2008 Final Rule - Summary of Changes

Friday,
November 16, 2007

Part II

Department of Labor
Employee Benefits Security
Administration
29 CFR Part 2520

Department of the
Treasury
Internal Revenue Service

Pension Benefit
Guaranty
Corporation
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Annual Reporting and Disclosure;
Revision of Annual Information Return/
Reports; Final Rule and Notice

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
Department of Labor, (202) 693–8523
(not a toll-free number).
SUPPLEMENTARY INFORMATION:

DEPARTMENT OF LABOR
Employee Benefits Security
Administration

A. Background

29 CFR Part 2520
RIN 1210–AB06

Annual Reporting and Disclosure
Employee Benefits Security
Administration, Labor.
ACTION: Final rule.

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AGENCY:

SUMMARY: This document contains
amendments to Department of Labor
regulations relating to annual reporting
and disclosure requirements under Part
1 of Subtitle B of Title I of the Employee
Retirement Income Security Act of 1974,
as amended (ERISA). The amendments
contained in this document are
necessary to conform the annual
reporting and disclosure regulations to
revisions to the Form 5500Annual
Return/Report of Employee Benefit
Plan, including a new Form 5500–SF
(Short Form or Short Form 5500), filed
for employee pension and welfare
benefit plans under ERISA and the
Internal Revenue Code of 1986, as
amended (Code). The changes to the
Form 5500 forms and implementing
regulatory amendments are intended to
facilitate the transition to an electronic
filing system, reduce and streamline
annual reporting burdens, especially for
small businesses, and update the annual
reporting forms to reflect current issues,
agency priorities and new requirements
under the Pension Protection Act of
2006. Some of the forms revisions apply
on a transitional basis for the 2008
reporting year before all of the form
revisions are fully implemented as part
of the switch under the ERISA Filing
Acceptance System (EFAST) to a wholly
electronic filing system for the 2009
reporting year. The current effective
date of the electronic filing requirement
under 29 CFR 2520.104a-2 also is being
postponed in this document to apply to
plan years beginning on or after January
1, 2009. The regulatory amendments
will affect the financial and other
information required to be reported and
disclosed by employee benefit plans
filing the Form 5500 Annual Return/
Report of Employee Benefit Plan,
including the Form 5500–SF, under
Title I of ERISA.
DATES: This rule is effective January 15,
2008.
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Goodman or Michael I.
Baird, Office of Regulations and
Interpretations, Employee Benefits
Security Administration, U.S.

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Under Titles I and IV of the Employee
Retirement Income Security Act of 1974,
as amended (ERISA), and the Internal
Revenue Code, as amended (Code),
pension and other employee benefit
plans generally are required to file
annual returns/reports concerning,
among other things, the financial
condition and operations of the plan.
Filing the Form 5500, ‘‘Annual Return/
Report of Employee Benefit Plan,’’
together with any required attachments
and schedules (Form 5500 Annual
Return/Report) through the ERISA
Filing Acceptance System (EFAST)
generally satisfies these annual
reporting requirements. The Form 5500
Annual Return/Report is the primary
source of information concerning the
operation, funding, assets, and
investments of pension and other
employee benefit plans. In addition to
being an important disclosure document
for plan participants and beneficiaries,
the Form 5500 Annual Return/Report is
a compliance and research tool for the
Department of Labor (Department),
Internal Revenue Service (IRS), and the
Pension Benefit Guaranty Corporation
(PBGC) (collectively, the Agencies) and
a source of information and data for use
by other federal agencies, Congress, and
the private sector in assessing employee
benefit, tax, and economic trends and
policies.
On July 21, 2006, the Agencies
published a notice of proposed forms
revisions (July 2006 Proposal) with
changes to the Form 5500 Annual
Return/Report for the 2008 reporting
year. 71 FR 41615. The proposed form
changes were intended to: facilitate the
transition to a wholly electronic filing
system for the 5500 Forms, including
removal of IRS-only schedules; reduce
and streamline annual reporting
burdens, especially for small businesses,
with the establishment of a new Short
Form 5500; and update the annual
reporting forms to reflect current issues
and agency priorities, including
enhanced reporting of plan fees and
expenses. The Department also
published a final rule requiring
electronic filing of the Form 5500
Annual Return/Report for plan years
beginning January 1, 2008 (Electronic
Filing Rule). 71 FR 41359 (July 21,
2006). On December 11, 2006, the
Agencies published a Notice of
Supplemental Proposed Forms
Revisions (Supplemental Notice). The
Supplemental Notice was necessary to

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make changes to the Form 5500 Annual
Return/Report required by the Pension
Protection Act of 2006, Pub. L. 109–280,
120 Stat. 780 (2006), enacted on August
17, 2006 (PPA). 71 FR 71562.
The Department received 38 comment
letters on the July 2006 Proposal from
representatives of employers, plans, and
plan service providers.1 It received
seven comments on the Supplemental
Notice. Copies of the comments are
posted on the Department’s Web site at
http://www.dol.gov/ebsa/regs.
The preamble to this Notice outlines
the final amendments being adopted to
the Department’s annual reporting
regulations to reflect the changes being
adopted to the Form 5500 Annual
Return/Report, the Form 5500–SF
‘‘Short Form Annual Return/Report of
Small Employee Benefits Plan’’ (Form
5500–SF or Short Form 5500), and the
required attachments and schedules
(collectively, the 5500 Forms) published
simultaneously. A comprehensive
discussion of the changes to the 5500
Forms and instructions is in a separate
notice of adoption of final revisions to
the annual report/return forms (Forms
Revision Notice) that is being published
in today’s Federal Register. To avoid
unnecessary duplication, that
discussion is incorporated herein by
reference and only a general summary of
the form and instruction changes is
included in this preamble as
background for the required cost/benefit
and regulatory impact analyses.
B. Discussion of the Revisions to 29
CFR Part 2520
The public comments generally did
not directly address the proposed
regulations themselves. Rather, the
comments were addressed to the scope
and specifics of the proposed forms and
instruction changes. As described more
fully in the Form Revision Notice, the
public comments generally approved of
the Agencies’ streamlining of the annual
reporting requirements through the
adoption of the new Form 5500–SF and
eliminating the IRS-only schedules from
the Form 5500 Annual Return/Report.
The comments also generally supported
the objectives of updating the annual
return/report filing requirements to
reflect current issues and enhancing
transparency and accountability,
although some commenters expressed
concerns about the benefits, feasibility,
and cost of complying with some of the
proposed changes, particularly the
1 The Department also received a comment letter
from the United States Department of Commerce,
Economic and Statistics Administration, Bureau of
Economic Analysis (BEA), indicating that the BEA
relies on the information collected in the Form 5500
to prepare certain statistics.

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
proposed changes to fee and expense
reporting and the extension of the
normal annual reporting requirements
to Code section 403(b) plans. Some
commenters also suggested postponing
implementation of the proposed
changes to allow filers and service
providers more time to implement
administrative procedures and alter
information systems in order to comply
with the new annual reporting
requirements. The comments included
suggestions for various technical
adjustments of the forms and
instructions to clarify and explain the
new annual reporting requirements.
The following sections of this
preamble describe the final regulations
being adopted by the Department to
implement the form and instruction
changes, including a postponement of
the current effective date of the
Electronic Filing Rule to make it
applicable one year later—for plan and
reporting years beginning on or after
January 1, 2009.
1. Section 2520.103–1
The Department’s annual reporting
regulations, including 29 CFR
2520.103–1, generally are promulgated
under the provisions of ERISA that
authorize the creation of limited
exemptions and simplified reporting
and disclosure for welfare plans under
ERISA section 104(a)(3), simplified
annual reports under ERISA section
104(a)(2)(A) for pension plans that cover
fewer than 100 participants, and
alternative methods of compliance for
all pension plans under ERISA section
110(a). See also ERISA section 505. To
accommodate the form and instruction
changes set forth in the Forms Revision
Notice, regulatory amendments to 29
CFR 2520.103–1 are being made to
update the references in the regulation
to the annual return/report as revised.

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(a) Short Form 5500 (Eligible Small Plan
Filers)
A new two-page Form 5500–SF is
being adopted to streamline the
reporting requirements for certain small
pension and welfare plans (generally,
plans with fewer than 100 participants)
that meet certain conditions regarding
their investments being held or issued
by regulated financial institutions and
that have a readily determinable fair
market value as described in the final
regulation at section 2520.103–
1(c)(2)(ii)(C). The Form 5500–SF is also
being adopted to provide a simplified
report for plans with fewer than 25
participants as required by section

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1103(b) of the PPA.2 A detailed
description of the Form 5500–SF, and a
facsimile of the form and instructions
are in the Forms Revision Notice being
published in today’s Federal Register.
Substantially all of the information
required to be reported by employee
benefit plans on the Short Form 5500
currently is included in the more
comprehensive information required to
be reported as part of the Form 5500
simplified report currently available to
small plans. The addition of the Short
Form 5500 does not eliminate the
existing simplified report available for
small plans but, rather, adds the Short
Form 5500 as another simplified
reporting option for eligible small plans.
As more fully described in the Forms
Revision Notice, the IRS has advised the
Department that, although there are no
mandatory electronic filing
requirements for the 5500 Forms under
the Code or the regulations issued
thereunder, the electronic filing of the
5500 Forms, in accordance with the
instructions and such other guidance as
the Secretary of the Treasury may
provide, will be treated as satisfying the
annual filing and reporting
requirements under Code sections
6058(a) and 6059(a). In addition, to ease
the burdens on plans that are not subject
to Title I of ERISA that file the Form
5500–EZ to satisfy the annual reporting
and filing obligations imposed by the
Code, the IRS has advised that it will
permit certain Form 5500–EZ filers to
satisfy the requirement to file the Form
5500–EZ with the IRS by filing the Short
Form 5500 electronically through the
EFAST processing system. Eligible Form
5500–EZ filers thus will have electronic
filing and paper filing options. The
electronic filing option will allow
eligible Form 5500–EZ filers to
complete and electronically file with
EFAST selected information on the
Short Form 5500. Those Form 5500–EZ
filers will also be able to choose instead
to file a Form 5500–EZ on paper with
the IRS.3
2 The PPA’s requirement to provide simplified
reporting for plans with fewer than 25 participants
is effective for plan years beginning after December
31, 2006. The Short Form 5500 will not be available
for use, however, until the move to the fully
electronic filing system for plan years beginning
after December 31, 2008. For the interim two years,
as discussed in more detail in the Forms Revision
Notice, the Agencies are offering to plans with
fewer than 25 participants that would meet the
eligibility requirements for the Short Form 5500 a
simplified reporting option within the context of
the existing annual report forms.
3 Under the voluntary electronic filing option,
Form 5500–EZ filers filing an amended return for
a plan year will have to file the amended return
electronically using the Form 5500–SF if they
initially filed electronically for the plan year and
will have to file with the IRS using the paper Form

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(b) Removal of IRS-Only Schedules from
the 5500 Forms Annual Return/Report
For plan years beginning after
December 31, 2008, the 5500 Forms will
no longer include any of the schedules
that are required only for the IRS. This
change was made to help effectuate the
adoption of a wholly electronic filing
requirement for the 5500 Forms.
Accordingly, the Schedule E (ESOP
Annual Information) and the Schedule
SSA (Annual Registration Statement
Identifying Separated Participants With
Deferred Vested Benefits) will no longer
be required to be filed as part of the
5500 Forms.4 Three questions on
employee stock ownership plan (ESOP)
information formerly reported on the
Schedule E will now be on the Schedule
R (Retirement Plan Information). The
IRS also has advised the Department
that it intends that plan administrators,
employers, and certain other entities
that are subject to additional filing and
reporting requirements under the Code
will have to continue to satisfy any
applicable requirements in accordance
with IRS revenue procedures,
regulations, publications, forms, and
instructions.
(c) Schedule A (Insurance Information)
Schedule A must be attached to the
Form 5500 Annual Return/Report for an
ERISA-covered plan if any pension or
welfare benefits under the plan are
provided by, or if the plan holds any
investment contracts with, an insurance
company, insurance service or other
similar organization. As with the
proposal, the Schedule A data elements
are largely unchanged from the current
form. The Department adopted in the
final Schedule A the proposed line item
to give administrators a specific space
on the Schedule A to report a failure by
an insurance carrier to provide
necessary information. Certain other
technical changes and clarifications
were made to the Schedule A and its
instructions to improve Schedule A as
a vehicle for disclosure of insurance fees
and commissions.
5500–EZ if they filed for the plan year with the IRS
on a paper Form 5500–EZ.
4 Schedule P (Annual Return of Fiduciary of
Employee Benefit Trust) was removed from Form
5500 filings beginning with the 2006 plan year
(2005 plan year for Form 5500–EZ) in anticipation
of the move to electronic filing. See, Announcement
2007–63, 2007–30 I.R.B 65. In addition, Schedule
T (Qualified Pension Plan Coverage Information)
was removed from Form 5500 filings beginning
with the 2005 plan year. The IRS notes that this
change was not intended to effect the applicable
required or optional nondiscrimination testing
(including the testing options described in Revenue
Procedure 93–42), 1993–2 C.B. 540.

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(d) Schedule SB (Single-Employer
Defined Benefit Plan Actuarial
Information) and Schedule MB
(Multiemployer Defined Benefit Plan
and Certain Money Purchase Plan
Actuarial Information) (Formerly
Schedule B)
Actuarial schedules are required for
defined benefit pension plans subject to
the minimum funding standards (see
Code section 412 and Part 3 of Title I
of ERISA). Schedules SB and MB will be
required to be filed as a non-standard
attachment for the 2008 plan year to
meet the requirements of the PPA and,
for the 2009 plan year and later, will be
filed in the same manner as the other
schedules under the electronic filing
system.
The Schedule SB must be filed for
single-employer defined benefit pension
plans (including multiple-employer
defined benefit pension plans).5 The
Schedule SB and accompanying
attachments will capture identifying
information about the plan and plan
sponsor, the type of plan, and prior year
plan size. It includes basic information
about plan assets, number of
participants, funding target information,
and a statement by an enrolled actuary.
It consists of basic actuarial worksheets
designed to allow the Agencies to
evaluate the plan’s compliance with the
funding requirements as amended by
sections 101, 102, 111, and 112 of the
PPA, and to ensure that the reporting
requirements under ERISA, as amended
by section 503 of the PPA, are included
on the schedule. The material is divided
into sections consisting of ‘‘Basic
information,’’ ‘‘Beginning of year
carryover and prefunding balances,’’
‘‘Funding percentages,’’ ‘‘Contributions
and liquidity shortfalls,’’ ‘‘Assumptions
used to determine funding target and
target normal cost,’’ ‘‘Miscellaneous
items,’’ ‘‘Reconciliation of unpaid
minimum required contributions for
prior years,’’ and ‘‘Minimum required
contribution for current year.’’ Airlines
that have frozen pension plans electing
the alternate funding schedule and
plans for which the effective date of the
new PPA funding rules is delayed
(PBGC settlement plans, certain defense
contractors, certain rural electrical
cooperatives, etc.) will not be required
5 Unlike multiemployer plans within the meaning
of ERISA sections 3(37) and 4001(a)(3) to which
more than one employer is required to contribute,
which must be maintained pursuant to one or more
collective bargaining agreements between one or
more employee organizations and more than one
employer, and which must satisfy other
requirements prescribed in regulations issued by
the Department at 29 CFR 2510.3–37, multipleemployer plans are plans that cover the employees
of two or more employers but are treated as singleemployer plans for various purposes under ERISA.

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to fill out all of these sections. Instead,
additional information related to the
applicable funding rules for such plans
will be provided as an attachment.
Schedule MB must be filed for all
multiemployer defined benefit plans
and money purchase plans (including
target benefit plans) that are currently
amortizing waivers. Schedule MB is
similar to the existing Schedule B. New
items that have been added include: (1)
Accrued liability determined using the
unit credit cost method; (2) information
about whether the plan is in
endangered, seriously endangered, or
critical status, and, if so, whether the
plan is complying with the applicable
requirements for its funding
improvement or rehabilitation plan; and
(3) information required by PPA section
503.
(e) Schedule C (Service Provider
Information)
Schedule C generally must be
attached to the Form 5500 Annual
Return/Report filed by large plan filers
to report persons who rendered services
to the plan or in connection with
transactions with the plan received,
directly or indirectly, $5,000 or more in
compensation during the plan year, and
to report terminations of plan
accountants or enrolled actuaries.
Consistent with recommendations of the
ERISA Advisory Council Working
Groups and the Government
Accountability Office (GAO), EBSA has
concluded that more information should
be disclosed on the Form 5500 Annual
Return/Report regarding plan fees and
expenses. See ERISA Advisory Council
Report of the Working Group on Plan
Fees and Reporting on Form 5500
(November 10, 2004) (available on the
Internet at: http://www.dol.gov/ebsa/
publications); Private Pensions:
Government Actions Could Improve the
Timeliness and Content of Form 5500
Pension Information, GAO–05–491
(available on the Internet at: http://
www.gao.gov).
Schedule C reporting continues to be
limited to large plan filers and the
$5,000 reporting threshold has been
retained. As in the proposal, the
Schedule C consists of three parts. Part
I of the Schedule C requires, subject to
an alternative reporting option
described below, the identification of
each person who received, directly or
indirectly, $5,000 or more in total
compensation (i.e., money or anything
else of value) in connection with
services rendered to the plan or their
position with the plan during the plan
year. To provide more informative
disclosures about the types of fees being
paid to or received by plan service

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providers, the final Schedule C requires
direct compensation paid by the plan to
be reported on a separate line item from
indirect compensation received from
sources other than the plan or plan
sponsor. In addition, in light of the fact
that particular service providers may
receive indirect compensation of
various types from various sources, the
final forms revisions expand the codes
currently required on the Schedule C to
better identify the types of services
provided and to also require codes for
types of fees received by the service
provider.
As noted above, the final form
revisions includes an alternative
reporting option for service providers
whose only compensation in relation to
the plan is limited to ‘‘eligible indirect
compensation’’ ( certain specified types
of common investment related fees)
provided that written disclosure(s) are
furnished to the plan administrator,
including in electronic form, that
disclose the existence of the indirect
compensation; the services provided for
the indirect compensation or the
purpose for payment of the indirect
compensation; the amount (or estimate)
of the compensation or a description of
the formula used to calculate or
determine the compensation; and the
identity of the party or parties paying
and receiving the compensation. Where
a particular service provider received
only ‘‘eligible indirect compensation’’
for which the required disclosures were
provided, instead of providing
information on the service provider, the
Schedule C may report instead
identifying information on the person or
persons who provided the plan with the
required written disclosures.
With respect to service providers
required to be listed on the Schedule C
who received such eligible types of
indirect compensation for which the
written disclosures were not provided
or any other indirect compensation, the
Schedule C requires more detailed
information on the indirect
compensation, including, in the case of
certain key service providers,
information regarding the payor if the
service provider received during the
plan year indirect compensation from a
single source of $1,000 or more.
Although filers generally have the
option of reporting a formula used to
calculate indirect compensation
received instead of an actual dollar
amount or estimate, where a formula is
used to describe indirect compensation
received by one of the key service
providers, the amount of indirect
compensation is presumed to meet the
reporting thresholds for purposes of the
Schedule C reporting requirements.

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As noted above, the final Schedule C
includes a new Part II for plan
administrators to identify each service
provider that failed or refused to
provide the information necessary to
complete Part I of the Schedule C.
The third part of the Schedule C (Part
III) is the current Part II of the Schedule
C used for reporting termination
information on plan accountants and
enrolled actuaries.

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(f) Schedule R (Retirement Plan
Information)
As noted above, in light of the
removal of the Schedule E (ESOP
Annual Information), selected questions
from the Schedule E are being
incorporated into the Schedule R in
order to continue to collect certain
information regarding ESOPs as part of
the Form 5500 Annual Return/Report.
As in the proposal, Schedule R has
been modified to include additional
questions required by section 503 of
PPA and to collect information the
PBGC needs to enable it to properly
monitor the plans it insures. The new
Part V collects PPA-required
information on multiemployer defined
benefit plans and additional information
related to major contributing employers.
Asset allocation questions for large
defined benefit plans (1,000 or more
participants) are included in Part VI.
Such plans must provide a breakdown
of plan assets by type of investment
(stock, investment-grade debt, highyield debt, real estate, and other).
Information on the average duration of
combined investment-grade and highyield debt is also required. For this
purpose, duration may be determined
using any generally accepted
methodology. Although the ESOPrelated questions will not be on the
Schedule R until the shift to the wholly
electronic filing system effective for the
2009 plan year, the PPA-related
questions and the asset allocation
questions for the PBGC will be required
as a non-standard attachment to the
Schedule R for the 2008 plan year.
(g) Technical and Conforming Changes
for Forms and Instructions
Various other technical and
conforming changes are being adopted
as part of the final changes to the 5500
Forms. Several of the more significant
changes include: (1) Revision of the
instructions for the Form 5500 Annual
Return/Report and development of
instructions for the Short Form 5500 to
reflect the new structure of the returns/
reports and electronic filing
requirements; (2) addition of questions
regarding compliance with the
Department’s blackout notice regulation

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in 29 CFR 2510.101–3; (3) addition of a
compliance question on whether the
plan failed to pay benefits when due
under the plan; (4) expansion of the use
of codes to report plan feature
information on pension and welfare
benefit plans; (5) elimination of the
optional entry of the form preparer’s
name and employer identification
number (EIN); (6) requiring small plans
to report administrative expenses
separately from other expenses on the
Schedule I; (7) addition of a question on
whether any minimum funding amount
reported for a pension plan will be met
by the funding deadline; and (8)
adoption of a standard format for use in
connection with an independent
qualified public accountant (IQPA)
rendering an opinion on the
supplemental schedule information on
Line 4a of Schedule H and I relating to
delinquent participant contributions.
(h) PPA-Required Simplified Reporting
for Plans With Fewer Than 25
Participants
As noted in the Forms Revision
Notice, section 1103(b) of the PPA
requires a simplified report for plans
with fewer than 25 participants to be
available for 2007 plan year filings, i.e.,
filings for plan years beginning after
December 31, 2006. To satisfy this
requirement, the Agencies proposed
giving plans covering fewer than 25
participants that would meet the
conditions for being eligible to file the
Short Form 5500—treating those
conditions as if they applied for 2007
plan year filings—the option of filing an
abbreviated version of the current Form
5500 Annual Return/Report for ‘‘small
plan’’ filers. The abbreviated version, to
a large extent, is an attempt to replicate,
within the context of the existing Form
5500 Annual Return/Report structure,
the information that would be required
to be reported on the Short Form 5500
by allowing certain schedules to be
excluded from the filing and requiring
only certain line items to be completed
on any required schedules. Although
the Department received a comment
suggesting that the Agencies satisfy the
PPA requirement by instituting the
Form 5500–SF for 2007 plan year
filings, the Department concluded that
approach would not be feasible or
appropriate given the costs that would
have been required to modify the
current EFAST system so that it could
process the Form 5500–SF. Rather, with
the additional deferral in the
implementation of the electronic filing
requirement, the proposed simplified
reporting option using the existing 5500
Forms for eligible plans with fewer than

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25 participants will be available for both
the 2007 and 2008 plan year filings.
Thus, for the 2007 and 2008 plan
years, plans with fewer than 25
participants that meet the eligibility
requirements for the Short Form 5500,
treating those conditions as if they
applied for 2007 and 2008 plan year
filings, will be permitted to satisfy the
annual reporting requirement by filing
on the appropriate year form and
schedules: (1) The Form 5500; (2) a
Schedule A for any insurance contracts
for which a Schedule A is required
under current rules, completing only
lines A, B, C, D and the insurance fee
and commission information in Part I;
(3) Schedule B for the 2007 plan year,
and, for the 2008 plan year, Schedule
MB for multiemployer defined pension
benefit plans and certain money
purchase plans, and Schedule SB for
single employer defined benefit pension
plans; (4) Schedule I; (5) Schedule R,
completing only lines A, B, C, D, and
Part II; and (6) Schedule SSA.
Additional detailed guidance regarding
this simplified reporting option is
included in the instructions to the 2007
Form 5500 and the instructions to the
2008 Form 5500.
The Department understands that
some eligible small plan filers may want
to wait until the implementation of the
Short Form 5500 for the 2009 plan year
in order to avoid having to make
changes to their annual reporting
systems and procedures for 2007 and
2008 plan year filings and then adjust
them again to start filing the Short Form
for the 2009 plan year. The above
simplified reporting alternative,
accordingly, is available for plans that
voluntarily take advantage of its
availability. Plans with fewer than 25
participants can instead continue to file
in accordance with the normal small
plan rules for the 2007 and 2008 plan
year.
(i) PPA-Required Actuarial Schedules
and Multiemployer Plan Reporting
The remaining PPA-required changes
in the 5500 Forms are the new actuarial
information schedules (Schedules SB
and MB), most of the questions on Part
V of the Schedule R—Additional
Information for Multiemployer Defined
Benefit Pension Plans, line 18 of the
Schedule R (certain liabilities to
participants and beneficiaries under two
or more pension plans), and line 7 of the
Form 5500 (number of employers
obligated to contribute to multiemployer
defined benefit plans).6 To comply with
6 For 2008, only multiemployer defined benefit
pension plans will be required to answer the new

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

the PPA, these reporting changes for
defined benefit and multiemployer
pension plans are being implemented
on a transitional basis under the current
EFAST system for 2008 plan year
annual reports. Plans required to file an
actuarial schedule will check the
Schedule B box on the 5500 Forms to
indicate that they are filing Schedule SB
or MB (for plan years beginning with the
2008 plan year) as an attachment to
their filing. Similarly, as to the new Part
V and line 18 on the Schedule R, and
the Form 5500 question for
multiemployer plans on the total
number of contributing employers, as
well as the new financial questions
needed by the PBGC, filers will be
directed in the instructions to include
answers to those questions as an
attachment to the Schedule R.7

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2. Section 2520.104a–2 Electronic
Filing of Annual Reports
The proposed revisions to the Form
5500 Annual Return/Report, which
include both those set forth in the
Agencies’ July 2006 Proposal and those
in the Supplemental Notice to address
changes required by the PPA, were part
of the Agencies’ move to a fully
electronic filing and processing system
to replace the existing largely paperbased EFAST system. As part of that
initiative, the Department published the
Electronic Filing Rule, establishing an
electronic filing requirement for the
Form 5500 Annual Return/Report and
the Form 5500–SF for plan years
beginning on or after January 1, 2008. 71
FR 41359. In adopting the final
Electronic Filing Rule, the Department
responded to public comments seeking
a postponement in the move to a wholly
electronic filing system by agreeing to a
deferral of the electronic filing mandate
for one year from the 2007 plan year to
the 2008 plan year. The Department
agreed to the deferral in order to ensure
an orderly and cost-effective migration
to an electronic filing system by both
the Department and annual report filers.
Under that deferral, the vast majority of
filers would have had until at least July
2009 to make any necessary adjustments
to accommodate the electronic filing of
their annual report because annual
question 7 on the 2009 Form 5500 (as a
nonstandard attachment), as mandated by the PPA,
but in 2009 and following years, all multiemployer
plans will be required to answer the question as
part of the electronic filing of the Form 5500, as
proposed in the July 2006 Proposal.
7 Because the 2007 forms will not include the
new PPA required questions, a caution was added
to the 2007 Form 5500 instructions to alert short
plan year filers required to complete the Schedule
SB, Schedule MB or the new Schedule R questions
that they will have to wait until the 2008 Forms and
instructions are publicly available for use for filing.

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reports generally are not required to be
filed until the end of the 7th month
following the end of the plan year.
Deferring the implementation date also
provided service providers, software
developers, and the Department
additional time to work through
electronic processing issues.
A significant percentage of the
commenters on the form revision
proposals, including several large
industry groups representing plan
sponsors and service providers, asked
for a further postponement in the
effective date of the forms changes, and
as a consequence, the electronic filing
requirement. The commenters
emphasized that the PPA, including its
new reporting and disclosure
obligations, would require many plans
and service providers to update existing
information management and
recordkeeping systems. They also
pointed out the certain of the changes in
the July 2006 proposal, especially the
enhanced fee disclosure requirements in
Schedule C and the increased reporting
by Code section 403(b) plans (described
below), would also require changes in
the way plans collect and keep plan
information. They argued that it would
be particularly burdensome to require
plans to transition to the new Form
5500 annual reporting obligations,
including the move to the wholly
electronic filing system, at the same
time as they were working to comply
with new PPA requirements. Also,
complications with the procurement
process and delays in completing the
2007 fiscal year appropriations
impacted the timing of the EFAST2
contract award.
The Department continues to believe
it is important for plans, service
providers, and the Agencies to have an
orderly and cost-effective migration to
the EFAST2 electronic filing system.
The Department, in conjunction with
the other Agencies, has decided to defer
for an additional one year the
implementation of annual reporting
forms changes not mandated by the
PPA. In determining to publish this
deferral in final form, the Department
considered section 553 of the
Administrative Procedure Act (APA),
which requires that an agency provide
for notice and comments prior to
promulgating substantive rules does not
apply when an agency, for good cause,
unless it determines that such
procedures are impractical, unnecessary
or contrary to the public interest. 5
U.S.C. 553(b)(A) and (B). The
Department has determined that in
order to effectuate an orderly migration
to the EFAST2 system, a deferral of the
final rule for one additional year is

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warranted without further notice and
comment.
First, the deferral is necessitated by
delays in the contracting process
beyond the Department’s control,
including the timing of the fiscal year
2007 budget appropriations, which
prevented a contract award in time to
build the new system to process 2008
plan year filings as contemplated in the
original rulemaking. The Agencies now
have, however, received the budgetary
authorization necessary to complete the
procurement process, have received
bids, and are actively pursuing the
process. As noted in the Department’s
FY 2008 Detailed Budget
Documentation, available on the
Internet at http://www.dol.gov, the
Department is on track for
implementing EFAST2 system on
January 1, 2010, to process filings for
the 2009 plan year.
Second, when implemented, the
elimination of paper filings in favor of
electronic filing will result not only in
significant improvements in the
timeliness and accuracy of information
available to workers, regulators and the
public about employee benefit plans
and result in operational improvements
and cost savings, a direct goal of the
President’s E-government initiative, but
it will also be used to fulfill information
collection and disclosure requirements
of the PPA, many of which apply for the
2008 plan year. Thus, additional delays
would negatively impact orderly and
cost-effective integration of the new
PPA requirements and the new EFAST2
system, in light of the PPA’s deadlines.
Third, publishing the deferral of the
effective date on an interim basis with
an opportunity for comment not only
could potentially interfere with the
contracting and budget process, but also
could also harm plans by leading them
to delay preparing for the move to the
new system, when it is not practical to
implement the new system either earlier
or later.
Accordingly, under the final
regulation, the electronic filing
requirement and all of the forms
changes, except for those mandated by
the PPA discussed in this Notice and
the Forms Revision Notice, will become
effective for all annual report filings
made under Part 1 of Title I of ERISA
for plan years (reporting years for nonplan filings) beginning on or after
January 1, 2009. To effectuate the
deferral of the electronic filing
requirement, this final rule includes an
amendment to the Electronic Filing Rule
published in the Federal Register on
July 21, 2006. Specifically, this final
rule amends the Department’s
regulation at 29 CFR 2520.104a–2 to

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
provide that the electronic filing
requirement is applicable for plan years
beginning on or after January 1, 2009.
Under this final rule, the vast majority
of filers will now have until at least July
2010 to complete any necessary
adjustments to accommodate the nonPPA required changes to the form and
those required for electronic filing of
their annual report because annual
reports generally are not required to be
filed until the end of the 7th month
following the end of the plan year.
3. Section 2520.104–44
Section 2520.104–44 and the current
Form 5500 Annual Return/Report
instructions provide for limited
reporting for pension plans that
exclusively use a tax deferred annuity
arrangement under Code section
403(b)(1), custodial accounts for
regulated investment company stock
under Code section 403(b)(7), or a
combination of both. The exemption in
section 2520.104–4(b)(3) is being
eliminated, with the result that Code
section 403(b) pension plans subject to
Title I will now be treated the same
under the regulations as any other Title
I pension plan for purposes of the
annual reporting requirements under
Title I of ERISA.

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

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Department has added the model notice
as an appendix to section 2520.104–46.8
5. Section 2520.104b–10
Section 104(b)(3) of ERISA provides
in part that, each year, administrators
must furnish to participants and
beneficiaries receiving benefits under a
plan SAR materials that fairly
summarize the plan’s annual report.
Section 2520.104b-10 sets forth the
requirements for the SAR used to satisfy
that requirement and prescribes formats
for such reports. The regulatory
amendments described in this Notice do
not include any change to the SAR
content requirements. In order to
facilitate compliance with the SAR
requirement for Short Form 5500 filers,
however, the Department is updating its
cross-reference guide to correspond the
line items of the SAR to the relevant
line items on the Form 5500 and Short
Form 5500. The cross-reference guide,
as before, would continue to be an
appendix to section 2520.104b-10.
C. Findings on the Revised 5500 Forms
as a Limited Exemption and Alternative
Method of Compliance
Section 104(a)(2)(A) of the Act
authorizes the Secretary of Labor
(Secretary) to prescribe by regulation
simplified reporting for pension plans
that cover fewer than 100 participants.
Section 104(a)(3) authorizes the
Secretary to exempt any welfare plan
from all or part of the reporting and
disclosure requirements of Title I of
ERISA or to provide simplified
reporting and disclosure if the Secretary
finds that such requirements are
inappropriate as applied to such plans.
Section 110 permits the Secretary to
prescribe for pension plans alternative
methods of complying with any of the
reporting and disclosure requirements if
the Secretary finds that: (1) The use of
the alternative method is consistent
with the purposes of Title I of ERISA,
provides adequate disclosure to plan
participants and beneficiaries, and
provides adequate reporting to the
Secretary; (2) application of the
statutory reporting and disclosure
requirements would increase costs to
the plan or impose unreasonable
8 The PPA requires defined benefit plans to
provide an Annual Funding Notice for plan years
beginning after January 1, 2008. Under the PPA,
plans that provide an Annual Funding Notice will
no longer have to provide an SAR. The Department
has a separate regulatory initiative regarding the
PPA-required Annual Funding Notice. The
Department anticipates that rulemaking will
provide that the enhanced disclosure required to be
eligible for the waiver of the requirement for an
audit by an independent qualified public
accountant be included in the Annual Funding
Notice for small pension plans providing that notice
instead of an SAR.

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64715

administrative burdens with respect to
the operation of the plan; and (3) the
application of the statutory reporting
and disclosure requirements would be
adverse to the interests of plan
participants in the aggregate. For
purposes of Title I of ERISA, the filing
of a completed Form 5500 Annual
Return/Report, including the filing by
eligible plans of the Short Form 5500, in
accordance with the instructions and
related regulations, generally would
constitute compliance with the
simplified report, limited exemption
and/or alternative method of
compliance in 29 CFR 2520.103–1. The
findings required under ERISA sections
104(a)(3) and 110 relating to the use of
the revised 5500 Forms as alternative
methods of compliance, simplified
report, and/or limited exemption from
the reporting and disclosure
requirements of Part 1 of Subtitle B of
Title I of ERISA are set forth below. In
revising the 5500 Forms and making the
amendments in this rulemaking, the
Department has attempted to balance
the needs of participants and
beneficiaries and the Department to
obtain information necessary to protect
ERISA rights and interests with the
needs of administrators to minimize
costs attendant with the reporting of
information to the federal government.
The Department makes the following
findings under sections 104(a)(3) and
110 of the Act with regard to the use of
the revised 5500 Forms as a simplified
report, alternative method of
compliance, and/or limited exemption
pursuant to 29 CFR 2520.103–1(b).
The use of the revised 5500 Forms is
consistent with the purposes of Title I
of ERISA and provides adequate
disclosure to participants and
beneficiaries and adequate reporting to
the Secretary. While the information
that would be required to be reported on
or in connection with the revised 5500
Forms deviates, as before, in some
respects, from that delineated in section
103 of the Act, the information needed
for adequate disclosure and reporting
under Title I is required to be included
on or as part of the 5500 Forms.
The use of the 5500 Forms will relieve
plans subject to the annual reporting
requirements from increased costs and
unreasonable administrative burdens by
providing a standardized format that
facilitates reporting, eliminates
duplicative reporting requirements, and
simplifies the content of the annual
report in general. The 5500 Forms are
intended to reduce further the
administrative burdens and costs
attributable to compliance with the
annual reporting requirements.

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

Taking into account the above, the
Department has determined that
application of the statutory annual
reporting and disclosure requirements
without the availability of the revised
5500 Forms and the new Schedules SB
and MB, would be adverse to the
interests of participants in the aggregate.
The revised 5500 Forms provide for the
reporting and disclosure of basic
financial and other plan information
described in section 103 of ERISA in a
uniform, efficient, and understandable
manner, thereby facilitating the
disclosure of such information to plan
participants and beneficiaries.
Finally, the Department has
determined under section 104(a)(3) of
ERISA that a strict application of the
statutory reporting requirements,
without taking into account the
revisions to the 5500 Forms would be
inappropriate in the context of welfare
plans for the same reasons discussed
above (i.e., the streamlined forms reduce
filing burdens without impairing
enforcement, research, and policy
needs, while at the same time providing
adequate disclosure to participants and
beneficiaries).
D. Regulatory Impact Analysis
Executive Order 12866 Statement
Under Executive Order 12866, the
Department must determine whether a
regulatory action is ‘‘significant’’ and
therefore subject to the requirements of
the Executive Order and review by the
Office of Management and Budget
(OMB). Section 3(f) of Executive Order
12866 defines a ‘‘significant regulatory
action’’ as an action that is likely to
result in a rule’s (1) having an annual

effect on the economy of $100 million
or more, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order.
Pursuant to the terms of the Executive
Order, it has been determined that this
regulatory action is likely to have an
annual effect on the economy of
approximately $100 million. Therefore,
this action is being treated as
‘‘economically significant’’ and subject
to OMB review under section 3(f)(1) of
Executive Order 12866. The Department
accordingly has undertaken to assess the
costs and benefits of this regulatory
action in satisfaction of the applicable
requirements of the Executive Order and
provides herein a summary discussion
of its assessment.
The amendments contained in this
final rule conform the annual reporting
and disclosure regulations promulgated
under Title I of ERISA to final revisions
to the 5500 Forms and instructions
being issued simultaneously with this
final rule. Inasmuch as the amendments
contained in this final rule implement
the forms revisions contained in the

Forms Revision Notice being published
simultaneously with this final rule, the
Department’s assessment pursuant to
the Executive Order combines the
regulatory amendments and the form
revisions, treating these changes as a
coordinated regulatory action. The
Department’s assessment, described
below, takes into account the public
comments received in response to the
July 2006 Proposal and the
Supplemental Notice, which are
discussed in detail in the preamble of
the Forms Revision Notice. That
discussion, to which reference is made
throughout this assessment, is hereby
incorporated into this assessment by
reference.
In accordance with OMB Circular A–
4 (available at http://
www.whitehouse.gov/omb/circulars/
a004/a-4.pdf), Table 1 below depicts an
accounting statement showing the
Department’s assessment of the net
annual cost reduction associated with
the provisions of the final rule and
forms revisions. Over the next ten years,
the Department anticipates an average
annual reduction in costs of $94 million
when using a 3% discount rate as
suggested by OMB Circular A–4.9 As
described more fully below, the
Department believes that the impact of
these changes will affect individual
employee benefit plans disparately,
depending on their individual
circumstances. While most employee
benefit plans are likely to experience a
decrease in costs, some plans may see
an increase in costs due to these rules.
Further information about the relative
increase or decrease in costs likely for
particular plan types is described below.

TABLE 1.—ACCOUNTING STATEMENT: ESTIMATED COST REDUCTION FROM THE CURRENT REPORTING REQUIREMENTS TO
THE 2009 REPORTING REQUIREMENTS
[In millions]
Estimates
Category

Primary
estimate

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Benefits:
Annualized Monetized ......................................................
($millions/year) .................................................................
Annualized Quantified ......................................................
Qualitative .........................................................................
Costs:
Annualized Monetized ......................................................
($millions/year) .................................................................
Annualized Quantified ......................................................
Qualitative .........................................................................

9 A 7% units discount rate increases the estimate
of the average annual reduction to $97 million. Both

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Low
estimate

Units
High
estimate

Frm 00008

Discount
rate
(percent)

Period
covered

94.3
97.1
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

2009
2009
................
................

7
3
7
3

2007 and later.
2007 and later.

14.8
15.4
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

2009
2009
................
................

7
3
7
3

2007 and later.
2007 and later.

annualized estimates are based on aggregate cost
savings of $25.6 million in 2007, $30.2 million in

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dollar

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2008, and $97.4 million, starting in 2009 (all in
2009 Dollars).

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
Need for Regulatory Action
As described in the preambles to the
July 2006 Proposal and the
Supplemental Notice, the Department is
promulgating these amendments of the
annual reporting regulations, the
revision of the Form 5500 Annual
Return/Report and its instructions, and
the creation of the Short Form 5500 and
its instructions, with the goal of
reducing the overall burden of the
statutory reporting requirements and the
forms without sacrificing the quality of
the information collected. This action
also furthers three specific Departmental
initiatives, described earlier in this
preamble: (1) Creating a fully electronic
filing system for processing the annual
reports filed by employee benefit plans;
(2) responding to reports from the GAO
and the ERISA Advisory Council
suggesting the need for substantive
changes in the information gathered
through the 5500 Forms, specifically
with respect to fees and expenses of
employee benefit plans; and (3)
effectuating new reporting and
disclosure requirements contained in
the PPA.
The principal reforms contained in
this final action include the adoption of
the Short Form 5500, the revision of
reporting requirements for Code section
403(b) plans, the creation of separate
Schedules SB and MB to replace the
Schedule B to report actuarial
information, the elimination of IRS-only
schedules, and the expansion of fee
reporting in Schedule C. Because of the
importance of these annual return/
reports as a source of information for
participants and beneficiaries, as an
enforcement and research tool for the
Department, and as a source of
information and data for use by other
federal agencies, Congress, and the
private sector in assessing employee
benefit, tax, and economic trends and
policies, the final regulatory action
increases the amount and improves the
quality of information that plans must
disclose. Because of the voluntary
nature of the employee benefit system,
however, the Department, in shaping
this regulatory action, has carefully
balanced the need for increased and
improved disclosure and plan
administrators’ and sponsors’ interest in
minimizing reporting costs.
Specifically, the burden associated
with completion of the Form 5500
Annual Return/Report can be divided
into two steps: reading the instructions
and completing the individual line
items. The current structure of the Form
5500 Annual Return/Report, even
without the introduction of the Short
Form 5500, in contrast to what filers

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would need to do to comply with the
statute in the absence of the Form 5500
Annual Return/Report, allows filers to
answer only relevant line items and
quickly find the instructions relevant to
the line items that they are required to
complete. In the absence of the Form
5500, filers would be required to read
and evaluate the statutory requirements
and make judgments, without carefully
targeted instructions, as to how to
comply with the statutory reporting
requirements. The Short Form 5500
requires not only less line item
information than the Form 5500 itself,
but eliminates the need to read
instructions that are not associated with
small plan filers. In addition, the
elimination of IRS-only schedules also
streamlines reporting under the new
system.
The filing burden under these
regulations thus is not only less than
under the existing Form 5500 Annual
Return/Report without revisions, but is
less than that under the statute.
Moreover, while requiring less
information than does the statute, the
information required, especially the
new enhanced fee disclosure
information, is carefully targeted to
provide the Agencies, participants and
beneficiaries, and others using the Form
5500 Annual Return/Report for research
purposes, more informative data.
Retaining the existing efficient format
of the annual return/report, with most of
the information broken out into separate
schedules, along with the introduction
of the Short Form 5500 for small plans
invested in assets with a readily
determinable market value should
reduce, relative to reporting in the
absence of the Form 5500 Annual
Return/Report, as revised, the time
required to read the instructions
because filers will now be more able to
skip over the instructions for schedules
that do not apply to them. It is,
however, expected that filers for whom
major changes apply (i.e. Short Form
eligible filers, Schedule SB, MB, and C
filers, and Code section 403(b) plan
administrators) will require additional
time in the initial year of filing to
thoroughly read the instructions and to
familiarize themselves with the revised
Form 5500 Annual Return/Report. It is
assumed, however, that most filers will
not require this additional time in
subsequent years. Entry of the
information required by the Form 5500
Annual Return/Report, including the
Short Form 5500, is made from financial
and other records maintained by plans.
Sound accounting and general business
practices would generally dictate that
all or most of these records be

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64717

maintained even in the absence of a
reporting requirement.
As a result, these final changes are
anticipated to result in an aggregate
reduction of reporting costs for filers as
compared with the reporting costs
before promulgation of these changes.
As explained below, the Department’s
assessment results in a conclusion that
the benefits to be derived from this
regulatory action justify the costs that
the action imposes on the public.
Regulatory Alternatives
Executive Order 12866 directs federal
agencies promulgating regulations to
evaluate regulatory alternatives. The
Department and the other Agencies have
done so in the process of developing
this final action.10 The preambles to the
July 2006 Proposal and the
Supplemental Notice describe the
regulatory alternatives that were
considered in making those proposals,
including the possibilities of different
eligibility criteria for the Short Form
5500; different approaches for satisfying
the PPA requirements for additional
actuarial and asset information
reporting; and different types of
reporting requirements for Code section
403(b) plans. In moving from the
proposals to final action, the
Department also considered alternatives
set forth in public comments, weighing
their costs and benefits against the
initial proposed actions. The final
decisions regarding the regulatory
amendments and forms revisions are set
forth and explained elsewhere in this
document and in the Forms Revision
Notice issued simultaneously with this
document and are assessed further
below. The following summarizes major
alternatives considered but not adopted
in finalizing these proposals.
Eligibility for Short Form 5500 for
certain plans with fewer than 25
participants. In considering public
comments in response to both the July
2006 Proposal and the Supplemental
Notice, several alternatives to the
proposal regarding eligibility to file the
Short Form 5500 were considered but
not adopted. Specifically, alternatives
considered included: (1) relaxing the
proposed eligibility requirement,
applicable to all small plans (with fewer
than 100 participants), that 100 percent
of the plan’s assets be invested in
10 As explained elsewhere in this preamble and
in the preamble to the Forms Revision Notice, the
IRS and the PBGC act jointly with the Department
in promulgating the 5500 Forms. The assessment
under E.O. 12866 described in this preamble,
therefore, makes reference to the three Agencies’
decisions in finalizing the forms changes, as well
as the Department’s decisions in finalizing the
amendments to the reporting regulations under
Title I of ERISA.

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

secured, easy to value assets and (2)
permitting all plans with fewer than 25
participants to file the Short Form 5500,
regardless of whether the plan’s
investments were so invested.
As described more fully in the
preamble to the Forms Revision Notice,
the benefits to be gained through the
ability to exercise oversight of small
plans that invest in other types of assets
justifies not diminishing the current
burden for plans with fewer than 25
participants by having them continue to
file the same information currently
required on those assets. Permitting
plans with employer securities or other
assets that are difficult to value to file
the limited information in the Short
Form 5500 would be inconsistent with
important policy objectives, which are
underscored by the PPA’s emphasis on
increasing plan transparency, more
accurately measuring plan assets,
increasing participant control over the
disposition of employer securities in
defined contribution plans, and
expanding the annual reporting
requirements for multiemployer plans.
Valuation of difficult-to-value assets,
such as employer securities, may
provide an opportunity for abuse or
mismanagement that is not lessened by
a plan’s smaller size. The additional
oversight possible through increased
reporting responsibilities justifies the
additional burden on such plans.
In any event, as described in the
Forms Revision Notice, the Department
estimates that 95 percent of singleemployer non-403(b) plans will qualify
to file the Short Form 5500, about 75
percent of which will be plans with
fewer than 25 participants. Expanding
Short Form filing eligibility to the
remaining plans with fewer than 25
participants would only affect about
25,000 additional plans. Further,
restricting Short Form 5500 eligibility
based on the nature of a plan’s asset
investments will not deprive those noneligible small plans of simplified annual
filing methods. Those small plans will
still be entitled to use the other
simplified reporting available to them
under the Form 5500 Annual Return/
Report. Taking these other simplified
options into account, we estimate that
this option would only have saved filing
plans approximately $4.8 million per
year, starting in 2009.11 We have
concluded that this is a reasonable cost
to meet the important policy goal of
ensuring proper disclosure for small
11 Due to the staggered implementation of the
form changes, the savings in 2007 and 2008 are
estimated to be about $250,000 annually.

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multiemployer plans and for plans with
difficult-to-value assets.
Scope of Code section 403(b) plan
reporting. The Department considered,
but rejects, alternatives, suggested by
commenters, to its proposal regarding
expanded reporting requirements for
Code section 403(b) plans that would
have retained the current limited
reporting requirements for such plans or
modified the proposal to permit such
plans their current exemption from
annual audit and accountant’s opinion
requirements. The Department rejects
these alternatives because they would
significantly reduce or eliminate the
benefit that will flow from expanded
reporting by Code section 403(b) plans,
which the Department believes will
result in significant improvements in
the administration of Code section
403(b) plans covered by Title I of
ERISA, reducing the rate of violations
currently being found in investigations
of Code section 403(b) plans and
increasing benefit security for such
plans’ participants and beneficiaries.
Scope of Schedule C reporting
obligations. The Department considered
and rejects several alternative
approaches to the reporting of direct
and indirect compensation on the
Schedule C prior to developing the final
decisions embodied in this action.
Specifically, the Department considered
and rejects alternatives that would have
limited reporting of indirect
compensation, including requiring
reporting of only indirect compensation
received by providers with direct
service relationships with the plan;
adding a ‘‘de minimis’’ exception for
reporting cash compensation under a
certain dollar amount; and reinstating
the ‘‘top 40’’ provider limitation. The
Department assessed the potential cost
savings of these and other alternatives
that would have reduced the amount
and detail of information on indirect
compensation required to be reported
against the benefits to be gained through
increased transparency regarding
compensation paid to plan service
providers by third parties. The
Department believes that the increased
transparency that will flow from the
indirect compensation reporting
required by this final rule will assist
plan fiduciaries in assessing the value
and appropriateness of their service
provider relationships, making more
efficient transactions possible and
preventing abuses that might arise
through receipt of indirect
compensation. The Department’s
modification of its proposals on
Schedule C disclosures, described in
detail in the Forms Revision Notice,
represents a compromise that balances

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the need for additional disclosure in
this area against the cost to the regulated
entities that additional disclosure would
likely impose.
Benefits and Costs
The Department believes that the
benefits to be derived from this final
regulatory action, including the final
amendments to the reporting regulations
and the final adoption of forms
revisions, justify their costs. The
Department further believes that these
revisions to the existing reporting
requirements will both reduce aggregate
reporting costs and enhance protection
of ERISA rights. The Department
conducted a thorough assessment of the
costs and benefits of these changes as
originally proposed. The major
proposed changes from the July 2006
Proposal that are promulgated in this
final rule essentially as proposed
include: (1) Adoption of the Short Form
5500; (2) removal of the IRS-only
schedules; and (3) adoption of fuller
reporting requirements for Code section
403(b) plans.
Changes proposed in the
Supplemental Notice that are being
finalized herein without substantial
change include: (1) adoption of separate
Schedules MB and SB to replace
Schedule B; and (2) adoption of the
Short Form 5500 as one method of
compliance to effectuate the PPA’s
directive to establish simplified
reporting for plans with fewer than 25
participants.
The discussion below under Benefits
and Costs presents the Department’s
assessment of this final action as a
whole and provides discussion of the
major aspects of the final action that
contributed to the assessment. The
discussion also makes note of some of
the modifications to the proposed
changes that are incorporated into the
final action and describes the extent to
which those modifications have affected
the Department’s assessment of this
action’s costs and benefits.
Benefits. As previously described in
the July 2006 Proposal and in the
Supplemental Notice, the regulatory
amendments and revised versions of the
5500 Forms announced today will
provide a standardized, streamlined
alternative means of compliance with
applicable statutory reporting
requirements and will also provide
appropriate simplified annual reports
and exemptions under section 104(a)(2)
and (3) of ERISA. The revised Form
5500, the Short Form 5500, and their
schedules will ease plan administrators’
compliance with reporting requirements
and greatly enhance the utility and
accessibility of information reported to

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
the government, participants and
beneficiaries, and others. Together with
the Department’s planned program for
assisting filers in the preparation and
electronic submission of filings, the
revised 5500 Forms will give plan
administrators clear guidance and a
supportive, routine mechanism for
satisfying their reporting obligations.
The revised 5500 Forms also are
designed so that the Department can
efficiently capture the information
electronically and assemble it into an
electronic database so that the
information can be processed and
analyzed in many beneficial ways.
These include monitoring compliance
with ERISA’s reporting and other
requirements; targeting and carrying out
prompt and effective enforcement
actions; informing participants and
beneficiaries of the characteristics,
operations, and financial status of their
benefit plans; producing statistics on the
employee benefit system, monitoring
trends therein, and informing the
public; and assembling information and
conducting research that advances
knowledge and fosters the formulation
of sound public policies toward
employee benefits.
Removal of the IRS-only schedules.
As explained in the Forms Revision
Notice published simultaneously with
this final rule, the elimination of the
IRS-only schedules (Schedule E and
Schedule SSA) beginning with returns/
reports for the 2009 plan year facilitates
the change to mandatory electronic
filing, which is expected to yield
substantial benefits. Title I information
that was previously collected in the
eliminated schedules will be collected
in other parts of the 5500 Forms. The
Department understands that the IRS is
currently considering whether to
continue to collect some of the omitted
IRS-only information via other Treasury
or IRS vehicles. The impact of the
removal of these schedules, therefore, is
anticipated to reduce reporting costs, as
estimated below, while preserving
ERISA protections.
Establishment of a Short Form 5500
for certain small plans. The Short Form
5500 will substantially reduce reporting
costs (as estimated below) for eligible
filers, while continuing the collection of
sufficient information to preserve ERISA
protections, and satisfying the
enforcement, research, and regulatory
needs of the Agencies, as well as the
disclosure needs of participants and
beneficiaries. The small single-employer
plans targeted for eligibility (those that
invest solely in secure assets that are
held or issued by regulated financial
institutions and have a fair market value
that is easily determined) are less at risk

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of harm through abuse or
mismanagement and can benefit
through the reduced filing costs. The
eligibility conditions for filing the Short
Form 5500, including the requirements
relating to security and valuation of the
plan’s investments, ensure both
adequate disclosure to participants and
beneficiaries in plans using the Short
Form 5500 and adequate annual
reporting to the Agencies. Small plans
that are not eligible to file the Short
Form 5500 remain eligible to file
simplified reports under currently
available methods of filing, such as
filing Schedule I instead of Schedule H
and eligibility for the waiver from filing
the report of an independent qualified
public accountant by virtue of enhanced
bonding.
Elimination of the special reporting
rules for Code section 403(b) plans. As
noted below, this revision is expected to
increase reporting costs for affected
plans. The Department believes,
however, that these added costs are
justified by the need to better protect the
participants and beneficiaries of these
plans. As discussed in the preamble to
the Notice of Adoption of Forms
Revisions, increased reporting by Code
section 403(b) plans is anticipated to
provide substantial benefits through
better administration of those plans and
increased oversight by the Agencies and
the public. Amending the annual
reporting requirements to place Code
section 403(b) plans on par with other
ERISA-covered pension plans will
achieve these results. The Department
anticipates that most small Code section
403(b) plans will be eligible to use the
Short Form 5500, and thus will only
have to meet that limited filing
obligation. The result of this change is
therefore only a modest increase in the
annual reporting burden on small Code
section 403(b) plan filers.
Schedule C fee and compensation
reporting. In developing the final
Schedule C fee and compensation
reporting requirements, the Department
modified certain aspects of the proposal
as it concerned additional reporting of
indirect compensation and fees paid to
plan service providers on Schedule C to
reach a balance between the cost to
plans and providers of gathering the
required information and the need for
increased transparency regarding such
fees and their potential effect on plans.
The final form, as did the proposal,
keeps the existing $5,000 threshold for
reporting direct and indirect
compensation, but now has separate
line items for reporting direct and
indirect compensation to reduce the
possibility of duplicative reporting. In
addition, the final forms revision adds

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64719

to the Schedule C an alternative
disclosure option. Where the plan
administrator has received required
disclosures of eligible indirect
compensation, the plan administrator
now has the option of reporting the
person providing the required
disclosures as an alternative to having
the amount of the eligible indirect
compensation reported on the Schedule
C itself. These modifications reduce
reporting burden for indirect
compensation, especially the potential
burdens associated with indirect
compensation that is difficult to track
on a plan-by-plan basis (e.g., ‘‘float’’ and
‘‘soft dollars’’). As discussed above, the
Department has also clarified that health
and welfare plans exempt under 29 CFR
2520.104–44 are not required to file the
Schedule C. The Department believes
that the final forms revisions for
Schedule C, which will improve
disclosure of both direct and indirect
compensation without overburdening
the efficient delivery of necessary
services to plans, will provide
substantial benefits to plans and their
participants and beneficiaries. Plan
administrators, the Department, and the
public will be better able to monitor the
compensation arrangements of plan
service providers, better able to
understand the impact of fees on plan
assets, and better able to evaluate the
value of purchased services. In addition,
it is expected that plan administrators
should be better able to negotiate fair
prices for necessary plan services.
Creation of separate actuarial
schedules for single-employer defined
benefit plans and multiemployer
defined benefit and certain money
purchase plans (Schedules SB and MB)
to reflect PPA changes in funding and
annual reporting requirements. Certain
changes to Schedule B were proposed in
the July 2006 Proposal. After passage of
the PPA, these proposals for Schedule B
were revised in the Supplemental
Notice to effectuate the additional
reporting requirements of the PPA, with
the Schedule B being divided into two
separate schedules, one for
multiemployer defined benefit plans
and certain money purchase plans (the
Schedule MB) and another for singleemployer defined benefit plans (the
Schedule SB). As noted below, the
adoption of this change is expected to
decrease reporting costs for singleemployer plans and slightly increase
reporting costs for multiemployer plans.
The Department concludes, however,
that the small cost increases for
multiemployer plans are justified by the
need to better monitor plan funding.
This information is needed by

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

participants, beneficiaries, and the
Agencies, particularly the PBGC, to
improve their ability to assess the
financial condition of the plan.
Additional data elements reported on
Schedule R. Consistent with the PPA,
the new Schedule R will require
increased reporting by multiemployer
defined benefit pension plans regarding
contributing employers, multiemployer
plan mergers, withdrawing employers
and their withdrawal liabilities, and
participants for whom no employer
makes contributions. Large singleemployer and multiemployer defined
benefit plans with 1,000 or more
participants will also have to report on
their plans’ asset allocations, and the
duration of debt portfolios. These latter
data elements are requested by the
PBGC and are not part of the PPA
requirements. As noted below, these

revisions will increase reporting costs
for affected plans. The PPA requires
multiemployer defined benefit plans to
report this additional information,
which is needed by participants,
beneficiaries, and the Agencies,
particularly the PBGC, to assess the
financial risk posed to the plan by a
financial collapse or withdrawal of one
or more contributing employers.12 The
need for and benefit of these PPA
required disclosures are essential to
making accurate assessments of the
potential risks to which these plans are
exposed.
Electronic filing and Web site display
of certain Form 5500 information. The
requirement to post information
electronically will give participants and
beneficiaries an additional method of
monitoring the financial status of their
pension plans. They will be able to

access important information
instantaneously and without any
additional costs involved, as plans must
be capable of electronic public
disclosure beginning with the 2009
reporting year.
Costs. Although the costs to plans of
satisfying their annual reporting
obligations will be lower under these
regulations than they would be under
regulations previously in force, they
will still be substantial. As shown in
Table 2 below, the aggregate cost of such
reporting under the regulations and
forms previously in force is estimated to
be $425.34 million annually, shared
across the 780,000 filers subject to the
filing requirement. The Department
estimates that the regulations and forms
revisions announced today will impose
an annual cost burden on the 780,000
filers of only $327.98 million.13

TABLE 2.—SUMMARY OF ANNUAL COSTS: REQUIREMENTS PREVIOUSLY IN EFFECT VS. NEW REQUIREMENTS
Total costs in dollars
(in millions)
Reporting Requirements Prior to this Action .......................................................
Change in Costs due to this Action (as of 2009 Plan Year Filings) ...................
Reporting Requirements in effect for Plan Year 2009 Filings ............................

$425.34
¥97.36
327.98

Total costs in hours
(in millions)
5.32
¥1.24
4.08

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Note: Number of affected plans: 780,000.

Because this final action makes
substantial changes to the requirements
previously in effect, filers will
experience some one-time transition
costs. The Department examined similar
transition cost issues in connection with
the last major revision to the Form 5500
Annual Return/Report, which was for
plan years beginning in 1999. See 65 FR
5026 (Feb. 2, 2000). Based on
information provided by plan service
providers and Form 5500 Annual
Return/Report software developers at
that time, the Department concluded
that such costs are generally loaded into
the prices paid by plans for affected
services and products, spread both
across plans and across the expected life
of the service and product changes. The
Department’s estimates provided here
are therefore intended to reflect such
spreading and loading of these
transition costs. That is, the gradual
defrayal of the transition costs is
included in the annual cost estimates
here.
The Department has analyzed the cost
impact of the individual revisions. In

doing so, the Department 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, both large and
small Code section 403(b) plans are
affected by the elimination of the
limited reporting rules for section 403(b)
plans, but small Code section 403(b)
plans are also affected by the
introduction of the Short Form 5500.
The Department quantified the
individual revisions as described below.
Removal of the IRS-only schedules.
Elimination of the IRS-only schedules
beginning with filings for the 2009 plan
year will reduce costs on the whole,
even though some of the information
previously collected in those schedules
will continue to be collected by the
Department elsewhere in the forms and
schedules. The net effect of these
changes will be to reduce the total
burden for 198,000 affected filers by
530,000 hours. Applying an hourly
labor rate of $86 for service providers

and $59 for plan sponsors, the
Department estimates that this revision
will lower the aggregate annual
reporting cost by an estimated $39.34
million.14
Establishment of a Short Form 5500
for certain small plans. An estimated
594,000 of the 629,000 total small plan
filers will be eligible to use the Short
Form 5500. Of these filers, 9,000 plans
are estimated to be small Code section
403(b) plans that will also be subject to
increased filing requirements. Their
annual reporting burden is estimated to
increase, as a result, by about $1.44
million. For the remainder of the Short
Form 5500 eligible plans (585,000
plans), the annual reporting burden is
reduced by $72.33 million. This leads to
an estimated aggregate saving due to the
Short Form 5500 of $70.90 million
(877,000 hours) annually.
Elimination of the special reporting
rules for Code section 403(b) plans.
While approximately 16,000 Code
section 403(b) plans will be subject to
increased reporting requirements, about
9,000 small Code section 403(b) plans

12 The addition of some of the new data elements
was included in the July 2006 Proposal based on
the apparent deterioration of the financial condition
of multiemployer plans and the PBGC’s belief in the
need to monitor better companies that are major
contributors to those plans.

13 The cost and burden hour estimates for the
baseline as well as for the new reporting
requirements are much lower than the estimates
reported in the July 2006 Proposal and the
Supplemental Notice. In the estimates reported in
this document, the Department is able to take
advantage of updated data, some changes to the

model and comments with respect to the burden
estimates. More detail about the cost estimates can
be found in the section ‘‘Assumptions,
Methodology, and Uncertainty.’’
14 The appropriateness of the labor rates used in
the calculations, as well as on other assumptions,
is discussed in the Technical Appendix.

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
will be eligible to use the new Short
Form 5500 and will also be eligible for
waiver of the audit requirement. The
impact of the changes on the small Code
section 403(b) plans is quantified above.
Seven thousand large Code section
403(b) plans will be required to file a
Form 5500 Annual Return/Report
similar to those filed by Code section
401(k) plans and will be subject to the
audit requirement. Annual reporting
costs for large Code section 403(b) plans
will increase by an estimated $7.7
million (100,000 hours).
Establishment of Schedules SB and
MB to replace Schedule B. Schedule B
will be replaced by two separate
schedules: A Schedule SB for single
employer (including multiple-employer)
defined benefit plans and a Schedule
MB for multiemployer defined benefit
plans and certain money purchase
plans. Overall costs will be reduced by
having two separate schedules, each of
which is tailored more precisely to a
separate targeted group of filers. The
42,000 filers of Schedule SB will
therefore see a total annual burden
reduction of almost 52,000 hours.
Applying an hourly labor rate of $86 for
service providers and $59 for plan
sponsors, the Department estimates that
this will lower the annual reporting cost
by an estimated $4.36 million for
Schedule SB filers. The 2,300 Schedule
MB filers will see a total burden
increase of 600 hours because these
filers will be required to complete new
items. Applying an hourly labor rate of
$86 for service providers and $59 for
plan sponsors, the Department estimates

that this will increase the annual
reporting cost by an estimated $47,000.
On the whole, replacing Schedule B
with new Schedules SB and MB will
decrease the aggregate total annual
burden by 51,000 hours, or by an
estimated $4.31 million.
Revision of Schedule C (Service
Provider Information). Schedule C
revisions are intended to clarify the
reporting requirements and improve the
information plan officials receive
regarding amounts being received by
plan service providers. The expanded
reporting requirements are expected to
increase the reporting burden for
Schedule C filers by about $2.44
million. This increase is partly offset by
a reduction in burden of $475,000,
resulting from the Department’s
clarification that welfare plans that meet
the conditions of 29 CFR 2520.104–44
are not required to file Schedule C.
Jointly, these changes are anticipated to
add annual reporting costs of $1.97
million (25,000 hours) for 48,000
affected plans.
Additional Data Elements on
Schedule R. Changes to Schedule R,
which include moving three questions
on ESOPs from Schedule E to Schedule
R, with an offset for deleting one
question, are expected to add $828,000
in costs (11,000 hours) for 91,000
affected filers.15 On average, the
reporting burden of affected plans is
estimated to increase by less than 7
minutes per plan. While some of the
affected plans may experience only
minimal burden increases, others
(particularly very large multiemployer

64721

defined benefit plans) will experience
an estimated increase in burden of up to
three hours.
Adoption of various technical
revisions and other miscellaneous
revisions to the Form 5500 Annual
Return/Report to improve and clarify
existing reporting requirements. Several
additional questions regarding insurers
that fail to supply information, plan
failures to pay benefits due, schedules
of delinquent participant contributions,
blackout compliance, mutual fund
dividends, fees paid to administrative
service providers, and the number of
contributing employers, as well as
additional pension plan characteristic
codes, were added to the Form 5500 and
Schedules A, H, and I. Together these
changes are estimated to add $6.68
million (85,000 hours) to annual
reporting costs and affect approximately
187,000 plans.
Electronic Filing and Website Display
of Form 5500 Information. These
requirements are not anticipated to add
any additional costs, as plans are
already required to be capable of
electronic filing and disclosure
beginning with the 2009 reporting year
under the electronic filing rule. See 71
FR 41359 (July 21, 2006). The costs and
benefits of electronic filing have
previously been assessed in connection
with promulgation of that rule.
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 employee benefit plans affected.

TABLE 3.—SUMMARY OF CHANGES TO THE REPORTING REQUIREMENTS: DOLLARS, HOURS, AND AFFECTED PLANS
Change in costs in
dollars
(in millions)

Change in costs in
hours

Removal of IRS-Only Schedules ...............................................................................
Short Form (small non-Code Sect. 403(b) Plans) .....................................................
Short Form (small Code Section 403(b) Plans) ........................................................
Large Code section 403(b) Plans ..............................................................................
Schedule MB .............................................................................................................
Schedule SB ..............................................................................................................
Schedule C ................................................................................................................
Schedule R ................................................................................................................
Technical and Miscellaneous Revisions ....................................................................

¥$39.34
¥72.33
1.44
7.70
0.047
¥4.36
1.97
0.828
6.68

¥530,000
¥895,000
18,000
100,000
600
¥52,000
25,000
11,000
85,000

198,000
585,000
9,000
7,000
2,000
42,000
48,000
91,000
187,000

Total ....................................................................................................................

¥97.36

¥1,237,400

780,000

Revisions effective for 2009 plan year filings

Number of affected plans

mstockstill on PROD1PC66 with RULES2

Note: Some displayed numbers do not sum up to the totals due to rounding.

The final action does not otherwise
alter reporting costs. Plans currently
exempt from annual reporting

requirements (such as certain small
unfunded or fully insured welfare plans
and certain simplified employee

pensions) will remain exempt. Also,
except for Code section 403(b) plans,
plans eligible for limited reporting

15 The introduction of the Short Form 5500
eliminated the requirement of filing the Schedule
R for almost 300,000 small plans previously filing
Schedule R (about 94 % of all small plans filing

Schedule R). This reduction in burden was
included in the decrease of reporting burden due
to the introduction of the Short Form 5500. The
moving of questions from Schedule E to Schedule

R (ESOP questions) is counted as a reduction of
burden in connection with the removal of the IRSonly schedules and as an increase in burden for
Schedule R filers.

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

options (such as certain IRA-based
pension plans) will continue to be
eligible. The revised Form 5500 Annual
Return/Report will retain the structure
that is familiar to individual and
corporate taxpayers—a simple main
form with basic identifying information
necessary, along with a checklist of the
schedules being filed. The structure is
designed to aid filers by allowing them
to assemble and file a return customized
to their plan.

mstockstill on PROD1PC66 with RULES2

Form 5500 Annual Return/Report
Changes Effective for the 2007 and 2008
Plan Year Filings
The sections above describe reporting
changes that will become effective for
the 2009 plan year filings. As discussed
in the preamble of the Forms Revision
Notice, the Agencies are making some
changes to the reporting requirements
for the 2007 and 2008 plan year filings
as mandated by the PPA, along with
adding a few new Schedule R items for
the 2008 plan year filings.16 Plans with
fewer than 25 participants that would
meet the conditions for being eligible to
file the Short Form 5500 will have the
option in their 2007 and 2008 plan year
filing of filing an abbreviated version of
the Form 5500 Annual Return/Report
for ‘‘small plan’’ filers. In addition,
defined benefit pension plans and
certain money purchase plans will file,
for the 2008 plan year, the new actuarial
information schedules (Schedules SB
and MB, as appropriate) instead of
Schedule B. In addition, certain filers
will be required to answer most of the
new questions on Schedule R
(Questions 13 to 19 of the 2009
Schedule R).17
The Department has calculated the
burden for the 2008 plan year return/
reports as described generally above
with respect to the 2009 plan year
filings, but appropriately modified for
the difference in filing requirements.
The Department estimates that the
reduction in burden resulting from the
simplified filing requirements for the
2007 and 2008 plan year filings will be
about half the burden reduction that
will result from the introduction of the
2009 Short Form 5500, for two reasons.
First, for the 2009 plan year filings,
eligible filers will fill out only the Short
Form 5500 and Schedules SB or MB, as
applicable. While the simplified filing
16 As mandated by the PPA, the simplified filing
option for small plans with fewer than 25
participants will become effective for 2007 plan
year return/reports. No other changes to the Forms
and Schedules are being made for that filing year,
except for a few updates to the Schedule B
instructions.
17 Filers will be required to provide the answers
to these new questions as an attachment.

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requirements for plan years 2007 and
2008 generally will be similar data items
as are on the Short Form 5500, the items
to be completed are spread over several
schedules, requiring filers to review all
of the instructions to those schedules.18
Second, use of the simplified filing
alternative for the 2007 and 2008 plan
years is optional. The Department has
assumed that not all small plan filers
will take advantage of this option, given
that it will be available only for the 2007
and 2008 plan years.
For the 2007 filing year no other form
changes that impacted the burden
analysis are being made. The
Department estimates a burden
reduction due to the simplified filings
for plans with less than 25 participants
of about $38.00 million (471,000 hours).
Assuming an additional 30 minute
transition burden for reviewing the
simplified filing requirements, the
estimate for the burden reduction is
reduced to $25.62 million (317,000
hours).
Without taking any transition burdens
into account, the Department has
estimated that the revisions for the 2008
plan year will reduce the filing burden
by about $41.54 million (511,000 hours).
Assuming an additional 30 minute
transition burden for reviewing the
simplified filing requirements, 150
minutes for Schedule SB, 90 minutes for
Schedule MB, and 60 minutes for
Schedule R, the Department estimates
that for the 2008 plan year the reporting
burden will fall by $30.23 million from
the $425.34 million that is estimated
under prior rules and forms, to an
aggregate burden of $395.11 million.19
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 filing the new Short Form
5500 should incur far lower costs than
a large, multiemployer defined benefit
pension plan that holds multiple
insurance contracts, engages in
numerous reportable transactions, and
pays fees in excess of $5,000 to a
18 As described further in the instructions, those
small plans required to file the Schedules SSA or
E will still have to file the schedules as part of their
Form 5500 Annual Return/Report filings in 2007
and 2008.
19 Hours are estimated to fall from the 5.32
million estimated under prior rules and forms, to
about 4.94 million hours, a reduction of about
374,000 hours.

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number of service providers. The
Department separately considered the
cost to different types of plans in
arriving at its aggregate cost estimates.
The Department’s basis for these
estimates is described below.
Assumptions Underlying this
Analysis. The Department’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 annually
will complete a filing. The Department
has used a ‘‘status quo’’ baseline for this
analysis, assuming that the world absent
the regulations will resemble the
present.20
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 during recent years. 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 U.S. Dept. of
Labor May 25, 1999.21 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.
Aggregate estimates were produced by
interacting these unit cost measures
with historical counts of Form 5500
Annual Return/Report filers who
provided the respective types of
information.22
Actuarial Research Corporation (ARC)
assembled a new model for estimating
burden, based on the Form 5500 Burden
Model that MPR most recently used for
estimating burdens in October 2004.
ARC assembled a simplified model,
drawing on implied burdens associated
with subsets of filer groups represented
in the MPR model. The ARC model is
described in broad terms below. Further
details about the model are explained in
the Technical Appendix which can be
accessed at the Department’s Web site at
http://www.dol.gov/ebsa.
To estimate aggregate burdens, types
of plans with similar reporting
requirements were grouped together in
various groups and subgroups. As
shown in Table 4, calculations of
aggregate cost were prepared for each of
20 Further detail can be found in the Technical
Appendix.
21 The Mathematica report can be accessed at the
Department’s Web site at http://www.dol.gov/ebsa.
22 The Department did not attempt to project the
number of filers into the future.

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
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 Total line in Table 4
shows that the aggregate cost under
prior and new regulations, respectively,
add up to $425.34 million and $327.98
million. The universe of filers was
divided into three basic plan types:
defined benefit pension plans, defined
contribution pension plans, and welfare

plans. Each of these major plan types
was further subdivided into
multiemployer and single-employer
plans. Defined contribution Code
section 403(b) plans were treated
separately from other defined
contribution plans. Since the filing
requirements differ substantially for
small and large plans, the plan types
were also divided by plan size. For large
plans (100 or more participants), the
defined benefit plans were further
divided between very large (1,000 or

64723

more participants) and other large plans
(at least 100 participants, but fewer than
1,000 participants). Small plans were
divided similarly, except that they were
divided into Short Form 5500 eligible
and Short Form 5500 ineligible plans, as
applicable. For each of these sets of
respondents, burden hours per
respondent were estimated for the Form
5500 Annual Return/Report itself and
for up to seven schedules.

TABLE 4.—NUMBER OF AFFECTED FILERS AND COSTS UNDER PRIOR AND NEW REQUIREMENTS

Number
affected

Type of plan

5500 Large Plans (>=100 participants) .......................................................................................
DB, ME, 100–1,000 participants ..........................................................................................
DB, ME, > 1,000 participants ...............................................................................................
DB, SE, 100–1,000 participants ...........................................................................................
DB, SE, > 1,000 participants ................................................................................................
DC, ME, non-403(b) .............................................................................................................
DC, ME, Code section 403(b) ..............................................................................................
DC, SE, non-403(b) ..............................................................................................................
DC, SE, Code section 403(b) ...............................................................................................
Welfare, ME ..........................................................................................................................
Welfare, SE ..........................................................................................................................
5500 Small Short Form Eligible ...................................................................................................
DB, SE ..................................................................................................................................
DC, SE, non-403(b) ..............................................................................................................
DC, SE, Code section 403(b) ...............................................................................................
Welfare, SE ..........................................................................................................................
5500 Small Short Form Ineligible ................................................................................................
DB, ME .................................................................................................................................
DB, SE ..................................................................................................................................
DC, ME, non-403(b) .............................................................................................................
DC, ME, Code section 403(b) ..............................................................................................
DC, SE, non-403(b) ..............................................................................................................
Welfare/ME ...........................................................................................................................
Welfare/SE ............................................................................................................................
Total ...............................................................................................................................

152,000
600
900
7,000
3,400
1,700
80
57,000
7,200
4,100
69,000
594,000
34,000
544,000
8,800
6,000
35,000
200
1,800
3,200
100
29,000
400
300
780,000

Aggregate
cost under
prior requirements
(in millions)
$177.16
1.40
1.99
15.38
7.08
2.56
0.0035
75.09
0.30
5.64
67.71
234.25
35.71
195.65
0.37
2.52
13.92
0.16
1.91
1.09
0.0042
10.45
0.17
0.13
425.34

Aggregate
cost under
new requirements
(in millions)
$175.99
1.33
2.13
13.10
7.21
2.45
0.10
65.14
8.38
5.94
70.21
139.03
24.33
111.64
1.81
1.25
12.96
0.18
1.76
1.02
0.0045
9.68
0.18
0.14
327.98

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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—fewer than 100 participants.

We also separately estimated the costs
for the form and for each schedule.
When items on a Form 5500 Annual
Return/Report schedule are required by
more than one Agency, the estimated
burden associated with that schedule is
allocated among the Agencies. This
allocation is based on whether only a
single item on a schedule is required by
more than one agency or whether
several or all of the items are required
by more than one agency. The burden
associated with reading the instructions
for each item also is tallied and
allocated accordingly.

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Jkt 214001

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, the annual
report for a large fully insured welfare
plan typically would consist of only a
few questions on the Form 5500,
Schedule A (Insurance Information),
and Schedule G, where applicable. The
requirement that this plan provide very
limited information on the Form 5500

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Annual Return/Report is reflected in the
estimates of reporting burden time. By
contrast, a large defined benefit pension
plan that is intended to be tax-qualified
and that uses a trust fund and invests in
insurance contracts would be required
to submit an annual report completing
almost all the line items of the Form
5500, plus Schedule A (Insurance
Information), Schedule B (Actuarial
Information), Schedule C (Service
Provider Information), Schedule D
(DFE/Participating Plan Information),
possibly the Schedule G (Financial
Transaction Schedules), Schedule H
(Financial Information), and Schedule R

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

(Retirement Plan Information), and
would be required to submit an IQPA’s
report and opinion. 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 burden for
the new Short Form 5500 was derived
summing the burden estimates for the
comparable line items contained in the
current Form 5500 Annual Return/
Report.
The Department 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, as
calculated by the ARC model, 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.23 The model then
estimated the burden impact of changes
in the number of filings (particularly
those associated with the introduction
of the Short Form 5500 for most small
filers) and of changes made to the form
and the various schedules. The model
uses data from the Form 5500 Annual
Return/Report for plan year 2003, which
is the most recent year for which
complete data is available.
The model estimated that the
proposed revisions will lead to
aggregate costs of $327.98 million,
which represents a cost reduction of
$97.36 million from the baseline. While
overall costs will be reduced, some large
plans may experience cost increases,
while small plans will likely experience
cost reductions. The total burden
estimates, as well as the burden broken
out by type of plan, can be found in
Table 4, above.
Uncertainty within Estimates. Because
the Department has access to the
historical Form 5500 Annual Return/
Report filing information, the
Department has good data for the
number of filers that file the various
schedules and the types of plans those
filers represent. However, there is some
23 To

the extent that plans may currently file
schedules that are not required, such filings were
disregarded in calculating the baseline reporting
burden and the final burden.

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17:38 Nov 15, 2007

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uncertainty regarding the expected
number of filers in the future and the
unit cost estimates. The Department
believes that it does not have sufficient
information that would allow making
good projections of the number of
pension plans in the future. Also, the
Department has no direct measure for
the unit costs and uses a proxy adapted
from the existing MPR model, which
was developed in the late 1990s. In
addition, some uncertainty is inherent
in any revision to the existing form, and
the level of uncertainty increases with
the novelty of the revision in question.
For example, there is a lesser degree of
uncertainty regarding the impact of
revisions that delete existing items or
move existing items from one schedule
to another, while there is greater
uncertainty regarding wholly new items
of information, such as those involving
indirect compensation.
Most of the key assumptions of the
model like the wage rates, hour burden
estimates, and the number of filers are
entering the model in a direct and
transparent way. If, for example, the
wage rate increases by 10%, the
reduction in costs also increases by
10%.24 Therefore, the Department did
not perform additional sensitivity tests.
The Department could not quantify
uncertainty because formal estimates of
errors are not available. However, the
Department believes that the actual
burden could very well be 10% higher
or lower than the estimates, based on
the Department’s experience in this
program and past trends in filings.
Peer Review
In December 2004, OMB issued a
Final Information Quality Bulletin for
Peer Review, 70 FR 2664 (January 14,
2005) (Peer Review Bulletin),
establishing that important scientific
information shall be peer reviewed
before it is disseminated by the Federal
government. The Peer Review Bulletin
applies to original data and formal
analytic models used by agencies in
regulatory impact analyses. The
Department determined that the data
and methods employed in its regulatory
analysis constituted ‘‘influential
scientific information’’ as defined in the
Peer Review Bulletin. Accordingly, a
peer review was conducted under
Section II of the Bulletin. The peer
review report concluded that the
methodology and data generally were
sound and produced plausible
estimates, which supported the
24 If the hourly labor costs for service providers
increases from $86 to $95 and for plan sponsors
from $59 to $65 (10% increase), then the reduction
in costs increases from about $97 million to $107
million (10% increase).

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Department’s conclusion that the
proposed form changes should reduce
the aggregate burden relative to the
previous forms. The analysis here for
the final regulations and forms revisions
uses the same methodology as did the
proposal, and the Department,
accordingly, is relying on the Peer
Review prepared for the Proposal. The
Peer Review Report can be accessed at
the Department’s Web site at http://
www.dol.gov/ebsa.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. In accordance
with section 603 of the RFA, the EBSA
presented an initial regulatory flexibility
analysis at the time of the publication of
the notice of proposed rulemaking
describing the impact of the rule on
small entities and seeking public
comment on such impact. After
reviewing and considering the public
comments submitted in response to the
proposal and the changes that are
incorporated into the final regulation,
the Department has prepared a final
regulatory flexibility analysis, which is
presented in this document as part of
the broader economic analysis. The
objectives of these amended regulations
and the associated forms revisions are to
streamline reporting and reduce
aggregate reporting costs, particularly
for small plans, while preserving and
enhancing protection of ERISA rights.
These purposes are detailed above in
this preamble and in the Forms Revision
Notice published simultaneously with
these regulations.
For purposes of analysis under the
RFA, EBSA continues to consider a
small entity to be an employee benefit
plan with fewer than 100 participants.
The basis of this definition is found in
section 104(a)(2) of ERISA, which
permits the Secretary to prescribe
simplified annual reports for pension
plans that cover fewer than 100
participants. Under ERISA section
104(a)(3), the Secretary may also
provide for exemptions or for simplified
reporting and disclosure for welfare
benefit plans. Pursuant to the authority
of ERISA section 104(a), the Department
has previously issued at 29 CFR
2520.104–20, 2520.104–21, 2520.104–
41, 2520.104–46, and 2520.104b–10
certain simplified reporting provisions
and limited exemptions from reporting

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
and disclosure requirements for small
plans, including unfunded or insured
welfare plans, that cover fewer than 100
participants and satisfy certain other
requirements.
Further, while some large employers
may have small plans, in general small
employers maintain most small plans.
Thus, EBSA believes that assessing the
impact of these requirements on small
plans is an appropriate substitute for
evaluating the effect on small entities.
The definition of small entity
considered appropriate for this purpose
differs, however, from a definition of
small business that is based on size
standards promulgated by the Small
Business Administration (SBA) (13 CFR
121.201) pursuant to the Small Business
Act (15 U.S.C. 631 et seq.). Prior to the
proposal, EBSA 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
EBSA received no comments suggesting
use of a different size standard. The
following subsections address specific
requirements of the RFA.
Need for the rule and its objectives.
The Department is amending the
regulations relating to the annual
reporting and disclosure requirements
of section 103 of ERISA and revising the
5500 Forms that are included in the
Forms Revision Notice being published
simultaneously with these regulations.
The Department continually strives to
tailor reporting requirements to
minimize reporting costs, while
ensuring that the information necessary
to secure ERISA rights is adequately
available. The optimal design for
reporting requirements to satisfy these
objectives changes over time. Benefit
plan designs and practices evolve over
time in response to market trends,
including trends in labor markets,
financial markets, health care and
insurance markets, and markets for
various services used by plans. Partly as
a result, the nature and mix of
compliance issues and risks to ERISA
rights change over time. Changes to
ERISA, the Code, and to associated
regulations also change the parameters
of ERISA rights and the methods needed
to protect those rights; in particular, this
amendment and the forms revisions are
necessary, in part, to implement
provisions of the PPA. In addition, the
technologies available to manage and
transmit information continually
advance. It is incumbent on the
Department to revise its reporting
requirements from time to time to keep
pace with such changes. The
Department is adopting these
regulations and associated forms
revisions to readjust its reporting

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requirements to take into account
certain recent changes in markets, the
law (including the PPA), and
technology, many of which are referred
to above in this preamble and/or in the
Forms Revision Notice published
simultaneously with these regulations.
Agency assessment of significant
issues raised by public comments and
changes to rule in response to such
comments. Commenters were mostly
supportive of the adoption of a Short
Form 5500. Some commenters objected
to excluding certain small plans from
eligibility for filing the Short Form
5500, that is, those small plans holding
employer securities and other difficultto-value assets. As discussed elsewhere
in this preamble, excluding this small
subset of small plans is justified by the
nature of these assets, and it would be
inappropriate for the Agencies to
compromise important Congressional
and regulatory policies, leaving
participants covered by these small
plans with insufficient protection of
their retirement savings. The Agencies
have taken other steps to reduce the
burden on the excluded small plans as
much as possible, however, including
continuing to allow these plans to
qualify for other simplified reporting
options. In addition, because the Short
Form 5500 will not be available until
the 2009 plan year, the Agencies are
planning to issue separate guidance for
plans with fewer than 25 participants
that would permit filing of an
abbreviated version of the Form 5500 for
the 2007 and 2008 plan years.
While expanding reporting
obligations for Code section 403(b)
plans, the Agencies have attempted to
minimize the burden on small Code
section 403(b) plans by not excluding
small Code section 403(b) plans from
any simplified reporting option for
which such plans are otherwise eligible.
In other words, small Code section
403(b) plans will be eligible to avail
themselves of simplified reporting
options to the same extent as any other
similarly situated plan.
As discussed elsewhere in this
preamble, the Agencies are rejecting
commenters’ suggestion to subject small
plans to Schedule C disclosure
requirements that do not currently
apply to small plans. The Agencies
conclude that the comment record in
support of the suggestion was
insufficient to outweigh the added
burden that would be placed on small
plans.
The Agencies also are making
clarifying changes to instructions for the
Short Form 5500, in response to
comments, to provide a clearer
description of the plans exempt from

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64725

filing, including small welfare plans,
but is refraining from adding similar
clarifications to the instructions for
individual schedules in order to avoid
adding unnecessary review burden for
filers.
Description and estimate of number of
small entities to which rule will apply.
This final action does not alter the
number of small plans required to
comply with the annual reporting
requirements, although it implements a
new Short Form 5500, which is
designed specifically to further
streamline the limited reporting
requirements presently applicable to
small plans. The Department estimates
that almost six million small, privatesector employee pension and welfare
benefit plans are covered under Title I
of ERISA. A large majority of these,
however, are fully insured or unfunded
welfare benefit plans, which currently
are exempt from annual reporting
requirements and will continue to be
exempt under this final action.
Approximately 629,000 small plans,
including small pension plans and
small funded welfare plans, currently
are required to file annual reports and
will continue to be so required under
this action. Of these, an estimated
594,000 will be eligible to use the new
Short Form 5500. Use of the Short Form
5500 is expected to reduce these plans’
reporting costs, while preserving or
enhancing the protection of their
participants’ ERISA rights.
Among small plans, perhaps the most
affected by this action will be the
approximately 9,000 small Code section
403(b) plans. As explained above, such
plans are currently subject only to
limited annual reporting requirements.
This action will increase these plans’
reporting costs, although the cost to
these plans will be comparable to that
currently borne by similar small plans
that are not operated under Code section
403(b). As discussed above, the
Department believes the added cost to
Code section 403(b) plans is justified by
the need to strengthen protections under
ERISA for those plans’ affected
participants and beneficiaries. The
numbers and types of small plans
affected by these regulations and the
magnitude and nature of the regulations’
effects are further elaborated below.
Description of projected reporting,
recordkeeping, and other compliance
requirements of the rule, including an
estimate of the classes of small entities
that will be subject to the requirements
and the types of professional skills
necessary for preparation of the report
or record. The reporting requirements
applicable to small plans are detailed
above and in the associated Forms

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

Revision Notice. For a large majority of
the 629,000 small plans subject to
annual reporting requirements, or an
estimated 563,000 plans, submission of
the Short Form 5500 alone will fully
satisfy their annual reporting
requirements. All of these plans are
eligible for the waiver of audit
requirements, and none are defined
benefit pension plans. For such plans,
therefore, satisfaction of the applicable
annual reporting requirements is not
expected to require the services of an
IQPA or auditor, but will require the use
of a mix of clerical and professional
administrative skills. For an additional
30,000 small defined benefit pension
plans and about 500 money purchase

plans that will be eligible to use the
streamlined Short Form 5500,
satisfaction of the reporting
requirements will require additional
services of an actuary and submission of
the Schedule SB or Schedule MB, as
applicable. The remaining 35,000 small
plans will not be eligible to use the
Short Form 5500 and will continue to be
required to file the Form 5500 Annual
Return/Report. Of these, fewer than
2,000 are defined benefit plans that
must use an actuary and file Schedule
MB or Schedule SB. All will require a
mix of clerical and professional
administrative skills to satisfy their
reporting requirements.

Satisfaction of 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
Department’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 lower on aggregate and for most
classes of plans. These estimates take
account of the quantity and mix of
clerical and professional skills required
to satisfy the reporting requirements for
various classes of plans.

TABLE 5.—SMALL PLAN REPORTING COSTS UNDER PRIOR AND NEW REQUIREMENTS

Class of small plan

Number
affected

Aggregate
cost under
prior requirements
(in millions)

Aggregate
cost under
new requirements
(in millions)

Defined Benefit Pension, Short Form eligible ...........................................
Defined Benefit Pension, Short Form ineligible ........................................
Code Section 403(b) ..................................................................................
Other Defined Contribution, Short Form eligible .......................................
Other Defined Contribution Pension, Short Form ineligible ......................
Funded Welfare .........................................................................................
Other Welfare ............................................................................................
Total for All Affected Small Plans ......................................................

34,000 ..............................................
2,000 ................................................
9,000 ................................................
544,000 ............................................
32,000 ..............................................
7,000 ................................................
None of approximately 6 million ......
629,000 ............................................

$35.71
2.07
0.38
195.65
11.54
2.83
........................
248.17

$24.33
1.93
1.81
111.64
10.70
1.58
........................
151.99

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Note: Some displayed numbers do not sum up to the totals due to rounding.

The Department notes that the
estimated reporting costs amount to
about $240 on average for each of the
629,000 small plans subject to annual
reporting requirements, or just $27 if
averaged across all of the approximately
5.7 million small plans covered by Title
I of ERISA. This compares with roughly
$1,200 on average for each of the
152,000 affected large filers.
The Department is unaware of any
relevant federal rules for small plans
that duplicate, overlap, or conflict with
these regulations.
Description of steps the agency has
taken to minimize impact on small
entities. In developing and finalizing
these regulations and the associated
forms revisions, the Department
considered a number of alternative
provisions directed at small plans, many
of which are discussed elsewhere in this
preamble and in the Forms Revision
Notice. For example, as discussed in the
Forms Revision Notice, the ERISA
Advisory Council suggested that the
Department consider exempting welfare
plans from reporting requirements, or,
alternatively, subjecting all welfare
plans to new, separately designed
reporting requirements. The Department
opted instead to retain both the

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requirement that small funded welfare
plans submit annual reports and the
exception from annual reporting
requirements for other small welfare
plans. Annual reporting by the
relatively small number of small funded
welfare plans is necessary, in the
Department’s view, to protect ERISA
rights in connection with the assets that
such plans hold. A requirement that the
remaining approximately six million
small welfare plans report annually is
not justified insofar as these plans have
no assets that need protection and
insofar as the vast majority of the plans
are fully insured and therefore
separately protected by state oversight
of the insurance contracts they hold and
the insurers that issue them. The
Department also considered both
narrower and broader eligibility criteria
for use of the Short Form 5500, settling
on criteria that limit eligibility to plans
holding relatively safe and protected
assets, which nonetheless includes a
large majority of small plans. The
Department also considered the
inclusion of more or fewer of the items
of information formerly collected from
small plans in the Form 5500 Annual
Return/Report, retaining only those
items it believes to be necessary and

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adequate to the protection of small plan
participants’ ERISA rights.
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 July
2006 Proposal solicited comments on
the information collections included in
the proposed amendments to the
Department’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 Internal Revenue Code.
The Department also submitted an
information collection request (ICR) to
OMB in accordance with 44 U.S.C.
3507(d), contemporaneously with
publication of the July 2006 Proposal,
for OMB’s review of the Department’s
information collections previously
approved under OMB Control No. 1210–
0110.25 Public comment on the
25 On August 29, 2006, OMB issued a notice
indicating that it would continue its approval of the
information collections approved under Control No.
1210–0110 as currently in effect, but would not
approve the Department’s request for approval of

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
information collections contained in the
Supplemental Notice was also solicited
in connection with the publication of
that Notice in December, 2006.
In connection with publication of this
final rule, the Department has submitted
an information collection request (ICR)
to OMB for its review of the changes in
burden estimates for the information
collections currently approved under
OMB Control No. 1210–0110 that are
the result of this final regulatory action
and the Forms Revision Notice
published simultaneously with this
rule. In order to avoid unnecessary
duplication of public comments, the
PRA information published in the
associated Forms Revision Notice is
incorporated herein by this reference in
its entirety. The public is advised that
an agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid OMB control
number. The Department intends to
publish a notice announcing OMB’s
decision upon review of the
Department’s ICR.
A copy of the ICR can be obtained by
contacting the Office of Policy and
Research, Employee Benefits Security
Administration, U.S. Department of
Labor, Room N–5718, 200 Constitution
Avenue, NW., Washington, DC 20210,
Telephone: (202) 693–8410; Fax: (202)
219–4745 or at http://www.RegInfo.gov.
These are not toll-free numbers.
Congressional Review Act
The final 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 will be
transmitted to the Congress and the
Comptroller General for review.

mstockstill on PROD1PC66 with RULES2

Unfunded Mandates Reform Act
For purposes of the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), as well as Executive Order
12875, these rules do not include any
Federal mandate that may result in
expenditures by state, local, or tribal
governments in the aggregate of more
than $100 million, adjusted for
inflation, or increased expenditures by
the private sector of more than $100
million, adjusted for inflation.
Federalism Statement
Executive Order 13132 (August 4,
1999) outlines fundamental principles
of federalism and requires adherence to
specific criteria by federal agencies in
revisions to the ICR until after consideration of
public comment on the July Proposal and
promulgation of a final rule, describing any
changes.

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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 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 in 29 CFR Part 2520
Accountants, Disclosure
requirements, Employee benefit plans,
Employee Retirement Income Security
Act, Pension plans, Pension and welfare
plans, Reporting and recordkeeping
requirements, and Welfare benefit plans.
■ In view of the foregoing, the
Department amends 29 CFR part 2520 as
set forth below:
PART 2520—RULES AND
REGULATIONS FOR REPORTING AND
DISCLOSURE
1. The authority citation for part 2520
is revised to read as follows:

■

Authority: 29 U.S.C. 1021–1025, 1027,
1029–31, 1059, 1134, and 1135; and
Secretary of Labor’s Order 1–2003, 68 FR
5374 (Feb. 3, 2003). 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
(a)(2), (b)(1) and (c) to read as follows:

§ 2520.103–1
report.

Contents of the annual

(a) * * *
(2) Under the authority of subsections
104(a)(2), 104(a)(3) and 110 of the Act,
and section 1103(b) of the Pension
Protection Act of 2006, a simplified
report, limited exemption or alternative

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64727

method of compliance is prescribed for
employee welfare and pension benefit
plans, as applicable. A plan filing a
simplified report or electing the limited
exemption or alternative method of
compliance shall file an annual report
containing the information prescribed in
paragraph (b) or paragraph (c) of this
section, as applicable, and shall furnish
a summary annual report as prescribed
in § 2520.104b–10.
(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 SB (SingleEmployer Defined Benefit Plan
Actuarial Information), Schedule MB
(Multiemployer Defined Benefit Plan
and Certain Money Purchase Plan
Actuarial Information), Schedule C
(Service Provider Information),
Schedule D (DFE/Participating Plan
Information), Schedule G (Financial
Transaction Schedules), Schedule H
(Financial Information), Schedule R
(Retirement Plan Information), and
other financial schedules described in
Sec. 2520.103–10. See the instructions
for this form.
*
*
*
*
*
(c) Contents of the annual report for
plans with fewer than 100 participants.
(1) Except as provided in paragraph
(c)(2) of this section and in paragraph
(d) of this section, and in §§ 2520.104–
43 and 2520.104a–6, 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 SB (Single
Employer Defined Benefit Plan
Actuarial Information), Schedule MB
(Multiemployer Defined Benefit Plan
and Certain Money Purchase Plan
Actuarial Information), Schedule D
(DFE/Participating Plan Information),
Schedule I (Financial Information—
Small Plan), and Schedule R
(Retirement Plan Information). See the
instructions for this form.
(2)(i) The annual report of an
employee benefit plan 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

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64728

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

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 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) A plan meets the conditions in
this paragraph (c)(2)(ii) with respect to
the year if the plan:
(A) Does not hold any employer
securities at any time during the year;
(B) Satisfies the audit waiver
conditions in §§ 2520.104–
46(b)(1)(i)(A)(1), (b)(1)(i)(B) and
(b)(1)(i)(C);
(C) Had at all times during the plan
year 100 percent of the plan’s assets
held for investment purposes invested
in assets that have a readily
determinable fair market value. For
purposes of this section, the following
shall be treated as assets that have a
readily determinable fair market value:
Shares issued by an investment
company registered under the
Investment Company Act of 1940;
investment and annuity contracts issued
by any insurance company, qualified to
do business under the laws of a State,
that provides valuation information at
least annually to the plan administrator;
bank investment contracts issued by a
bank or similar financial institution, as
defined in § 2550.408b–4(c) of this
chapter, that provides valuation
information at least annually to the plan
administrator; securities (except
employer securities) traded on a public
exchange; government securities issued
by the United States or by a State; cash
or cash equivalents held by a bank or
similar financial institution, as defined
in § 2550.408b–4(c) of this chapter, by
an insurance company, qualified to do
business under the law of a State, by an
organization registered as a brokerdealer under the Securities Exchange
Act of 1934, or by any other
organization authorized to act as a
trustee for individual retirement
accounts under section 408 of the
Internal Revenue Code; and any loan
meeting the requirements of section
408(b)(1) of the Act and the regulations
issued thereunder; and
(D) Is not a multiemployer plan.
*
*
*
*
*
■ 3. Amend § 2520.104–44 by revising
(b)(1)(iii) and (b)(2), and removing (b)(3)
to read as follows:

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§ 2520.104–44 Limited exemption and
alternative method of compliance for annual
reporting by unfunded plans and by certain
insured plans.

supplemented, will be deemed to satisfy
the notice content requirements of
paragraph (b)(1)(i)(B) of this section.

*

Appendix to § 2520.104–46—Model
Summary Annual Report Notice (Plan
Administrators Will Need to Modify the
Model to Omit Information That Is Not
Applicable to the Plan)

*
*
*
*
(b) * * *
(1) * * *
(iii) Partly in the manner specified in
paragraph (b)(1)(i) of this section and
partly in the manner specified in
paragraph (b)(1)(ii) of this section; and
(2) A pension benefit plan the benefits
of which are provided exclusively
through allocated insurance contracts or
policies which are issued by, and
pursuant to the specific terms of such
contracts or policies benefit payments
are fully guaranteed by an insurance
company or similar organization which
is qualified to do business in any State,
and the premiums for which are paid
directly by the employer or employee
organization from its general assets or
partly from its general assets and partly
from contributions by its employees or
members: Provided, That contributions
by participants are forwarded by the
employer or employee organization to
the insurance company or organization
within three months of receipt and, in
the case of a plan that provides for the
return of refunds to contributing
participants, such refunds are returned
to them within three months of receipt
by the employer or employee
organization.
*
*
*
*
*
■ 4. In § 2520.104–46, add a new
paragraph (e) and a new appendix to the
section to read as follows:
§ 2520.104–46 Waiver of examination and
report of an independent qualified public
accountant for employee benefits plan with
fewer than 100 participants.

*

*
*
*
*
(e) Model notice. The appendix to this
section contains model language for
inclusion in the summary annual report
to assist plan administrators in
complying with the requirements of
paragraph (b)(1)(i)(B) of this section to
avail themselves of the waiver of
examination and report of the
independent qualified public
accountant for employee benefit plans
with fewer than 100 participants. Use of
the model language is not mandatory. In
order to use the model language in the
plan’s summary annual report,
administrators must, in addition to any
other information required to be in the
summary annual report, select among
alternative language and add relevant
information where appropriate in the
model language. Items of information
that are not applicable to a particular
plan may be deleted. Use of the model
language, appropriately modified and

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The U.S. Department of Labor’s regulations
require that an independent qualified public
accountant audit the plan’s financial
statements unless certain conditions are met
for the audit requirement to be waived. This
plan met the audit waiver conditions for the
plan year beginning (insert year) and
therefore has not had an audit performed.
Instead, the following information is
provided to assist you in verifying that the
assets reported on the (Form 5500 or Form
5500-SF—select as applicable) were actually
held by the plan.
At the end of the (insert year) plan year,
the plan had (include separate entries for
each regulated financial institution holding
or issuing qualifying plan assets):
[Set forth amounts and names of
institutions as applicable where indicated],
[(insert $ amount) in assets held by (insert
name of bank)], [(insert $ amount) in
securities held by (insert name of registered
broker-dealer)], [(insert $ amount) in shares
issued by (insert name of registered
investment company)], [(insert $ amount) in
investment or annuity contract issued by
(insert name of insurance company)].
The plan receives year-end statements from
these regulated financial institutions that
confirm the above information. [Insert as
applicable—The remainder of the plan’s
assets were (1) qualifying employer
securities, (2) loans to participants, (3) held
in individual participant accounts with
investments directed by participants and
beneficiaries and with account statements
from regulated financial institutions
furnished to the participant or beneficiary at
least annually, or (4) other assets covered by
a fidelity bond at least equal to the value of
the assets and issued by an approved surety
company.]
Plan participants and beneficiaries have a
right, on request and free of charge, to get
copies of the financial institution year-end
statements and evidence of the fidelity bond.
If you want to examine or get copies of the
financial institution year-end statements or
evidence of the fidelity bond, please contact
[insert mailing address and any other
available way to request copies such as email and phone number].
If you are unable to obtain or examine
copies of the regulated financial institution
statements or evidence of the fidelity bond,
you may contact the regional office of the
U.S. Department of Labor’s Employee
Benefits Security Administration (EBSA) for
assistance by calling toll-free 1.866.444.EBSA
(3272). A listing of EBSA regional offices can
be found at http://www.dol.gov/ebsa.
General information regarding the audit
waiver conditions applicable to the plan can
be found on the U.S. Department of Labor
Web site at
http://www.dol.gov/ebsa under the heading
‘‘Frequently Asked Questions.’’

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Federal Register / Vol. 72, No. 221 / Friday, November 16, 2007 / Rules and Regulations
5. Amend § 2520.104a–2(a) to read as
follows:

■

§ 2520.104a–2
reports.

Electronic filing of annual

(a) Any annual report (including any
accompanying statements or schedules)
filed with the Secretary under part 1 of

title I of the Act for any plan year
(reporting year, in the case of common
or collective trusts, pooled separate
accounts, and similar non-plan entities)
beginning on or after January 1, 2009,
shall be filed electronically in
accordance with the instructions
applicable to such report, and such

64729

other guidance as the Secretary may
provide.
*
*
*
*
*
■ 6. Revise the Appendix to
§ 2520.104b–10 to read as follows:
§ 2520.104b–10

*

*

*

Summary Annual Report.

*

*

APPENDIX TO § 2520.104B–10.—THE SUMMARY ANNUAL REPORT (SAR) UNDER ERISA: A CROSS-REFERENCE TO THE
ANNUAL REPORT
SAR item
A. PENSION PLAN:
1. Funding arrangement .....................
2. Total plan expenses .......................
3. Administrative expenses .................
4. Benefits paid ...................................
5. Other expenses ..............................
6. Total participants ............................
7. Value of plan assets (net): .............
a. End of plan year.
b. Beginning of plan year ............
8. Change in net assets .....................
9. Total income ...................................
a. Employer contributions ............
b. Employee contributions ...........
c. Gains (losses) from sale of assets.
d. Earnings from investments ......
10. Total insurance premiums ............
11. Unpaid minimum required contribution (S–E plans) or Funding deficiency (ME plans):.
a. S–E Defined benefit plans.
b. ME Defined benefit plans ........
c. Defined contribution plans .......
B. WELFARE PLAN
1. Name of insurance carrier ..............
2. Total (experience rated and nonexperienced 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. Change in net assets .....................
7. Total income ...................................
a. Employer contributions ............
b. Employee contributions ...........

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c. Gains (losses) from sale of assets.
d. Earnings from investments ......
8. Total plan expenses .......................
9. Administrative expenses .................
10. Benefits paid .................................
11. Other expenses ............................

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Form 5500 large plan filer line
items

Form 5500 small plan filer line
items

Form 5500–9a ..........................
Sch. H–2j ..................................
Sch. H–2i(5) ..............................
Sch. H–2e(4) ............................
Sch. H–Subtract the sum of
2e(4) & 2i(5) from 2j.
Form 5500–6f ...........................
Sch. H–1l [Col. (b)] ...................

Same ........................................
Sch. I–2j ....................................
Sch. I–2h ..................................
Sch. I–2e ..................................
Sch. I–2i ....................................

Not applicable.
Line 8h.
Line 8f.
Line 8d.
Line 8g.

Same ........................................
Sch. I–1c [Col. (b)] ...................

Line 5b.
Line 7c [Col. (b)].

Sch. H–1l [Col. (a)] ...................
Sch. H–Subtract 1l [Col. (a)]
from 1l [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–2b(4)(C) .......................

Sch. I–1c [Col. (a)] ...................
Sch. I–Subtract 1c [Col. (a)
from Col. (b)].
Sch. I–2d ..................................
Sch. I–2a(1) & 2b if applicable

Line 7c [Col. (a)].
Line 7c–Subtract Col. (a) from
Col. (b).
Line 8c.
Line 8a(1) if applicable.

Sch. I–2a(2) & 2b if applicable

Line 8a(2) & 8a(3) if applicable.

Not applicable ...........................

Not applicable.

Sch. H–Subtract the sum of
2a(3), 2b(4)(C) and 2c from
2d.
Total of all Schs. A–6b .............
Sch. SB–39 ...............................

Sch. I–2c ...................................

Line 8b.

Total of all Schs. A–6b .............
Same ........................................

Not applicable.
Same.

Sch. MB–10 ..............................
Sch. R–6c, if more than zero ...

Same ........................................
Same ........................................

Not applicable.
Line 12d.

All Schs. A–1(a) ........................
All Schs. A–Sum of 9a(1) and
10a.

Same ........................................
Same ........................................

Not applicable.
Not applicable.

All Schs. A–9a(1) ......................
All Schs. A–9b(4) ......................
Sch. H–1l [Col. (b)] ...................

Same ........................................
Same ........................................
Sch. I–1c [Col. (b)] ...................

Not applicable.
Not applicable.
Line 7c [Col. (b)].

Sch. H–1l [Col. (a)] ...................
Sch. H–Subtract 1l [Col. (a)]
from 1l [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–2b(4)(C) .......................

Sch. I–1c [Col. (a)] ...................
Sch. I–Subtract 1c [Col. (a)]
from 1c [Col. (b)].
Sch. I–2d ..................................
Sch. I–2a(1) & 2b if applicable

Line 7c [Col. (a)].
Line 7c–Subtract [Col. (a)] from
7c [Col. (b)].
Line 8c
Line 8a(1) if applicable.

Sch. I–2a(2) & 2b if applicable

Line 8a(2) if applicable.

Not applicable ...........................

Not applicable.

Sch. H–Subtract the sum of
2a(3), 2b(4)(C) and 2c from
2d.
Sch. H–2j ..................................
Sch. H–2i(5) ..............................
Sch. H–2e(4) ............................
Sch. H–Subtract the sum of
2e(4) & 2i(5) from 2j.

Sch. I–2c ...................................

Line 8b.

Sch.
Sch.
Sch.
Sch.

Line
Line
Line
Line

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I–2j ....................................
I–2h ..................................
I–2e ..................................
I–2i ....................................

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Form 5500–SF filer line items

8h.
8f.
8d.
8g.

64730

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

Signed at Washington, DC, this 30th day of
October, 2007.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.
[FR Doc. E7–21765 Filed 11–15–07; 8:45 am]

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