Agencies have conducted notice and comment
rulemaking before making significant changes to the forms and
schedules. This proposed revision to the DOL's reporting regulations is
needed to implement the forms revisions proposed in the three-agency
(DOL, IRS, and the PBGC) Notice of Proposed Forms Revisions (NPFR),
which is being published separately in today's Federal Register.
As noted above and discussed in detail below, because the Form 5500
Annual Return/Report has not kept pace with market developments and
changes in the laws covering employee benefit plans, problems with
outdated and missing information negatively impact the Agencies'
effective and efficient protection of employee retirement and group
health benefits. That fact is reflected in the more than 15 reports
that have been issued since the publication of the last major forms
revisions from the Government Accountability Office (GAO), the DOL's
Office of Inspector General (DOL-OIG), the United States Treasury
Inspector General for Tax Administration (the TIGTA), and the ERISA
Advisory Council that all call for expanded annual reporting by
employee benefit plans and improvements in the Form 5500 Annual Return/
Report.\1\ In
[[Page 47497]]
developing these proposed updates to the Form 5500 Annual Return/
Report, the DOL, along with IRS and PBGC, carefully considered those
reports in determining where changes are needed.
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\1\ See, e.g., U.S. Gov't Accountability Office, GAO-10-54,
Private Pensions: Additional Changes Could Improve Employee Benefit
Plan Financial Reporting (2009) (available at www.gao.gov/assets/300/298052.pdf); U.S. Gov't Accountability Office, GAO-14-441,
Private Pensions: Targeted Revisions Could Improve Usefulness of
Form 5500 Information (2014) (available at www.gao.gov/products/GAO-14-441); 2013 ERISA Advisory Council Report: Private Sector Pension
De-risking and Participant Protections, Dep't of Labor, www.dol.gov/ebsa/publications/2013ACreport2.html); Dep't of Labor Office Of
Inspector Gen., 05-14-003-12-12, EBSA Could Improve Its Usage of
Form 5500 Data (2014) (available at www.oig.dol.gov/public/reports/oa/2014/05-14-003-12-121.pdf); U.S. Gov't Accountability Office,
GAO-14-92, Private Pensions: Clarity of Required Reports and
Disclosures Could Be Improved (2013) (available at www.gao.gov/assets/660/659211.pdf); U.S. Gov't Accountability Office, GAO-14-92,
Private Pensions: Clarity Of Required Reports And Disclosures Could
Be Improved, Report to Congressional Requesters (2013) (available at
www.gao.gov/assets/660/659211.pdf); U.S. Dep't of Labor Office of
Inspector Gen., 09-13-001-12-121, Employee Benefits Security
Administration Needs to Provide Additional Guidance And Oversight to
ERISA Plans Holding Hard-to-Value Alternative Investments (2013)
(available at www.oig.dol.gov/public/reports/oa/2013/09-13-001-12-121.pdf); U.S. Gov't Accountability Office, GAO-12-665, Private
Sector Pensions: Federal Agencies Should Collect Data and Coordinate
Oversight of Multiple Employer Plans (2012) (available at
www.gao.gov/assets/650/648285.pdf); U.S. Dep't of Labor Office Of
Inspector Gen., 09-12-002-12-121, Changes Are Still Needed In The
ERISA Audit Process To Increase Protections For Employee Benefit
Plan Participants (2012) (available at www.oig.dol.gov/public/reports/oa/2012/09-12-002-12-121.pdf); U.S. Gov't Accountability
Office, GAO-12-325, 401(K) Plans: Increased Educational Outreach and
Broader Oversight May Help Reduce Plan Fees (2012) (available at
www.gao.gov/products/GAO-12-325); U.S. Gov't Accountability Office,
GAO-08-692, Defined Benefit Plans: Guidance Needed to Better Inform
Plans of the Challenges and Risks of Investing in Hedge Funds and
Private Equity (2012) (available at www.gao.gov/products/GAO-08-692); Treasury Inspector Gen. for Tax Administration, The Employee
Plans Function Should Continue Its Efforts to Obtain Needed
Retirement Plan Information (2011) (available at www.treasury.gov/tigta/auditreports/2011reports/201110108fr.pdf); 2011 ERISA Advisory
Council Report: Hedge Funds and Private Equity Investments, Dep't of
Labor, www.dol.gov/ebsa/publications/2011ACreport3.html); 2013 ERISA
Advisory Council Report: Locating Missing and Lost Participants,
Dep't of Labor, www.dol.gov/ebsa/publications/2013ACreport3.html#2;
2010 ERISA Advisory Council Report: Employee Benefit Plan Auditing
and Financial Reporting Models, Dep't of Labor, www.dol.gov/ebsa/publications/2010ACreport2.html; 2008 ERISA Advisory Council Report:
Working Group on Hard-to-Value Assets and Target Date Funds, Dep't
of Labor, www.dol.gov/ebsa/publications/2008ACreport1.html.
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In addition, a significant update being made to the Form 5500
Annual Return/Report is the introduction of basic reporting
requirements for all plans that provide group health benefits that have
fewer than 100 participants and are covered by Title I of ERISA, most
of which are currently exempt from reporting requirements, and the
addition of a new schedule (Schedule J) proposed to be required for all
group health plans. This reflects a new emphasis on transparency under
the Affordable Care Act \2\ and a desire to offer plan sponsors the
opportunity to satisfy certain Affordable Care Act reporting
requirements addressed in this proposal by a more robust Form 5500
Annual Return/Report filing for those group health plans currently
required to file and by elimination of the current exemption for plans
that provide group health benefits that have fewer than 100
participants that are fully insured, unfunded, or a combination. Once
finalized, these proposed changes will result in annual return/report
forms that are a more effective policy, enforcement, and research tool,
and one that will increase transparency, accountability, and confidence
in the employee benefit plan system.
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\2\ The Patient Protection and Affordable Care Act, Public Law
111-148, was enacted on March 23, 2010, and the Health Care and
Education Reconciliation Act of 2010, Public Law 111-152, was
enacted on March 30, 2010. These statutes generally are collectively
known as the ``Affordable Care Act.''
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The Agencies' proposed changes to the Form 5500 Annual Return/
Report also should be viewed in light of the fact that the last two
major revisions of the Form 5500 Annual Return/Report \3\ occurred in
1999 and 2009 in connection with a major shift from a paper-based
filing system to the current internet-based wholly electronic filing
and electronic data processing system (EFAST and now EFAST2), which is
operated by a private sector contractor. For the last two major form
revision cycles, the Agencies were focused on moving filers to new
technologies for filing Form 5500 Annual Return/Report data. In
recognition of the burden and challenges that filers would face in
migrating to new filing technologies, the Agencies' generally deferred
proposing major form changes that would add substantial new burdens. In
fact, by deferring our current proposals until now, the new EFAST2
capabilities are making more feasible and efficient processing of both
the existing and the expanded data we are proposing to collect.
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\3\ The Agencies' last tri-agency major revision to the Form
5500 Annual Return/Report series was effective for the 2009 plan
year forms. Before that, the last major revision was effective for
the 1999 plan year forms and was implemented together with the
initial implementation of EFAST. In interim years, the Agencies have
made other focused changes, which are set forth annually in the
``Changes to Note'' section in the instructions.
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B. Summary of the Major Revisions of the Regulatory Action
The proposed forms revisions and the DOL implementing regulations
are intended to address changes in applicable laws and the employee
benefit plan and financial markets, and corresponding shifts in agency
priorities and needs since the last major revision. The proposed
revisions are also expected ultimately to make filing and processing
more efficient and accurate and to restore a greater level of
transparency in the employee benefit plan market.\4\ The proposed forms
revisions fall under the following general categories:
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\4\ In addition, this rulemaking and forms revisions are being
coordinated generally with a re-bid and updating of the ERISA Filing
Acceptance System (EFAST2)--the wholly electronic Form 5500 Annual
Return/Report filing and processing system. Unlike the 1999 and 2009
forms revisions, the re-bid of EFAST2 does not involve major changes
in the EFAST2 key system requirements, capabilities, and functions.
Rather, although there are some changes to the system, the re-bid
process is largely being undertaken in response to Federal
Acquisition Regulation (FAR) requirements on periodic re-bidding of
longer term contracts. Under these circumstances, there may be
opportunities to implement various form changes either before or
after the re-bid EFAST2 contract is awarded. The timing of the re-
bid of EFAST2 and implementation of form changes may also be
affected by whether funds necessary for the re-bid or form
implementation are appropriated as part of the Agencies' respective
budgets. Accordingly, although the overall objective is to implement
these proposed form changes as part of a re-bid EFAST2 contract,
rulemaking and budget issues may require the Agencies to consider a
more staged approach.
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1. Modernize Financial and Investment Reporting by Pension Plans
A key component of the proposal would expand and modernize
financial and investment information reported by pension plans.
Reporting on the financial operations and integrity of U.S. private
pension plans (both defined benefit and defined contribution) is
critical given the ongoing importance of such plans to the retirement
security of America's workforce. Moreover, improved transparency of
financial products and investments acquired by plans is critical to the
ability of the Agencies to fulfill their statutory oversight role. It
is also important for ongoing monitoring of retirement plans by
employers, plans, participants and beneficiaries, and policy makers.
These proposed changes to financial reporting are specifically designed
to improve reporting of alternative investments, hard-to-value assets,
and investments through collective investment vehicles and participant-
directed brokerage accounts.
An overriding objective of these proposed revisions to the
financial
[[Page 47498]]
information collected as part of the annual return/report is to present
plan financial and balance sheet information, including the currently
required schedules of assets, in a way that better reflects the
investment portfolios and asset management practices of employee
benefit plans. The basic objective of ERISA's mandatory financial
reporting is to provide information about the reporting entity for the
Agencies' enforcement, research, and policy formulation programs; for
other federal agencies, Congress, and the private sector to assist them
in assessing employee benefit, tax, and economic trends and policies;
and for plan participants and beneficiaries and the general public to
understand and monitor better the activities and investments of
employee benefit plans. As reflected in the various reports from the
GAO, the DOL-OIG, the ERISA Advisory Council, and the TIGTA, the
current information collected on the Form 5500 Annual Return/Report and
Form 5500-SF is insufficient to satisfy those objectives.
The financial statements contained in the current Schedule H (Large
Plan Financial Information) and Schedule I (Small Plan Financial
Information) are based on data elements that have remained largely
unchanged since the Form 5500 Annual Return/Report was established in
1975. Over the past four decades, the U.S. private pension system has
shifted from defined benefit (defined benefit or DB) pension plans
toward defined contribution (defined contribution or DC) pension plans,
often participant-directed 401(k)-type DC pension plans. The financing
of retirement benefits has changed dramatically coincident with the
shift from DB to DC pension plans. In 1978, when legislation was
enacted authorizing 401(k) plans that allow employees to contribute to
their own retirement plan on a pre-tax basis, participants contributed
only 29 percent of the contributions to DC pension plans and only 11
percent of total contributions to both DB and DC pension plans. ``In
the years following 1978, employee contributions to DC pension plans
steadily rose to a peak of approximately 60 percent in 1999, where it
has remained.'' See Dep't of Labor, Private Pension Plan Bulletin
Abstract of 2012 Form 5500 Annual Reports, at 1 (2015). Simultaneously,
the number of single-employer DB pension plans has decreased from
92,000 in 1990 to just under 29,000 single-employer pension plans in
2009. See U.S. Gov't Accountability Office, GAO-09-291, Defined Benefit
Pensions: Survey Results of the Nation's Largest Private Defined
Benefit Plan Sponsors Highlights (2009) (available at https://www.gao.gov/new.items/d09291.pdf).
The shift from DB pension plans to DC pension plans--and the
corresponding increase of participants' own contributions to those
plans as opposed to employer contributions--has led to increased
responsibility for participants to manage their own retirement savings,
which includes having to select among investment options in their
retirement plans. See Private Pension Plan Bulletin Abstract Of 2012
Form 5500 Annual Reports, at 2 (Of the 516,000 section 401(k)-type
plans in 2012, 87.8 percent allowed participants to direct investment
of all of their assets, and 3.1 percent allowed participants to direct
investment of a portion of their assets.) The need for more relevant
and comparable financial information is not limited to 401(k) and other
DC pension plans; it also extends to DB pension plans. Reports cited
above from GAO, the DOL-OIG, the TIGTA, and the ERISA Advisory Council
also have focused on the need for increased transparency and
accountability generally in connection with employee benefit plan
investments in hard-to-value and alternative assets, as well as assets
held through pooled investment vehicles.
Further, the Agencies need better information to effectively
oversee and enforce existing rules and regulations. For example, as
part of the 1999 and 2009 forms revisions, the Agencies stopped
collecting a variety of information regarding ESOPs. ESOPs, however,
continue to be a significant enforcement focus and concern for both DOL
and the Department of Treasury (Treasury)/IRS. Under the proposal,
ESOPs would be required to again report information, on the Schedule E,
about their employer stock acquisitions. Plan investment in hard-to-
value and other alternative investments, such as derivatives, limited
partnerships, hedge funds, private equity, and real estate, was
highlighted as an oversight risk by both GAO and the DOL-OIG. Plans
invested in derivatives, limited partnerships, hedge funds, private
equity, real estate, and other alternative investments would be
required under the proposal to identify such investments specifically.
Having plans and direct filing entities (DFEs) report this information
would be a significant improvement; the Agencies would no longer be
limited to identifying issues involving investments in derivatives and
other hard-to-value assets by opening investigations on a plan-by-plan
basis. For example, regulators would be able to search the data base
for particular investments or managers where there were indications
that there were problems with such investment or manager for all plans
that made such investments. The improved financial transparency in the
proposed revisions to the Form 5500 Annual Return/Report data
collection in general would better enable public and private data users
to identify patterns and trends in plan investments and behavior.
For defined contribution pension plans, especially participant-
directed plans, the proposal also would provide better information on
employee participation rates in 401(k)-type plans and more relevant
information on the types of investment alternatives available in such
plans (including information on each designated investment alternative
in the plan, information on qualified default investment alternatives,
and information on whether the investment alternatives are actively
managed or passively managed index funds). As Form 5500 Annual Return/
Report information is required by Title I of ERISA to be publicly
available, not only would expanded data collection assist in the
Agencies' research and policymaking objectives, public access to this
information would enable interested private sector and other
governmental stakeholders to perform data-based research or help plan
sponsors, fiduciaries, and participants and beneficiaries better
understand their plan and plan investments. For example, it would be
more feasible to compare performance of plans based on types of
investments, and get information on how certain plan investment options
and structures might correlate to participation, overall performance,
or best preparation of workers for retirement.
2. Support Oversight of Group Health Plans and Ongoing Implementation
of the Affordable Care Act
The proposed forms revisions and DOL implementing regulations would
expand Form 5500 reporting by group health plans \5\ by eliminating
obsolete
[[Page 47499]]
exemptions for certain plans from Form 5500 reporting. Specifically,
most private employer-sponsored group health plans with fewer than 100
participants that are fully insured, unfunded, or a combination of the
two, currently do not file the Form 5500 Annual Return/Report under the
terms of the current DOL exemptions. As a result, for policy
formulation, research, and regulatory impact analyses, the DOL must
rely on surveys, instead of Form 5500 Annual Return/Report data, to
generate even basic estimates of the size of the ERISA group health
plan universe that is a major part of the nation's health care delivery
system. The current lack of information collected on the Form 5500
Annual Return/Report from group health plans impairs the effectiveness
of EBSA's ability to develop health care regulations and complicates
the DOL's ability to enforce such regulations and educate plan
administrators regarding compliance.
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\5\ Under the proposed changes, all ``group health plans'' that
meet the definition in 733(a) of the Act, including plans that claim
``grandfathered'' status under 29 CFR 2950.715-1251, are required to
file some or all of the Form 5500 Annual Return/Report and
applicable schedules, including the Schedule J, regardless of
whether such plans are exempt from certain market reform
requirements under ERISA Sec. 732(a) (exemption for certain small
group health plans that have less than two participants who are
current employees) or ERISA Sec. 733(c) (group health plans
consisting solely of excepted benefits). Employee welfare benefit
plans as defined in ERISA Sec. 3(1) that do not meet the definition
of ``group health plan'' under 733 of the Act (i.e., they do not
provide benefits for medical care) are not subject to the proposed
enhanced reporting requirements applicable to group health plans.
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In addition, section 1253 of the Affordable Care Act requires the
Secretary of Labor to prepare an annual report that includes certain
general information on self-insured group health plans using data
collected from the Form 5500 Annual Return/Report (the ``Self-Insured
Health Plan Report''). Current Form 5500 Annual Return/Report data
provides the basis only for an incomplete assessment of self-insured
plans. For example, information about the amount of outstanding claims
for a self-insured plan, a proposed new data element on the Schedule J,
would be a critical flag that would identify the need for further
inquiry or investigation of a group health plan that may be unable to
pay outstanding claims. Early intervention by EBSA could prevent a
participant from facing bankruptcy over unpaid medical expenses that
otherwise would have been covered had the group health plan been
properly funded.
We expect more group health plan filings will help the DOL allocate
enforcement resources and streamline enforcement actions. For example,
these additional filings will enable the DOL to correlate information
reported by different group health plans to help identify widespread
noncompliance perpetuated by a common service provider rather than
relying on multiple investigations of client plans to detect a pattern
of non-compliance by a single service provider. Obtaining a correction
by going directly to the service provider makes the correction process
more efficient for the service provider and the Department and results
in uniform and efficient corrective action for participating plans.
EBSA anticipates that Form 5500 Annual Return/Report data may similarly
be used in future versions of the biennial Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) Report
to Congress on the compliance of group health plans and health
insurance coverage offered in connection with such plans with the
requirements of MHPAEA. The proposed changes to group health plan
reporting thus are important to the government's ability to accomplish
oversight obligations under the Affordable Care Act and other federal
laws governing group health plans, to more effectively monitor health
policy issues as they pertain to ERISA-covered plans, and to provide
Congress with accurate information about self-insured plans and whether
the plan is complying with the protections of MHPAEA.
3. Reporting To Satisfy Public Health Service Act Sections 2715A and
2717
Sections 2715A and 2717 of the Public Health Service Act (PHS Act),
as added by the Affordable Care Act and incorporated into ERISA section
715,\6\ include important new reporting requirements for group health
plans and health insurance issuers in the group and individual markets.
Specifically, section 2715A of the PHS Act incorporates the
transparency provisions of section 1311(e)(3) of the Affordable Care
Act to require non-grandfathered group health plans and health
insurance issuers offering non-grandfathered group or individual health
insurance coverage to make available to the DOL, the Department of
Health and Human Services (HHS), Treasury, State insurance
commissioner, and the public a host of information on health plan
enrollment and claims.\7\ This includes: (1) Claims payment policies
and practices; (2) periodic financial disclosures; (3) data on
enrollment and disenrollment; (4) data on the number of denied claims;
(5) data on rating practices; (6) information on cost-sharing and
payments with respect to any out-of-network coverage; (7) information
on enrollee and participation rights; and (8) other information as
determined by the Secretary. Moreover, section 2717 of the PHS Act
generally requires non-grandfathered group health plans and health
insurance issuers offering non-grandfathered group or individual health
insurance coverage to report annually to the DOL, HHS and the Treasury
and to enrollees under the plan whether the benefits under the plan:
(A) Improve health outcomes through the implementation of activities
such as quality reporting, effective case management, care
coordination, chronic disease management, and medication and care
compliance initiatives, including through the use of the medical homes
model as defined for purposes of section 3602 of the Affordable Care
Act, for treatment or services under the plan or coverage; (B)
implement activities to prevent hospital readmissions through a
comprehensive program for hospital discharge that includes patient-
centered education and counseling, comprehensive discharge planning,
and post discharge reinforcement by an appropriate health care
professional; (C) implement activities to improve patient safety and
reduce medical errors through the appropriate use of best clinical
practices, evidence based medicine, and health information technology
under the plan or coverage; and (D) implement wellness and health
promotion activities.
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\6\ Sections 2715A and 2717 of the PHS Act are also incorporated
into section 9815(a)(1) of the Code.
\7\ Information required under sections 2715A and 2717 of the
PHS Act that is provided as part of a Form 5500 Annual Return/Report
would be made available to the public and to the plan's participants
and beneficiaries. Section 104(b)(4) of ERISA requires the plan
administrator, on written request of a participant or beneficiary,
to furnish among other documents, a copy of the latest annual
report. See also 29 CFR 2520.104b-1(b)(2). The DOL's regulation at
29 CFR 2520.104b-30 provides that the plan administrator of an
employee benefit plan may impose a reasonable charge that is not to
exceed 25 cents per page to cover the cost of furnishing the latest
annual report, but also provides that participants and beneficiaries
must be provided at no charge a copy of the statement of the assets
and liabilities of the plan and accompanying notes, and the
statement of income and expenses of the plan and accompanying notes.
See also 29 CFR 2520.104b-10(d)(3) and (4).
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These regulations propose conforming amendments in 29 CFR 2590.715-
2715A and 29 CFR 2590.715-2717 to clarify that compliance with the
reporting requirements in 29 CFR 2520.103-1 (including filing any
required schedules to the annual report) by plans subject to ERISA
would satisfy the reporting requirements of PHS Act sections 2715A and
2717, incorporated in ERISA through ERISA section 715(a)(1).\8\ As
explained in FAQs issued
[[Page 47500]]
August 11, 2015,\9\ HHS proposed an information collection for public
comment in connection with the transparency provisions of section
1311(e)(3) of the Affordable Care Act. The proposed data collection
would collect certain information from Qualified Health Plan (QHP)
issuers in Federally-facilitated Exchanges and State-based Exchanges
that use the federal eligibility and enrollment platform. The HHS
proposal explained that other reporting requirements would be proposed
at a later time, through a separate rulemaking with respect to non-
Exchange coverage, including those that extend to health insurance
issuers offering non-grandfathered group or individual health insurance
coverage outside of the Exchanges and non-grandfathered group health
plans (including large group and self-insured health plans).\10\
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\8\ The Treasury Department and the IRS intend to publish
proposed regulations in 26 CFR 54.9815-2715A and 54.9815-2717
clarifying that group health plans required to file an annual report
pursuant to section 104 of ERISA that comply with the reporting
requirements in 29 CFR 2520.103-1 (including filing any required
schedules to the annual report) would satisfy the reporting
requirements of sections 2715A and 2717 of the PHS Act, as
incorporated in the Code. Group health plans that are not required
to file an annual report pursuant to section 104 of ERISA but that
are subject to sections 2715A and 2717 of the PHS Act as
incorporated in the Code, will not be required to do any reporting
to comply with sections 2715A and 2717 of the PHS Act, as
incorporated in the Code, unless and until the Treasury Department
and the IRS issue subsequent further guidance or rulemaking
regarding any such reporting by such plans.
\9\ See FAQs about Affordable Care Act Implementation (Part
XXVIII), available at https://www.dol.gov/ebsa/faqs/faq-aca28.html
and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/ACA-FAQ-Part-XXVIII-transparency-reporting-final-8-11-15.pdf.
\10\ Nonfederal governmental plans (as defined in PHS Act
section 2791(d)(8)(C)) and health insurance issuers (as defined in
PHS Act section 2791(b)(2) and ERISA section 733(b)(2)) are not
required to file annual reports pursuant to ERISA sections 103 or
104. Accordingly, any reporting required of such plans and issuers
to satisfy PHS Act sections 2715A and 2717 will be addressed
separately by HHS in future rulemakings and/or guidance.
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This rulemaking proposes transparency and quality reporting for
non-grandfathered group health plans under PHS Act sections 2715A and
2717, as incorporated in ERISA. It takes into account differences in
markets and other relevant factors to streamline reporting under
multiple reporting provisions and reduce unnecessary duplication. The
DOL is proposing to collect and provide high-value data to
participants, beneficiaries, and regulators, such as information about
benefits and plan design characteristics, funding, grandfathered plan
status, rebates received by the plan (such as medical loss ratio
rebates), service provider information (including information regarding
any third party administrators, pharmacy benefit managers, mental
health benefit managers, and independent review organizations),
information on any stop loss insurance, claims processing and payment
information (including number of claims filed, paid, appealed and
denied), wellness program information, and other compliance
information. In addition to improving DOL's oversight and enforcement
activities, the collection of high-value data will lead to greater
transparency for consumers, which may assist them in making a decision
whether to elect the coverage or opt for another plan such as through
their spouse's employer, with the caveat that these data will be
collected a number of months after the end of the plan year they
describe and thus will not be timely for use in concurrent oversight,
enforcement, or consumer choice activities. The DOL may propose
collecting additional data in the future. The DOL requests comments
regarding other plan characteristics that may be helpful for
participants to have information on in evaluating their plan. Further,
as noted above, this document includes proposed conforming amendments
in 29 CFR 2590.715-2715A and 29 CFR 2590.715-2717 to clarify that
compliance with the proposed annual reporting requirements by plans
subject to ERISA that provide group health benefits would satisfy the
ACA reporting requirements under PHS Act sections 2715A and 2717
incorporated in ERISA through ERISA section 715(a)(1). The Department
is specifically seeking public comments on those conforming amendments
and the proposed annual reporting requirements for plans that provide
group health benefits, including the new Schedule J, in light of the
Supreme Court's recent decision in Gobeille v. Liberty Mutual Insurance
Co., 136 S. Ct. 936 (2016).
4. Modernize Data Collection and Usability
This project would standardize and structure the Form 5500 Annual
Return/Report to make key retirement and health and welfare benefit
data, including information on assets held for investment, more
available and usable in the electronic filing and data environment.
Modernization is consistent with the Administration's ``Smart
Disclosure'' effort. Executive Office of the President of the United
States, Nat'l Science and Technology Council, Smart Disclosure and
Consumer Decision-making: Report of the Task Force on Smart Disclosure
(2013). The proposed changes would enable private sector data users to
develop more individualized tools for employers to evaluate both their
retirement and welfare plans and for employees to manage their
retirement savings and welfare plan choices.
5. Updating and Improving Reporting of Service Provider Fee and Expense
Information
The DOL has been engaged in a long term initiative focused on
transparency and oversight of service provider and investment fees and
expenses. The fee initiative has focused on reporting indirect
compensation received by service providers (2009 Form 5500 Annual
Return/Report revisions), disclosures about service provider
compensation to plan fiduciaries (DOL's regulation, effective in 2012,
at 29 CFR 2550.408b-2), and plan disclosures to participants and
beneficiaries particularly in 401(k)-type plans (DOL's regulation,
effective in 2012, at 29 CFR 2550.404a-5).
The fee disclosure regulations were finalized after the publication
of the 2009 forms changes. The 2009 indirect compensation reporting
requirements permitted filers to disclose rather than report most
indirect compensation. This was in response to commenters concerns
about potentially inconsistent requirements in Form 5500 reporting and
disclosure under the then proposed disclosure regulations. Accordingly,
the 21st Century initiative includes proposed revisions that are
designed to harmonize Form 5500 reporting requirements with the now
final disclosure regulations, especially the ERISA section 408b-2
regulation. The GAO, in particular, recommended that the DOL require
plans to report all indirect compensation received by certain of their
service providers and to harmonize the ERISA section 408b-2 regulation
disclosure and annual reporting requirements. U.S. Gov't Accountability
Office, GAO-14-441, Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500 Information (2014) (available at www.gao.gov/products/GAO-14-441).
A key purpose of the required fee disclosures in the ERISA section
408b-2 regulation is to help make sure that pension plan fiduciaries
can more effectively negotiate service provider fees based on a better
understanding of compensation that the service provider expects to
receive, including from third-party sources that might represent a
conflict of interest. We believe that annually reporting compensation
received by a service provider and its sources on the Form 5500 Annual
Return/Report will provide a powerful tool and economic basis for
improved evaluation of investment, recordkeeping, and administrative
service arrangements. We have already
[[Page 47501]]
seen innovative uses of Form 5500 Annual Return/Report data by private
sector companies that have created tools for evaluating and
benchmarking employee benefit plans. Further, service provider failures
to disclose indirect compensation as required under the ERISA section
408b-2 regulation have resulted in EBSA obtaining corrective monetary
recoveries to plans. Comparing disclosures of anticipated compensation
under the ERISA section 408b-2 regulation to compensation received as
reported on the Form 5500 Annual Return/Report may uncover disparities
between anticipated and actual compensation, which may provide the
basis for improved targeting of our enforcement actions.
6. Improving Employee Benefit Plan General Compliance With ERISA and
the Code
The Form 5500 Annual Return/Report and related financial audit
requirements historically have served to establish discipline for plan
fiduciaries by requiring an annual examination of the employee benefit
plan's financial and administrative operations. The proposed forms
revisions and DOL implementing regulations would add selected new
questions regarding plan operations, service provider relationships,
and financial management of plans. These questions are intended to
compel fiduciaries to evaluate plan compliance with important
requirements under ERISA and the Code and to provide the Agencies with
improved tools to focus oversight and enforcement resources. The
proposed regulations would also update the requirements for
certifications for limited scope audits under 29 CFR 2520.103-8.
C. Costs and Benefits
The regulatory impact analysis includes a qualitative discussion of
the benefits associated with the proposed rules' five primary
objectives. Under the current regulations and forms, the Form 5500
Annual Return/Report annually collects data from approximately 816,000
large and small plan filers--pension and all types of welfare plans,
including group health--and DFEs with an aggregate annual cost of
$488.1 million. The Form 5500 Annual Return/Report is a central part of
the Agencies' enforcement programs, but the benefits of an updated Form
5500 Annual Return/Report would extend beyond the value of enhanced
enforcement. A modernized Form 5500 Annual Return/Report that is more
aligned with current investment practices and reflects the requirements
of current law also has benefits for plan sponsors, plan participants,
Congress, academics, and others, as explained in more detail below.
As with the current reporting scheme, the proposed revisions are
crafted to limit burden increases for small plans, both pension and
welfare, including group health plans. The burden increase for small
pension plans that are eligible to file the Form 5500-SF is much less
than it is for those pension plans filing the Form 5500 Annual Return/
Report that have complex portfolios that include alternative and hard-
to-value assets or are employee stock ownership plans, which plans are
of greater concern with respect to retirement security of their
participants. Similarly, the burden increase for fully insured welfare
plans that provide group health benefits with fewer than 100
participants, is much less than it is for welfare plans that provide
group health benefits and are fully or partially self-insured, which
are at greater risk for non-payment of benefit claims. As is discussed
in more detail below, the burden increase for small pension plans that
are invested in simple, Form 5500-SF eligible portfolios is very
modest, and the changes that apply to those plans (which will mostly
apply to all filers) will provide much needed information about the
operations, compliance, and asset allocations of such plans. Similarly,
welfare plans that provide group health benefits with fewer than 100
participants and that are fully insured, which are currently exempt
from filing any Form 5500 Annual Return/Report, would file limited
identifying and coverage information. The changes were intentionally
limited in order that the burden would be as minimal as possible, while
still getting the crucial information about that significant component
of the nation's healthcare delivery system and reinforcing for the
fiduciaries responsible for many of those plans the need to satisfy
important consumer protections required by Title I of ERISA and the
Affordable Care Act-related health care benefits. The proposed changes
involve only a nominal burden increase for welfare plans other than
group health.
Under the proposed regulations and revised forms, the Form 5500
Annual Return/Report would collect data from approximately 2.97 million
filers with an aggregate annual cost of $817.0 million. New reporting
requirements for the 2.15 million welfare plans that provide group
health benefits that we estimate are currently covered under Title I of
ERISA, but exempt under current Form 5500 annual reporting rules,
represent over 73 percent of the increased burden for the entire
proposal. That increase is largely due to the number of new filers and
not the per plan cost. Other than the initial filing year burden for
learning the new reporting requirements, the burden per plan for even
these new filers, almost all of which are fully insured plans with
fewer than 100 participants, is very limited because they are only
required to provide registration-type and other nominal benefit
coverage information.
This expansion in the number of first-time filers that are plans
that provide group health benefits that have fewer than 100
participants represents new data on group health care issues that is
otherwise unavailable or not gathered in a way that is readily usable
for ERISA compliance, policy, and enforcement purposes. From a
compliance perspective, requiring reporting will be useful to educate
plan sponsors and fiduciaries of their obligations with respect to
group health plans. Getting first time information on the full breadth
of plans providing health benefits that are subject to ERISA will be
key data for policy-making regarding such plans and their participants.
From an enforcement perspective, data analysis could lead to detection
and intervention in a distressed health plan, which could help minimize
financial harm suffered by participants when medical claims are unpaid
by such plans. Medical bills contribute to a large and increasing share
of personal bankruptcies in the United States.\11\ Moreover, the
potential burden for new filers is expected to be overcome by
satisfying, to some extent, data collections required by Congress in
the Affordable Care Act. Sections 2715A and 2717 of the PHS Act, as
added by the Affordable Care Act, significantly expand reporting
requirements for group health plans subject to ERISA. EBSA is
coordinating with HHS on using the Form 5500 Annual Return/Report as an
alternative mechanism to satisfy these reporting requirements.\12\
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\11\ David U. Himmelstein, M.D., Deborah Thorne, Ph.D.,
Elizabeth Warren, JD, and Steffie Woolhandler: The American Journal
of Medicine, Medical Bankruptcy in the United States, 2007: Results
of a National Study. Available online at https://www.amjmed.com/article/S0002-9343(09)00404-5/abstract?cc=y=.
\12\ Section 2715A of the PHS Act extends the transparency
reporting provisions set forth in section 1311(e)(3) of the
Affordable Care Act (applicable to issuers of ``qualified health
plans'' offered on Exchanges) to non-grandfathered group health
plans and non-grandfathered group or individual health insurance
coverage offered through or outside of Exchanges. As more fully
described on pages 13-14 herein, section 2717 of the PHS Act
generally requires non-grandfathered group health plans and health
insurance issuers offering non-grandfathered group or individual
health insurance coverage to submit annual reports to the DOL, HHS
and the Treasury regarding quality of care programs offered by the
plan.
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[[Page 47502]]
Revisions to the financial schedules (Schedule H and related
investment asset reporting changes) and service provider reporting
(Schedule C changes) impact predominantly large plans with complex
investment portfolios (often involving alternate investments, hard-to-
value assets and employer securities). These changes comprise the
second and third largest shares of the burden increase, respectively,
adding $57.6 million and $12.9 million. Small pension plans that are
subject to expanded reporting under these proposed revisions are a
small percentage of total small pension plan filers and the additional
burdens are generally limited to those plans that choose to invest in
alternative and hard-to-value assets, which present more risk and
demand more transparency.
Revisions to Schedule D and DFE reporting represent the largest
burden reduction within the proposed changes. These changes affect all
DFEs and those plans that invest in DFEs and reduce aggregate burden by
$10.1 million.
In addition, it is important to note that the total burden
associated with the Form 5500 Annual Return/Report has risen from
$327.98 million to $488.1 million since the last rulemaking in November
2007 primarily due to the increase in wage rates and the number of plan
filers over the last eight years under the current rule. In other
words, approximately 90 percent of the $160.1 million increase to the
baseline burden since the last RIA was prepared is simply due to
changes in the broader economy over the past decade, not this
rulemaking.
Estimated Burden Change
Estimated Total Burden Change
------------------------------------------------------------------------
Annual costs Annual burden hours
(millions) \13\
------------------------------------------------------------------------
Total for current reporting $488.1 4.4 million.
requirements.
Change due to proposed GHP 241.6 2.2 million.
requirements.
Change due to all other Proposed 87.2 798,000.
Requirements.
Total for Proposed Reporting 817.0 7.2 million.
Requirements.
Increase in baseline since 2007 127.0 0.
due to update in wage rates.
Increase in baseline since 2007 16.9 149,000.
due to update in number of
plans (not including plans
subject to new GHP reporting).
------------------------------------------------------------------------
Estimated Burden Change by Type of Filer
---------------------------------------------------------------------------
\13\ The Burden Hours column shows the amount of time necessary
to fulfill filing requirements, whether that burden is incurred by
the plans themselves or by outside service providers hired by the
plans. The Cost column shows the monetized version of those burden
hours.
----------------------------------------------------------------------------------------------------------------
Aggregate
Number of Number of Aggregate annual cost Aggregate
filers under filers under annual cost under annual cost
Type of filer current proposed under current proposed change
(thousands) (thousands) requirements requirements (millions)
(millions) (millions)
----------------------------------------------------------------------------------------------------------------
Form 5500 Large Plans........... 148.5 148.5 $252.4 $309.3 $56.9
Pension/Large............... 75.1 75.1 141.2 174.6 33.5
Welfare/Large Health........ 47.9 47.9 91.7 114.2 22.5
Welfare/Large Non-Health.... 25.6 25.6 19.6 20.5 1.0
Form 5500 Small Pension and Non- 29.7 29.7 14.4 38.3 23.9
Health Plans...................
Pension ESOP................ 3.8 3.8 1.8 5.8 4.1
Pension Non-ESOP............ 22.6 22.6 11.1 29.9 18.8
Welfare/Non-Health.......... 3.3 3.3 1.5 2.5 1.0
Form 5500-SF Small Pension and 622.4 622.4 205.8 227.3 21.5
Non-Health Plans...............
Pension..................... 621.8 621.8 205.6 227.0 21.4
Non-Health Welfare.......... 0.7 0.7 0.2 0.2 0.0
Form 5500 Small Health.......... 6.2 2,158.0 4.1 227.9 223.86
Fully Insured Health........ 0.0 1,869.0 0.0 69.6 69.6
Other Health................ 6.2 289.0 4.1 158.2 154.2
DFEs............................ 9.4 8.9 11.4 14.2 2.8
-------------------------------------------------------------------------------
Overall Total............... 816.3 2,967.5 488.1 817.0 328.8
----------------------------------------------------------------------------------------------------------------
Note: Some displayed numbers do not sum up to the totals due to rounding.
Large plans--100 participants or more.
Small plans--generally fewer than 100 participants.
Estimated Burden Change by Form Revision
[[Page 47503]]
----------------------------------------------------------------------------------------------------------------
Filers under
Change in Change in Filers under proposed Annual cost
Revisions annual costs annual burden current requirements per affected
(millions) hours requirements (thousands) filer
(thousands) (thousands) \14\
----------------------------------------------------------------------------------------------------------------
Changes in Schedule H (Including $57.6 535.4 115.1 114.6 $502
changes to Schedules of Assets
and Reportable Transactions)
and Eliminate Schedule I.......
Schedule C...................... 12.9 116.6 82.4 100.2 128
DFE Reporting Changes (Including -10.1 -94.2 61.1 8.9 -1,137
changes to Schedule D).........
Schedule E...................... 2.5 22.0 0.0 6.7 374
Completion of lines 1-5 on Form 69.6 623.0 0.0 1,869 37
5500 and lines 1-8 on Schedule
J by fully insured GHPs with
fewer than 100 participants....
Completion of Form 5500 by GHPs 39.0 349.1 54.1 336.9 116
with fewer than 100
participants that are unfunded,
combination unfunded/fully
insured, or funded with a trust
and GHPs with 100 or more
participants...................
Completion of Schedule J by GHPs 133.0 1,179.2 0.0 336.9 395
with fewer than 100
participants that are unfunded,
combination unfunded/fully
insured, or funded with a trust
and GHPs with 100 or more
participants...................
All Other Revisions............. 24.4 217.9 1,076.7 1,024.2 24
----------------------------------------------------------------------------------------------------------------
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\14\ The elimination of the concept of Master Trust Investment
Account reporting and requiring reporting by a master trust instead,
whose burden change is accounted for in the DFE Reporting Changes
row, results in a reduction in the number of schedules attached.
These reductions are reflected in the rows specific to the schedule
affected.
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II. Discussion of the Proposed Revisions to 29 CFR Part 2520
ERISA section 103 broadly sets out annual financial reporting
requirements for employee benefit plans. The Form 5500 Annual Return/
Report and the DOL's related regulations generally are promulgated
under the ERISA provisions authorizing limited exemptions to these
requirements and simplified reporting and disclosure for welfare plans
under ERISA section 104(a)(3), simplified annual reports under ERISA
section 104(a)(2)(A) for pension plans that cover fewer than 100
participants, and alternative methods of compliance for all pension
plans under ERISA section 110. The forms, instructions, and related
regulations are also promulgated under the DOL's general regulatory
authority in ERISA sections 109 and 505.
The forms, schedules, and instructions, in addition to providing an
alternative method of compliance under ERISA section 110 for the
mandatory reporting requirements under section 103, also serve to help
the DOL carry out its statutory directives under sections 506 and 513
of ERISA. Specifically, section 506(a) of ERISA authorizes the
Secretary of Labor to coordinate with other Agencies to avoid
unnecessary expense and duplication of functions among Government
agencies; the Form 5500 Annual Return/Report is designed to
simultaneously satisfy annual reporting requirements for each of the
three Agencies and help the Agencies more effectively and efficiently
(from both an Agency and a public perspective) enforce the provisions
of ERISA and the Code. Section 506(b) gives the DOL responsibility for
detecting and investigating civil and criminal violations of Title I of
ERISA. The Form 5500 Annual Return/Report is one of the important tools
the DOL uses to effectuate its responsibility to detect and investigate
such violations. Section 513(b)(2) of ERISA specifically directs DOL to
undertake research studies relating to pension plans, including but not
limited to (A) the effects of this subchapter upon the provisions and
costs of pension plans, (B) the role of private pensions in meeting the
economic security needs of the Nation, and (C) the operation of private
pension plans including types and levels of benefits, degree of
reciprocity or portability, and financial and actuarial characteristics
and practices, and methods of encouraging the growth of the private
pension system. The Form 5500 Annual Return/Report is the most
important overall tool DOL has to fulfill this statutory imperative,
and the changes in the proposal are essential for required research, as
well as enforcement.
The proposed changes to the Form 5500 Annual Return/Report and
regulations are designed to: (1) Modernize financial information filed
regarding plans; (2) harmonize information on fees and expenses that
plans pay to service providers with the information that service
providers disclose to plans under 29 CFR 2550.408b-2; (3) enhance
mineability of data filed on the Form 5500 Annual Return/Report; (4)
require reporting by all plans covered by Title I of ERISA that provide
health benefits, including adding a new Schedule J (Group Health Plan
Information); and (5) focus filers on compliance with certain ERISA and
Code provisions through new questions on plan operations, service
provider relationships, and financial management. If adopted, the
changes generally would apply for plan years beginning on or after
January 1, 2019. See the regulatory impact analysis in this document
for a discussion of how the proposed amendments and the proposed form
revision address these goals. These revisions are being proposed in
conjunction with recompeting the contract for operation of the ERISA
Filing and Acceptance System (EFAST2), which is expected to begin
processing Plan Year 2019 forms, beginning January 1, 2020. Certain
changes may be made earlier, particularly those changes collecting
information under the Code or Title IV of ERISA that do not require
amendment to DOL regulations to implement (but not those related to
group health plans). The Notice of Proposed Forms Revisions published
concurrently in today's Federal Register sets forth a comprehensive
discussion of form and instruction changes that relate to this proposed
regulation.
1. Section 2520.103-1
Section 2520.103-1 generally describes the content of the Form 5500
Annual Return/Report as a limited
[[Page 47504]]
exemption and alternative method of compliance for ERISA-covered
employee benefit plans to satisfy annual reporting requirements under
Title I. To accommodate the form, schedule, and instruction changes in
the Notice of Proposed Forms Revisions, the proposed regulatory
amendments in this document would update form and schedule references
in Sec. 2520.103-1. The proposal would also require all plans that
provide group health benefits, regardless of size, to file the Form
5500 Annual Return/Report in accordance with the instructions. Group
health plans, regardless of size, would not be eligible to file the
Form 5500-SF.\15\ The proposal would also require pension benefit plans
with fewer than 100 participants that are required to file the Form
5500 Annual Return/Report to file the Schedule C (Service Provider
Information). It would also generally require both large and small
employee stock ownership plans to file the Schedule E (ESOP
Information). Under the proposal, only DFEs would be required to
complete the Schedule D to report participating plan information; plans
would no longer be required to file Schedule D because they would be
reporting detailed information about the collective investment vehicles
in which they invest, including DFEs, on the Schedule of Assets Held
for Investment and the Schedule of Assets Disposed of During Plan Year.
In order to improve the transparency of reporting for plans that
participate in a master trust, the proposal would require that master
trusts operate either on a calendar year basis or on the same fiscal
year as all the plans that participate in the master trust. In general,
a master trust is a trust maintained by a bank or similar institution
to hold the assets of more than one plan sponsored by a single employer
or by a group of employers under common control.
---------------------------------------------------------------------------
\15\ The details of the limited reporting that would be required
for small fully insured group health plans would be set forth in the
instructions.
---------------------------------------------------------------------------
2. Section 2520.103-2
Section 2520.103-2 describes the content of the Form 5500 Annual
Return/Report for a group insurance arrangement (GIA) that files an
annual report under Sec. 2520.104-43. The amendments proposed in this
document include the requirement to file the proposed new Schedule J.
Group health plans that are part of a GIA would continue to be exempt
from filing a Form 5500 Annual Return/Report under 29 CFR 2520.104-43.
For plans to be eligible for this exemption, the GIA would have to file
a separate Schedule J for each group health plan participating in the
GIA.
3. Section 2520.103-3, 2520.103-4, and 2520.103-1(e)
Section 2520.103-3 provides an exemption for employee benefit plans
from certain annual reporting requirements for plan assets held in a
common collective trust (CCT) maintained by a bank, trust company, or
similar institution. Section 2520.103-4 provides a similar exemption
for plan assets held in a pooled separate account (PSA) maintained by
an insurance carrier. Section 2520.103-1(e) provides for special
reporting rules for plans that participate in a master trust. The
Notice of Proposed Forms Revisions would alter the annual reporting
requirements for plans investing in CCTs, PSAs and master trusts in
significant ways to increase the transparency of plan investments in
such pooled investment vehicles. The DOL proposes revising language to
29 CFR 2520.103-3, 29 CFR 2520.103-4, and 29 CFR 103-1(e) to reflect
those changes.
4. Section 2520.103-6
Section 2520.103-6 sets forth the contents of the Schedule of
Reportable Transactions that is part of the Form 5500 Annual Return/
Report. The Schedule of Reportable Transactions is required to be filed
by plans and DFEs that file their own Form 5500 Annual Return/Report.
This schedule is used to report, subject to conditions and exceptions,
individual transactions or series of transactions that involve more
than five percent of the current value of the assets of the plan or
DFE. The existing rules require the schedule to include the name of
each party to a ``reportable transaction.'' The form and instructions
changes being published concurrently with this document include certain
additions and clarifications of the content of the Schedule of
Reportable Transactions designed to improve the information regarding
parties involved in these significant plan transactions or series of
transactions. 29 CFR 2520.103-6(d)(1) sets forth the content
requirements for the Schedule of Reportable Transactions. Rather than
list all the schedules' content requirements, the proposed amendment to
paragraph (d)(1) would simply reference the schedules' contents in the
relevant Form 5500 Annual Return/Report instructions.
5. Section 2520.103-8
Section 2520.103-8 implements the limited-scope audit exemption
described in ERISA section 103(a)(3)(c). Specifically, this exemption
allows a plan to exclude from the examination and report of an
independent qualified public accountant (IQPA) any statement or
information regarding plan assets held by banks, similar institutions,
or insurance carriers if the statement or information is prepared and
certified by the bank, similar institution, or insurance carrier. The
GAO and the DOL's Inspector General (DOL-OIG) have recommended that the
Department revise section 2520.103-8 to improve the information being
reported by plan administrators electing a limited scope audit. The DOL
agrees that better information is needed by plan administrators in
connection with limited scope audits. To address concerns it has
observed, as well as to respond to the GAO and the DOL-OIG
recommendations,\16\ the DOL proposes amending section 2520.103-8.
Currently, section 2520.103-8 requires the bank or insurance company to
certify the accuracy and completeness of the information being provided
by a written declaration which is signed by a person authorized to
represent the bank or insurance carrier. The DOL proposes to amend the
requirements under section 2520.103-8 to require that the
certification:
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\16\ The Agencies discuss various GAO and DOL-OIG
recommendations with respect to the Form 5500 Annual Return/Report
and the steps the Agencies are taking that are consistent with the
recommendations in the Notice of Proposed Forms Revisions published
today in the Federal Register.
---------------------------------------------------------------------------
(1) Appear on a separate document from the list of plan assets
covered by the certification;
(2) Identify the bank or insurance company holding those plan
assets that are the subject of the certification;
(3) Describe the manner in which the bank or insurance company is
holding the assets covered by the certification;
(4) State whether the bank or insurance company is providing
current value information regarding the assets covered by the
certification, and if so, state that the assets for which current value
is being certified are separately identified in the list of assets
covered by the certification;
(5) If current value is not being certified for all of the assets
covered by the certification, include a caution that the certification
is not certifying current value information and the asset values
provided by the bank or insurance company may not be suitable for use
in satisfying the plan's obligation to report current value information
on the Form 5500 Annual Return/Report; and
(6) If the certification is being provided by an agent on behalf of
the bank or insurance company, a statement
[[Page 47505]]
certifying that the person providing the certification is an authorized
agent acting on behalf of the bank or insurance company and affirming
that the bank or insurance company is taking responsibility for the
accuracy and completeness of the certification and the underlying
records used as a basis for the information being certified.
6. Section 2520.103-10
Section 2520.103-10 identifies the financial schedules that are
required to be included as part of the Form 5500 Annual Return/Report,
which include the ``Schedule of Assets Held for Investment'' and
``Schedule of Assets Acquired and Disposed within the Plan Year.''
Paragraph (b)(1)(i) of Sec. 2520.103-10 sets forth the content
requirements for the Schedule of Assets Held for Investment. The Notice
of Proposed Forms Revisions proposes certain additions and
clarifications to the content of the Schedule of Assets Held for
Investment that are designed to improve the information regarding
parties and assets involved in these significant plan investments.
Rather than list all the required contents of this schedule, the
proposed amendment to paragraph (b)(1)(i) of Sec. 2520.103-10 would
simply reference the contents of the schedule listed in the relevant
Form 5500 Annual Return/Report instructions.
Paragraph (b)(2)(i) of Sec. 2520.103-10 sets forth the content
requirements for the ``Schedule of Assets Acquired and Disposed of
During the Plan Year.'' This proposed amendment reflects the Agencies'
proposal to revise and rename the current ``Schedule of Assets Acquired
and Disposed of Within the Plan Year.'' Filers would be required to
report information on the disposal of certain assets, regardless of
when the assets were acquired. The Notice of Proposed Forms Revisions
also includes certain proposed additions and clarifications of the
content of the Schedule of Assets Disposed of During the Plan Year that
are designed to improve the information regarding parties and assets
involved in these plan transactions. Rather than list the required
contents of the Schedule of Assets Disposed of During the Plan Year,
the proposed amendment to paragraph (b)(2)(i) of Sec. 2520.103-10
would reference the contents of the schedule listed in the relevant
Form 5500 Annual Return/Report instructions.
7. Section 2520.104-20 and 2520.104-26
Section 2520.104-20 provides an exemption from certain annual
reporting and disclosure provisions of ERISA for certain welfare plans
that cover fewer than 100 participants at the beginning of the plan
year and for which benefits are paid exclusively from the general
assets of the employer or employee organization sponsoring the plan,
exclusively through insurance, or a combination of both. An expansion
of the annual reporting of information regarding plans that provide
group health benefits is described in detail in the Notice of Proposed
Forms Revisions. To implement those changes, the DOL proposes
eliminating the existing regulatory exemption for welfare plans that
provide group health benefits (the exemption will continue to apply to
other small welfare plans). Thus, small plans that provide group health
benefits that are unfunded, or a combination of unfunded and fully
insured, will be required to file an annual return/report, including
the new Schedule J, in accordance with the requirements in the proposed
instructions. Under the proposal, small fully insured plans will only
be required to answer basic identifying and plan characteristic
information on the Form 5500 and limited health plan benefit,
insurance, and participant information on the Schedule J. Similarly,
the limited exception in Sec. 2520.104-26 for certain unfunded dues-
financed welfare plans maintained by employee organizations would be
amended to further limit the exemption to those unfunded dues-financed
welfare plans that do not provide health benefits.
8. Section 2520.104b-10
Section 104(b)(3) of ERISA provides in part that, each year,
administrators must furnish to participants and beneficiaries receiving
benefits under a plan materials that fairly summarize the plan's annual
report. Section 2520.104b-10 sets forth the requirements for the
Summary Annual Report (SAR) and prescribes formats for such reports.
The amendments being proposed do not include any change to the SAR
requirements. However, in order to facilitate compliance with the SAR
requirement, the DOL is updating its cross-reference guide to
correspond to the line items of the Form 5500 Annual Return/Report and
Form 5500-SF. The cross-reference guide has also been updated to
reflect that defined benefit pension plans that furnish an annual
funding notice to participants and beneficiaries, pursuant to 29 CFR
2520.101-4, are not required to furnish a SAR. This update reflects
statutory changes enacted as part of the Pension Protection Act of 2006
extending the annual funding notice requirements of section 101(f) of
ERISA. The cross-reference guide, as before, would continue to be an
appendix to 29 CFR 2520.104b-10.
9. Technical and Conforming Changes for Forms and Instructions
Various other technical and conforming changes are being proposed
as part of the restructuring of the Form 5500 Annual Return/Report.
III. Regulatory Impact Analysis
Executive Order 12866 and 13563 Statement
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, and public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Under Executive Order 12866, it must be determined whether a
regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and review by the Office of
Management and Budget (OMB). Section 3(f) of Executive Order 12866
defines a ``significant regulatory action'' as an action that is likely
to result in a rule's (1) having an annual effect on the economy of
$100 million or more, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs, or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
Pursuant to the terms of the Executive Order, it has been
determined that this regulatory action is likely to have an annual
effect on the economy of $100 million or more. Therefore, this action
is being treated as ``economically significant'' and subject to OMB
review under section 3(f)(1) of Executive Order 12866. The DOL
accordingly has undertaken to assess the costs and
[[Page 47506]]
benefits of this regulatory action in satisfaction of the applicable
requirements of the Executive Order and provides herein a summary
discussion of its assessment.
Table 1--Accounting Statement: Estimated Costs From Current Reporting Requirements to 2019 Reporting Requirements
[In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimates Units
---------------------------------------------------------------------------------------------------------------
Category Primary Discount rate
estimate Low estimate High estimate Year dollar (percent) Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
Annualized Monetized................ .............. .............. .............. .............. .............. ..............................
($millions/year).................... .............. .............. .............. .............. ..............
Annualized Quantified............... .............. .............. .............. .............. .............. ..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualitative............................. The proposal pursues five main objectives: (1) Improve reliability of reporting and transparency of financial
products and investments acquired by plans, especially alternative investments, hard-to-value assets, and
investments through collective investment vehicles; foster ongoing monitoring of retirement plans by
employers, plans, participants and beneficiaries, and policymakers; and better leverage the ability of the
Agencies to fulfill their statutory oversight role. (2) Establish better compliance awareness and education,
provide critical data for Agency oversight, collect information needed for Congressionally mandated reports on
group health plans, and satisfy certain reporting requirements under sections 2715A and 2717 of the PHS Act as
added by the Affordable Care Act and incorporated into ERISA section 715. (3) Standardize and structure the
Form 5500 Annual Return/Report to make key retirement and health and welfare benefit data, including
information on assets held for investment, more available and usable in the electronic filing and data
environment, which, consistent with the Administration's ``Smart Disclosure'' effort, to enable private sector
data users to develop more individualized tools for employers to evaluate their retirement plans and for
employees to manage their retirement savings. (4) By harmonizing reporting on Schedule C of the Form 5500
Annual Return/Report with the now final disclosure requirements in DOL's regulation at 29 CFR 2550.408b-2,
provide a powerful tool and economic basis for improved evaluation of investment, recordkeeping, and
administrative service arrangements, including potential innovative uses of Form 5500 Annual Return/Report
data by private sector companies that have created tools for evaluating and benchmarking employee benefit
plans, provide tools to benefit participants where failures to disclose indirect compensation received by a
service provider have resulted in corrective monetary recoveries to plans, as well as minimize filer confusion
with the harmonization of reporting and disclosure requirements. (5) Enhance reporting on plan compliance to
improve plan operations, protect participants and beneficiaries and their retirement benefits, and educate and
provide annual discipline for plan fiduciaries.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs:
Annualized Monetized................ 372.6 .............. .............. 2016 7 2019 and later.
($millions/year).................... 366.2 .............. .............. 2016 3 2019 and later.
Annualized Quantified............... .............. .............. .............. .............. .............. ..............................
Qualitative......................... .............. .............. .............. .............. .............. ..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Background and Need for Regulatory Action
The Form 5500 Annual Return/Report is the principal source of
information and data available to the Agencies concerning the
operations, funding, and investments of pension and welfare benefit
plans covered by ERISA and the Code. Accordingly, the Form 5500 Annual
Return/Report is essential to each Agency's enforcement, research, and
policy formulation programs and is a source of information and data for
use by other federal agencies, Congress, and the private sector in
assessing employee benefit, tax, and economic trends and policies. The
Form 5500 Annual Return/Report also serves as the primary means by
which the operations of plans can be monitored by plan participants and
beneficiaries and the general public.
As discussed in the Notice of Proposed Forms Revisions published
concurrently with this document and below, the DOL has received several
reports from the GAO, the DOL-OIG, and the ERISA Advisory Council
indicating the need for substantive changes to annual reporting forms
and regulations. TIGTA has also suggested to the IRS that substantive
changes are needed. In response to these reports, the continued shift
from DB to DC plans, and legislative and regulatory changes that have
been issued since the last major revision to the Form 5500 Annual
Return/Report, the DOL has determined that the substantial revisions to
the reporting scheme discussed earlier in this preamble and in the
Notice of Proposed Forms Revisions, published concurrently, are
necessary and appropriate. These changes will ensure that the Agencies,
plan participants and beneficiaries and the general public can monitor
the operations of employee benefit plans. With their help, the Form
5500 Annual Return/Report will continue to serve its essential
functions.
As described earlier in this document, the proposed revisions to
the Form 5500 Annual Return/Report reflect priorities of and efforts by
the Agencies to improve the quality of the information collected, while
limiting wherever possible, especially for small pension plans invested
in easy to value assets and plans that provide group health benefits
that have fewer than 100
[[Page 47507]]
participants that are fully insured, the overall burden of the
statutory reporting requirements and the forms. To accomplish this
goal, the Agencies have pursued five objectives. The need for
regulatory action to achieve these objectives is discussed below.
(1) Modernizing financial information.
Modernizing the Schedule H Balance Sheet and Income Statement: The
financial statements contained in the current Schedule H (Large Plan
Financial Information) and Schedule I (Small Plan Financial
Information) are based on data elements that have remained largely
unchanged since the Form 5500 Annual Return/Report was established in
1975. Many investments in alternative and hard-to-value assets and
those held through collective investment funds that are frequently held
by plans and the investment industry today were not as prevalent in
1975. Thus, they do not fit squarely into any of the existing Schedule
H reporting categories. Further, some of these investments in
alternative and hard-to-value assets, including those held through
collective investment funds, are sufficiently complex that plan
administrators and plan accountants may not completely understand how
they fit into the balance sheet reporting on the Form 5500 Annual
Return/Report. This results in inconsistent financial reporting by
filers because certain types of investments may arguably fall into one
or more categories. For example, a ``hedge'' fund could potentially be
reported as a limited partnership or some other type of collective
investment entity, or could be reported in a different reporting
category based on the primary assets held through a particular type of
collective investment vehicle.
Additionally, many filers simply report investments that do not
readily fit into one of the existing categories in ``Other.'' For
example, large retirement plans reported having $153 billion in assets
that they categorized as ``Other'' on the Schedule H balance sheet for
2013. DFEs reported an additional approximately $407 billion in assets
as ``Other'' for the 2013 plan year. In order to determine why there is
a substantial amount in ``Other,'' the Agencies now have to rely on the
current, unstructured Schedule H Line 4i Schedules of Assets, which
might not specifically indicate the necessary details, or the Agencies
would need to contact the filer for the information. The types of
alternative and hard-to-value assets that might be reported in
``Other'' include: Options, index futures, state and municipal
securities, hedge funds, and private equity. Some of these asset types
can be fairly complex and merit more rather than less transparency in
order to determine the overall financial health of the plan. The
inability to distinguish these types of assets on the Form 5500 Annual
Return/Report reduces the form's usefulness for policy analysis and
research as well for monitoring plans for enforcement purposes.
A recent GAO report stated, for example, that, ``while hedge funds
and private equity have very different risk, return, and disclosure
considerations from state and municipal securities, all of these
investments could be included in the ``other plan asset'' category.''
\17\ GAO also noted that the plan asset categories on the Schedule H
are not representative of current plan investments, and provide little
insight into the investments themselves, the level of associated risk,
or structures of the investments.\18\ The DOL-OIG also recommended that
the Agencies revise the Form 5500 Annual Return/Report to improve
reporting of hard-to-value assets and alternative investments.\19\
Based on their own assessment and experience in research and
enforcement and the use of the Form 5500 Annual Return/Report to
support these critical agency functions and responsibilities, as well
as in response to these recommendations, as discussed in detail earlier
in this document, the Agencies are proposing to make changes to the
Schedule H balance sheet and income statement.
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\17\ GAO, Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 12.
\18\ Id. at 11-12.
\19\ EBSA Needs to Provide Additional Guidance and Oversight to
ERISA Plans Holding Hard-To-Value Alternative Investments, at 4, 18,
and 19.
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Modernizing the Schedule H, Line 4i Schedules of Assets: As
discussed in detail in the Notice of Proposed Forms Revisions published
simultaneously with this document, the Agencies are proposing
structural, data element and instruction changes to the current
Schedule H, Line 4i(1) Schedule of Assets Held for Investment and Line
4i(2) Schedule of Assets Acquired and Disposed of Within Year. These
schedules are filed by plans required to file the Schedule H and by
certain DFEs. The Schedules of Assets are a central element of the
financial disclosure structure of ERISA. They are the only place on the
Form 5500 Annual Return/Report where plans are required to list
individual plan investments identified by major characteristics, such
as issue, maturity date, interest rate, cost and current value. As
such, they are the only part of the Form 5500 Annual Return/Report that
can be used to evaluate the year-to-year performance, liquidity, and
risk characteristics of a plan's individual investments.
The current reported information, however, suffers from several
shortcomings. First, this information is not reported in a data-
capturable format. Only an image or picture of the attachments that are
currently filed as non-standard attachments to filers' electronic Form
5500 Annual Return/Report filings is available through the EFAST2
public disclosure function. Second, the Line 4i Schedules of Assets are
not always found in the same place in each annual return/report. For
example, the Line 4i Schedules of Assets are often incorporated in the
larger audit report of the plan's IQPA that itself is filed as a
nonstandard attachment to the Form 5500 Annual Return/Report. Third,
the schedules do not require a standardized method for identifying and
describing assets on the Line 4i Schedules. Therefore, under the
current reporting rules, the same stock or mutual fund may be
identified with various different names or abbreviations.
The creation of more detailed and structured Schedules of Assets is
a specific recommendation of the DOL-OIG and the GAO.\20\ The proposed
changes to the Schedules of Assets are designed to remedy the
shortcomings described above. In addition, data capturability of the
Line 4i Schedules of Assets will make it much easier and more efficient
to monitor plan holdings as computer programs can read and analyze the
data much more efficiently. It will allow the Agencies and the
interested public to monitor a larger number of pension plans and their
asset allocations. The existence of a group of private companies that
are transforming the Line 4i Schedule of Assets Held for Investment of
the larger pension plans into data-capturable information and using it
to compare plan investment menus and investment allocations is a clear
indication that plans sponsors and their service providers also are
interested in having access to these data. For example, one of these
companies sent a letter to DOL stating that they believe that the
information on the Form 5500 Annual Return/Report is very useful in
``helping the agency understand the performance and design of
retirement plans in the market place'' and that the data availability
fosters ``third party data collection and
[[Page 47508]]
evaluation efforts that in turn help protect retirement plan
participants.'' \21\ Plan sponsors can use this information to see how
their investment menus compare to similarly situated plans and service
providers often use this information to identify plans with
underperforming investments in order to attract new business. This can
lead to more competition and improved plan performance, which will
ultimately benefit participants.
---------------------------------------------------------------------------
\20\ See EBSA Needs to Provide Additional Guidance and Oversight
to ERISA Plans Holding Hard-to-Value Alternative Investments, at 17;
Private Pensions: Targeted Revisions Could Improve Usefulness of
Form 5500 Information, at 37.
\21\ See August 23, 2010 Comment Letter from Ryan Alfred,
President, BrightScope, Inc. Re: Proposed Extension of Information
Collection, Form 5500 https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201009-1210-002).
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Changes to DFE Reporting: Under the current reporting rules, DFEs
are permitted, or in some cases required, to file their own Form 5500
Annual Return/Report. Generally, pension plans that invest in DFEs only
are required to report their interest in the DFE but do not have to
report detailed information regarding the underlying investments in the
DFE. Such plans are required to file a Schedule D on which the plans
identify each DFE in which they invest and the year-end values of the
plans' interests. Although DFEs file their own Form 5500 Annual Return/
Report, only Master Trust Investment Accounts (MTIAs) and entities
meeting the conditions of DOL regulation 29 CFR 103-12 (103-12 IEs) are
required to include as part of their own Form 5500 Annual Return/
Report, detailed asset holdings on the Schedule H, Line 4i Schedules of
Assets. Insurance company pooled separate accounts (PSAs) and bank
common/collective trusts (CCTs), which together account for 32 percent
of large plans' reported DFE holdings, do not report such information,
nor are the investing plans required to report it, although the
information is required by regulation to be provided by PSAs and CCTs
to investing plans on an annual basis.
The Agencies have encountered, and researchers have reported to the
DOL,\22\ difficulties matching plans' investments in DFEs reported by
investing plans and DFEs in which the plans and other DFEs are
participating. Some of this stems from incomplete, unreliable, or
inconsistent data on Schedule D filings. For example, for 2013, about
57 percent of plans and 17 percent of DFEs that filed a Schedule D and
reported non-zero amounts of interest in DFEs on Schedule H have at
least one discrepancy in reporting of more than $1,000 between the
value of the investment in a DFE on their Schedule D and their Schedule
H. There might be some legitimate reasons for these discrepancies, e.g.
different plan year dates, but these discrepancies make it difficult to
verify filing accuracy. Another more troubling issue is that there are
more than 7,000 plan filings for 2013 that report investments in DFEs
that cannot be directly linked to any applicable DFE filings. This
problem primarily involves CCTs and PSAs. Investments in these unlinked
DFEs account for more than $382 billion in assets. A serious
consequence of not being able to link these plan filings and assets to
DFE filings is that the Agencies and participants do not get
information on their plan investments and thus are not able to monitor
these investments.
---------------------------------------------------------------------------
\22\ See ``Invisible Pension Investments,'' Peter J. Wiedenbeck,
Rachael K. Hinkle & Andrew D. Martin (https://sites.lsa.umich.edu/admart/wp-content/uploads/sites/127/2014/08/vatr13.pdf).
---------------------------------------------------------------------------
GAO has recommended that the Agencies take steps to address the
problem of incomplete or inaccurate matching between plan and DFE
filings.\23\ Therefore, as discussed in detail earlier in this
document, the Agencies are proposing to revise the reporting structure
of both Schedule H and the Line 4i Schedules of Assets, with
corresponding changes to Schedule D, that are intended to ensure that
the Agencies, plan fiduciaries, plan service providers, and other users
of data have the tools to create a more complete picture of plans'
investment in pooled investment vehicles.
---------------------------------------------------------------------------
\23\ See, GAO Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500, at 14-15.
---------------------------------------------------------------------------
Changes to Financial Information Reporting for Small Plans: Small
pension plans that are invested in ``eligible'' plan assets and
otherwise meet certain requirements are eligible to file Form 5500-SF,
which was established in part to comply with provisions of the PPA
requiring a simplified form of reporting for plans with fewer than 25
participants.\24\ Currently, the Form 5500-SF does not require filers
to breakout assets on the balance sheet into specific categories. Small
plans that are not eligible to file the Form 5500-SF because they are
invested in hard-to-value and alternative investments currently file
Schedule I, but the Schedule I does not require small plan filers to
provide detailed plan asset information and does not provide
significantly more useful financial information than the Form 5500-SF
with respect to alternative and hard-to-value assets.
---------------------------------------------------------------------------
\24\ See section 1103(b) of the Pension Protection Act of 1996,
Public Law 109-280, 120 Stat. 780 (2006).
---------------------------------------------------------------------------
The lack of specific questions on the investment activity of small
pension plans, which comprise over 80 percent of filers, impairs the
usefulness of the Form 5500 Annual Return/Report as a tool to obtain a
meaningful picture of small plan investments, especially investments in
hard-to-value and alternative investments. As the GAO has noted, the
limited financial information provided on the Schedule I creates a
challenge for participants, beneficiaries, oversight agencies,
researchers, and other users of the Form 5500 Annual Return/Report or
Form 5500 Annual Return/Report data.\25\ Therefore, as discussed in
detail in the Notice of Proposed Forms Revisions published today, under
the proposal, Form 5500-SF filers would be required to provide a modest
additional breakout of plan investments on the balance sheet. The
proposal also would eliminate the Schedule I for small plans that are
not eligible to file the Form 5500-SF, predominantly because they are
invested in hard-to-value and alternative investments, including
employer securities. Under the proposal, such plans instead would be
required to complete Schedule H and the Line 4i Schedules of Assets.
These changes are designed to ensure that the Agencies are able to
collect critical information regarding small plan investments in hard-
to-value and alternative investments.
---------------------------------------------------------------------------
\25\ GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information, at 18.
---------------------------------------------------------------------------
Although the proposed elimination of Schedule I and the addition of
basic investment category information to the Form 5500-SF balance sheet
would result in additional reporting for those small plans invested in
hard-to-value and alternative investments, those small plans with
simple investment portfolios would not see a significant increase in
their annual reporting burden. In light of changes in the financial
environment and increasing concern about investments in hard-to-value
assets and alternative investments, however, the Agencies believe that
requiring the more detailed financial information regarding hard-to-
value investments on the Schedule H is important for regulatory,
enforcement, and disclosure purposes for those small plans with more
complex portfolios that include hard-to-value or alternative
investments. The inherent increased risk posed by hard-to-value or
alternative investments affects participants in small plans as well as
large plans, but without these proposed revisions, the participants in
small plans are left without the protection afforded participants in
large plans that comes from the reporting that large plans are already
required to do. Although such small plans would be
[[Page 47509]]
required to complete the Schedule H instead of the Schedule I,
including the Schedule H Line 4i(1) and 4i(2) Schedules of Assets,
eligible small plans, as under the current rules, would still be
eligible for a waiver of the annual examination and report of an IQPA
under 29 CFR 2520.104-46, and the number count required to determine
eligibility would be changed from the number of participants at the
beginning of the plan year to the number of participants with account
balances at the beginning of the plan year.
(2) Updating fee and expense information on plan service providers
with a focus on harmonizing annual reporting requirements on Schedule C
with DOL's final disclosure requirements at 29 CFR 2550.408b-2.
The current rules for reporting indirect compensation on the
Schedule C as part of the Form 5500 Annual Return/Report, including the
limited reporting option for ``eligible indirect compensation,'' were
implemented starting with the 2009 forms.\26\ Those changes were part
of a three-pronged regulatory initiative that included the DOL's
regulations under 29 CFR 2550.408b-2 and participant-level disclosure
regulations under 29 CFR 2550.404a-5. At the time the 2009 Schedule C
rules were finalized, neither the ERISA section 408b-2 regulation nor
the ERISA section 404a-5 regulation had been promulgated. Some elements
of the 2009 Schedule C, for example, the eligible indirect compensation
provisions, were adopted in light of the fact that it was not certain
at the time what the ERISA section 408b-2 final rule would require.
Those provisions were also meant to respond to concerns from the
regulated community, especially large plan service providers, about
having to create two different record-keeping systems to meet the
various requirements of the Form 5500 Annual Return/Report and
disclosures required under 408b-2 should the later promulgated
provisions differ from the Form 5500 reporting requirements on indirect
compensation.
---------------------------------------------------------------------------
\26\ See 72 FR 74731 (Nov. 16, 2007).
---------------------------------------------------------------------------
Now that EBSA has promulgated the ERISA sections 408b-2 and 404a-5
final regulations, there is a need to harmonize fee reporting under the
Schedule C and ERISA section 408b-2 regulations to: (1) Make it easier
to understand the disclosure and reporting rules regarding indirect
compensation; (2) improve quality of data by minimizing any filer
confusion that might result from differences in the two requirements
and having all the compensation required to be disclosed to be reported
on the Schedule C; (3) reduce burden by synchronizing the record-
keeping that would be required for ERISA section 408b-2 regulations
before-the-fact disclosure with Schedule C's after-the-fact reporting;
and (4) make the information easier to understand for end users of the
forms by bringing consistency between the service provider fees
disclosed to the plan fiduciaries and the service provider fees
reported to the Agencies and made public. In this regard, a recent GAO
report stated that some filers advised that there was confusion over
what Schedule C requires to be reported, including in comparison to
what is required under the ERISA section 408b-2 regulations disclosure
scheme.\27\ Therefore, as discussed in detail earlier in this document,
the Agencies are proposing various changes to the Schedule C to better
harmonize it with the disclosure requirements under the final ERISA
section 408b-2 regulation. Among other changes, the Agencies are
proposing to eliminate the concept of ``eligible indirect
compensation'' on Schedule C in part because ``eligible indirect
compensation'' was created prior to the finalization of ERISA section
408b-2 rules to address concerns about possible future inconsistencies
that are no longer applicable. Instead of being able to rely on the
construct of ``eligible indirect compensation'' to report only the name
of the person providing the disclosures to the plan administrator, the
proposal would require filers to report all types of compensation for
ERISA section 408b-2 ``covered'' service providers. This change will
also help address concerns raised by other data sources on service
provider compensation about the completeness of Schedule C compensation
data. A recent survey by Deloitte Consulting LLP for the Investment
Company Institute reported fees paid by 401(k) plans that greatly
exceeded fees reported on the Schedule C at every asset level.\28\
---------------------------------------------------------------------------
\27\ See GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information, at 22.
\28\ Deloitte Consulting LLP (2014, August). Inside the
Structure of Defined Contribution/401(k) Plan Fees, 2013: A Study
Assessing the Mechanics of the `all-in' Fee. (Available at https://www.ici.org/pdf/rpt_14_dc_401k_fee_study.pdf).
---------------------------------------------------------------------------
The proposed forms revisions, and implementing DOL regulations,
would also require small pension plans that are not eligible to file
the Form 5500-SF and welfare plans that are funded with a trust with
fewer than 100 participants to file the Schedule C. Currently, only
large pension plans and large welfare plans that are not unfunded or
insured (e.g., funded using a trust) must file the Schedule C, thus
excluding almost 90 percent of current pension plan filers and over 80
percent of current welfare plan filers from having to disclose service
provider fees. The DOL recognizes the burdens small plans face in
complying with reporting obligations, but must weigh them against the
market efficiencies that can be gained through improved transparency
and fee disclosure. The DOL therefore proposes to require small pension
plans to file Schedule C only if they do not meet the eligibility
conditions for filing the Form 5500-SF, which predominantly are those
pension plans that are invested in alternative or hard-to-value assets.
The DOL proposes to require welfare plans that offer group health
benefits with fewer than 100 participants to file Schedule C only if
they are not unfunded or insured (e.g., funded with a trust), because
those plans are most likely to experience financial difficulties.
Defined contribution pension plan Form 5500-SF filers, as well as
defined contribution pension plan Form 5500 Annual Return/Report filers
required to complete the Schedule H, would also have to attach the
comparison chart that is required to be furnished to participants under
the DOL's regulation at 29 CFR 2550.404a-5. Although the comparison
chart would not be attached in a ``structured'' format, it would
provide, with a minimal burden increase, a picture of the investment
earnings and fees for defined contribution pension plans, which
constitute the majority of small plan filers.
Requiring those small pension plans that are not eligible to file
the Form 5500-SF and welfare plans that include group health benefits
with fewer than 100 participants that are not unfunded or insured
(e.g., funded with a trust) to complete the Schedule C as part of their
Form 5500 Annual Return/Report filing, and requiring Form 5500-SF
defined contribution pension plan filers to include the 404a-5
comparison chart should address some of the GAO's concerns that service
provider fee information is incomplete because plans with fewer than
100 participants are not currently required to file information about
indirect compensation received by the plans' service providers.\29\
Both the proposed Schedule C information for small plans not eligible
to file the Form 5500-SF and the 404a-5 information would also enable
sponsors of small plans to more easily compare fee information between
their plans and increase competition for these services.
[[Page 47510]]
In addition, financial information reporting could be better aligned
with recently adopted disclosure rules to ensure that all fees are
reported by the plans.\30\
---------------------------------------------------------------------------
\29\ See GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information, at 25.
\30\ Id. at 50.
---------------------------------------------------------------------------
(3) Enhancing usability of data filed on the annual return/report.
E-filing, as well as advances in information technology, have
changed both the regulated community's and government's ability to use
the Form 5500 Annual Return/Report data. The government can now provide
the data in a much more timely and comprehensive manner. As a result,
the Form 5500 Annual Return/Report data sets are posted on the
Internet, updated monthly, and the images of the individual filings and
attachments are made available at no cost to the requester.\31\ This
has allowed the public as well as the Agencies to monitor plan
investments and trends more efficiently. Several private companies have
started to build data sets and applications using the Form 5500 Annual
Return/Report data to compare plans and service providers and make
these services available to plan sponsors and service providers. These
developments can lead to better review of plan investments and
increased competition, ultimately benefiting plans and participants.
---------------------------------------------------------------------------
\31\ Requests for individual filings and attachments are
available at no cost to the requester. Bulk requests are available
at a minimal cost to the requester. See Guide to Submitting Requests
Under the Freedom of Information Act, Section VIII (https://www.dol.gov/dol/foia/guide6.htm).
---------------------------------------------------------------------------
The usefulness of the Form 5500 Annual Return/Report data for
comprehensive plan monitoring is dependent on comparable data being
available for all or most plans and on the data being available in
data-capturable formats. The current financial reporting structures and
requirements, however, do not allow the data to be utilized to the
fullest extent. As stated above, the Schedule H Line 4i, Schedules of
Assets, and the Line 4j, Schedule of Reportable Transactions, as well
as other attachments to various schedules (including Schedules MB and
SB) are not filed in a standardized electronic format and therefore
cannot be searched and analyzed electronically. As a result, the
Agencies, other governmental users, including policymakers, and the
public have difficulty accessing and making most effective use of key
information about pension plan investments.
The proposed requirement for filers to complete a standardized
Schedule H Line 4i(1), Schedule of Assets Held for Investment and Line
4i(2) Schedule of Assets Disposed of by End of Plan Year, in a data-
capturable format would address some of the critical gaps in available
data on pension plan investing, which accounts for over $7.87 trillion
of United States savings. The Agencies' proposal to standardize the
Schedule H, Line 4i Schedules of Investments also is responsive to the
DOL-OIG's recommendation that the Agencies create a searchable
reporting format for the Schedule H, Line 4i Schedules of Assets and
otherwise increase the accessibility of Form 5500 Annual Return/Report
data, particularly information on hard-to value assets and multiple-
employer plans.\32\
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\32\ See EBSA Needs to Provide Additional Guidance and Oversight
to ERISA Plans Holding Hard-to-Value Alternative Investments, at 17;
see also GAO Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 37; GAO, Federal Agencies
Should Collect Data and Coordinate Oversight of Multiple Employer
Plans, at 30.
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In addition, this proposal would enhance the usability of data by
replacing some of the attachments to the various schedules (including
some attachments to Schedules MB and SB) \33\ with text fields and
having filers report required information in text fields on the face of
the forms and on schedules instead of requiring this information to be
filed as non-standard attachments. The Agencies took into account the
size and complexity of the attachments in determining which should be
text fields and which should continue to be attachments, despite the
overarching goal of improving data usability for the complete form. In
a few cases, especially for detailed actuarial charts, the Agencies
determined that requiring standardized attachments or requiring the
information to be provided on the face of the forms and schedules could
potentially be overly difficult, costly, and complex, and therefore the
costs would outweigh the benefits.
---------------------------------------------------------------------------
\33\ The proposed Schedule E, which is based in large part on
the Schedule E from 2008 and earlier, would use text fields rather
than attachments for some of the previously asked questions.
---------------------------------------------------------------------------
Further improvements would be realized from the proposal's
requirement that other currently unstructured data or new elements
would also be collected as structured data. These include the lists of
employers participating in multiple-employer and controlled group plans
required to be attached to the Form 5500 Annual Return/Report or Form
5500-SF; the Schedule H, Line 4a Schedule of Delinquent Contributions,
and Schedule H, Line 4j Schedule of Reportable Transactions. Having
information on delinquent participant contributions and reportable
transactions in a ``structured'' data format would benefit the Agencies
by allowing them to identify common types of violations across plans,
more quickly respond to any identified issues, and better determine
areas where more enforcement and encouragement of compliance and
education is needed. Having this data reported in a structured format
would also benefit the Agencies and the general public by identifying
the universe of employers that participate in multiple-employer and
controlled group plans and allowing them to quickly identify plan
sponsors that might be affected by adverse market conditions or
financial distress.
In summary, advances and developments in technology allow data
users to run increasingly sophisticated analyses using the existing
Form 5500 Annual Return/Report data, but this is dependent on the
availability of these data in a data-capturable format. In addition to
researchers interested in studying trends in the employee benefits
industry, some companies have reached out to the DOL to request that
Form 5500 Annual Return/Report data be collected in a more standardized
and consistent format.\34\ If these data were available in such a
format, researchers, businesses and plan professionals could use the
data more efficiently to inform employers and participants on plan
structures, operations, and finances. Particularly important in a
constrained federal budgetary environment, such data will allow EBSA's
enforcement staff to monitor many more employee benefit plans in a
systematic and efficient way, producing more fruitful investigations
and reducing the inefficiencies and disruptions resulting from
unnecessary investigations.
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\34\ See August 23, 2010 Comment Letter from BrightScope Re:
Proposed Extension of Information Collection, Form 5500 (https://
www.dol.gov/EBSA).
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(4) Requiring reporting by all group health plans covered by Title
I of ERISA, including adding a new Schedule J (Group Health Plan
Information).
The enactment of the Affordable Care Act expanded DOL's already
growing oversight and regulatory responsibilities with respect to the
provision of group health benefits to workers in private sector
employer-sponsored group health plans. Generally most welfare plans
that include group health benefits that have fewer than 100
participants do not currently file the Form 5500 Annual Return/Report.
The current regulation exempts small plans from the requirement to file
if they are unfunded, fully insured or combination unfunded/fully
insured.\35\ The current lack of information collected on the Form 5500
[[Page 47511]]
Annual Return/Report from group health plans diminishes the
effectiveness of EBSA's ability to develop health care regulations and
complicates the DOL's ability to enforce such regulations and educate
plan administrators regarding compliance. Congress, DOL, other
governmental users, private researchers, service providers, and other
members of the regulated community currently are not able to
confidently estimate even the most basic information regarding group
health plans, such as the total number of plans that exist or trends
that are occurring in the marketplace.
---------------------------------------------------------------------------
\35\ 29 CFR 2520.104-20.
---------------------------------------------------------------------------
The Affordable Care Act requires the Secretary of Labor to provide
Congress with an annual report containing general information on self-
insured employee health benefit plans and financial information
regarding employers that sponsor such plans. This ``Annual Report on
Self-Insured Group Health Plans,'' by the terms of the statute, must
use data from the Form 5500 Annual Return/Report. However, as noted
above, those small plans that are self-insured and do not use a trust
are not required to file the Form 5500 Annual Return/Report with the
DOL and the Form 5500 Annual Return/Report only collects limited
information from self-insured plans that do file.\36\ Also, as the 2015
Report states, ``health benefits may be reported together with certain
other benefits, such as disability or life insurance benefits, on a
single Form 5500 Annual Return/Report. This makes it difficult to
distinguish how the different benefits are financed.'' \37\ To fulfill
its responsibility to Congress, the DOL has developed an algorithm to
try to infer the funding method for plans that file. This methodology,
however, may not accurately identify self-insured plans and can only
draw information from the Form 5500 Annual Returns/Reports filed, which
are a limited sample, and the methodology may compromise the validity
of any conclusions drawn from the report and any resulting policy
prescriptions.
---------------------------------------------------------------------------
\36\ Only a little over 20,000 self-insured and approximately
4,000 mixed self-insured health plans file annually with the DOL
under the current reporting scheme. See ``Report to Congress: Annual
Report on Self-Insured Group Health Plans,'' March 2015, page iii
(available at https://www.dol.gov/ebsa/pdf/ACAReportToCongress2015.pdf).
\37\ Id. at v.
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In addition, sections 2715A and 2717 of the PHS Act, as added by
the Affordable Care Act and incorporated into ERISA section 715,
include important new reporting requirements for group health plans
subject to ERISA. Specifically, section 2715A of the PHS Act
incorporates the transparency provisions of section 1311(e)(3) of the
Affordable Care Act to require non-grandfathered group health plans and
health insurance issuers offering non-grandfathered group or individual
health insurance coverage to make available to the public, and the
government a host of information on health plan enrollment and claims,
including: (1) Claims payment policies and procedures; (2) periodic
financial disclosures; (3) data on enrollment and disenrollment; (4)
data on the number of denied claims; (5) data on rating practices; (6)
information on cost-sharing and payments with respect to any out-of-
network coverage; (7) information on enrollee and participant rights;
and (8) other information as determined by the Secretary. Moreover,
section 2717 of the PHS Act generally requires non-grandfathered group
health plans and health insurance issuers offering non-grandfathered
group or individual health insurance coverage to report annually
whether the benefits under the plan: (A) Improve health outcomes
through the implementation of activities such as quality reporting,
effective case management, care coordination, chronic disease
management, and medication and care compliance initiatives, including
through the use of the medical homes model as defined for purposes of
section 3602 of the Affordable Care Act, for treatment or services
under the plan or coverage; (B) implement activities to prevent
hospital readmissions through a comprehensive program for hospital
discharge that includes patient-centered education and counseling,
comprehensive discharge planning, and post discharge reinforcement by
an appropriate health care professional; (C) implement activities to
improve patient safety and reduce medical errors through the
appropriate use of best clinical practices, evidence based medicine,
and health information technology under the plan or coverage; and (D)
implement wellness and health promotion activities.
These regulations propose conforming amendments in 29 CFR 2590.715-
2715A and 29 CFR 2590.715-2717 to clarify that compliance with the
reporting requirements in 29 CFR 2520.103-1 (including filing any
required schedules to the annual report) by plans subject to ERISA
would satisfy the reporting requirements of PHS Act section 2715A and
2717,\38\ incorporated in ERISA through ERISA section 715(a)(1).\39\ As
explained in FAQs issued August 11, 2015,\40\ HHS proposed an
information collection for public comment in connection with the
transparency provisions of section 1311(e)(3) of the Affordable Care
Act. The proposed data collection would collect certain information
from Qualified Health Plan (QHP) issuers in Federally-facilitated
Exchanges and State-based Exchanges using the federal eligibility and
enrollment platform. The HHS proposal explained that other reporting
requirements would be proposed at a later time, through a separate
rulemaking with respect to non-Exchange coverage, including those that
extend to health insurance issuers offering non-grandfathered group and
individual health insurance coverage outside of Exchanges and non-
grandfathered group health plans (including large group and self-
insured health plans).
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\38\ The Treasury Department and the IRS intend to publish
proposed regulations in 26 CFR 54.9815-2715A and 54.9815-2717
clarifying that group health plans required to file an annual report
pursuant to section 104 of ERISA that comply with the reporting
requirements in 29 CFR 2520.103-1 (including filing any required
schedules to the annual report) would satisfy the reporting
requirements of sections 2715A and 2717 of the PHS Act, as
incorporated in the Code. Group health plans that are not required
to file an annual report pursuant to section 104 of ERISA but that
are subject to sections 2715A and 2717 of the PHS Act as
incorporated in the Code, will not be required to do any reporting
to comply with sections 2715A and 2717 of the PHS Act, as
incorporated in the Code, unless and until the Treasury Department
and the IRS issue subsequent further guidance or rulemaking
regarding any such reporting by such plans.
\39\ Nonfederal governmental plans (as defined in PHS Act
section 2791(d)(8)(C)) and health insurance issuers (as defined in
PHS Act section 2791(b)(2) and ERISA section 733(b)(2)) are not
required to file annual reports pursuant to ERISA section 103.
Accordingly, any reporting required of such plans and issuers to
satisfy PHS Act sections 2715A and 2717 will be addressed separately
by HHS in future rulemakings and/or guidance.
\40\ See FAQs about Affordable Care Act Implementation (Part
XXVIII), available at www.dol.gov/ebsa/faqs/faq-aca28.html and
www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/ACA-FAQ-Part-XXVIII-transparency-reporting-final-8-11-15.pdf.
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This rulemaking proposes transparency and quality reporting for
non-grandfathered group health plans under PHS Act sections 2715A and
2717, as incorporated in ERISA. It takes into account differences in
markets and other relevant factors and reduces unnecessary duplication.
The DOL is proposing to collect and provide high-value data to
participants, beneficiaries, and regulators, such as information about
benefits and plan design characteristics, funding, grandfathered plan
status, rebates received by the plan (such as medical loss ratio
rebates), service provider information (including information regarding
any third party administrators, pharmacy benefit managers, mental
health benefit
[[Page 47512]]
managers, and independent review organizations), information on any
stop loss insurance, claims processing and payment information
(including number of claims filed, paid, appealed and denied), wellness
program information, and other compliance information. The collection
of high-value data will lead to greater transparency for consumers and
assist in their decision-making process.
As discussed in detail in the Notice of Proposed Form Revision, the
proposal would make significant changes to group health plan reporting.
First, the proposal would add a new Schedule J (Group Health Plan
Information). Plans that provide group health benefits that have 100 or
more participants, all of which are currently required to file a Form
5500 Annual Return/Report, would have to include the new Schedule J in
their annual report, with the remaining reporting requirements
generally unchanged, except as proposed to be changed for all filers.
Plans that provide group health benefits with fewer than 100
participants that are funded using a trust would generally be required
to report the same information as plans that provide group health
benefits with 100 or more participants that are funded using a trust;
they would no longer be permitted to file the Form 5500-SF. Although
this would require such plans to complete the Schedule C and the
Schedule H, for plans with simple investments, there should only be a
modest burden increase over completing the Form 5500-SF. Small welfare
plans funded with a trust that are invested in assets that are not
``eligible plan assets'' for purposes of Form 5500-SF filing, are
already required to file the Form 5500 Annual Return/Report, along with
the Schedule I, and if applicable, Schedule A.
Group health plans that have fewer than 100 participants currently
exempt from filing an annual report under 29 CFR 2520.104-20 because
they are completely unfunded or combination unfunded/fully insured now
would be required to file a Form 5500, a Schedule J, and, if
applicable, a Schedule A. Plans that are unfunded pay some or all of
their benefits out of the plan sponsors' general assets, which exempts
them from state insurance regulation, making the DOL their sole
regulatory agency. Because such small plans are not currently required
to file the Form 5500 Annual Return/Report, there is no comprehensive
and direct source of data about the number and characteristics of these
plans. Further, because these plans are small, they are more
susceptible to financial difficulties. Because of these concerns, the
DOL believes that it is important to have more detailed benefit,
financial, and compliance information for ``unfunded'' plans that are
self-insured or partially self-insured than for those small plans that
are fully insured. These plans would be required under the proposal to
file the complete Form 5500 and Schedule J and, if applicable, Schedule
A.
Plans that provide group health benefits that have fewer than 100
participants that are fully insured would be required to answer only
limited questions on both the Form 5500 and Schedule J, and would not
be required to file any other schedules or attachments. Collecting this
limited data on fully insured plans providing group health benefits
that have fewer than 100 participants would give the DOL basic
information to identify health insurance plans they regulate and allow
them to better monitor plan trends and activities, but minimize the
reporting burden from more detailed reporting that is more generally
required on the Form 5500, Schedule A, Schedule J, and any other
applicable schedules that comprise the Form 5500 Annual Return/Report.
(5) Improving compliance under ERISA and the Code through selected
new questions regarding plan operations, service provider
relationships, and financial management of the plan.
In an era of limited financial resources, the Agencies must pursue
new and creative ways to maximize the efficacy of their enforcement
budgets. Improving compliance under ERISA and the Code reduces the need
for costly enforcement actions. Focusing filer compliance through
selected new questions regarding plan operations, service provider
relationships, and financial management of the plan under ERISA and the
Code can also have the effect of allowing the Agencies' enforcement
staff to work more efficiently, and therefore better protect plan
participants and beneficiaries.
Analysis of Benefits and Costs
The DOL believes that the benefits to be derived from this
proposal, including the amendments to the reporting regulations and the
forms revisions, would justify their costs. The DOL further believes
that these revisions to the existing reporting requirements will
enhance protection of ERISA rights by improving the effectiveness of
enforcement actions and by improving the quality of data used for
research and policymaking purposes. The DOL conducted a detailed
assessment of the costs and benefits of these changes.
Benefits
As stated previously, the proposal pursues five main objectives.
The various changes to the forms, schedules, instructions, and DOL
regulatory exemptions and requirements are together intended to
integrate these various objectives, and all of the other goals together
are proposed with the intention of supporting the move towards fuller
transparency and data mineability overall. Fuller transparency could
increase participant trust levels, which could encourage pension plan
participants to increase their retirement savings and welfare plan
participants to use benefits when needed, resulting in strengthened
retirement security and improved public health. The benefits of each of
the five main objectives are discussed below.
(1) Modernizing financial information.
As stated previously, the financial information, particularly the
asset/liability statement, contained in the current Schedule H (Large
Plan Financial Information), Schedule I (Small Plan Financial
Information), as well as the more recently established Form 5500-SF, is
based on data elements that have remained largely unchanged since the
Form 5500 Annual Return/Report was established in 1975. Many
investments in alternative and hard-to-value assets and held in
collective investment funds do not fit squarely into any of the
existing reporting categories on Schedule H. As discussed previously,
the GAO has expressed concerns that many investments with widely
varying risk, return, and disclosure considerations are often reported
in the catch-all ``other plan asset'' category.\41\ GAO also noted that
the plan asset categories on the Schedule H are not representative of
current plan investments, and provide little insight into the
investments themselves, the level of associated risk, or structures of
the investments.\42\ The DOL-OIG also recommended that the Agencies
revise the Form 5500 Annual Return/Report to improve reporting of hard-
to-value assets and alternative investments.\43\
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\41\ GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information, at 12.
\42\ Id. at 11-12.
\43\ EBSA Needs to Provide Additional Guidance and Oversight to
ERISA Plans Holding Hard-To-Value Alternative Investments,
Department of Labor Office of Inspector General Report Number: 09-
13-001-12-121 at 4, 18, and 19.
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As part of their overall evaluation of how best to restructure
financial reporting to maximize usable data while limiting burden
increases, the Agencies also concluded that research and
[[Page 47513]]
enforcement efforts could be enhanced by updating the asset reporting
categories and by standardizing Schedule H Line 4i attachments.
Accordingly, the changes the Agencies are proposing to make to the
asset breakouts on the balance sheet and income statement components of
Schedule H would make the asset reporting more consistent with the
current financial marketplace and enable the Agencies, plan sponsors,
and participants and beneficiaries to develop a more accurate and
detailed picture of the types of assets held by plans, including hard-
to-value assets and alternative investments and investment held through
collective investment vehicles. The proposed changes take into account
many of the sophisticated and complex investments that do not fit
neatly into any of the existing program categories, which would lead to
consistent reporting by filers and more transparency by limiting the
consolidation of many diverse investments into the catch-all ``Other''
category on the balance sheet on the Schedule H.
The Agencies also opted to revise the Schedule H Line 4i Schedules
of Assets attachment into two, distinct structured data attachments.
Doing so will produce more consistent data, reduce confusion over the
proper format to provide required data, and enable data mineability.
Moreover, as discussed in detail earlier in this document and the
Notice of Proposed Forms Revisions published simultaneously, the
structural, data element and instruction changes to the Schedule H,
Line 4i Schedule of Assets Held for Investment the Agencies are
proposing will allow the Form 5500 Annual Return/Report to be better
used as a tool to evaluate the year-to-year performance of a plan's
individual investments. The creation of more detailed and structured
Schedule H, Line 4i Schedules of Assets is a specific recommendation of
the DOL-OIG and the GAO.\44\ The proposed changes to the Schedule H
Line 4i Schedules of Assets, in addition to better meeting the needs of
the Agencies, other government users, and other end users of the data,
should also serve to address the shortcomings identified in these
reports.
---------------------------------------------------------------------------
\44\ See EBSA Needs to Provide Additional Guidance and Oversight
to ERISA Plans Holding Hard-to-Value Alternative Investments, at 17;
Private Pensions: Targeted Revisions Could Improve Usefulness of
Form 5500 Information, at 37.
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The proposed changes made to DFE reporting would ensure that the
Agencies, plan fiduciaries, plan service providers, and other users of
data have the tools to create a more complete picture of plans'
investments in pooled investment vehicles. Similarly, the proposed
changes to the financial information reported by small plans would
improve the utility of the Form 5500 Annual Return/Report as a tool to
obtain a meaningful picture of small plan investments in hard-to-value
and alternative investments as suggested by GAO and other government
oversight and advisory bodies.\45\
---------------------------------------------------------------------------
\45\ Id.
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Although these changes would result in additional reporting for
certain small plans, the Agencies do not expect that small plans with
simple investment portfolios would experience a significant increase in
their annual reporting burden. Small plans with complex portfolios that
include hard-to-value or alternative investments should have more
transparent financial statements which may require somewhat more
complex financial reporting obligations. In light of changes in the
financial environment and increasing concern about investments in hard-
to-value assets and alternative investments, the Agencies believe that
requiring separate financial information regarding hard-to-value
investments is important for regulatory, enforcement, and disclosure
purposes.\46\
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\46\ Although such small plans would be required to complete the
Schedule H instead of the Schedule I, including the Schedule H Line
4i(1) and 4i(2) Schedules of Assets, eligible small plans, as they
can under the current rules, would still be eligible for a waiver of
the annual examination and report of an IQPA under 29 CFR 2520.104-
46.
---------------------------------------------------------------------------
A major overriding objective of these proposed forms revisions is
to modernize the Form 5500 Annual Return/Report information collection
so that the presentation of plan trust financial and balance sheet
information is a more transparent and detailed reflection of the
investment portfolios and asset management practices of employee
benefit plans. The basic objective of general financial reporting is to
provide information about the reporting entity for the Agencies'
enforcement, research, and policy formulation programs, for other
federal agencies, Congress, and the private sector in assessing
employee benefit, tax, and economic trends and policies; and for plan
participants and beneficiaries and the general public in monitoring
employee benefit plans. Modernizing the financial reporting instruments
will bring greater transparency to plan transactions, which will
enhance the efficiency of the Agencies' enforcement efforts.
Specifically, the Agencies will be better able to target their
enforcement efforts, which will reduce the number of investigations
involving plans that are not engaging in problematic activities.
Additionally, ERISA Section 513(a) authorizes and directs the
Secretary of Labor and EBSA to conduct a robust research program on
employee benefits. The Form 5500 Annual Return/Report is one of the
leading sources of data used in this research program. Modernizing the
financial information reported on the Form 5500 Annual Return/Report
will improve the quality of the research conducted by internal and
external researchers. This improved research will, in turn, improve the
quality of policy decisions made by DOL and other governmental
policymakers that rely on the Form 5500 Annual Return/Report data.
(2) Updating fee and expense information on plan service providers
with a focus on harmonizing annual reporting requirements on Schedule C
with DOL's final disclosure requirements at 29 CFR 2550.408b-2.
As previously discussed, the proposal would harmonize the Schedule
C rules with the DOL's regulations at 29 CFR 2550.408b-2. The Agencies
believe that requiring reporting of all indirect compensation (rather
than continuing the exemption from reporting for ``eligible indirect
compensation''), but limiting indirect compensation reporting to the
service providers and types of compensation that are required to be
disclosed under the ERISA section 408b-2 regulation will provide a
particular benefit to plan record keepers. The information required to
be reported would be an after the fact reporting of fees that should
have been disclosed in advance under the ERISA section 408b-2
regulation. Because the ERISA section 408b-2 regulation requires
covered service providers to provide plan administrators the
information they need to satisfy their Form 5500 Annual Return/Report
obligations with respect to compensation information, the additional
burden should be limited to entering the data on the Form 5500 Annual
Return/Report.\47\
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\47\ See 29 CFR 2550.408b-2(c)(iv).
---------------------------------------------------------------------------
Currently, given that some significant component of indirect
compensation is not reported because it is permitted to be treated as
``eligible indirect compensation,'' and the fact that some filers
report formulas instead of dollar amounts, the Agencies and public only
have limited information regarding the total compensation that service
providers receive and that affects plans' finances and potentially
involves conflicts of interests among service providers. Almost 90
percent of 2013
[[Page 47514]]
Schedule C filers reported at least one service provider receiving some
amount of eligible indirect compensation, and nearly 70 percent of 2013
Schedule C filers reported at least one provider receiving only
eligible indirect compensation. Filers identifying at least one service
provider as receiving some amount of eligible indirect compensation on
their Schedules C, according to the overall Form 5500 data, report
holding roughly two-thirds of all pension assets. Thus, the limited
``eligible indirect compensation'' reporting impacts the data relating
to service provider fees in connection with the servicing and
management of a significant amount of assets. In addition, analysis of
these data also indicates that almost 50 percent of Schedule C filers
report at least one service provider who provides a formula instead of
an explicit or estimated amount of compensation. These filers report
holding almost 40 percent of all pension assets. Providing only a
formula without an actual or estimated dollar amount of the
compensation makes it very hard for plan sponsors or participants to
identify the exact amount of compensation.
The proposed rules and the subsequent reported information would
make it possible to get a much better understanding on the fees that
were transferred between service providers in the form of indirect
compensation, therefore allowing plan sponsors and participants to
assess the fees that they are incurring. The Agencies anticipate that
the increased transparency under the proposal would likely lead to
increased competition in the service provider market.
Aligning the Schedule C with ERISA section 408b-2 disclosure should
benefit the regulated community by clarifying and streamlining the
information reported on the Schedule C, which should reduce filer
confusion, and in turn reduce any filer burden caused by the confusion.
The updated service provider information will also improve targeting in
the Agencies' enforcement efforts, be a resource for independent
researchers to identify fee trends, and help policymakers identify
opportunities to make regulatory adjustments.
The proposed rule would also require small pension plans that are
not eligible to file the Form 5500-SF and welfare plans that provide
group health benefits that are not unfunded or insured (e.g., funded
using a trust) and have fewer than 100 participants to file Schedule C.
Currently, only large plans (for welfare plans, only large plans that
are not unfunded or insured) must file a Schedule C, thus a large
portion of plans do not disclose service provider compensation, except
total administrative expenses, which includes direct compensation to
service providers.\48\ The Agencies believe that the ideal solution for
enforcement, research, policymaking, and participant monitoring
purposes would be for all indirect compensation to be required to be
reported, but recognize the burdens small plans face in complying with
disclosure obligations. The Agencies therefore propose to require small
pension plans to file Schedule C only if they do not meet the
eligibility conditions for filing the Form 5500-SF, which generally
would be those pension plans that are invested in alternative or hard-
to-value assets. The Agencies propose to require welfare plans that
offer group health benefits with fewer than 100 participants to file
Schedule C only if they are funded using a trust. This makes the
reporting requirements consistent with those for other welfare plans
that are funded using a trust that are required to file the Form 5500.
Self-insured plans are more susceptible to experience financial
difficulties than fully insured plans. Requiring these small plans to
file a Schedule C would address some of the GAO's concerns that not all
critical information on indirect compensation is being reported to the
Agencies.\49\
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\48\ ``Direct'' compensation is included as an administrative
expense item on both the Form 5500-SF and on Schedule H, but it is a
total and is not linked to payments to specific service provider.
Because it is not a ``balance sheet'' item, indirect compensation is
not reported as part of the financial statements.
\49\ See GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information at 25-26 (``Given these various exceptions to fee
reporting requirements, Schedule C may not provide participants, the
government, or the public with information about a significant
portion of plan expenses and limits the ability to identify fees
that may be questionable.'')
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(3) Enhancing mineability of the data filed on the Form 5500 Annual
Return/Report.
As stated previously, a key component of the proposal is to make it
easier and more efficient to use the data from the Form 5500 Annual
Return/Report for research, policy analysis, and enforcement purposes.
The primary way the Agencies propose to enhance the mineability of Form
5500 Annual Return/Report data is by structuring and standardizing the
questions on the forms and schedules and structuring certain
information currently required to be reported in the form of a
nonstandard attachment to the filing. This will improve the integrity
of the collected data and allow the Agencies and others to compare,
aggregate, and analyze these data.
The Agencies have identified a number of areas where the current
method of reporting information impedes data usability and are
proposing several changes to facilitate the efficient use of Form 5500
Annual Return/Report data. Data from Schedule H Line 4i (Schedule of
Assets), for example, is currently not available in a standardized
electronic format and would be very useful for monitoring the
performance of plan investments. The proposed rules would require the
Schedule H Line 4i, Schedules of Assets, to be filed in a standardized
electronic format, which will allow them to be searched and matched to
performance data through common software programs. As a result, the
Agencies and the public would have much less difficulty accessing key
information about the plan's investments. Additional improvements in
data mineability and plan monitoring also would be realized from the
proposal's requirement that other currently unstructured data or new
elements also be collected as structured data under the proposal,
including the lists of employers participating in multiple-employer and
controlled group plans required to be attached to the Form 5500 Annual
Return/Report or Form 5500-SF, the Schedule H, Line 4a Schedule of
Delinquent Contributions, and Schedule H Line 4j Schedule of Reportable
Transactions.
Data mineability also would be improved by the proposal's
requirement that some data would be reported as text fields instead of
as attachments. This would increase the accessibility of data. Similar
to the proposed specific data elements for the Schedule H Line 4i
Schedules, which replace a suggested format for an unstructured
attachment, the Agencies believe, based on their own use of the data to
support the research, policy, and oversight efforts of the Agencies,
and input from other end users, that data mineability will be enhanced
by requiring the use of text fields on the face of the schedules
instead of having information filed as non-standard attachments.
Another limitation on data mineability and usability of the current
Form 5500 Annual Return/Report is that actuarial information is
reported in the form of PDF attachments to the Schedules MB and SB,
rather than on the face of the actuarial schedules. Therefore, as
discussed above, the proposal would expand data elements on actuarial
schedules including information previously reported on unstructured
attachments. If questions are directly answered on structured forms and
schedules, like the Form 5500
[[Page 47515]]
Annual Return/Report and the listed schedules (as opposed to non-
standard attachments) the data are ``machine-readable'' in the 5500
data base, and computer programs can be written to read the data sets
created by DOL. This would make more readily searchable and usable
actuarial information essential to the Agencies' enforcement efforts
and in their ability to target plans with likely compliance issues.
Furthermore, the availability of the data would enhance the ability of
private-sector auditors using the information to validate a plan
actuary's calculations. The data would also provide new opportunities
for research. There is no source of system-wide data on defined benefit
pension plan participants with age, service, and average benefit
levels. The availability of such data would allow for more refined
projections of future coverage and benefits adequacy for plan
participants and beneficiaries. As more of these data are collected
over the years, trends in plan coverages and benefits could more easily
be analyzed and identified.
The proposed rules make an additional change to reporting
requirements that is expected to make filing some of the plan
characteristics easier and more reliable. Instead of having to report
all applicable plan characteristic codes under one line item, the
proposal would ask for this information grouped by topic. Currently,
some filers report an incomplete picture of their plan characteristics.
For example, some filers have characteristics that should warrant
supplying five or more codes, but instead they only supply two or
three. It is expected that the new questions will be easier for filers
to respond to and that the data reported will be more accurate.
In summary, these improvements in data mineability will make it
more efficient to conduct Form 5500 Annual Return/Report data analysis
and to use the data to monitor plans, and identify trends.
(4) Requiring reporting by all group health plans covered by Title
I of ERISA, including adding a new Schedule J (Group Health Plan
Information).
As discussed above, the proposal would eliminate the current
exemption from reporting for certain group health plans covered by
Title I of ERISA so that all group health plans covered by Title I of
ERISA will be required to file a Form 5500 Annual Return/Report.
Currently, generally most plans that provide group health benefits with
fewer than 100 participants that meet the conditions of existing
regulations are exempt from filing the Form 5500 Annual Return/Report,
because they are unfunded, fully insured, or a combination of unfunded/
fully insured. Requiring such plans to file would fill an information
gap, which would allow the DOL to effectively meet its statutory
obligation to enforce the ERISA requirements that apply to group health
plans. Currently, the DOL must rely on complaints from plan
participants as its primary source to uncover ERISA violations in small
plans that are exempt from annual reporting. Eliminating this exemption
would provide the DOL with the information necessary to be more
proactive and systematic in identifying violations and in providing
compliance assistance. The DOL would be able to track total health plan
counts and coordinate its enforcement efforts relating to plans
providing benefits through common issuers. For example, fully-insured
plans using the same insurance provider often contain provisions that
are similar. By requiring plans providing group health benefits, that
are unfunded, fully insured, or combination unfunded/fully insured and
have fewer than 100 participants to identify themselves and the
insurance carrier through which they are insured, the DOL should be
able to better determine which plans might be affected by noncompliant
plan provisions. The DOL also could better coordinate its enforcement
efforts with affected service providers and other Federal and State
agencies.
This information also would enhance the DOL's ability to develop
health care regulations, conduct policy analysis and research with
respect to participant trends, and comply with the Affordable Care Act
requirement to report to Congress annually regarding self-insured
plans.
(5) Improving compliance under ERISA and the Code through selected
new questions regarding plan operations, service provider
relationships, and financial management of the plan.
Improving compliance under ERISA and the Code through selected new
questions will bring two main benefits. First, these compliance
questions will serve as a form of education for plan administrators and
a self-compliance check. The Agencies believe that the new compliance
questions under the proposal, as is true of the existing compliance
questions, would help plan administrators better understand and monitor
required plan behavior and would remind plan administrators to comply
with requirements under ERISA and the Code, and thus will improve
protections for participants and beneficiaries.
Second, these compliance questions will allow the Agencies, with
their limited enforcement budgets, to engage in more sophisticated
targeting and compliance assistance. Improvements in data management
technology now enable the Agencies to create plan risk profiles to
improve the effectiveness of investigations. These compliance
questions, including questions on audit and oversight requirements,
nondiscrimination, administrative expenses, participant contributions,
and automatic enrollment, will improve the risk profiles, which will
further enable the Agencies to use their enforcement resources in the
most efficient way possible.
Costs
The costs for plans to satisfy their annual reporting obligations
would increase under these proposed regulations relative to the current
regime.\50\ As shown in Table 2 below, the aggregate annual cost of
such reporting under the current regulations and forms is estimated to
be $488.1 million annually, shared across the 816,000 filers subject to
the filing requirement. The DOL estimates that the regulations and
forms revisions proposed today will impose an annual burden of $817.0
million on 2.97 million filers, for a total increase of $328.8 million
annually.
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\50\ The DOL believes that the annual cost burden on filers
would be higher still in the absence of the proposed regulations
enabling use of the Form 5500 Annual Return/Report in lieu of the
statutory requirements. Without the Form 5500 Annual Return/Report,
filers would not have the benefits of any regulatory exceptions,
simplified reporting, or alternative methods of compliance, and
standardized and electronic filing methods.
[[Page 47516]]
Table 2--Summary of Annual Costs: Current Requirements vs. Proposed
Requirements
------------------------------------------------------------------------
Total annual
Total annual costs burden hours
(millions) (thousands)
------------------------------------------------------------------------
Current reporting requirements.. $488.1 4,378.5
Change due to Revisions......... 328.8 2,949.0
Proposed Reporting Requirements. 817.0 7,327.5
------------------------------------------------------------------------
Because this proposal makes substantial changes to the requirements
currently in effect, filers also will experience some one-time
transition costs. The DOL estimates that plans will require twice as
long to supply the new data elements during the first year, relative to
subsequent years, and will therefore encounter one-time transition
costs of $328.8 million.
The DOL has analyzed the cost impact of the individual revisions.
In doing so, the DOL took account of the fact that various types of
plans would be affected by more than one revision and that the sequence
of multiple revisions would create an interaction in the cumulative
burden on those plans. For example, nearly all pension plans that are
required to file the Form 5500 and related schedules, including ESOPs,
would be affected by the changes to the Schedule H. ESOPs, however,
would be affected not only by the proposed Schedule H changes, but also
by the proposed restoration of Schedule E. The DOL quantified the
individual revisions as described below and shown in Table 3.
(1) Revised financial reporting on the Schedule H and elimination
of the Schedule I.
Revising the Schedule H, including the revisions to the Schedule H
Line 4i Schedules of Assets, and eliminating the Schedule I will
increase net costs. The DOL estimates that the net effect of these
changes will be to increase the total burden by 535,400 hours. These
changes, in conjunction with revisions to the reporting requirements
for DFEs, discussed below, will decrease the number of filers reporting
on Schedule H and/or Schedule I from 115,100 to 114,600. Applying an
hourly labor rate of $114.95 for service providers and $98.25 for plan
sponsors, the DOL estimates that this revision will increase the
aggregate annual reporting cost by an estimated $57.6 million.\51\
---------------------------------------------------------------------------
\51\ The appropriateness of the labor rates used in the
calculations and assumptions are discussed in the Technical
Appendix, which can be accessed at the DOL's Web site at
www.dol.gov/ebsa.
---------------------------------------------------------------------------
(2) Required reporting by all group health plans covered by Title I
of ERISA, including addition of a new Schedule J (Group Health Plan
Information).
Currently, about 54,000 welfare plans that provide group health
benefits file the Form 5500 Annual Return/Report and applicable
schedules. Of these 54,000 filers, approximately 48,000 are welfare
plans that provide group health benefits with 100 or more participants
and the rest are welfare plans that provide group health benefits with
fewer than 100 participants. We estimate that this proposed change will
increase the number of welfare plan with group health benefit filers to
approximately 2.2 million. Of these 2.2 million welfare plans with
group health benefits, 1.9 million welfare plans with group health
benefits are expected to be fully insured plans with fewer than 100
participants, while 289,000 welfare plans with group health benefits
are expected to be unfunded, combination unfunded/fully insured, or
funded with a trust with fewer than 100 participants, and approximately
48,000 welfare plans with group health benefits are expected to have
100 or more participants.
The 1.9 million plans that provide group health benefits, have
fewer than 100 participants, and are fully insured would be required to
complete lines 1-5 on Form 5500 and lines 1-8 on Schedule J. The
289,000 plans that provide group health benefits, have fewer than 100
participants, and are unfunded, combination unfunded/fully insured, or
funded with a trust would be required to file a Form 5500, Schedule J,
and Schedule A, if applicable, and if they were already required to
file a Form 5500 Annual Return/Report (i.e., funded with a trust), they
would be required to attach any other applicable schedules. The 48,000
plans that provide group health benefits and have 100 or more
participants that already are required to file a Form 5500 Annual
Return/Report would be required to attach a Schedule J in addition to
any other forms and schedules that they are currently required to
submit.
The DOL estimates that requiring plans that provide group health
benefits, have fewer than 100 participants, and are fully insured to
complete only lines 1-5 of the Form 5500 and lines 1-8 of the Schedule
J will increase total burden by 623,000 hours and increase the
aggregate annual reporting cost by $69.6 million. Requiring all other
plans that provide group health benefits and have fewer than 100
participants (unfunded, combination unfunded/fully insured, or funded
with a trust) and all plans that provide group health benefits and have
100 or more participants to file a Form 5500 Annual Return/Report,
Schedule J, and any other required schedules and attachments will
increase the total burden by 349,100 hours for the Form 5500 Annual
Return/Report and 1.2 million hours for the Schedule J. The aggregate
annual reporting cost associated with requiring all other group health
plans with fewer than 100 participants (unfunded, combination unfunded/
fully insured, or funded with a trust) and all group health plans with
100 or more participants to file a Form 5500 Annual Return/Report,
Schedule J, and any other required schedules and attachments is $39.0
million for the Form 5500 Annual Return/Report and $133.0 million for
the Schedule J.
Based on the foregoing, the DOL estimates that, in total, group
health plan annual reporting burden will increase by approximately 2.2
million hours and the aggregate annual reporting cost will increase by
$241.6 million.
(3) Restored Schedule E.
Approximately 6,700 employee stock ownership plans (ESOPs) will be
subject to increased reporting on the restored Schedule E. As discussed
above, the Schedule E is intended to provide increased reporting
related to areas of concern specific to ESOPs. The DOL estimates that
the restored Schedule E will add approximately 22,000 hours of burden
and an additional $2.5 million of aggregate annual reporting cost.
(4) Revised Schedule C.
As discussed above, Schedule C revisions are intended to harmonize
the Schedule C reporting of indirect compensation with the disclosures
required under the DOL's final rules on service provider compensation
at 29 CFR 2550.408b-2, expand the Schedule C reporting requirement to
all pension plans required to file the Form 5500 regardless of size,
expand the Schedule C reporting requirement to welfare plans that offer
group health benefits with fewer than 100 participants if they are
[[Page 47517]]
funded with a trust, clarify the indirect compensation reporting
requirements, and improve the information plan officials receive
regarding amounts received by plan service providers. The expanded
reporting requirements are expected to increase the number of Schedule
C filers from approximately 82,400 to approximately 100,200. Reporting
burden for Schedule C filers is expected to increase by 116,600 hours,
i.e. roughly an hour per filer, which will produce an additional $12.9
million of annual aggregate reporting cost. Of this $12.9 million
increase, $5.3 million is borne by existing filers and is attributable
to eliminating the ``eligible indirect compensation'' reporting relief;
\52\ $7.2 million is borne by filers newly required to attach a
Schedule C; \53\ and $0.4 million is borne by existing filers and is
attributable to all other changes to the Schedule C.\54\
---------------------------------------------------------------------------
\52\ As discussed previously, the DOL is eliminating the limited
reporting option for ``eligible indirect compensation.'' The DOL
believes that many of the costs associated with gathering and
organizing data necessary for expanded service provider reporting,
to the extent that the information was not already required to be
provided to and kept by the plan administrator for ``eligible
indirect compensation'' that did not have to be reported, have
already been accounted for as part of the RIA for the ERISA section
408b-2 rule. Therefore, these costs reflect only the incremental
increase of reporting service provider compensation to the Agencies.
Under the proposal, indirect compensation reporting would be limited
to the types of service providers and compensation under ERISA
section 408b-2, in contrast to all service providers currently
having to report on the Schedule C receipt of indirect compensation.
\53\ For new filers, this includes the costs of all other
changes to the Schedule C.
\54\ Costs may not add up to the total due to rounding.
---------------------------------------------------------------------------
As indicated in the regulatory impact analysis in the final
publication of the regulation at 29 CFR 2550.408b-2, the DOL believes
that more transparency of service provider compensation serves to
discourage harmful conflicts, reduce information gaps, improve
fiduciary decision-making about plan services, enhance value for plan
participants, and increase the DOL's ability to redress abuses
committed by service providers. 77 FR 5632, 5650 (Feb. 3, 2012). As is
true with the improved disclosure required under the DOL's regulation
at 29 CFR 2550.404a-5, increased transparency and ability to compare
fees (and, on the improved balance sheet and schedules of assets) are
expected to reduce participants' time otherwise used for searching for
fee and other investment information and to produce substantial
additional benefits, in the form of improved investment decisions,
although the DOL has not been able to quantify this effect. 75 FR
64910, 64928 (Oct. 20, 2010).
(5) Changes to reporting requirements and methods for direct filing
entities (DFEs), added compliance questions, and all other changes.
As discussed earlier in the preamble, the rule proposes to make
several changes to the DFE filing requirements. For example, the
Agencies propose eliminating the concept of Master Trust Investment
Accounts (MTIA) reporting and require reporting by a master trust
instead. The proposal also would change the filing requirements for a
CCT or PSA in which the plan invests by requiring the plan to report
the interests in the CCT or PSA on the Schedule H balance sheet (Part
I, Line 1b) regardless of whether the PSA or CCT in which the plan
invests files a Form 5500 Annual Return/Report as a DFE, changing how
assets held through DFEs are reported on the proposed Schedule H Line
4i(1) Schedule of Assets Held for Investment, and eliminate the
requirement for plans to file the Schedule D, since the DFE information
that had been on Schedule D would now be on plans' Schedule H Line
4i(1) Schedule of Assets Held for Investment. The net effect of these
changes to DFE reporting is to reduce the number of Schedule D filers
from 61,100 to 8,900, with smaller reductions in the filing of other
schedules discussed elsewhere. Reporting burden associated with DFEs is
expected to fall by 94,200 hours, which will produce a $10.1 million
reduction in aggregate reporting cost.
Additionally, the DOL proposes a series of compliance questions
primarily on the Form 5500, Form 5500-SF, and Schedule R. Other
miscellaneous changes throughout the forms and schedules include
requiring new information on employer matching contributions, employee
participation rates and plan design for defined contribution plans, and
changes to the reporting on Schedule G.
Some of these compliance questions and other miscellaneous changes
add burden, while others reduce burden. Together, the DOL estimates
that the net effect of these various changes would add approximately
219,300 hours of aggregate reporting burden, which will produce an
additional $21.5 million in aggregate reporting cost. In combination
with the changes to DFE reporting discussed above, these changes will
reduce the aggregate number of forms and schedules filed by 52,500.
Table 3 contains a summary of the changes in costs, expressed both
in dollars and in hours, allocated to the changes outlined above and
the number of affected filings.
Table 3--Summary of Changes to the Reporting Requirements
----------------------------------------------------------------------------------------------------------------
Number of
Number of filers under [Delta] Cost
Change in Change in filers under proposed per affected
Revisions costs burden hours current requirements filer by
(millions) (thousands) requirements (thousands) proposed
(thousands) \55\ requirements
----------------------------------------------------------------------------------------------------------------
Elimination of Schedule I & $57.6 535.4 115.1 114.6 $502
Change in Schedule H...........
Schedule C...................... 12.9 116.6 82.4 100.2 128
DFE Reporting Changes (Including -10.1 -94.2 61.1 8.9 -1,137
changes to Schedule D).........
Schedule E...................... 2.5 22.0 0.0 6.7 374
Completion of lines 1-5 on Form 69.6 623.0 0.0 1,869 37
5500 and lines 1-8 on Schedule
J by fully insured GHPs with
fewer than 100 participants....
Completion of Form 5500 by GHPs 39.0 349.1 54.1 336.9 116
with fewer than 100
participants that are unfunded,
combination unfunded/fully
insured, or funded with a trust
and GHPs with 100 or more
participants...................
Completion of Schedule J by GHPs 133.0 1,179.2 0.0 336.9 395
with fewer than 100
participants that are unfunded,
combination unfunded/fully
insured, or funded with a trust
and GHPs with 100 or more
participants...................
[[Page 47518]]
All Other Revisions \56\........ 24.4 217.9 1,076.7 1,024.2 24
-------------------------------------------------------------------------------
Total (Unique Filers)....... 328.8 2,949.0 816.3 2,967.5 111
----------------------------------------------------------------------------------------------------------------
The proposal does not otherwise alter reporting costs. With the
exception of most welfare plans that provide group health benefits,
plans currently exempt from annual reporting requirements (such as
certain simplified employee pensions (SEPs) and small unfunded, fully
insured, or combination unfunded/fully insured welfare plans that do
not provide group health benefits) would remain exempt. Also, plans
eligible for limited reporting options (such as certain IRA-based
pension plans) would continue to be eligible. The revised Form 5500
Annual Return/Report would retain the structure that is familiar to
individual and corporate taxpayers--the form would continue to contain
basic identifying information, participant counts, and plan
characteristics, along with a checklist of the schedules being filed.
---------------------------------------------------------------------------
\55\ The proposed change eliminating the concept of MTIA
reporting and requiring reporting by a master trust instead, whose
burden change is taken into account in the DFE Reporting Changes
row, produces a reduction in the number of schedules included in
filings. The change in the number of schedules filed is taken into
accounted in the row specific to the schedule affected.
\56\ The number of filers in this row exceeds the total number
of filers because an individual filer counts more than once when it
is affected by more than one revision included in the ``All Other
Revisions'' category.
---------------------------------------------------------------------------
Assumptions, Methodology, and Uncertainty
The cost and burden associated with the annual reporting
requirement for any given plan will depend upon the specific
information that must be provided, given the plan's characteristics,
practices, operations, and other factors. For example, a small, single-
employer defined contribution pension plan eligible to file the Form
5500-SF should incur far lower costs than a large, multiemployer
defined benefit pension plan that holds multiple insurance contracts,
engages in reportable transactions, and has many service providers that
each received over $5,000 in compensation. The DOL separately
considered the cost to different types of plans in arriving at its
aggregate cost estimates. The DOL's basis for these estimates is
described below.
Assumptions Underlying this Analysis: The DOL's analysis assumes
that all benefits and costs will be realized in the first year of the
reporting cycle to which the changes apply and within each year
thereafter. This assumption is premised on the requirement that each
plan will be required to file the Form 5500 Annual Return/Report. The
DOL has used a ``status quo'' baseline for this analysis, assuming that
the world absent the proposed regulations will resemble the
present.\57\
---------------------------------------------------------------------------
\57\ Further detail can be found in the Technical Appendix,
which can be accessed at www.dol.gov/ebsa.
---------------------------------------------------------------------------
Methodology: Mathematica Policy Research, Inc. (MPR) developed the
underlying cost data, which has been used by the Agencies in estimating
burden related to the Form 5500 Annual Return/Report since 1999. See 65
FR 21068, 21077-78 (Apr. 19, 2000); Borden, William S., Estimates of
the Burden for Filing Form 5500: The Change in Burden from the 1997 to
the 1999 Forms, Mathematica Policy Research, submitted to DOL May 25,
1999.\58\ The cost information was derived from surveys of filers and
their service providers, as modified due to comments, which were used
to measure the unit cost burden of providing various types of
information. The DOL has adjusted these unit costs since 1999 to
account for changes to the forms and schedules and increases in the
cost of labor and service providers since MPR developed the initial
data.
---------------------------------------------------------------------------
\58\ The MPR report can be accessed at the DOL's Web site at
www.dol.gov/ebsa.
---------------------------------------------------------------------------
For this forms revision, the DOL used the adjusted MPR unit cost
data for pension and non-health welfare plans. The DOL developed the
unit cost data for group health plans using the best available data. To
develop unit costs for DFEs, the DOL created weighted averages of the
unit costs for plans.
To obtain filer counts for pension plans, non-health welfare plans,
and DFEs, the DOL used historical counts of Form 5500 Annual Return/
Report filers tabulated by type and reported characteristics. For
counts of group health plan filers, the DOL used data from the Medical
Expenditure Panel Survey, Insurance Component (MEPS-IC) and Census of
Business data.
The MEPS-IC is an annual survey of establishments collected by the
Agency for Healthcare Research and Quality (AHRQ) about employer
sponsored health insurance. AHRQ uses two sources to draw their data:
(1) A random sample, from the Census Bureau, of private-sector business
establishments with annual payroll greater than zero; and (2) a list of
employers or other insurance providers identified by the Medical
Expenditure Panel Survey, Household Component respondents who report
having private health insurance. In 2013, approximately 39,000 private-
sector establishments were surveyed.
In 2003, DOL began using the MEPS-IC as a basis for estimating the
number of health plans. The number of plans was based on the share of
the total number of establishments that offer health insurance by size.
DOL then attempted to correct for establishments that offer multiple
health plans by making a reasonable assumption that the share of
establishments that reported that they ``offer 2 or more plans''
offered two distinct plans. Finally, DOL attempted to control for
multiple establishments covered by the same plan sponsor by using the
Census of Business ratio of establishment-to-firms and dividing the
total number of establishment plans by this ratio to produce an
estimate of the number of health ``plans'' which has been consistently
around 2.5 million over the years.
The DOL modeled its approach to calculating burden on the approach
used during the 2009 forms revision. Aggregate burden estimates were
produced in both revisions by multiplying the unit cost measures by the
filer count estimates. The methodology is described in broad terms
below.\59\
---------------------------------------------------------------------------
\59\ Further details about the approach are explained in the
Technical Appendix, which can be accessed at the DOL's Web site at
www.dol.gov/ebsa.
---------------------------------------------------------------------------
[[Page 47519]]
To estimate aggregate burdens, types of plans with similar
reporting requirements were grouped together in various groups and
subgroups. As shown in Table 4 below, calculations of aggregate cost
were prepared for each of the various subgroups both under requirements
in effect prior to this action and under the forms as revised. Table 4
also shows the number of plans within each subgroup affected by the
revisions. The universe of filers was divided into four basic types:
Defined benefit pension plans, defined contribution pension plans,
welfare plans, and DFEs. For the plans, each of these major plan types
was further subdivided into multiemployer and single-employer
plans.\60\ Since the filing requirements differ substantially for small
and large plans, the plan types were also divided by plan size. For
large plans (100 or more participants), the defined benefit plans were
further divided between very large (1,000 or more participants) and
other large plans (at least 100 participants, but fewer than 1,000
participants). Small plans (less than 100 participants) were divided
similarly, except that they were divided into Form 5500-SF eligible and
Form 5500-SF ineligible plans, as applicable. Welfare plans were
divided into group health plans and plans that do not provide any group
health benefits, while plans that provide group health benefits and
have fewer than 100 participants were divided into fully insured group
health plans and unfunded, combination unfunded/fully insured plans, or
funded with a trust group health plans. DFEs were divided into Master
Trusts/MTIAs, CCTs, PSAs, 103-12 IEs, and GIAs. For each of these sets
of respondents, burden hours per respondent were estimated for the Form
5500 Annual Return/Report itself and up to seven schedules or the Form
5500-SF (and the Schedule SB, for Form 5500-SF eligible defined benefit
pension plans).
---------------------------------------------------------------------------
\60\ For purposes of this analysis, multiple employer plans were
treated as single employer plans.
---------------------------------------------------------------------------
We also separately estimated the costs for each of the forms and
for each schedule that is part of the Form 5500 Annual Return/Report.
When items on a schedule are required by more than one Agency, the
estimated burden associated with that schedule is allocated among the
Agencies. This allocation is based on how many items are required by
each agency. The burden associated with reading the instructions for
each item also is tallied and allocated accordingly.
The reporting burden for each type of plan is estimated in light of
the circumstances that are known to apply or that are generally
expected to apply to such plans, including plan size, funding method,
usual investment structures, and the specific items and schedules such
plans ordinarily complete. For example, under the proposal, a small,
fully insured group health plan would be required to file only basic
questions on the Form 5500 and the proposed Schedule J. By contrast, a
large single-employer defined benefit pension plan that is intended to
be tax-qualified that has insurance products among its investments and
whose service providers received compensation above the Schedule C
reporting thresholds would be required to submit an annual report
completing almost all the line items of the Form 5500, plus Schedule A
(Insurance Information), Schedule SB (Single-Employer Defined Benefit
Plan Actuarial Information), Schedule C (Service Provider Information),
possibly the Schedule G (Financial Transaction Schedules), Schedule H
(Financial Information), and Schedule R (Retirement Plan Information),
and would be required to submit an IQPA report. In this way, the
Agencies intend meaningfully to estimate the relative burdens placed on
different categories of filers.
Burden estimates were adjusted for the proposed revisions to each
schedule, including items added or deleted in each schedule and items
moved from one schedule to another.
The DOL has not attributed a recordkeeping burden to the 5500 Forms
in this analysis or in the Paperwork Reduction Act analysis because it
believes that plan administrators' practice of keeping financial
records necessary to complete the 5500 Forms arises from usual and
customary management practices that would be used by any financial
entity and does not result from ERISA or Code annual reporting and
filing requirements.
The aggregate baseline burden is the sum of the burden per form and
schedule as filed prior to this action multiplied by the estimated
aggregate number of forms and schedules filed.\61\ The DOL estimated
the burden impact of changes in the numbers of filings and of changes
made to the form and the various schedules. The burden estimates use
data from the Form 5500 Annual Return/Report for plan year 2013, which
is the most recent year for which complete data is available. The
Overall Total line in Table 4 shows that the aggregate cost under the
current and proposed requirements, respectively, add up to $488.1
million and $817.0 million.
---------------------------------------------------------------------------
\61\ Some filers are eligible to file the Form 5500-SF, but
choose to file a Form 5500 and attach Schedule I and/or other
schedules because they find it less burdensome to do so in their
particular situation. In an effort to be conservative in estimating
burden, counts of these filings are adjusted to reflect what they
would have filed if they had chosen to file the Form 5500-SF.
Table 4--Number of Affected Filers and Costs Under Prior and New Requirements
----------------------------------------------------------------------------------------------------------------
Aggregate
Number of Number of Aggregate annual cost
filers under filers under annual cost under
Type of filer current proposed under current proposed
requirements requirements requirements requirements
(thousands) (thousands) (millions) (millions)
--------------------------------------------------------------------------------------------------
Overall Total..................... 816.3 2,967.5 $488.1 $817.0
Large Plans....................... 148.5 148.5 252.4 309.3
DB/ME/100-1,000 LARGE (Non- 0.5 0.5 1.6 1.9
ESOP)........................
DB/ME/1,000+ LARGE (Non-ESOP). 0.8 0.8 2.8 3.1
DB/SE/100-1,000 LARGE (Non- 4.8 4.8 13.0 15.2
ESOP)........................
DB/SE/1,000+ LARGE (Non-ESOP). 2.8 2.8 8.5 9.6
DC/ME/LARGE (100+ 1.1 1.1 2.1 2.5
Participants) (Non-ESOP).....
DC/SE/LARGE (100+ Partic.) 2.9 2.9 4.0 6.4
(ESOP).......................
DC/SE/LARGE (100+ Partic.) 62.2 62.2 109.2 135.9
(Non-ESOP)...................
Welfare/LARGE (Health)........ 47.9 47.9 91.7 114.2
[[Page 47520]]
Welfare/ME/LARGE (Non-Health). 0.8 0.8 1.1 1.4
Welfare/SE/LARGE (Non-Health). 24.8 24.8 18.5 19.1
Small Plans Eligible for 5500-SF.. 622.4 622.4 205.8 227.3
DB/Eligible for 5500-SF/SMALL 41.1 41.1 37.6 39.0
(Non-ESOP)...................
DC/Eligible for 5500-SF/SMALL 580.7 580.7 168.0 188.0
(Non-ESOP)...................
Welfare/Eligible for 5500-SF/ 0.7 0.7 0.2 0.2
SMALL (Non-Health)...........
Small Plans Not Eligible for 5500- 35.9 2,187.7 18.4 266.1
SF...............................
DB/ME/Not Eligible for 5500-SF/ 0.05 0.05 0.06 0.1
SMALL (Non-ESOP).............
DB/SE/Not Eligible for 5500-SF/ 0.9 0.9 1.0 1.8
SMALL (Non-ESOP).............
DC/ME/Not Eligible for 5500-SF/ 0.001 0.001 0.0004 0.002
SMALL (ESOP).................
DC/ME/Not Eligible for 5500-SF/ 0.1 0.1 0.1 0.2
SMALL (Non-ESOP).............
DC/SE/Not Eligible for 5500-SF/ 3.8 3.8 1.8 5.8
SMALL (ESOP).................
DC/SE/Not Eligible for 5500-SF/ 21.5 21.5 10.0 27.9
SMALL (Non-ESOP).............
Welfare/Not Eligible for 5500- 0.0 1,869.0 0.0 69.6
SF/SMALL (Fully Insured
Health)......................
Welfare/Not Eligible for 5500- 6.2 289.0 4.1 158.2
SF/SMALL (Unfunded,
Combination Unfunded/Fully
Insured, or Funded with a
Trust Health)................
Welfare/ME/Not Eligible for 0.1 0.1 0.1 0.2
5500-SF/SMALL (Non-Health)...
Welfare/SE/Not Eligible for 3.2 3.2 1.5 2.4
5500-SF/SMALL (Non-Health)...
DFEs.............................. 9.4 8.9 11.4 14.2
Master Trust Investment 1.6 1.0 2.7 2.2
Accounts and Master Trusts...
Common Collective Trusts...... 4.0 4.0 4.3 6.0
Pooled Separate Accounts...... 3.2 3.2 3.3 4.7
103-12 Investment Entities.... 0.5 0.5 0.7 0.9
Group Insurance Arrangements.. 0.1 0.1 0.4 0.4
----------------------------------------------------------------------------------------------------------------
Note: Some displayed numbers do not sum up to the totals due to rounding.
DB--defined benefit plans.
DC--defined contribution plans.
SE--single-employer plans.
ME--multiemployer plans.
Large plans--100 participants or more.
Small plans--generally fewer than 100 participants.
Uncertainty Within Estimates: Because the DOL has access to the
historical Form 5500 Annual Return/Report filing information, the DOL
has good data for the number of pension plans, large welfare plans,
including group health plan filers that file the various schedules, and
DFEs, and the types of plans those filers represent. However, there is
some uncertainty regarding the number of welfare plans that provide
group health benefits and have fewer than 100 participants filing.
There is also some uncertainty in the unit cost estimates.
There are two main issues with the methodology for counting welfare
plans that provide group health benefits. First, MEPS does not
differentiate between establishments offering single or multiemployer
plans, which implies EBSA over-counts health plans (i.e., a firm
offering health insurance is counted as providing benefits to their
employees when in fact one multiemployer plan may cover several firms).
Second, MEPS-IC respondents that ``offer 2 or more plans'' are
generally referencing plan types (i.e. HMO vs PPO) or types of
employees (part-time plan vs executive plan) which would likely be
included on a single Form 5500 Annual Return/Report with a single plan
number on the form, which again would over-count the EBSA estimate.
With regard to the unit cost estimates, the DOL has no direct
measure for the unit costs and uses a proxy adapted from the MPR model,
which was developed in the late 1990s. In addition, some uncertainty is
inherent in any proposed revision to the existing form, and the level
of uncertainty increases where the proposal adds a new requirement,
such as the proposed new group health plan filing requirements, rather
than revising, deleting, or moving existing items from one schedule to
another.
Regulatory Alternatives
Executive Order 12866 directs federal agencies promulgating
regulations to evaluate regulatory alternatives. The DOL and the other
Agencies have done so in the process of developing this proposal. The
following summarizes major alternatives considered, but not proposed.
(1) Alternative approaches for modernizing financial information
besides revising the Schedule H and eliminating the Schedule I.
Most of the changes that are being proposed to modernize the
financial information that is reported on the form respond to
recommendations from GAO, DOL-OIG, TIGTA, ERISA Advisory Council and
other advisory groups. Early in the regulatory process, the Agencies
considered revising the Schedule I instead of eliminating it, but the
Agencies determined that reporting on alternative and hard-to-value
assets, which is not required on the current Schedule I, is just as
vital for enforcement purposes for small plans as for large plans.
Adding reporting on alternative and hard-to-value assets to the
financial statement on Schedule I in a meaningful way would have made
Schedule H and Schedule I substantially similar. Therefore, to best
effectuate the goal of providing more transparency on plan investments
in alternative and hard-to-value assets, which is important for
understanding the risks to participants in small plans as well as
large, the Agencies concluded that eliminating the Schedule I and
requiring small plans with alternative and hard-
[[Page 47521]]
to-value assets to file the Schedule H was the most appropriate
alternative.
(2) Alternative approaches for group health plan reporting.
In addition to the proposed annual reporting regime described in
detail earlier in this preamble, the DOL considered a variety of other
reporting options for group health plans. Among the options considered
were (a) using existing IRS data or entering into a data sharing
agreement with HHS; (b) requiring all group health plans, including
small, fully insured plans to file a complete Form 5500 and Schedule J,
along with the other schedules required to be filed currently by group
health plans that are not exempt from filing under the existing
regulations; and (c) requiring small, fully insured plans to file a
Form 5500 and Schedule J every second or third year and requiring those
plans to file a registration form in all other years, similar to the
Form 5500-C/R structure used prior to 1999.
In an effort to minimize burden and reporting duplication, the DOL
reviewed existing IRS health plan data to determine if any of these
data would be usable. The DOL concluded that all data collected by the
IRS about health plans, such as premium information, minimum essential
coverage information, and information on the number of employees
covered, is collected specifically to assess Affordable Care Act-
related excise taxes and penalties and is subject to a higher threshold
for information sharing than most other data collected by federal
agencies. Therefore, the DOL concluded that its enforcement,
policymaking, and research needs would not rise to the threshold to
enable the IRS to share data. The DOL also consulted with HHS to
determine whether any of their data might be appropriate; however, HHS
does not collect any data on the ``plan'' level, which is the level of
detail needed by the DOL to inform oversight, Congressional reporting,
and policy obligations under Title I of ERISA.
The DOL considered requiring welfare plans that offer group health
benefits with fewer than 100 participants that are fully insured to
file the complete Form 5500 and Schedule J, as would now be required of
welfare plans that offer group health benefits with fewer than 100
participants that are unfunded, combination unfunded/fully insured, or
funded with a trust. The DOL also considered requiring welfare plans
that offer group health benefits with fewer than 100 participants that
are fully insured to attach a Schedule A (in addition to the Form 5500
and Schedule J). The DOL decided against both of these options after
weighing the benefits of getting additional data and the likely
burdens. DOL also took into account that that the data of most benefit
is the proposed new reporting to provide identity, number, and basic
funding and benefit structures and types for these plans, which is
currently unavailable due to the Form 5500 filing exemption from filing
for these plans. More information than that would provide the DOL with
somewhat more robust data, but it would not merit the burden of
requiring the estimated nearly 2 million small, fully insured plans to
report such information, particularly since much of the information is
directed towards pension plans and welfare plans that are funded with a
trust. For comparison, the DOL estimates that a plan that provides
group health benefits with fewer than 100 participants filing a
complete Form 5500 Annual Return/Report and a complete Schedule J will
incur 5 hours and 14 minutes of burden, while one with fewer than 100
participants answering only limited questions on the Form 5500 and
Schedule J will incur only 30 minutes of burden. If the DOL were to
require these plans to file a complete Form 5500 and a complete
Schedule J, then each of the estimated 2 million welfare plans that
offer group health benefits with fewer than 100 participants that are
fully insured would incur an additional 4 hours and 44 minutes of
burden, at an additional aggregate annual reporting cost of $927.6
million. Attaching a Schedule A requires 2 hours and 45 minutes of
burden for welfare plans that offer group health benefits with fewer
than 100 participants. If the DOL were to require welfare plans that
offer group health benefits with fewer than 100 participants that are
fully insured to attach Schedule A, the additional aggregate annual
reporting cost would be $583.4 million. The DOL concluded that
requiring these fully insured plans to file a complete Form 5500 and
Schedule J, as well as potentially Schedule A would grant the DOL
slightly more robust data in a significantly more burdensome fashion
compared with the chosen option.
The DOL decided, however, that plans that provide group health
benefits and have fewer than 100 participants that are not fully
insured, i.e., some or all of the funding comes from the general assets
of the employer or funded through a trust, would have to complete the
full Form 5500 Annual Return/Report and the full Schedule J, as well as
the Schedule A, if applicable. The filings for plans that provide group
health benefits and have fewer than 100 participants that are unfunded,
combination unfunded/fully insured, or funded with a trust would
generally be similar to those for plans that provide group health
benefits and have 100 or more participants that are funded in the same
way. Group health plans that are unfunded, combination unfunded/fully
insured, or funded with a trust, by definition, are fully or partially
self-insured, and the DOL believes that the additional Schedule J
information, in particular, is important for the DOL's role with regard
to oversight and to development of the self-insured report.
Relatedly, the DOL also considered not requiring plans that provide
group health benefits and have fewer than 100 participants that are
funded with a trust to file the more detailed financial and service
provider information required of large plans that are funded with a
trust, in particular the Schedule C and Schedule H. Small welfare plans
that provide group health benefits that are funded with a trust are
already filing either the Form 5500-SF or the Form 5500 Annual Return/
Report and the Schedule I. If a small welfare plan funded with a trust
is required to file a Form M-1 or is invested in alternative or hard-
to-value assets, it currently would have to file the Form 5500 with a
Schedule I, and, if applicable, Schedule A. As with small pension plans
required to file the Form 5500 Annual Return/Report, in general, the
proposal would have plans that provide group health benefits and have
fewer than 100 participants that are funded using a trust file in the
same manner as plans that provide group health benefits that have 100
or more participants that are funded using a trust.
With respect to requiring filing of the Schedule C by plans that
provide group health benefits and have fewer than 100 participants that
are currently not subject to any filing requirement (i.e., unfunded,
fully insured, or combination unfunded/fully insured), the Agencies
took into account that the existing 408b-2 regulation only applies to
pension plans. Large welfare plans that are funded with a trust are
already required to file a Schedule C with service provider
compensation information, and the difference in information reporting
should not be significant. Moreover, small plans that are funded with a
trust would already be required to keep as part of their records
information on direct compensation, because direct expenses are
reported as administrative expenses of the plan. With respect to
indirect compensation, given that the class of service providers for
whom indirect compensation must be reported is
[[Page 47522]]
limited to those identified in 408b-2, a small plan should not have
many service providers that would be required to be reported, and so
the burden should be minimal. Just as the Agencies believe that it is
important to have improved information on small pension plans that
invest in alternative and hard-to-value assets, so too, they believe
that is important to have the information for small welfare plans that
are funded with a trust that invest in such assets. To the extent that
small plans funded with a trust are the plans most likely to experience
financial difficulties, having this information should help the
Agencies and participants and beneficiaries better monitor the
financial stability. Additionally, the Form 5500 Annual Return/Report
together with the proposed Schedule J would give basic contribution,
claims, benefit structure, and group health compliance information. For
these reasons, the DOL concluded that the burden of requiring plans
that provide group health benefits and have fewer than 100
participants, other than those funded with a trust, to also file the
Schedule C and Schedule H would outweigh the benefits of requiring that
these schedules be filed; therefore, those plans are not required to do
so.
Finally, the DOL considered requiring small, fully insured plans to
file a Form 5500 Annual Return/Report and Schedule J every second or
third year and requiring those same plans to file a registration form
in alternate years. This option was ruled out due to public comments
made during the 1999 Form 5500 Annual Return/Report revisions. Prior to
the 1999 revisions, some filers were eligible to file the Form 5500-C/
R, which included robust reporting during one year and more limited
reporting during the second and third years of a three year cycle.
Commenters responding to the proposed 1999 revisions were supportive of
the DOL's plan to eliminate Form 5500-C/R, and accordingly eliminate
the multi-year cycle of reporting, because they felt that it was
difficult to keep track of the schedule.\62\ In an effort to take those
comments into account, the DOL decided not to propose a reporting
scheme for small, fully insured group health plans that required filing
a registration statement in certain years and more expansive
information in other years because DOL thought it would likely be
confusing, lead to filer error, and inconsistent reporting. The
proposal to have the currently exempt plans that provide group health
benefits with fewer than 100 participants complete some or all of the
Form 5500 Annual Return/Report and Schedule J was designed to get the
minimal amount of information needed for research, policy, and
oversight purposes, with the simplest and least amount of reporting.
---------------------------------------------------------------------------
\62\ See 65 FR 5026.
---------------------------------------------------------------------------
(3) Alternative approaches for ESOP-specific reporting.
In addition to the proposed restoration of the Schedule E, the
Agencies also considered whether to add only certain additional ESOP
questions to existing schedules, such as the Schedule R, which
currently has ESOP questions that were moved to the Schedule R from the
Schedule E when the Schedule E was eliminated for 2009 and later
filings. As discussed above, before 2009, the Schedule E (ESOP Annual
Information) was an IRS-only component of the Form 5500 Annual Return/
Report used to collect data on ESOPs. As with other ``IRS-only''
schedules that were part of the Form 5500 Annual Return/Report, when
the DOL mandated electronic filing of the Form 5500 Annual Return/
Report as part of EFAST2, the Schedule E was removed from the Form 5500
Annual Return/Report in 2009 due to the statutory limits on the IRS's
authority to mandate electronic filing of such information.
The DOL believes that many of the ESOP questions that were
eliminated in 2009 because they were ``IRS-only'' are useful for DOL's
enforcement and research programs of DOL, as well as for participants
and beneficiaries in ESOPs. In addition, several new questions have
been included to provide a more comprehensive view of ESOPs. With the
increase in ESOP-specific questions, the use of a single schedule for
all ESOP questions would be a more effective and efficient information
collection tool for the Agencies than having some questions on the
Schedule R and some questions on the Schedule E.
(4) Alternative approaches for service provider reporting.
Most of the changes that are being proposed to revise the service
provider information that is reported on the form respond to
recommendations from GAO, DOL-OIG, TIGTA, and other advisory groups. As
discussed previously, the Agencies evaluated whether to require welfare
plans that offer group health benefits with fewer than 100 participants
to complete the Schedule C. The Agencies also evaluated whether or not
to require small pension plans that are required to file the Form 5500
Annual Return/Report to complete the Schedule C, but decided that due
to the importance of the information for participants and
beneficiaries, plan officials responsible for understanding
compensation arrangements, and the Agencies, the benefit outweighed the
burden. Because the majority of pension plan filers are small plans
that are eligible to file the Form 5500-SF, the Agencies considered
whether to add questions to the Form 5500-SF requiring filers to
provide indirect compensation information. The Agencies determined that
to minimize burden, rather than adding new questions that were a subset
or total of those on the Schedule C, they would simply require defined
contribution pension plan Form 5500-SF filers to file the comparison
chart under the DOL's regulation at 29 CFR 404a-5. This would provide
some information (though not in the form of structured data) regarding
service provider compensation with only minimal burden.
(5) Alternative approaches for DFE reporting.
Most of the changes that are being proposed to revise DFE reporting
respond to recommendations from GAO, DOL-OIG, TIGTA, and others. The
Agencies considered a variety of alternative ways to improve DFE
reporting. Included in those alternatives was expanding Schedule D
reporting to require plans to provide the date of the most recent Form
5500 Annual Return/Report filing of the DFEs in which a plan or
investing DFE was invested. The Agencies also considered having both
plans and CCTs, PSAs, and 103-12 IEs identify on the Schedule H, Line
4i Schedules of Assets the underlying assets of those DFEs. To minimize
burden and duplicative reporting, the Agencies instead chose to
eliminate the requirement for plans to complete the Schedule D, and
have plans and filing DFE's identify on the plan or filing DFEs Line 4i
Schedule of Assets underlying assets by category where the DFE has
filed a Form 5500 Annual Return/Report. The assets would be broken out
by the plan only if a CCT or PSA did not file a Form 5500 Annual
Return/Report. The Agencies also considered whether to require plans
that file the Form 5500-SF that participate in DFEs to provide more
detailed information on those DFEs to help provide a more complete
crosswalk between DFE and plan filings. The Agencies determined that
the burden would outweigh the benefit in that regard. In addition, the
Agencies considered, but decided against, requiring CCTs and PSAs that
file the Form 5500 Annual Return/Report and 103-12 IEs to complete both
Schedule H, Line 4i Schedules of Assets. The Agencies determined that
having such entities complete just the Line 4i(1) Schedule of Assets
Held for
[[Page 47523]]
Investment, and not the Line 4i(2) Schedule of Assets Disposed During
Plan Year, would adequately address concerns with quality and
usefulness of data, while minimizing burden.
Regulatory Flexibility Act--Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. In accordance with section 603 of the RFA, the following
reflects EBSA's Initial Regulatory Flexibility Analysis (IRFA)
describing the impact of the rule on small entities and seeking public
comment on such impact.
For purposes of this IRFA, the DOL continues to consider a small
entity to be an employee benefit plan with fewer than 100 participants,
as it has in many previous IRFAs measuring the impact of proposed
regulatory actions on small employee benefit plans. The definition of
small entity considered appropriate for this purpose differs, however,
from a definition of small business that is based on size standards
promulgated by the Small Business Administration (SBA) (13 CFR 121.201)
pursuant to the Small Business Act (15 U.S.C. 631 et seq.). The basis
of EBSA's definition of a small entity for this IRFA is found in
section 104(a)(2) of ERISA, which permits the Secretary to prescribe
simplified annual reports for pension plans that cover fewer than 100
participants. While some large employers may have small plans, in
general small employers maintain most small plans. The Form 5500 Annual
Return/Report impacts any employer in any private sector industry who
chooses to sponsor a plan. The DOL is unable to locate any data linking
employer revenue to plans to determine the relationship between small
plans and small employers in industries whose SBA size standard is
revenue-based. For a separate project, the DOL purchased data on ESOPs
that file the Form 5500 and on defined contribution pension plans that
file the Form 5500-SF from Experian Information Solutions, Inc. The
Experian dataset provides the number of employees for the plan sponsor.
By merging these data with internal DOL data sources, the DOL
determined the relationship between small plans and small employers in
industries whose SBA size standard is based on a threshold number of
employees that varies from 100 to 1,500 employees. Based on these data,
the DOL estimates that over 97 percent of small retirement plans and
over 80 percent of small health plans are sponsored by employers with
less than 100 employees. The DOL estimates that over 99 percent of
small retirement plans and over 97 percent of small health plans are
sponsored by employers with less than 1,500 employees. Thus, the DOL
believes that assessing the impact of these proposed rules on small
plans is an appropriate substitute for evaluating the effect on small
entities. In previous regulations, the DOL has consulted with the SBA
Office of Advocacy concerning use of this participant count standard
for RFA purposes, see 13 CFR 121.902(b)(4), and the DOL received no
comments suggesting use of a different size standard. The Department
solicits public comments on the appropriateness of continuing to use
this size standard.
The following subsections address specific components of an IRFA,
as required by the RFA.
Need for the rule and its objectives: The DOL is publishing this
proposal to amend the regulations relating to the annual reporting and
disclosure requirements of section 103 of ERISA simultaneously with the
publication of the Notice of Proposed Forms Revisions. The DOL
continually strives to tailor reporting requirements to minimize
reporting costs, while ensuring that the information necessary to
secure ERISA rights is adequately available. The optimal design of
reporting requirements in order to satisfy these objectives changes
over time. As discussed in the Need for Regulatory Action section
above, the Form 5500 and the financial statements contained in the
current Schedule H (Large Plan Financial Information) and Schedule I
(Small Plan Financial Information) are based on data elements that have
remained largely unchanged since the Form 5500 Annual Return/Report was
established in 1975. Meanwhile, benefit plan designs and practices have
evolved over time in response to market trends in labor, financial,
health care, and insurance markets, and markets for various services
used by plans. In addition, the technologies available to manage and
transmit information continually advance. Therefore, it is incumbent on
the Agencies to revise their reporting requirements from time to time
to keep pace with such changes. The proposed forms revisions, and
associated DOL regulatory amendments in the proposal, are intended to
calibrate reporting requirements to take into account certain recent
changes in markets, the law (including the Affordable Care Act), and
technology, many of which are referred to above in this document.
Description and estimate of number of small entities to which rule
will apply: This proposal increases the number of small plans required
to comply with annual reporting requirements by requiring approximately
1.9 million welfare plans that provide group health benefits with fewer
than 100 participants that previously were exempt from annual reporting
to file a Form 5500 Annual Return/Report, completing lines 1-5 on Form
5500 and lines 1-8 on Schedule J. This proposal also requires
approximately 289,000 plans that provide group health benefits and have
fewer than 100 participants that are unfunded, combination unfunded/
fully insured, or funded with a trust to file a Form 5500 Annual
Return/Report, where previously roughly 6,000 were required to do so.
In total, approximately 2.81 million small pension plans and plans that
provide group health benefits covering fewer than 100 participants
would be required to comply with annual reporting requirements, where
previously approximately 658,000 were required to do so. As described
previously, estimates of the number of small pension plans and small
welfare plans that do not offer group health benefits are based on 2013
Form 5500 filing data. Estimates of the number of plans that provide
group health benefits and have fewer than 100 participants are based on
MEPS-IC and Census of Business data.
Description of projected reporting, recordkeeping, and other
compliance requirements of the rule: The reporting requirements
applicable to small plans are detailed above and in the associated
Notice of Proposed Forms Revision. Almost 89 percent of the 2.81
million small plans subject to the proposed annual reporting
requirements can satisfy the requirements through streamlined options.
The 1.9 million welfare plans that provide group health benefits
with fewer than 100 participants can fulfill the proposed reporting
requirements answering lines 1-5 of the Form 5500 and line 1-8 of the
Schedule J. For these plans, annual reporting will require the use of a
mix of clerical and professional administrative skills.
Over 581,000 small defined contribution pension plans and small
welfare plans that do not provide group health benefits can fulfill the
proposed reporting requirements with the Form 5500-SF with no schedules
required to be attached. All of these plans are
[[Page 47524]]
eligible for the waiver of audit requirements. For such plans,
therefore, satisfaction of the applicable proposed annual reporting
requirements is not expected to require the services of an IQPA or
auditor, but, like the small, fully insured group health plans, will
require the use of a mix of clerical and professional administrative
skills. Another 41,000 small defined benefit pension plans and money
purchase plans will continue to be eligible to use the streamlined
5500-SF; satisfaction of the proposed reporting requirements will
require additional services of an actuary and submission of the
Schedule SB or Schedule MB, as applicable, and no other schedules.
The remaining 319,000 small pension and welfare plans will not be
eligible to use the Form 5500-SF or any other streamlined reporting
option. These plans will be required to file the Form 5500 Annual
Return/Report, along with any other schedules required for pension
plans or welfare plans that are not fully insured group health
plans.\63\ Of these plans, approximately 289,000 are welfare plans that
provide group health benefits and are unfunded, combination unfunded/
fully insured, or funded with a trust, 25,000 are defined contribution
pension plans, and over 3,000 are welfare plans that do not provide
group health benefits. All will require a mix of clerical and
professional administrative skills to satisfy the proposed reporting
requirements. Fewer than 1,000 small pension plans that are not
eligible to use the Form 5500-SF are defined benefit pension plans that
will be required to use an actuary and file Schedule MB or Schedule SB
in addition to needing a mix of clerical and professional
administrative skills to satisfy the proposed reporting requirements.
---------------------------------------------------------------------------
\63\ The exact schedules that these plans are required to attach
vary based on the plans' specific facts and circumstances.
---------------------------------------------------------------------------
Satisfaction of the proposed annual reporting requirements under
these regulations is not expected to require any additional
recordkeeping that would not otherwise be part of normal business
practices.
Table 5 below compares the DOL's estimates of small plans'
reporting costs under the requirements in effect prior to this action
with those under the new requirements for various classes of affected
plans. As shown, costs under the new requirements will be slightly
higher for small pension plans and small welfare plans that are
eligible to file the Form 5500-SF and significantly higher for small
pension and welfare plans that are not eligible to file the Form 5500-
SF (including group health plans). As discussed above, the significant
increase for group health plans reflects the elimination of prior
reporting exemptions for most plans that provide group health benefits
and have fewer than 100 participants. The significant increase for
small pension plans and small welfare plans that do not offer group
health benefits that are not eligible to file the Form 5500-SF results
primarily from the changes to financial and service provider reporting.
The DOL notes that for the over 90 percent of plans that are eligible
for annual reporting under streamlined options, the per-filer cost
under the proposed requirements increases by $35-37 annually relative
to the current requirements.\64\ These estimates take account of the
quantity and mix of clerical and professional skills required to
satisfy the reporting requirements for various classes of plans.
---------------------------------------------------------------------------
\64\ In the case of the 2.0 million small, fully insured group
health plans, the increase in per filer cost is from no cost to $37
per year.
Table 5--Small Plan Reporting Costs Under Prior and New Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aggregate
Number of Number of Aggregate annual cost Annual per Annual per
filers under filers under annual cost under filer cost filer cost
Class of small plan current proposed under current proposed under current under proposed
requirements requirements requirements requirements requirements requirements
(thousands) (thousands) (millions) (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Defined Benefit Pension--Eligible for 5500-SF........... 41.1 41.1 $37.6 $39.0 $916 $951
Defined Benefit Pension--Not Eligible for 5500-SF....... 1.0 1.0 1.1 1.9 1,150 1,970
Defined Contribution Pension--Eligible for 5500-SF...... 580.7 580.7 168.0 188.0 289 324
Defined Contribution Pension--Not Eligible for 5500-SF.. 25.4 25.4 11.8 33.9 484 1,335
Welfare--Non-Health--Eligible for 5500-SF............... 0.7 0.7 0.2 0.2 289 324
Welfare--Non-Health--Not Eligible for 5500-SF........... 3.3 3.3 1.5 2.5 455 758
Welfare--Fully Insured Health........................... 0.0 1,869.0 0.0 69.6 0 37
Welfare--Unfunded, Combination Unfunded/Insured, or 6.2 289.0 4.1 158.2 654 547
Funded with a Trust Health.............................
-----------------------------------------------------------------------------------------------
Total for All Small Plans........................... 658.3 2,810.1 224.3 493.4 341 176
--------------------------------------------------------------------------------------------------------------------------------------------------------
In comparison to the costs per filer described in Table 5, the
75,000 large pension plans will incur an average cost of $2,326 under
the proposed requirements and the almost 74,000 large welfare plans
subject to annual reporting requirements will incur an average cost of
$1,833 each year.\65\
---------------------------------------------------------------------------
\65\ Average costs for large plans do not include the costs of
obtaining the report of an IQPA or an actuarial report, if such a
report is required for the plan's specific situation.
---------------------------------------------------------------------------
Table 6 below compares the DOL's estimates of small plans'
reporting costs under the requirements in effect prior to this action
with those under the new requirements as a percentage of plan assets
for pension plans and welfare plans that do not offer group health
benefits and as a percentage of annual health insurance premiums for
welfare plans that offer group health benefits to show the impact of
the reporting requirement on small plans of differing
[[Page 47525]]
sizes.\66\ As shown, group health plans with five or fewer participants
that are unfunded, combination unfunded/fully insured, or funded with a
trust incur the highest costs as a result of the proposed reporting
requirements, incurring an annual reporting cost of 0.998 percent of
their annual health insurance premiums. Non-health welfare plans that
are eligible to file Form 5500-SF and have between 6 and 10
participants incur the second highest costs under the proposed
reporting requirements. These plans' annual reporting cost is 0.561
percent of their plan assets.
---------------------------------------------------------------------------
\66\ Plan asset data reflects data reported on 2013 Form 5500
filings. Because so few plans that provide group health benefits and
have fewer than 100 participants are currently subject to annual
reporting requirements and many group health plans do not hold
assets in trusts, the DOL concluded that annual health insurance
premium data reported by the Kaiser Family Foundation was a more
appropriate metric for comparison of group health plans.
Table 6--Small Plan Reporting Costs Under Prior and New Requirements as a Percentage of Plan Assets or Aggregate
Annual Health Insurance Premiums
----------------------------------------------------------------------------------------------------------------
Annual per filer
Annual per filer cost under
cost under current proposed
requirements as a requirements as a Number of plans
Class of small plan (participants) percentage of plan percentage of plan subject to
assets or assets or proposed filing
aggregate annual aggregate annual requirements
health insurance health insurance
premiums premiums
----------------------------------------------------------------------------------------------------------------
Defined Benefit Pension--Eligible for 5500-SF:
5 or Fewer...................................... 0.088 0.091 178,694
6-10............................................ 0.084 0.087 105,458
11-25........................................... 0.067 0.070 139,971
26-50........................................... 0.040 0.041 86,936
51-75........................................... 0.022 0.023 38,822
76-90........................................... 0.018 0.018 14,491
90-99........................................... 0.016 0.016 6,341
Defined Benefit Pension--Not Eligible for 5500-SF:
5 or Fewer...................................... 0.002 0.003 566
6-10............................................ 0.050 0.086 82
11-25........................................... 0.041 0.069 60
26-50........................................... 0.016 0.027 40
51-75........................................... 0.017 0.028 46
76-90........................................... 0.016 0.027 66
90-99........................................... 0.020 0.034 90
Defined Contribution Pension--Eligible for 5500-SF:
5 or Fewer...................................... 0.045 0.050 178,694
6-10............................................ 0.036 0.040 105,458
11-25........................................... 0.024 0.027 139,971
26-50........................................... 0.014 0.016 86,936
51-75........................................... 0.010 0.011 38,822
76-90........................................... 0.008 0.009 14,491
90-99........................................... 0.007 0.008 6,341
Defined Contribution Pension--Not Eligible for 5500-
SF:
5 or Fewer...................................... 0.011 0.033 15,650
6-10............................................ 0.040 0.115 1,856
11-25........................................... 0.021 0.062 1,989
26-50........................................... 0.012 0.033 1,888
51-75........................................... 0.009 0.026 1,362
76-90........................................... 0.009 0.026 990
90-99........................................... 0.008 0.024 1,086
Welfare--Non-Health--Eligible for 5500-SF:
5 or Fewer...................................... 0.135 0.151 263
6-10............................................ 0.501 0.561 61
11-25........................................... 0.269 0.301 124
26-50........................................... 0.124 0.139 91
51-75........................................... 0.036 0.041 58
76-90........................................... 0.057 0.064 32
90-99........................................... 0.134 0.150 23
Welfare--Non-Health--Not Eligible for 5500-SF:
5 or Fewer...................................... 0.019 0.032 1,917
6-10............................................ 0.197 0.328 51
11-25........................................... 0.172 0.287 117
26-50........................................... 0.038 0.064 218
51-75........................................... 0.073 0.123 310
76-90........................................... 0.028 0.047 323
90-99........................................... 0.150 0.250 404
Welfare--Fully Insured Health....................... .................. .................. 1,869,000
5 or Fewer...................................... 0.000 0.068 ..................
6-10............................................ 0.000 0.034 ..................
11-25........................................... 0.000 0.014 ..................
26-50........................................... 0.000 0.007 ..................
[[Page 47526]]
51-75........................................... 0.000 0.005 ..................
76-90........................................... 0.000 0.004 ..................
90-99........................................... 0.000 0.003 ..................
Welfare--Unfunded, Combination Unfunded/Fully .................. .................. 289,000
Insured, or Funded with a Trust Health.............
5 or Fewer...................................... 1.192 0.988 ..................
6-10............................................ 0.596 0.496 ..................
11-25........................................... 0.238 0.199 ..................
26-50........................................... 0.119 0.100 ..................
51-75........................................... 0.079 0.066 ..................
76-90........................................... 0.066 0.055 ..................
90-99........................................... 0.060 0.050 ..................
----------------------------------------------------------------------------------------------------------------
Note: Due to data constraints, the DOL is unable to break out smaller subgroup plan counts for welfare plans
that provide group health benefits with fewer than 100 participants. Instead, the DOL has provided the total
number of welfare plans that provide group health benefits with fewer than 100 participants.
The DOL is unaware of any relevant federal rules for small plans
that duplicate, overlap, or conflict with these regulations.
Description of steps the DOL has taken to minimize impact on small
entities: In developing these regulations and the associated forms
revisions, the Agencies considered a number of alternative provisions
directed at small plans, many of which are discussed elsewhere in this
preamble and in the Notice of Proposed Forms Revision. The DOL believes
that the proposed changes to the reporting requirements impose the
least amount of burden on small plans, while allowing the DOL to
collect sufficient information for it to fulfill its statutory
responsibilities. Any efforts to further reduce reporting burden would
have had a detrimental impact on the DOL's ability to protect plan
participants and beneficiaries.
The new reporting requirements for welfare plans that offer group
health benefits with fewer than 100 participants comprise over 83
percent of the increased burden on small plans. The subset of these
welfare plans that are fully insured comprises almost 87 percent of
welfare plans that offer group health benefits with fewer than 100
participants. As discussed previously, the DOL considered requiring
welfare plans that offer fully insured group health benefits with fewer
than 100 participants to file a Form 5500 Annual Return/Report and
Schedule J annually, or alternatively, on a two or three year cycle.
The DOL opted instead to have those plans file only limited information
on the Form 5500 Annual Return/Report and Schedule J. Requiring those
plans to file a complete Form 5500 Annual Return/Report and Schedule J
annually would have added $927.6 million in annual reporting costs
relative to the chosen alternative. The DOL also considered requiring
welfare plans that offer group health benefits with fewer than 100
participants that are fully insured to attach a Schedule A (in addition
to the Form 5500 and Schedule J). If the DOL were to require welfare
plans that offer group health benefits with fewer than 100 participants
that are fully insured to attach Schedule A, the additional aggregate
annual reporting cost would be $583.4 million relative to the option
chosen. The DOL rejected both of these options because they added
significant cost ($1.5 billion total) with limited additional benefit.
As discussed above, the Schedule I is being eliminated for small
plans that are not eligible to file Form 5500-SF because the Schedule I
does not require small plans to provide detailed plan asset
information. This shortcoming impairs the utility of the Form 5500
Annual Return/Report as a tool to obtain a meaningful picture of small
plan investments in hard-to-value and other assets. As the GAO has
noted, the limited financial information provided on the Schedule I
creates a challenge for participants, beneficiaries, oversight
agencies, researchers, and other users of the Form 5500 Annual Return/
Report or its data.\67\ Accordingly, under the proposed change,
approximately 27,000 small plans that are not eligible to file the Form
5500-SF and currently are required to file the Schedule I would be
required to complete the Schedule H and the applicable schedules of
assets. Although this would result in additional reporting details for
certain small plans, the Agencies do not expect that small plans with
simple investment portfolios would see a significant increase in their
annual reporting burden. Small plans with complex portfolios that
include hard-to-value or alternative investments should have more
transparent financial statements which may require somewhat more
complex financial reporting obligations. In light of changes in the
financial environment and increasing concerns about investments in
hard-to-value assets and alternative investments, the Agencies continue
to believe that requiring separate financial information regarding
hard-to-value investments is important for regulatory, enforcement, and
disclosure purposes. The DOL notes that although the proposal would
require such small plans to complete the Schedule H instead of the
Schedule I, including the Schedule H Line 4i(1) and 4i(2) Schedules of
Assets, small plans that are eligible for a waiver of the annual
examination and report of an IQPA under current rules would still be
eligible for this waiver under the proposal.\68\
---------------------------------------------------------------------------
\67\ GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information, at 18.
\68\ 29 CFR 2520.104-46.
---------------------------------------------------------------------------
The proposed rule would also require approximately 18,200 small
plans that
[[Page 47527]]
are not eligible to file the Form 5500-SF to file Schedule C.
Currently, only large plans must file a Schedule C, thus excluding a
large portion of plans from having to disclose service provider fees.
The Agencies recognize the burdens small plans face in complying with
disclosure obligations. The Agencies therefore propose to require small
pension plans to file Schedule C only if they do not meet the
eligibility conditions for filing the Form 5500-SF, which generally
would be those pension plans that are invested in alternative or hard-
to-value assets. Small welfare plans that provide group health benefits
(which are not eligible to file the Form 5500-SF) would also be
required to file the Schedule C if they are not unfunded or insured
(e.g., funded using a trust). This would continue to emphasize
sensitivity to reporting burden for small plans with simple investment
portfolios, while addressing some of the GAO's concerns that not all
critical information on indirect compensations is being reported to the
Agencies. See GAO Targeted Revisions Could Improve Usefulness of Form
5500 Information at 25-26 (``Given these various exceptions to fee
reporting requirements, Schedule C may not provide participants, the
government, or the public with information about a significant portion
of plan expenses and limits the ability to identify fees that may be
questionable.'') In addition, the rule would align financial
information reporting with recently adopted disclosure rules to ensure
that all fees are reported by the plans.\69\
---------------------------------------------------------------------------
\69\ Id. at 50.
---------------------------------------------------------------------------
Paperwork Reduction Act Statement
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3506(c)(2)), the DOL requests comments on the
information collections included in the proposed amendments to the
DOL's regulations relating to annual reporting and disclosure
requirements under Part 1 of Subtitle B of Title I of ERISA and in the
proposed revision of the Form 5500 Annual Return/Report pursuant to
Part 1 of Subtitle B of Title I and Title IV of ERISA and the Code. The
DOL has submitted an information collection request (ICR) to OMB in
accordance with 44 U.S.C. 3507(d), for OMB's review of the DOL's
information collections previously approved under OMB Control No. 1210-
0110.
A copy of the ICR can be obtained by contacting the U.S. Department
of Labor, Employee Benefits Security Administration, Office of Policy
and Research, 200 Constitution Avenue NW., Room N-5718, Washington, DC
20210, Telephone: (202) 693-8410; Fax: (202) 219-4745 or at
www.RegInfo.gov. These are not toll-free numbers.
OMB asks that comments about information collections in this NPRM
be submitted by mail or courier to the Office of Information and
Regulatory Affairs, Attn: OMB Desk Officer for DOL-EBSA, Office of
Management and Budget, Room 10235, 725 17th Street NW., Washington, DC
20503; by Fax: 202-395-6881 (this is not a toll-free number); or by
email: OIRAsubmission@omb.eop.gov. Commenters are encouraged, but not
required, to send a courtesy copy of any comments to the party
identified in the ADDRESSES section of this NPRM. OMB requests that
comments be received within 75 days of publication of the proposed rule
to ensure their consideration. Comments submitted in response to this
request become a matter of public record. The Department and OMB are
particularly interested in comments that:
Evaluate whether the collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
Evaluate the accuracy of the DOL's estimate of the burden
of the collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
Congressional Review Act
The proposed rules being issued here are subject to the
Congressional Review Act provisions of the Small Business Regulatory
Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and, if
finalized, will be transmitted to the Congress and the Comptroller
General for review. The proposed rule is a ``major rule'' as that term
is defined in 5 U.S.C. 804, because it is likely to result in an annual
effect on the economy of $100 million or more.
Unfunded Mandates Reform Act Statement and Summary
Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1531-1538 requires each Federal agency to prepare a written statement
assessing the effects of any Federal mandate in a proposed or final
agency rule that may result in an expenditure of $100 million or more
(adjusted annually for inflation with the base year 1995) in any one
year by State, local, and tribal governments, in the aggregate, or by
the private sector. Such a mandate is deemed to be a ``significant
regulatory action.'' The current proposal is expected to have such an
impact on the private sector, and the DOL therefore hereby provides
such an assessment. The DOL's written statement as required by this act
follows:
The DOL is issuing the current proposed regulations and forms
revisions under Sections 103, 104, 110 and 505 of ERISA (29 U.S.C.
1023, 1024, 1030, and 1135). Under Titles I and IV of ERISA and the
Code, pension and other employee benefit plans are generally required
to file annual returns/reports concerning, among other things, the
financial condition and operations of the plan. Filing a Form 5500
Annual Return/Report of Employee Benefit Plan or Form 5500-SF Short
Form Annual Return/Report of Small Employee Benefit Plan, together with
any required schedules and attachments, generally satisfies these
annual reporting requirements. The current proposal would amend current
reporting regulations and update the existing forms and schedules as
explained in the summary information provided above in this document.
The DOL assessed the anticipated benefits and costs of the current
proposal pursuant to Executive Order 12866 in the Regulatory Impact
Analysis for the current proposal, above, and concluded that its
benefits would justify its costs. The current proposal's material
benefits and costs generally would be largely confined to the private
sector, where plans would incur increased costs from expanded reporting
requirements, while participants and beneficiaries and other end-users
of the Form 5500 Annual Return/Report data would benefit from improved
reporting. The DOL itself, as well as IRS, PBGC, and other governmental
users would benefit from increased efficiency in enforcement activity
and improved quality in research and policy decisions resulting from
reporting data that more accurately reflect the current plan
marketplace.
Some employee benefit plans sponsored by tribal governments that
are subject to ERISA because they cover employees who are involved in
performing commercial activities (whether or not such activities are
essential government functions) may be affected by the Federal mandate
contained in this rule, if it is adopted as
[[Page 47528]]
proposed. The DOL does not have sufficient data to estimate the amount
of the increase in future compliance costs that would be imposed on
tribal governments that sponsor these plans, but it believes such costs
would be similar to those imposed on private sector employers that are
discussed in the regulatory impact analysis. Such increased costs would
not be paid with Federal financial assistance (or otherwise paid for by
the government). The DOL is not aware of any available Federal
resources to carry out this mandate on tribal governments. The
budgetary impact of the mandate will fall on tribal governments that
maintain certain employee benefit plans. Apart from this, the DOL does
not believe that the mandate will cause any disproportionate budgetary
effects on any particular regions of the nation or particular tribal
governments, urban, rural or other types of communities, or particular
segments of the private sector.
The DOL has not consulted with elected representatives of tribal
governments, but will do so after the proposed regulations and forms
revisions are published.
In summary, the DOL believes the benefits of this proposed rule are
significant, and will result in a modernized annual return/report that
has substantially more utility for the agencies, the regulated
community, and the public. The proposed rule would also impose
increased costs on employee benefit plan sponsors. Tribal governments
that sponsor ERISA-covered plans will incur increased costs as will all
other sponsors of ERISA-covered plans. The DOL lacks sufficient
information to quantify the number of tribal governments impacted by
this proposed rule, but believes that the costs imposed on tribal
governments will be consistent with the costs imposed on all other
sponsors of ERISA-covered plans. Finally, the DOL does not believe that
the costs imposed by this proposed rule will have any disproportionate
budgetary effects based on any particular regions of the nation or
particular tribal governments, urban, rural or other types of
communities, or particular segments of the private sector.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires adherence to specific criteria by
federal agencies in the process of their formulation and implementation
of policies that have substantial direct effects on the States, the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. These proposed rules do not have federalism implications
because they would have no substantial direct effect on the States, on
the relationship between the national government and the States, or on
the distribution of power and responsibilities among the various levels
of government. Section 514 of ERISA provides, with certain exceptions
specifically enumerated, that the provisions of Titles I and IV of
ERISA supersede any and all laws of the States as they relate to any
employee benefit plan covered under ERISA. The requirements implemented
in these rules do not alter the fundamental provisions of the statute
with respect to employee benefit plans, and as such would have no
implications for the States or the relationship or distribution of
power between the national government and the States.
List of Subjects
29 CFR Part 2520
Accounting, Employee benefit plans, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Department proposes
to amend Subchapter C, parts 2520 and 2590 of Title 29 of the Code of
Federal Regulations as follows:
PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE
0
1. The authority section for part 2520 continues to read as follows:
Authority: 29 U.S.C. 1021-1025, 1027, 1029-31, 1059, 1134, and
1135; and Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9,
2012). Sec. 2520.101-2 also issued under 29 U.S.C. 1132, 1181-1183,
1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.102-3,
2520.104b-1, and 2520.104b-3 also issued under 29 U.S.C. 1003, 1181-
1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.104b-1
and 2520.107 also issued under 26 U.S.C. 401 note, 111 Stat. 788.
0
2. In Sec. 2520.103-1, revise paragraphs (b)(1), (c)(1), (c)(2)(i),
(c)(2)(ii)(D), (E), and (e), and add paragraphs (c)(2)(ii)(F) and
(c)(2)(iii) to read as follows:
Sec. 2520.103-1 Contents of the annual report.
* * * * *
(b) * * *
(1) A Form 5500 ``Annual Return/Report of Employee Benefit Plan''
and any statements or schedules required to be attached to the form,
completed in accordance with the instructions for the form, including
Schedule A (Insurance Information), Schedule C (Service Provider
Information), Schedule E (ESOP Annual Information), Schedule G
(Financial Transaction Schedules), Schedule H (Financial Information),
Schedule J (Group Health Plan Information), Schedule MB (Multiemployer
Defined Benefit Plan and Certain Money Purchase Plan Actuarial
Information), Schedule R (Retirement Plan Information), Schedule SB
(Single-Employer Defined Benefit Plan Actuarial Information), and other
financial schedules described in Sec. 2520.103-10. See the instructions
for this form.
* * * * *
(c) * * *
(1) Except as provided in paragraphs (c)(2), (d), (e), and (f) of
this section, and in Sec. Sec. 2520.104-43, 2520.104a-6 and 2520.104-
44, the annual report of an employee benefit plan that covers fewer
than 100 participants at the beginning of the plan year shall include a
Form 5500 ``Annual Return/Report of Employee Benefit Plan'' and any
statements or schedules required to be attached to the form, completed
in accordance with the instructions for the form, including Schedule A
(Insurance Information), Schedule C (Service Provider Information),
Schedule E (ESOP Annual Information), Schedule G (Financial
Transactions), Schedule H (Financial Information), Schedule J (Group
Health Plan Information), Schedule MB (Multiemployer Defined Benefit
Plan and Certain Money Purchase Plan Actuarial Information), Schedule R
(Retirement Plan Information), and Schedule SB (Single Employer Defined
Benefit Plan Actuarial Information), completed in accordance with the
instructions for the form. See the instructions for this form.
(2)(i) The annual report of an employee pension benefit plan or
employee welfare benefit plan that does not provide group health
benefits and that covers fewer than 100 participants at the beginning
of the plan year and that meets the conditions in paragraph (c)(2)(ii)
of this section with respect to a plan year may, as an alternative to
the requirements of paragraph (c)(1) of this section, meet its annual
reporting requirements by filing the Form 5500-SF ``Short Form Annual
Return/Report of Small Employee Benefit Plan'' and any statements or
schedules required to
[[Page 47529]]
be attached to the form, including Schedule SB (Single Employer Defined
Benefit Plan Actuarial Information) and Schedule MB (Multiemployer
Defined Benefit Plan and Certain Money Purchase Plan Actuarial
Information), completed in accordance with the instructions for the
form. See the instructions for this form.
(ii) * * *
(D) Is not a multiemployer plan;
(E) Is not a plan subject to the Form M-1 requirements under Sec.
2520.101-2 (Filing by Multiple-employer Welfare Arrangements and
Certain Other Related Entities); and
(F) Is not a group health plan as defined in section 733(a) of the
Act.
(iii) The annual report of an employee benefit plan that meets the
definition of a group health plan as defined in section 733(a) of the
Act that covers fewer than 100 participants at the beginning of the
plan year shall include a Form 5500 ``Annual Return/Report of Employee
Benefit Plan'' and any statements or schedules required to be attached
to the form, completed in accordance with the instructions for the
form, including Schedule A (Insurance Information), Schedule C (Service
Provider Information), Schedule H (Financial Information), and Schedule
J (Group Health Plan Information). See the instructions for this form.
* * * * *
(e) Plans that participate in a master trust. The plan
administrator of a plan which participates in a master trust shall file
a Form 5500 Annual Return/Report in accordance with the instructions
for the form relating to master trusts. For purposes of annual
reporting, a master trust is a trust for which a regulated financial
institution serves as trustee or custodian (regardless of whether such
institution exercises discretionary authority or control respecting the
management of assets held in the trust) and in which assets of more
than one plan sponsored by a single employer or by a group of employers
under common control are held. A master trust must operate either on a
calendar year basis or on the same fiscal year as all of the plans that
are participating in the master trust. For purpose of this paragraph, a
regulated financial institution is a bank, trust company, or similar
financial institution regulated, supervised, and subject to periodic
examination by a State or Federal agency. Common control is determined
on the basis of all relevant facts and circumstances (whether or not
such employers are incorporated).
0
3. In Sec. 2520.103-2, revise paragraph (b)(1) to read as follows:
Sec. 2520.103-2 Contents of the annual report for group insurance
arrangement.
* * * * *
(b) Contents. (1) A Form 5500 ``Annual Return/Report of Employee
Benefit Plan'' and any statements or schedules required to be attached
to the form, completed in accordance with the instructions for the
form, including Schedule A (Insurance Information), Schedule C (Service
Provider Information), Schedule D (DFE/Participating Plan Information),
Schedule G (Financial Transaction Schedules), Schedule H (Financial
Information), a separate Schedule J (Group Health Plan Information) for
each participating plan, and the other financial schedules described in
Sec. 2520.103-10. See the instructions for this form.
* * * * *
0
4. In Sec. 2520.103-3, revise paragraph (c) to read as follows:
Sec. 2520.103-3 Exemption from certain annual reporting requirements
for assets held in a common or collective trust.
* * * * *
(c) Contents. (1) A plan that meets the requirements of paragraph
(b) of this section, and that invests in a common or collective trust
that files a Form 5500 report in accordance with Sec. 2520.103-9,
shall include in its annual report: information required by the
instructions to Schedule H (Financial Information) about the current
value of and net investment gain or loss relating to the units of
participation in the common or collective trust held by the plan;
identifying information in the common or collective trust including its
name, employer identification number, and any other information
required by the instructions to the Schedule of Assets Held for
Investment Purposes and Schedule of Assets Disposed of During Plan
Year; and such other information as is required in the separate
statements and schedules of the annual report about the value of the
plan's units of participation in the common or collective trust and
transactions involving the acquisition and disposition by the plan of
units of participation in the common or collective trust.
(2) A plan that meets the requirements of paragraph (b) of this
section and that invests in a common or collective trust that does not
file a Form 5500 report in accordance with Sec. 2520.103-9, shall
include in its annual report: Information required by the instructions
to Schedule H (Financial Information) about the current value of and
the net investment gain or loss relating to the units of participation
in the common or collective trust held by the plan; information
required by the accompanying instructions to the ``Schedule of Assets
Held for Investment'' about the current value of the plan's allocable
portion of the underlying assets and liabilities of the common or
collective trust; identifying information about the common or
collective trust including its name, employer identification number,
and any other information required by the instructions to the Schedule
of Assets Held for Investment Purposes and Schedule of Assets Disposed
of During Plan Year; and such other information as is required in the
separate statements and schedules of the annual report about the value
of the plan's units of participation in the common or collective trust
and transactions involving the acquisition and disposition by the plan
of units of participation in the common or collective trust.
0
5. In Sec. 2520.103-4, revise paragraph (c) as follows:
Sec. 2520.103-4 Exemption from certain annual reporting requirements
for assets held in an insurance company pooled separate account.
* * * * *
(c) Contents. (1) A plan that meets the requirements of paragraph
(b) of this section, and which invests in a pooled separate account
that files a Form 5500 report in accordance with Sec. 2520.103-9,
shall include in its annual report: Information required by the
instructions to Schedule H (Financial Information) about the current
value of and net investment gain or loss relating to the units of
participation in the pooled separate account held by the plan;
identifying information about the pooled separate account including its
name, employer identification number, and any other information
required by the instructions to the Schedule of Assets Held for
Investment Purposes and Schedule of Assets Disposed of During Plan
Year; and such other information as is required in the separate
statements and schedules of the annual report about the value of the
plan's units of participation in the pooled separate account and
transactions involving the acquisition and disposition by the plan of
units of participation in the pooled separate account.
(2) A plan that meets the requirements of paragraph (b) of this
section and which invests in a pooled separate account that does not
file a Form 5500 report in accordance with Sec. 2520.103-9, shall
include in its annual report: Information required by the instructions
[[Page 47530]]
to Schedule H (Financial Information) about the current value of and
the net investment gain or loss relating to the units of participation
in the pooled separate account held by the plan; information required
by the accompanying instructions to the ``Schedule of Assets Held for
Investment'' about the current value of the plan's allocable portion of
the underlying assets and liabilities of the pooled separate account;
identifying information about the pooled separate account including its
name, employer identification number, and any other information
required by the instructions to the Schedule of Assets Held for
Investment Purposes and Schedule of Assets Disposed of During Plan
Year; and such other information as is required in the separate
statements and schedules of the annual report about the value of the
plan's units of participation in the pooled separate account and
transactions involving the acquisition and disposition by the plan of
units of participation in the pooled separate account.
0
6. In Sec. 2520.103-6, revise paragraph (d) to read as follows:
Sec. 2520.103-6 Definition of reportable transaction for annual
return/report.
* * * * *
(d) Contents. (1) The schedule of reportable transactions shall be
filed in the format and include information as described in the
instructions for the Form 5500 Annual Return/Report of Employee Benefit
Plan.
(2) [Removed]
0
7. In Sec. 2520.103-8, revise paragraphs (a) and (c) and add new
paragraphs (d) and (e) to read as follows:
Sec. 2520.103-8 Limitation on scope of accountant's examination.
(a) General. Under the authority of section 103(a)(3)(C) of the
Act, the examination and report of an independent qualified public
accountant need not extend to any statement or information prepared and
certified by a bank or similar institution or insurance carrier
provided the certification meets the requirements of paragraph (d) of
this section.
* * * * *
(c) Excluded information. Any statements or information certified
to by a bank or similar institution or insurance carrier described in
paragraph (b) of this section, provided that the statements or
information regarding assets so held are prepared and certified to by
the bank or insurance carrier in accordance with the requirements of
(d) of this section and Sec. 2520.103-5.
(d) Contents and manner. The certification described in paragraph
(a) of this section shall:
(1) Appear on a separate document from the list of plan assets
covered by the certification;
(2) Identify the bank or insurance company holding the plan's
assets;
(3) Describe the manner in which the bank or insurance company is
holding the assets covered by the certification;
(4) State whether the bank or insurance company is providing
current value information regarding the assets covered by the
certification in accordance with 2520.103-5, and if so, state that the
assets for which current value is being certified are separately
identified in the list of assets covered by the certification;
(5) If current value is not being certified for all of the assets
covered by the certification, include a caution that the certification
is not certifying current value information and the asset values
provided by the bank or insurance company may not be suitable for use
in satisfying the plan's obligation to report current value information
on the Form 5500 Annual Return/Report; and
(6) If the certification is being provided by an agent on behalf of
the bank or insurance company, a statement certifying that the person
providing the certification is an authorized agent acting on behalf of
the bank or insurance company and affirming that the bank or insurance
company is taking responsibility for the accuracy and completeness of
the certification and the underlying records used as a basis for the
information being certified.
(e) The administrator of a plan which meets the requirements of
paragraph (b) of this section, and which is not required to have
covered by the accountant's examination or report any of the
information described in paragraph (c) of this section shall attach to
the Form 5500 Annual Return/Report of Employee Benefit Plan the
certification of investment information created by certain banks or
insurance companies in accordance with the requirements of paragraph
(d) of this section to comply with the limited scope audit
requirements.
0
8. In Sec. 2520.103-10, revise paragraphs (b)(1)(i) and (2)(i) to read
as follows:
Sec. 2520.103-10 Annual report financial schedules.
* * * * *
(b) * * *
(1) * * *
(i) A schedule of all assets held for investment purposes at the
end of the plan year (see Sec. 2520.103-11) with assets aggregated and
identified as described in the instructions to the Form 5500 Annual
Return/Report of Employee Benefit Plan.
* * * * *
(2) Assets disposed of during the plan year. (i) A schedule of all
assets disposed of during the plan year (see Sec. 2520.103-11) with
assets aggregated and identified as described in the instructions to
the Form 5500 Annual Return/Report of Employee Benefit Plan.
* * * * *
0
9. In Sec. 2520.104-20, revise paragraph (b)(1) to read as follows:
Sec. 2520.104-20 Limited exemption for certain small welfare plans.
* * * * *
(b) * * *
(1) Which have fewer than 100 participants at the beginning of the
plan year, and do not provide benefits consisting of medical care as
defined in section 733(a)(2) of the Act;
* * * * *
0
10. In Sec. 2520.104-26, revise paragraph (b) to read as follows:
Sec. 2520.104-26 Limited exemption for certain unfunded dues financed
welfare plans maintained by employee organizations.
* * * * *
(b) Application. This exemption applies only to welfare benefit
plans that do not provide benefits consisting of medical care as
defined in section 733(a)(2) of the Act that are maintained by an
employee organization, as that term is defined in section 3(4) of the
Act, paid out of the employee organization's general assets, which are
derived wholly or partly from membership dues, and which cover employee
organization members and their families.
* * * * *
0
11. Revise Sec. 2520.104-42 to read as follows:
Sec. 2520.104-42 Waiver of certain actuarial information in the
annual report.
Under the authority of section 104(a)(2)(A) of ERISA, the
requirement of section 103(d)(6) of ERISA that the annual report
include as part of the actuarial statement (Schedule SB) the present
value of all of the plan's liabilities for nonforfeitable pension
benefits allocated by termination priority categories, as set forth in
section 4044 of title IV of ERISA, and the actuarial assumptions used
in these computations, is waived.
0
12. In Sec. 2520.104b-10, revise the Appendix to Sec. 2520.104b-10 to
read as follows:
[[Page 47531]]
Sec. 2520.104b-10 Summary annual report.
* * * * *
Appendix to Sec. 2520.104B-10--The Summary Annual Report (SAR) Under
ERISA: A Cross-Reference to the Annual Report
------------------------------------------------------------------------
Form 5500-SF line
SAR Item Form 5500 line items items
------------------------------------------------------------------------
A. Pension Plan (defined contribution pension benefit plans and defined
benefit pension plans that do not furnish the annual funding notice
under 29 CFR 2520.101-4)
------------------------------------------------------------------------
1. Funding arrangement...... Form 5500-10a....... Line 13a.
2. Total plan expenses...... Sch. H--2j.......... Line 10h.
3. Administrative expenses.. Sch. H--2i(12)(C)... Line 10f.
4. Benefits paid............ Sch. H--2e(4)....... Line 10d.
5. Other Expenses........... Sch. H--Subtract the Line 10g.
sum of 2e(4) &
2i(12)(C) from 2j.
6. Total Participants at end Form 5500--7f....... Line 7f.
of plan year.
7. Value of plan assets
(net):
a. end of plan year..... Sch. H--1l [Col. Line 9c [Col. (b)].
(b)].
b. beginning of plan Sch. H--1l [Col. Line 9c [Col. (a)].
year. (a)].
8. Changes in Net Assets.... Sch. H--Subtract 1l Line 9c-Subtract
[Col. a] from 11 [Col. a] from [Col.
[Col. b]. b].
9. Total Income............. Sch. H--2d.......... Line 10c.
a. Employer Sch. H--2a(1)(A, & Line 10a(1)(A).
contributions. 2a(2) if applicable.
b. Employee Sch. H--2a(1)(B), & Line 10a(1)(B).
contributions. 2a(2) if applicable.
c. Gains (losses) from Sch. H--2c(4)(C).... Not applicable.
sale of assets.
d. Earnings from Sch. H--Subtract the Line 10b.
investments. sum of 2a(3) and
2c(4)(C) from 2d.
10. Name of insurance Schs. A--1a......... Not applicable.
carriers.
11. Total insurance premiums Sch. A--5b (total of Not applicable.
all contracts).
12. Unpaid minimum required
contribution (S-E plans or
Defined contribution plans)
or Funding deficiency (ME
plans):
a. S-E Defined benefit Sch. SB--43......... Same.
plans.
b. ME Defined benefit Sch. MB--10......... Not applicable.
plans.
c. Defined contribution Sch. R--7c, if not Line 16b.
plans. zero.
------------------------------------------------------------------------
B. Welfare Plan
------------------------------------------------------------------------
1. Name of insurance Schs. A--1a......... Not applicable.
carriers.
2. Total (experience rated Schs. A--Sum of Not applicable.
and non-experienced rated) 9a(1) and 10a
insurance premiums. (total of all
contracts).
3. Experience rated premiums Schs. A--9a(1) Not applicable.
(total of all
contracts).
4. Experience rated claims.. Schs. A--9b(4) Not applicable.
(total of all
contracts).
5. Value of plan assets
(net).
a. end of plan year..... Sch. H--1l [Col. Line 9c [Col. (b)].
(b)].
b. beginning of plan Sch. H--1l [Col. Line 9c [Col. (a)].
year. (a)].
6. Changes in Net Assets.... Sch. H--Subtract 1l Line 9c--Subtract
[Col. a] from [Col. [Col. a] from [Col.
b]. b].
7. Total Income............. Sch. H--2d.......... Line 10c.
a. Employer Sch. H--2a(1)(A) & Line 10a(1)(A) if
contributions. 2a(2) if applicable. applicable.
b. Employee Sch. H--2a(1)(B) & Line 10a(1)(B) if
contributions. 2a(2) if applicable. applicable.
c. Gains (losses) from Sch. H--2c(4)(C).... Not applicable.
sale of assets.
d. Earnings from Sch. H--Subtract the Line 10b.
investments. sum of 2a(3) and
2c(4)(C) from 2d.
8. Total plan expenses...... Sch. H--2j.......... Line 10h.
9. Administrative expenses.. Sch. H--2i(12)(C)... Line 10f.
10. Benefits paid........... Sch. H--2e(4)....... Line 10d.
11. Other Expenses.......... Sch. H--Subtract the Line 10g.
sum of 2e(4) &
2i(12)(C) from 2j.
------------------------------------------------------------------------
PART 2590 --RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
13. The authority citation for Part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Pub. L.104-191, 110 Stat. 1936; sec. 401(b), Pub. L.
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
Subpart C--Other Requirements
0
14. Add Sec. Sec. 2590.715-2715A and 2590.715-2717 to Subpart C to
read as follows:
Sec. 2590.715-2715A Provision of additional information.
A group health plan that complies with the requirements of Sec.
2520.103-1 of this Chapter and any implementing guidance (including
filing any required schedules to the annual report required by Sec.
2520.103-1) satisfies the requirements of PHS Act section 2715A, as
incorporated in ERISA.
[[Page 47532]]
Sec. 2590.715-2717 Ensuring the quality of care.
A group health plan that complies with the requirements of Sec.
2520.103-1 of this Chapter and any implementing guidance (including
filing any required schedules to the annual report required by Sec.
2520.103-1) satisfies the requirements of PHS Act section 2717, as
incorporated in ERISA.
Signed at Washington, DC, this 20th day of June 2016.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, U.S.
Department of Labor.
[FR Doc. 2016-14892 Filed 7-11-16; 4:15 pm]
BILLING CODE 4510-29-P
