2023-02653. Annual Information Return/Reports

AGENCY:

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

ACTION:

Final forms revisions.

SUMMARY:

This document contains final forms and instructions revisions for the Form 5500 Annual Return/Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan effective for plan years beginning on or after January 1, 2023. The forms and instructions revisions relate to statutory amendments to the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) enacted as part of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) for multiple-employer plans and groups of plans, as well as changes intended to improve reporting of certain plan financial information regarding audits and plan expenses and enhance the reporting of certain tax qualification and other compliance information by retirement plans. There are also some minor changes that further improve defined benefit plan reporting by building on changes made to the forms for plan years beginning on or after January 1, 2022. The remaining changes are technical changes that are part of the annual rollover of the Form 5500 and Form 5500-SF forms and instructions. The revisions being finalized in this document affect employee pension and welfare benefit plans, plan sponsors, administrators, and service providers to plans subject to annual reporting requirements under ERISA and the Code.

DATES:

The final forms and instructions revisions in this document are effective for plan years beginning on or after January 1, 2023.

FOR FURTHER INFORMATION CONTACT:

Janet Song, Florence Novellino, or Colleen Brisport Sequeda, Office of Regulations and Interpretations, Employee Benefits Security Administration, U.S. Department of Labor (DOL), [phone] for questions related to reporting requirements under Title I of ERISA. For information related to the IRS reporting requirements under the Code, contact Cathy Greenwood, Employee Plans Program Management Office, Tax Exempt and Government Entities, [phone]. For information related to Pension Benefit Guaranty Corporation (PBGC) reporting and changes in this document, including proposed changes to the actuarial schedules, contact Karen Levin, Regulatory Affairs Division, Office of the General Counsel, PBGC, [phone].

Customer service information: Individuals interested in obtaining general information from the DOL concerning Title I of ERISA may call the EBSA Toll-Free Hotline at 1-866-444-EBSA (3272) or visit the DOL's website ( www.dol.gov/​agencies/​ebsa).

SUPPLEMENTARY INFORMATION:

A. ERISA Reporting Framework

Titles I and IV of the Employer Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) generally require pension and other employee benefit plans to file annual returns/reports concerning, among other things, the financial condition and operations of the plan. Filing a Form 5500 Annual Return/Report of Employee Benefit Plan (Form 5500) or, if eligible, a Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan (Form 5500-SF), together with any required schedules and attachments (together “Form 5500 Annual Return/Report”), in accordance with related instructions, generally satisfies these annual reporting requirements. ERISA sections 103 and 104 broadly set out annual financial reporting requirements for employee benefit plans under Title I of ERISA. The Form 5500 Annual Return/Report, and related instructions and regulations, are also promulgated under the DOL's general regulatory authority in ERISA sections 109 and 505.^[1]

In the United States, there are an estimated 2.5 million health plans,^[2] an estimated 673,000 other welfare plans,^[3] and approximately 747,000 private pension plans.^[4] These plans cover roughly 152 million private sector workers, retirees, and dependents,^[5] and have estimated assets of $12 trillion.^[6] The Form 5500 Annual Return/Report serves as the principal source of information and data available to the DOL, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) (together “Agencies”) concerning the operations, funding, and investments of approximately 864,000 pension and welfare benefit plans that file.^[7] Accordingly, the Form 5500 Annual Return/Report is essential to each Agency's enforcement, research, and policy formulation programs, as well as for the regulated community, which makes increasing use of the information as more capabilities develop to interact with the data electronically. The data is also an important source of information for use by other Federal agencies, Congress, and the private sector in assessing employee benefits, tax, and economic trends and policies. The Form 5500 Annual Return/Report also serves as a primary means by which the operations of plans can be monitored by participating employers in multiple- employer plans and other group arrangements, by plan participants and beneficiaries, and by the general public.

B. September 2021 Proposed Rule and Final Rule Phases I, II and III

On September 15, 2021, the Agencies published a notice of proposed forms revisions (NPFR) to amend the Form 5500 Annual Return/Report primarily to implement annual reporting changes related to legislative provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) focused on multiple-employer pension plans (MEPs) and defined contribution group reporting arrangements (DCGs or DCG reporting arrangements).^[8] 86 FR 51488 (Sep. 15, 2021). The NPFR also set forth additional proposed changes intended to improve reporting on multiemployer and single-employer defined benefit pension plans, update reporting on Form 5500 Annual Return/Report to make the financial information collected on the Form 5500 Annual Return/Report more useful and usable, enhance the reporting of certain tax qualification and other compliance information by retirement plans, and transfer to the DOL Form M-1 (Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)) participating employer information for multiple-employer welfare arrangements that are required to file the Form M-1. 86 FR 51488 (Sept. 15, 2021). The DOL simultaneously published a proposed rulemaking (NPRM) required to implement the proposed forms revisions. 86 FR 51284 (Sep. 15, 2021). The NPFR and the NPRM are collectively referred to as the September 2021 proposal.

The Agencies received 114 comments on the September 2021 proposal. The comments, which were all posted on the DOL's website, generally focused on the proposed changes for the 2022 plan year forms and on future rulemakings.

In December 2021, the DOL published a final forms revisions rulemaking (2021 Final Forms Revisions) that set forth a narrow set of changes to the instructions for the Form 5500 and Form 5500-SF, effective for plan years beginning on or after January 1, 2021. 86 FR 73976 (Dec. 29, 2021). Those instruction changes generally implemented annual reporting changes for MEPs, including pooled employer plans (PEPs), that were described in the September 2021 proposal. The DOL noted in that publication that other changes to the Form 5500 Annual Return/Report would be the subject of one or more separate and later final notices to address other elements of the September 2021 proposal. That rule is also referred to herein as Final Rule Phase I.^[9]

In May 2022, the Agencies published a second final forms revisions rulemaking effective for plan years beginning on or after January 1, 2022. 87 FR 31133 (May 23, 2022). Those forms and instructions revisions generally implemented annual reporting changes for defined benefit plans on Schedules MB, SB and R, but also added certain plan characteristics codes for MEPs, including one to specifically identify PEPs, to the list of plan characteristics the plans must use to describe the plan on their annual report. That 2022 rule is referred to herein as Final Rule Phase II.

The Agencies stated in the 2022 Final Forms Revisions notice that the remaining proposed changes from the September 2021 proposal to the Form 5500 Annual Return/Report would be addressed either in a further final forms revisions notice or possibly re-proposed with modifications in a separate proposal as part of a broader range of improvements to the annual reporting requirements.^[10] The decision to defer further changes until a third final rule was also based on the need to coordinate the careful consideration of public comments and other regulatory processes for adopting final changes to the Form 5500 Annual Return/Report with a separate contractual development schedule for integrating forms and instructions changes into the wholly-electronic EFAST2 filing system that receives and displays Form 5500 Annual Return/Report filings.^[11]

This third rulemaking document (herein referred to as Final Rule Phase III) addresses the remaining subjects included in the September 2021 proposal, including DCG reporting arrangements, Schedule DCG and related audit issues, Schedule MEP and related reporting requirements regarding MEPs, financial statement improvements to the Schedule H and Schedules of Assets, changes in participant counting methodology for determining eligibility for small plan reporting purposes, including the conditional waiver of the Independent Qualified Public Accountant (IQPA) audit requirements, and additional questions on pension plan compliance with certain Code requirements. Some changes in those areas are being adopted in final form and others that were included in the September 2021 proposal are being deferred for further development and public input as part of a more general Form 5500 improvement project listed on DOL's semi-annual regulatory agenda. The final forms and instructions changes adopted in this Final Rule Phase III generally apply beginning with the 2023 plan year Form 5500 Annual Return/Report.

C. Overview of SECURE Act Changes Related to Form 5500 Annual Reporting Changes

The SECURE Act, which overall was designed to expand and preserve workers' retirement savings, is the most significant legislation impacting ERISA and Code provisions pertaining to retirement plans since the Pension Protection Act of 2006. Among other things, the SECURE Act directed the Secretaries of the Departments of Labor and Treasury (together the “Departments”) to develop a new aggregate annual reporting option for certain groups of retirement plans and included other statutory amendments that directly impact annual reporting requirements for MEPs. In relevant part, the SECURE Act's expansion of MEPs and direction for the Departments to establish a consolidated reporting option for defined contribution pension plans that share certain key characteristics should help expand retirement coverage by making it easier for record keepers and other financial services providers to offer attractive retirement plan alternatives and for employers, especially small ones, to pick from an array of retirement plan alternatives and structure that works best.

Section 101 of the SECURE Act amended ERISA section 3(2) and added ERISA sections 3(43) and 3(44) to allow for a new type of ERISA-covered MEP—a defined contribution pension plan called a “pooled employer plan” (PEP), operated by a “pooled plan provider” (PPP). PEPs allow multiple unrelated employers to participate without the need for any common interest among the participating employers (other than having adopted the plan).^[12] Under ERISA section 3(2), a PEP is treated for purposes of ERISA as a single plan that is a MEP. A PEP is defined in ERISA section 3(43) as a plan that is an individual account plan established or maintained for the purpose of providing benefits to the employees of two or more employers; that is a qualified retirement plan, a plan that consists of annuity contracts described in Code section 403(b) that also meets the requirements of Code section 403(b)(15),^[13] or a plan funded entirely with individual retirement accounts (IRA-based plan); and the terms of which must meet certain requirements set forth in the statute.^[14]

ERISA section 3(43) further provides that PEPs do not include multiemployer plans as defined in ERISA section 3(37) or plans maintained by employers that have a common interest other than having adopted the plan.^[15] The term PEP also does not include a plan established before the date the SECURE Act was enacted unless the plan administrator elects to have the plan treated as a PEP and the plan meets the ERISA requirements applicable to a PEP established on or after such date. The PPP for a PEP must file a registration statement with the Secretary of Labor and the Secretary of Treasury pursuant to ERISA section 3(44) and section 413(e)(3)(A)(ii) of the Code. On November 16, 2020, as part of implementing the SECURE Act section 101, the DOL published a notice of final rulemaking establishing Form PR (Pooled Plan Provider Registration) (Form PR) and making its filing the registration requirement for PPPs. 85 FR 72934 (Nov. 16, 2020). The Treasury, DOL, and the IRS have advised that filing the Form PR with the DOL will satisfy the requirement to register with the Secretary of the Treasury.^[16] The instructions to the Form PR tell PPP registrants to use the same identifying information on the Form 5500 Annual Return/Reports filed by the PEPs, particularly name; EIN for the PPP; any identified affiliates providing services; trustees; and plan name and number for each PEP.

Section 101 of the SECURE Act also amended ERISA section 103(g) for MEPs. Section 103(g) of ERISA requires that the Form 5500 Annual Return/Report of a MEP generally must include a list of participating employers and a good faith estimate of the percentage of total contributions made by each participating employer during the plan year. The SECURE Act amended section 103(g) to expand the participating employer information that must be reported on the Form 5500 Annual Return/Report ^[17] also to require the aggregate account balances attributable to each employer in the plan (determined as the sum of the account balances of the employees of each employer and the beneficiaries of such employees), and applied section 103(g) to retirement plans that currently meet the definition of a MEP under ERISA section 210(a), including any PEPs, for plan years beginning on or after January 1, 2021.^[18] With respect to a PEP, section 103(g) further requires that the annual return/report must include the identifying information for the person designated under the terms of the plan as the PPP.

Section 101 of the SECURE Act also amended ERISA section 104(a)(2)(A) to permit the Secretary of Labor to prescribe by regulation simplified reporting for MEPs subject to ERISA section 210(a) with fewer than 1,000 participants in total, so long as each participating employer has fewer than 100 participants.

Section 202 of the SECURE Act provides that the Departments, shall, in cooperation, modify the Form 5500 Annual Return/Report so that all members of a group of defined contribution pension plans that are individual account plans described in section 202 may file a single consolidated annual return/report satisfying the requirements of both section 6058 of the Code and section 104 of ERISA, effective for plan years beginning on or after January 1, 2022.^[19] The SECURE Act further provides that, in developing the consolidated return/report, the Departments may require any information regarding each plan in the group determined to be necessary or appropriate for the enforcement and administration of the Code and ERISA. The SECURE Act also mandates that the consolidated reporting by such a group must include such information as will enable participants in each of the plans to identify any aggregated return/report filed with respect to their plan. Section 202 provides that to constitute an eligible group of plans, all of the plans in the group must be either individual account plans or defined contribution plans as defined in section 3(34) of ERISA or in section 414(i) of the Code; must have the same trustee as described in section 403(a) of ERISA; the same one or more named fiduciaries as described in section 402(a) of ERISA; the same administrator as defined in section 3(16)(A) of ERISA and plan administrator as defined in section 414(g) of the Code; must have plan years beginning on the same date; and must provide the same investments or investment options to participants and beneficiaries. Section 202 further provides that a plan not subject to Title I of ERISA shall be treated as meeting these requirements for being eligible to be part of a consolidated reporting group of plans, if the same person that performs each of the functions described in the above requirements, as applicable, for all other plans in such group performs each of such functions for such plan.^[20]

Accordingly, the statutory authorization to develop a new type of consolidated reporting arrangements for groups of plans ( i.e., DCGs), the establishment of a new type of multiple-employer plan ( i.e., PEP), and the changes to the required reporting on participating employers in multiple-employer plans required some adjustments to the Form 5500 Annual Return/Report.

D. Overview of Final Form and Instruction Changes and Discussion of Public Comments

After consideration of the written comments received, the Agencies have determined to adopt various elements of the proposed forms and instructions changes with some modifications as set forth below. The forms and instructions changes fall into seven major categories: (1) adding a DCG consolidated reporting option; (2) adding Schedule MEP to collect MEP information; (3) adding certain new Code compliance questions; (4) changing the methodology for counting participants in defined contribution plans for purposes of determining eligibility for small plan reporting options; (5) additional defined benefit plan reporting improvements; (6) adding new breakout categories to the “Administrative Expenses” category of the Income and Expenses section of the Schedule H balance sheet; and (7) miscellaneous and conforming changes to forms and instructions. The DOL is also concurrently publishing a separate final rule that adds new regulations at 29 CFR 2520.103-14 and 2520.104-51, pursuant to section 110 of ERISA, and revises existing reporting regulations as needed to conform the Title I annual reporting regulations to the forms and instructions changes being adopted in this notice.

1. SECURE Act Section 202 DCG Reporting Arrangements

As noted above, section 202 of the SECURE Act directs the Departments to modify the Form 5500 to allow certain groups of defined contribution pension plans to file a single consolidated annual return/report. For a group of plans to be able to file a consolidated return/report, section 202(c) of the SECURE Act provides that all plans must be individual account plans or defined contribution plans that have the same trustee; the same one or more named fiduciaries; the same plan administrator under ERISA and the Code; the same plan year; and provide the same investments or investment options for participants and beneficiaries. The SECURE Act also provides that in developing the consolidated return/report for such arrangements, the Departments shall require such information as will enable a participant in a plan to identify any consolidated return or report filed with respect to the plan. The SECURE Act statutory provision further expressly provides the Departments with the authority to require such return/report to include any information regarding each plan in the group they determine is necessary or appropriate for the enforcement and administration of the provisions of ERISA and the Code.

The Departments explained in the proposal, and continue to believe, that the conditions in section 202 of the SECURE Act suggest that the section was primarily aimed at plans of unrelated small businesses that adopt a plan that has received approval from the IRS as to its form through the IRS Pre-Approved Program (pre-approved plan) offered by the same provider, and that section 202 was intended to provide this type of business structure with annual reporting cost efficiencies similar to those that MEPs and PEPs can offer to their participating employers. The Departments gave significant weight to that view of the purpose of the SECURE Act provision as they considered public comments and reached conclusions on final forms revisions in this area.

After considering the public comments on the proposal, the Departments continue to believe that an efficient and effective approach to establishing such a consolidated return/report option is to amend the Form 5500 Annual Return/Report and its related instructions to provide that the filing requirements for large pension plans and direct filing entities (DFEs) will generally apply to this new type of DFE—a defined contribution group (DCG) reporting arrangement—except that an additional schedule (Schedule DCG Individual Plan Information) to report individual plan-level information will have to be attached for each plan included in the DCG filing. As described in more detail below, the final rule is largely consistent with the September 2021 proposal, although several changes are being made in response to public comments, including eliminating the requirements that the DCG reporting arrangement and participating plans use a “single trust” and obtain an IQPA audit of that single trust, and that the investments of all participating plans be in investments that satisfy the qualifying assets condition that currently applies for small plans to be eligible to file a Form 5500-SF and for the small plan audit waiver. The separate Notice of Final Rulemaking being published with these final form revisions adds new DOL regulations at 29 CFR 2520.103-14 and 2520.104-51, pursuant to section 110 of ERISA, that set forth this DCG reporting arrangement option as an alternative method of compliance for eligible plans to satisfy the generally applicable requirement under Title I of ERISA to file their own separate Form 5500.

a. Conditions Applicable to DCG Reporting Arrangements

This final rule provides that a DCG reporting arrangement is treated as a new type of DFE that is required to: (1) file a Form 5500 under rules and conditions generally applicable to large defined contribution pension plans; (2) report specific plan-level information on the new Schedule DCG regarding each individual plan in the DCG, which shall include an IQPA audit report for each large plan and each small plan that does not meet the conditions in 29 CFR 2520.104-46 for a waiver of the IQPA audit and opinion requirements in ERISA section 103; and (3) ensure that each individual plan included in the DCG filing meets specified eligibility conditions that are consistent with SECURE Act Section 202 statutory criteria and designed to meet necessary and appropriate financial accountability and oversight protections.

The final rule sets forth the eligibility conditions for a defined contribution pension plan to file as part of a DCG reporting arrangement, and thus rely on this alternative method of compliance to satisfy the annual reporting obligation in section 104 of ERISA and in section 6058 of the Code. To satisfy such annual reporting obligations, all defined contribution pension plans filing as part of a DCG must meet the following eligibility conditions with respect to such DCG:

All plans are individual account plans or defined contribution plans that—

(1) Have the same trustee meeting the requirements set forth in ERISA section 403(a) (“common trustee”);

(2) Have the same one or more named fiduciaries designated in accordance with the requirements set forth in ERISA section 402(a) (“common named fiduciaries”), except that an individual employer may be a named fiduciary of each employer's own plan, provided that the other named fiduciaries are the same and common to all plans;

(3) Have a designated administrator under ERISA section 3(16)(A) that is the same plan administrator and common to all plans (“common plan administrator”);

(4) Have plan years beginning on the same date (“common plan year”);

(5) Provide the same investments or investment options to participants and beneficiaries in all the plans (“common investments or investment options”) (as discussed below, a single dedicated brokerage window provided by the same designated registered broker-dealer common to all plans that restricts participant and beneficiary investments solely to assets with a readily determinable fair market value as described in 29 CFR 2520.103-1(C)(2)(ii)(C) will be treated as a “common investment option” for purposes of this paragraph);

(6) Do not hold any employer securities at any time during the plan year, except that this condition does not prohibit investments in any employer's publicly traded securities within an otherwise “common investment or investment option” available to all participants and beneficiaries in the plans participating in the DCG;

(7) Either obtain an audit by an IQPA and file the IQPA report with the DCG consolidated Form 5500, or be eligible for the waiver of the annual examination and report of an IQPA under 29 CFR 2520.104-46; ^[21] and

(8) Are not a MEP (including a PEP) or a multiemployer plan.

The Form 5500 also includes a new checkbox on the Form 5500 (Part II, line 10a(4)) to indicate that at least one Schedule DCG is attached to the Form 5500, with a space for the filer to enter the number of Schedules DCG (one per participating plan) attached to the Form 5500 filing.

These conditions are designed to meet SECURE Act section 202 statutory criteria for plans participating in a group filing as well as related administrative requirements for DCG compliance and agency enforcement, including important information and transparency requirements that enable participants to find information in DCG filings regarding their particular plan. This approach also responds to public comments that asked the Departments to reconsider some of the proposed conditions for DCG reporting in an effort to reduce the costs and administrative burdens, particularly with respect to audit costs and for smaller plans, while continuing the benefits of having appropriate financial transparency and accountability for plans participating in, and persons managing and operating, DCG reporting arrangements.^[22]

b. Eliminating the Single DCG Trust, DCG Trust Audit, and “Eligible Plan Assets” Requirements for All Investments in DCG Reporting Arrangements

The September 2021 Proposal included conditions that the investment assets of the plans participating in the DCG would have to be held in a single trust and the consolidated Form 5500 Annual Return/Report filed by the DCG would have to include an audit of the single trust's financial statements. The proposal also required that all investments of the participating plans be 100% invested in certain secure, easy to value assets that are treated as having a “readily determinable fair market value” under 29 CFR 2520.103-1(c)(2)(ii) and that participating plans satisfy the small plan audit waiver under 29 CFR 2520.104-46 by virtue of having 95% or more of their assets as “qualifying plan assets” and not by virtue of enhanced bonding. For the reasons discussed below, these conditions are revised in the final forms revisions and rule. The DCG reporting arrangement may, but is not required to, use a single trust to satisfy the SECURE Act condition that all plans in the DCG have the “same trustee.” Rather, the plans participating in the DCG must instead hold all plan assets in trust by one or more trustees in accordance with section 403(a) of ERISA,^[23] with the condition that such trustee(s) be the same, i.e., a common trustee, for all plans participating in the DCG. The common trustee or trustees are required to be either named in the trust instrument or in the plan instrument or appointed by a person who is a named fiduciary of the participating plan. Upon acceptance of being named or appointed, such trustee or trustees must have exclusive authority and discretion to manage and control the assets of the plan, except to the extent that the authority to manage, acquire, or dispose of assets of the plan is delegated to one or more investment managers pursuant to section 402(c)(3) of ERISA or the plan expressly provides that the trustee or trustees are subject to the direction of a named fiduciary who is not a trustee (in which case the trustees must be subject to proper directions of such fiduciary which are made in accordance with the terms of the plan and which are not contrary to ERISA).

With respect to requiring use of a single trust, several commenters argued that nothing in the SECURE Act limits DCGs to only those plans that utilize a single group trust arrangement, noting that the statute directive was to use the “same trustee.” Two commenters argued that there were no strong practical or policy reasons for treating sub-trusts of a single trust as qualitatively different from separate trusts with the same trustee for DCG eligibility purposes. Two commenters noted that some DCG structures may want to use a master trust, with sub-trusts for each individual plan in the DCG, while other DCGs may use pre-approved plan documents and identical trust documents that name the same entity as trustee. Another commenter pointed out that many trust agreements are negotiated in a custom way to fit a particular employer's requirements, so that requiring all employers in a particular DCG to be bound by the same trust terms is unnecessarily restrictive. One commenter expressed concern about the potential inapplicability of section 3(a)(2) of the Securities Act of 1933 and section 3(c)(11) of the Investment Company Act of 1940, which contain similar registration exemptions for interests and participations in a single trust fund issued in connection with ERISA plans and for collective trust funds maintained by a bank through the exercise of substantial investment authority over trust assets. The commenter argued that SEC staff has historically taken the view that, for purposes of both exemptions, a single trust fund must be maintained in connection with a single-employer plan or in connection with plans sponsored by a group of commonly controlled or otherwise closely related plan sponsors. The commenter expressed concern about additional costs and burdens for DCG arrangements if the SEC registration exemptions are unavailable to a DCG “single trust.” Finally, a commenter suggested that, as an alternative to requiring use of a single trust, the DOL revise the proposal to permit both use of a single trust or multiple trusts.

With respect to the audit requirements, one commenter supported both the trust level audit and the separate audit requirement for any large plan that elects to participate in a DCG and rely on the DCG's consolidated Form 5500 to satisfy the plan's annual reporting obligation. One commenter opposed the concept of auditing different types of plans together on the basis that there are significant differences in the standards for and operation of plans so that they should not be treated the same and not audited together. Most commenters, however, raised various concerns regarding the cost and administrative burdens related to obtaining IQPA audits. Some commenters claimed that the cost of a plan-level audit would be in the range of an average of $15,000-$25,000 per plan and complained that this cost would negate cost savings that a DCG consolidated reporting option was supposed to provide. One commenter argued that the objectives of an audit to validate funds flowing in and out of the plan, identify late or missing contributions, obtain confirmation that the plan has sufficient controls to prevent and detect errors, and confirm compliance with DOL rules generally can be achieved through other less expensive means. A few commenters argued that they read the SECURE Act's provisions on a consolidated or aggregated annual report as envisioning some type of consolidated or aggregated audit as part of the DCG filing and, based on that premise, argued that requiring any individual plan audits would frustrate the SECURE Act's goal of easing administrative burdens associated with the Form 5500 filing requirement. Several other commenters suggested the DOL should allow for a “consolidated audit” of all the plans participating in a DCG reporting requirement, rather than requiring separate audits by each participating plan. One commenter argued that requiring plan-level audits puts DCGs at a commercial disadvantage relative to PEPs and MEPs because under Generally Accepted Auditing Standards (GAAS), PEPS and MEPS are subject to a single audit of the single plan. One commenter suggested that separate audits should be required only when the auditor discovers something in a consolidated audit requiring further investigation at the individual plan level. Some commenters supported a consolidated trust audit but only in lieu of individual plan audits if the single trust condition was retained. Another commenter suggested DOL consider an alternative where DCGs are treated similar to a master trust (or MTIA), which itself is not subject to audit and, if each plan within a master trust has fewer than 100 participants and otherwise meets the requirements to be exempt from audit, there would be no audit at the plan or master trust level. A commenter suggested that the new Schedule DCG for Form 5500 could require additional information from the plan administrator that would provide transparency and accountability at a lower cost than a plan-level audit.^[24]

With respect to the requirement that participating plans be 100% invested in “eligible plan assets,” some commenters argued that the DOL exceeded its statutory authority claiming that the SECURE Act limit is that investments or investment options be the same for each DCG participating plan. Another argued that the requirement hindered cost efficiencies for large plans that participate in a DCG, hampered an investment fiduciary's ability to prudently select investment alternatives for participants, and placed indirect restrictions on the range of plans that could join DCGs by prohibiting individual account plans that use “white label” funds from joining a DCG.

In the September 2021 proposal, the DOL explained that the single trust requirement was designed to allow for DCG reporting arrangements to have a single trust level audit, and also to reflect DOL's thoughts that a trust level audit would provide important financial accountability and oversight protections for arrangements that may be reporting on very large sums of plan assets in the aggregate. The DOL also explained that the “single trust” structure was based in part on the single trust structure used by plans of unrelated small businesses that adopt a plan offered by the same provider that has received approval from the IRS as to its form through the IRS Pre-Approved Program (pre-approved plan).^[25] The DOL also noted that an efficiency that would flow from an audit of a DCG single trust would be that the versions of the separate schedules referenced in ERISA section 103(a)(3)(A) and 29 CFR 2520.103-10(b) filed as part of the DCG consolidated Form 5500 would be treated as ERISA section 103(b)(3) supplemental schedules for purposes of the required IQPA's opinion on whether those schedules were presented in conformity with DOL rules and regulations, including the delinquent participant contributions schedule filed by the DCG in connection with line 4a of its Form 5500, Schedule H. The single trust, taken together with the condition that plans relying on the DCG consolidated Form 5500 report arrangement must be 100% invested in eligible plan assets and be eligible for the small plan audit waiver under 29 CFR 2520.104-46, but not by reason of enhanced bonding (which are current requirements for small plans being eligible to file the Form 5500-SF), was expected to simplify the audit requirement for the DCG single trust and the audits of participating plans subject to a separate plan-level audit because all the investments would be secure, easy-to-value assets.

In the September 2021 proposal, the DOL also explained that an audit of a DCG trust would not be an adequate substitute for plan-level audits of the plans relying on the DCG consolidated Form 5500 filing. Although the line items on the trust's financial statement would be audited, the underlying participating plans themselves would not be audited, so that compliance with the provisions of the plans that are invested in and funded by the trust would not be audited. In a trust audit, the amount of contributions received by the trust might be tested against the contributions remitted by participating plans, but, whether those contribution amounts remitted are in accordance with the individual plan provisions would not be tested, as they would be tested in an audit of the plan. There could be undisclosed, material errors in the amount of contributions remitted to the trust versus what should have been remitted. Similarly, in a trust audit, the benefit payments to participants might be tested in terms of amounts paid and whether they were authorized, but whether such payments were in compliance with plan provisions, such as vesting provisions, would not be tested as they would be tested in a plan's audit. In a plan audit, participant data is tested. Participant data testing involves determining whether employees are properly included or excluded from participating and whether the census data upon which eligibility for certain contributions and distributions are made is accurate. The audit of a trust would not test this at all. Finally, the materiality threshold for a trust audit could be significantly higher than that which would apply in the case of an individual participating plan because the trust threshold would be based on total assets in the trust rather than assets in each individual plan.

Although the DOL continues to believe that the single trust proposal carried reporting and efficiency benefits, the DOL also agrees that adopting an alternative approach suggested by some commenters that permits use of either a single DCG-level trust or multiple plan-level trusts would provide more flexibility to DCG arrangements in attempting to realize the operational efficiencies and cost savings for participating plans that DCGs were intended to achieve.

Thus, the final rule addresses commenters' concerns by providing flexibility to utilize one or more separate trusts as part of a DCG reporting arrangement, including trusts that may be set up for particular employers. It similarly removes the restriction on types of sub-trusts that can be used, should a particular DCG choose to utilize a single trust. The above structure serves to treat plans that join a DCG, versus those that do not, on a level playing field with respect to audits, and will support plans freely entering and exiting DCG reporting arrangements according to plan needs and in the best interests of plan participants and beneficiaries. Although the “eligible plan asset” restriction on investments is not being adopted as part of the final forms revisions, the Departments expect that the SECURE Act requirement that all plans participating in the DCG reporting arrangement have the same investments or investment options, together with the requirement for a plan-level audit for small plans that do not meet the conditions for the DOL small pension plan audit waiver regulation, will likely result in DCG reporting arrangements requiring participating small plans to invest in “eligible plan assets” in any event. Thus, it is expected that plan assets covered by the DCG report would generally be held by regulated financial institutions.

However, consistent with the September 2021 proposal, this final rule retains the requirement that a large plan that elects to participate have a plan-level audit. Also, the final rule requires that small plans participating in the DCG either separately meet the audit waiver conditions or have a plan-level audit and attach the audit report to the DCG's consolidated Form 5500 filing.^[26]

As explained in the September 2021 proposal, the DOL views an IQPA audit at the plan level as an important financial transparency and accountability condition for DCG reporting arrangements. Generally, pension plans and funded welfare plans with 100 or more participants are required to have an audit of the plan's financial statements performed by an IQPA. The DOL explained that in an audit of the DCG trust, the line items on the trust's financial statement are audited, but, because the underlying participating plans themselves are not audited, compliance with the provisions of the plans that are invested in and funded by the trust are not audited. Therefore, in a trust audit, the amount of contributions received by the trust might be tested against the contributions remitted by participating plans, but, whether those contribution amounts remitted are in accordance with the individual plan provisions would not be tested, as they would be tested in an audit of the plan. There could be undisclosed, material errors in the amount of contributions remitted to the trust versus what should have been remitted. Similarly, in a trust audit, the benefit payments to participants might be tested in terms of amounts paid and whether they were authorized, but whether the payments were in compliance with plan provisions, such as vesting provisions, would not be tested as they would be tested in an audit at the plan level. In a plan audit, participant data is tested. Participant data testing involves determining whether employees are properly included or excluded from participating and whether the census data upon which eligibility for certain contributions and distributions are made is accurate. The audit of a trust would not test this at all. Finally, the materiality threshold for a trust audit could be significantly higher than the threshold that would apply in the case of an individual participating plan. This is because the trust threshold would be based on total assets in the trust rather than assets in each individual plan. In comparison, under Statement on Auditing Standards No. 136 (SAS 136), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, independent qualified public accountants are required to consider relevant plan provisions that affect the risk of material misstatement for various transactions, account balances, and related disclosures. Areas such as participant eligibility, plan contributions, benefit payments and participant loans are all covered as part of a plan-level audit. Additionally, auditors are required to communicate reportable findings to the plan that are identified during the audit of the plan. For example, it has been the DOL's experience that plan audits lead to increased reporting of prohibited transactions, such as identifying and disclosing delinquent participant contributions. The DOL has not changed its views in this regard and disagrees with the commenter who suggested that the IQPA audit could be replaced with lesser safeguards and reliance on certain other filings to report plan noncompliance with specific plan asset requirements.

Thus, after considering the public comments, the DOL continues to believe that a plan-level audit in accordance with the requirements of section 103 of ERISA, and accompanying regulations, is necessary and appropriate for plans participating in a DCG unless the plan individually meets the conditions for an audit waiver under the DOL's regulations.^[27] The final rule, however, does not require that all plans (both large and small) be 100% invested in the types of assets that are required for a plan to be able to file the Form 5500-SF. The final rule also does not include the requirement that plans must be eligible for the small plan audit waiver by virtue of having 95% or more of its assets invested in “qualifying plan assets” under 29 CFR 2520.104-46(b)(1)(i)(A)(1), and not by reason of enhanced bonding. These elements of the proposal have not been included in the final changes and have been replaced with a more “audit neutral” approach to the DCG reporting arrangement requirements under which an IQPA audit and IQPA audit report are required unless the plan meets the conditions for the existing small plan audit waiver that would be available to any small plan, regardless of whether the plan participates in a DCG reporting arrangement.

With respect to the commenters who argued that the SECURE Act's provisions on a consolidated or aggregated annual report envision some type of consolidated or aggregated audit as part of the DCG filing, the DOL disagrees. The September 2021 proposal explained that it was not possible under GAAS to have a consolidated audit of all the participating plans in the DCG reporting arrangement. Rather, for a GAAS audit, the audit would have to be of the participating plans in the DCG reporting arrangement. Comments submitted by accounting industry stakeholders confirmed that conclusion. Nothing in the SECURE Act indicates that Congress intended to make wholesale changes to ERISA's GAAS and Generally Accepted Accounting Principles (GAAP) requirements applicable to plan audits and opinions of plan financial statements. The DOL also does not interpret the SECURE Act to provide for any new IQPA audit exceptions or exclusions for plans in a DCG. The statute directs the Departments to jointly modify requirements under Code Section 6058 and ERISA Section 104 to allow a group of plans to file a single aggregated return or report that meets the requirements of both sections. Section 202 of the SECURE Act makes no mention of audit relief for plans participating in a DCG. It also does not amend sections 103 or 104 of ERISA for DCG reporting arrangements, which set forth the generally applicable plan audit requirements and authorizes the DOL to provide conditional audit waivers through regulation.^[28] To the contrary, SECURE Act section 202(b) specifically provides the Departments with authority to include any information regarding each plan in the DCG reporting arrangement determined to be necessary or appropriate for enforcement and compliance with the Code and ERISA.

As for commenters arguing for DCGs receiving analogous audit requirements to those applicable to MEPS, including PEPs, the DOL does not view DCGs as analogous to MEPs for audit purposes. Unlike MEPs, which are single plans subject to a single plan audit, DCGs are a collection of separate plans. Further, as described above, under GAAS, which is expressly incorporated into ERISA as the source of audit standards for plans, it is not possible to have a consolidated audit of all the individual plans in the DCG reporting arrangement. Commenters also provided no substantial evidence that a DCG consolidated report would provide better or different protections for plan participants with regard to risks a plan audit addresses, such as financial misstatements in plan books and records or plan-level failures to comply with applicable Code or ERISA Title I requirements.^[29]

Thus, the final forms revisions do not provide for a “consolidated audit” of all the plans in the DCG for purposes of complying with ERISA IQPA audit and reporting requirements.

c. Content Requirements for DCG Form 5500

The final forms notice also adopts content requirements for the consolidated Form 5500 return/report filed by the DCG reporting arrangement that, except for the single trust and audit provisions described above, are largely unchanged from the proposal. Under the final forms revisions, DCG reporting arrangements must file a Form 5500 Annual Return/Report that includes largely the same information that large pension plans and other DFEs are required to file, except that a DCG reporting arrangement would also be required to include in its annual report a Schedule DCG (described below) to report individual participating plan information for each plan that is a part of the DCG reporting arrangement. One commenter expressed support for a separate Schedule DCG for each plan saying it allows for participants to know where they stand in relation to their separate plans; but otherwise cautioned against too much streamlining in other DCG reporting areas. Another commenter urged individual plan disclosures on DCG be as streamlined as possible, saying most questions should be answered on a group basis and asserting that supplemental information should only be supplied with respect to plans with compliance issues, rather than requiring broader disclosures. Another commenter expressed concerns with reconciling plan-level information on Schedule DCG, suggesting development of a separate schedule or attachment, similar to Schedule MEP, for DCG participating employers. As discussed below, the final forms revisions attempt to strike a balance between important plan information required to be disclosed on Schedule DCG, and other information that is disclosed on an aggregate basis on Form 5500 and specified Schedules as applicable to particular DCG filings.

Specifically, the content of the DCG annual return/report would include a Form 5500 Annual Return/Report of Employee Benefit Plan and any statements or schedules required to be attached to the form for such entity, completed in accordance with the instructions for the form, including Schedule A (Insurance Information), Schedule C (Service Provider Information), Schedule D (DFE/Participating Plan Information), Schedule G (Financial Transaction Schedules), Schedule H (Financial Information), Schedule DCG (Individual Plan Information), schedules described in § 2520.103-10(b)(1) and (b)(2) with information aggregated for all the participating plans unless otherwise provided in the instructions to the Form 5500, and, for DCG consolidated Form 5500 filings that cover large plans (generally those with 100 or more participants) and small plans that do not meet the regulatory conditions for the small pension plan audit waiver, an IQPA audit report and the related financial statements for each such plan, attached to the Schedule DCG for the plan. This would include separate financial statements described in ERISA section 103(a)(3)(A) and § 2520.103-1(b)(2) if such financial statements are prepared in order for the independent qualified public accountant to form the required opinions on the individual participating plans subject to the audit requirement.

Information reported on the various schedules to the Form 5500, other than Schedule DCG, would be reported for all participating plans in the aggregate. Thus, a Schedule A would be required for all insurance contracts that constitute one of the common investments or investment alternatives available to the participants in all the participating plans, regardless of whether certificates were to be issued to individual plans or participants upon selection of that option by a participant. Similarly, service providers to the DCG arrangement and to each of the participating plans would all be reported on Schedule C, even if the service provider did not actually provide services or charge fees to a particular plan because, for example, the service provider provided investment management services with respect to a particular investment option that was not selected by any of the participants in a particular plan. The $5,000 threshold for a service provider to be reported on Schedule C would be based on the total amount received by the service provider from all sources, not broken down and measured on a per plan or other allocated method. For example, reporting on Schedule C would still be required if the total amount was $5,000 or more, even if the amount paid by or charged against the assets of each of the participating plans or otherwise allocated to each plan was less than $5,000 per plan. Reportable transactions on Schedule G would include all reportable transactions for all the participating plans. For reporting delinquent participant contributions on Schedule H, Line 4a, the DCG filing would be required to answer “yes” and report the aggregate of all delinquent participant contributions for all the plans covered by the DCG filing, but would not file a Schedule of Delinquent Participant Contributions. The individual plans would report delinquent participant contributions for the plan on the plan's Schedule DCG, and plans subject to the IQPA audit requirements would attach a Schedule of Delinquent Contributions to their Schedule DCG. For Schedule H, Line 4i, Schedule of Assets information is reported on a consolidated basis for all plans in the DCG reporting arrangement; some of that information would come from the Schedule of Assets attached to Schedule DCG for those plans required to have an audit. For plans not subject to an audit, the common plan administrator would maintain the necessary records to prepare the consolidated Schedule of Assets, showing all plans' assets, that is attached to Schedule H of the DCG reporting arrangement's Form 5500.

The Departments expect that this will help streamline the process of answering compliance questions by having the question answered on a group basis rather than by each plan and allowing the common administrator of all the participating plans to use a consolidated supplemental schedule to identify only the plans with compliance issues.

d. Schedule DCG (Individual Plan Information)

Section 202(b) of the SECURE Act specifically provides that the Departments may require the consolidated Form 5500 return/report filed by the DCG reporting arrangement to include any information regarding each plan in the group as IRS and DOL may determine necessary or appropriate for the enforcement and administration of the Code and ERISA. The IRS examines individual plans, not groups of plans, to ensure that plan sponsors and/or employers comply with the tax laws governing retirement plans, and to help protect the retirement benefits of participants and beneficiaries. Although various provisions of Title I of ERISA, including the fiduciary responsibility provisions, apply to investments and financial and administrative services providers, the DOL similarly focuses much of its enforcement and oversight on plan level compliance. The Departments concluded that it is necessary and appropriate for their enforcement and administration of the Code and ERISA to require information with respect to a plan's qualification, investments, financial condition, and operation on a separate basis for each plan relying on the DCG consolidated Form 5500. Thus, consistent with the proposal, the final forms revision provides that a separate Schedule DCG is required for each individual plan relying on the DCG consolidated Form 5500 to satisfy their annual return/report filing obligation. The Schedule DCG includes:

• Part I—DCG Information includes the DCG name, EIN, and plan number. Information in Part I must match the DCG information reported on Part II of the consolidated Form 5500.
• Part II—Individual Schedule DCG Information includes checkboxes to confirm that the plan for which the Schedule DCG is being filed is a single-employer plan (as noted above, MEPs and multiemployer plans may not participate in a DCG) or a collectively bargained plan; and checkboxes to indicate if the Schedule DCG is a first filing, an amended filing, or a final filing.
• Part III—Basic Individual Plan Information, including the plan name, plan number, plan effective date; plan sponsor's information (name and address, EIN, telephone number, and business code); plan administrator's information (name and address, EIN, and telephone number); total number of participants; total number of active participants; number of participants with account balances; and number of participants who terminated employment during the plan year with accrued benefits that were less than 100% vested.
• Part IV—Plan Financial Information, including total plan assets (including participant loans); total plan liabilities; net plan assets; contributions received or receivable in cash from the employer, participants, and others; noncash contributions and total contributions; benefit payments; corrective distributions, and certain deemed distributions of participant loans; direct expense information; net income; and assets transferred to (from) plans.
• Part V—Plan Characteristics, including two-digit boxes for entry of all applicable codes in the List of Plan Characteristics Codes in the instructions to the Form 5500.

• Part VI—Compliance Questions, including delinquent participant contributions, nonexempt transactions, plan assets/liabilities transferred from the plan, indication of whether the plan is a defined contribution plan subject to section 412 of the Code, plan coverage and nondiscrimination information, and whether a plan is a pre-approved plan that received a favorable IRS Opinion Letter.

• Part VII—Accountant Opinion Information for Participating Plans, including questions regarding the required individual IQPA report and financial statements that must be filed with the Schedule DCG filed for participating large plans (generally, plans that cover 100 or more participants with account balances as of the beginning of the plan year) and small plans that do not meet the audit waiver conditions.

One commenter expressed support for the DCG reporting proposal, saying a separate Schedule DCG allows participants to know where they stand in relation to their plan, adding that the Schedule DCG requires less information than a plan would provide on a single Form 5500. Another commenter said the DCG schedule will create more work for auditors because they must separately review each Schedule DCG and reconcile the form at the plan level. The commenters argued that this will require more audit work and more work by record keepers to provide the data. They suggested the DCG file a new consolidated attachment for all the participating plans using a schedule similar to Schedule MEP for employers participating in a multiple-employer plan.

The Departments view the Schedule DCG as consistent with and supported by the SECURE Act's express direction to provide a consolidated filing option in a way that enables participants to find information on their plan. The Departments agree with the commenter supporting the new Schedule DCG as providing participants with important and streamlined information regarding their plan. Further, as previously mentioned, the consolidated filing for DCG reporting arrangement is different from a MEP filing since it essentially aggregates the information of many separate plans, as opposed to the MEP which is one plan with multiple participating employers. Moreover, since there is a plan at the MEP level, MEP level information, with a supplementary schedule showing a list of participating employers and certain information on each employer's account balances and other specific data items is what the SECURE Act section 101 requires for MEPs.^[30] For a DCG reporting arrangement, since it is an aggregate report on many different separate plans, the additional details in Schedule DCG provide important plan-level information for purposes of DOL and IRS oversight and enforcement obligations and also provide a straightforward way for participants in a plan relying on the DCG consolidated Form 5500 to find information on their particular plan.

Another commenter recommended that the agencies allow a DCG to file a single Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, on behalf of all individual plans filing a Form 5500 as part of a DCG reporting arrangement. The commenter also suggested that filing of the Form 8955-SSA be incorporated into the DOL EFAST2 system, because, according to the commenter, the EFAST2 system is a more scalable, robust system and better suited for enterprise-level processing. Section 202 of the SECURE Act provides for the filing of a combined annual report for a group of plans that satisfies the annual reporting requirements under Code section 6058 and ERISA section 104. Section 202 of the SECURE Act does not apply to the annual registration statement (Form 8955-SSA) that is required under Code section 6057.^[31] Accordingly, the IRS declined to provide for the filing of a combined annual registration statement for the Form 8955-SSA as part of the DCG consolidated reporting option.

e. Other DCG Participating Plan Conditions

i. Same Fiduciary

The September 2021 proposal included the SECURE Act section 202 condition that plans in a DCG reporting arrangement must have the “same one or more named fiduciaries.” ERISA section 402 separately provides that every employee benefit plan shall be established and maintained pursuant to a written instrument and that the “named fiduciaries” must be identified in that instrument.^[32] The DOL stated in the proposal that they understand that it is customary for the employer/plan sponsor to be a named fiduciary of the employer's plan and do not believe the SECURE Act intended that each employer in a group of plans be a named fiduciary of every plan in the group. The proposal included an exception under which the employer/plan sponsor can be a named fiduciary of each employer's own plan, provided that the other named fiduciaries under the plans are the same and common to all plans. There were no significant comments on this requirement or the exception. Accordingly, this requirement is being adopted in these final forms revisions unchanged from the proposal.

ii. Same Plan Administrator

The SECURE Act requires that all the plans have the same administrator as defined in section 3(16)(A) of ERISA and plan administrator as defined in Code section 414(g). As explained in the September 2021 proposal, in general, under ERISA and the Code the “plan administrator” or “administrator” is the person specifically so designated by the terms of the instrument under which the plan is operated. If an administrator is not so designated, the administrator/plan administrator is the plan sponsor, as defined in ERISA section 3(16)(B). The Departments explained that they do not believe that the default “plan sponsor” provision is workable in the context of a statutorily mandated construct for a consolidated annual report covering multiple separate plans. No significant comments were received raising concerns with the proposal or suggesting alternatives. Accordingly, the final forms revisions require that there be a designated common plan administrator for all the participating plans of the DCG reporting arrangement and that the common plan administrator (which is expected to be an entity or organization) must be identified as the administrator on the DCG Form 5500 and any applicable schedules pursuant to the Form 5500 instructions, which have been updated to accommodate DCG filers.

iii. Same Investments or Investment Options

The SECURE Act further requires that all the participating plans of the DCG provide the “same investments or investment options” to participants and beneficiaries to be able to rely on the DCG consolidated Form 5500 as satisfying their annual reporting obligation. In the Departments' view, the “same investments” requirement covers individual account plans in which some or all of the investments are not subject to participant direction, and the “same investment options” requirement applies to those aspects of the plan's investments that are subject to participant direction. This statutory requirement was, in part, intended to allow for appropriate transparency in the aggregated financial information that will be filed by the DCG consistent with the objective of the DCG to provide plans with a more efficient and less burdensome filing alternative. The Committee Report of the House Ways and Means Committee for the House version of the SECURE Act expressly states that the DCG provisions were intended to apply to identical plans: “The Committee believes that, in the case of identical plans (that is, plans with the same plan year, trustee, administrator and investments) maintained by unrelated employers, permitting a single Form 5500, containing information specific to each plan, rather than requiring a separate Form 5500 for each plan as under present law, can reduce aggregate administrative costs, making it easier for small employers to sponsor a retirement plan and thus improving retirement savings.” ^[33]

Commenters did not raise objections or concerns with this “common investments” condition in general, but some commenters did raise questions regarding whether there would be further clarifications or examples provided regarding the criteria for the offering of the “same investments or investment options,” with one specifically asking about use of investment platforms that allow participating plans to choose investments to offer their participants from a menu of available investments. The commenters suggested that DOL should clarify that the “same investments or investment options” condition is met in the case of a common investment platform in which participating plans may select from available investments but each participating plan is not required to make all available investments available to their participants. A few commenters focused on the related provision in the proposal that prohibited the use of brokerage windows and investments in employer securities, saying that the proposal inappropriately limited these plan features from the DCG reporting arrangement and urged the Agencies to reconsider.

On the brokerage window prohibition in the proposal, one commenter opposed inclusion of brokerage windows in DCG reporting arrangements. That commenter believes the type of disclosures necessary are unworkable in group reporting arrangements and that plans with brokerage windows would not meet the “same investment option” requirement the commenter deems crucial to DCG reporting requirements because of the wider range of investments in brokerage windows. Most commenters, however, cited varying reasons for supporting inclusion of brokerage windows, also known as self-directed brokerage accounts (SDBAs), including arguments that: (1) a wider choice of investments improves participant engagement with the plan, (2) allowing a brokerage window allows plan sponsors to otherwise offer a smaller menu of plan investments, (3) almost half of defined contribution pension plans use SBDAs, and (4) SBDAs are considered an important retirement plan offering.

Commenters that supported allowing brokerage windows argued that the brokerage window itself, not each underlying investment available through the window, should be classified as the “investment or investment option.” ^[34] However, views diverged as to whether all plans within a DCG must offer brokerage windows to their participants and whether the investment options offered through brokerage windows must be the same for each plan participating in a DCG. One commenter argued that a SDBA with a designated brokerage provider with the same types of investments for all the plans within a DCG should be seen as meeting the SECURE Act requirement. This commenter also recommended that “Qualifying SDBA” should be defined as: a self-directed brokerage account or window available to all plans in the DCG as an investment alternative in addition to other investment options offered to such plans and that meets the following conditions: (1) it is provided by a single designated registered broker-dealer, and (2) the only permitted investments in the Qualifying SDBA are assets with a readily determinable fair market value as described in 29 CFR 2520.103-1(c)(2)(ii)(C).^[35] Other commenters suggested that the SECURE Act's investment commonality requirement could be achieved if all individual plans within a DCG were offered the same brokerage window; but that each such individual plan should not be required to make all of the investments in the brokerage platform available to its participants. One association commenter stated that some of its members believe commonality would be achieved only if all individual plans within a DCG offer a brokerage window, while other members believe commonality would be achieved if each such individual plan within a DCG has the option of whether to make the brokerage window available to its participants.

One commenter supporting inclusion of SBDAs did not support any changes to the Form 5500 requiring additional information regarding SDBAs, participants using SDBAs, or the individual assets held by plans as a result of investments made through SDBAs, assuming the DOL adopts the commenter's definition for “Qualifying SDBAs.” Under that definition, as described above, a “Qualifying SDBA” would not include tangible personal property, loans, partnerships or joint-venture interests, real property, employer securities, or investments that could result in a loss in excess of the account balance of the participant or beneficiary who directed the transaction. Those are the classes of assets that the Form 5500-SF currently requires to be reported separately even if held through a brokerage window. Other commenters argued that assets in brokerage window investments should be reported in the aggregate generally as one asset held for investment purposes and that brokerage window investments should not be broken down further. The commenter argued that further detail would be too costly due to the need to involve third parties and also asserted that more detailed information would not provide valuable information to the Agencies.

With respect to allowing employer securities as a DCG investment option, one commenter expressed support for the restriction on the holding of employer securities as an investment and three others supported allowing employer securities as an investment. The commenters stated that the proposal would exclude existing plans that offer employer securities to its participants from participating in DCGs. One of those commenters cited the example of the separate retirement plans of a parent company and its subsidiaries that would qualify to file a consolidated report except for the presence of one plan in the group that offers employer securities. That same commenter also was concerned that employers should not be forced to choose between making employer securities available as an investment option (which ERISA specifically contemplates and encourages) and participating in a DCG reporting arrangement. All of the commenters who addressed the employer security issue argued that indirect holding of employer securities in a bank collective investment fund or insurance company pooled separate account should not preclude a plan from joining a DCG reporting arrangement. The commenters asked the DOL to clarify that a plan with a diversified pooled investment fund, such as a collective investment trust, under which participants may indirectly invest in employer securities, would be eligible to participate in a DCG arrangement, as long as the diversified pooled investment fund option is offered to all plans in the DCG.

The DOL disagrees with commenters who argued that the SECURE Act precludes the exercise of regulatory discretion to place reasonable guardrails on the use of the DCG alternative reporting method, given the cited authorities under SECURE Act Section 202(b) and ERISA section 110. Rather, under existing ERISA authorities, the DOL must find that a simplified reporting option is “appropriate” under ERISA's protective provisions. Similarly, for the DOL to establish an alternative method of complying with the generally applicable annual reporting requirements under ERISA, the DOL would need to make findings that: (1) the alternative method provides adequate disclosure to participants and beneficiaries and adequate reporting to the Secretary; (2) the application of the requirement of part 1 of Title I of ERISA would (A) increase the costs to the plan, or (B) impose unreasonable administrative burdens with respect to the operation of the plan; and (3) the application of part 1 would be adverse to the interests of plan participants in the aggregate. The Departments do not view the SECURE Act as directing them to ignore the protective conditions of ERISA and look only to the specific enumerated criteria in section 202(b) of the SECURE Act in establishing a consolidated reporting option for DCGs. Rather, such a reading of the SECURE Act would compromise enforcement and administration of ERISA and the Code and impair the disclosure interests of plan participants and beneficiaries in plans that rely on a DCG consolidated return/report.

The DOL also is not persuaded by commenters arguments that Congress' direction of “sameness” for investments, and other indications that a DCG is intended for essentially “identical” plans, should be ignored in favor of allowing substantial variation in the menu of investment options available to participants in different plans covered by the DCG Form 5500, including employer securities. In the DOL's view, allowing substantial variation in the investments or investment options of participating plans is not an appropriate reading of the SECURE Act terminology requiring the “same” investments or investment options. That kind of investment structure also would require more detailed financial reporting at the plan level on the Schedule DCG to provide appropriate oversight and accountability and, therefore, would be inconsistent with the objective of reduced aggregate administrative costs of annual reporting for plans in DCG reporting arrangements. Accordingly, the final forms revisions and related final rule would not permit a DCG to satisfy the same investments or investment options requirement by offering a common investment platform with a broad array of available investments with each participating plan potentially having unique investment option menus selected from that broad platform. Further, the Departments note that a DCG is just one alternative reporting method that eligible plans may use. Separate annual reporting alternatives remain in place for plans that would prefer a broader range of investment choices or a more customized plan design. The fact that certain types of plans might not be able to file as part of a DCG based on types of investments they wish to offer as options does not outweigh the interest in following Congress' directive to develop a new filing option aimed at simplifying filing and reducing costs (while still meeting important transparency safeguards) for plans with key common characteristics, including plan investments, plan trustees, plan fiduciaries and plan administrators.

Nonetheless, the Departments agree that some modifications to the proposal regarding brokerage windows and employer securities could be adopted that would provide more flexibility to plans and DCGs while still providing for an adequate level of uniformity, financial transparency and accountability. Specifically, the DOL and IRS concluded that they could permissibly interpret the SECURE Act to classify a brokerage window as the “same investment option” provided that: (1) the brokerage window is available through a single designated brokerage window provider that is a registered broker-dealer, and (2) the only permitted investments in the brokerage window are assets with a readily determinable fair market value as described in 29 CFR 2520.103-1(c)(2)(ii)(C). Also, the Departments agree that publicly traded securities of a particular employer held in a DCG common investment option, such as a mutual fund or some type of collective trust or pooled account investment option, that is otherwise a prudent plan option and is an available option to all DCG participating plans, would not preclude a plan sponsored by the issuing employer from being included in the DCG reporting arrangement, provided all other DCG structural requirements are met. In this case, the DOL views the indirect holding to be part of the otherwise “same investment” option holding such security, rather than being the investment option itself. The Departments are not adopting the commenters' other suggested loosening of the “same investments or investment options” because the Departments concluded that the suggested further loosening was not consistent with the SECURE Act requirements and underlying goal of improving the administrative simplicity and efficacy of annual reporting for plans in a DCG reporting arrangement.

f. DCG Eligibility for Plans Without a Trustee

Although, as described above, section 202 of the SECURE Act includes a requirement that eligible plans must have the same “trustee” as described in section 403(a) of ERISA, the DOL and IRS note that it is commonplace for ERISA-covered plans to use insurance ( e.g., individual account plans using variable annuity structures and Code section 403(b)(1) plans) and custodial accounts ( e.g., Code section 403(b)(7) plans) as funding vehicles. ERISA section 403(b) includes explicit exceptions to the trust requirement for such plan designs. There is no legislative history for SECURE Act section 202 discussing why the provision was limited to plans with “trustees.” Although, in the September 2021 proposal, the DOL and IRS expressed concern about whether the SECURE Act section 202 requirement for a “trustee” could be read to include plans without trustees funded by insurance or custodial accounts pursuant to the trust exceptions in ERISA section 403(b), the DOL and IRS specifically solicited comments on whether they should, pursuant to their general regulatory authority, provide a consolidated reporting option for plans that use the same custodial account or insurance policy as the funding vehicle for their plans, and if so, whether special conditions should apply in light of the absence of a trustee or trustees.

A number of commenters responded to the request and said they support and encourage expanding DCG reporting to 403(b) plans, even though they technically do not have trustees but instead use annuities or custodial accounts. Notwithstanding the explicit trust requirement in the statutory provision, a number of commenters said there was no evidence of intent by Congress to exclude 403(b) plans and urged the DOL and IRS to allow 403(b) plans to participate in DCGs.^[36] Several commenters said the Departments have the regulatory authority to expand access to 403(b) plans and encouraged exercising it in this instance. Several commenters said that such plans that use the same insurance company or the same custodian are functionally equivalent to groups of plans that have a common trustee, and another commenter said limiting DCG reporting to only trusteed plans was unnecessarily restrictive. Other commenters cited section 403 of ERISA and 401(f) of the Code as providing support for custodial accounts and contracts to be treated similar to trusts for DCG purposes, since they are treated similar to trusteed plans in other contexts. Notwithstanding the fact that section 202(c)(2)(A) of the SECURE Act requires all plans in a DCG to have “the same trustee (as described in section 403(a) of [ERISA] . . .),” one commenter said they found no legal or policy basis to preclude such plans from the cost efficiencies that SECURE Act section 202 was intended to offer.

After considering the comments, the Departments continue to believe that the SECURE Act provision is limited to plans with trustees but agree that it may still be possible pursuant to their general regulatory authority to provide a DCG reporting option for 403(b) plans notwithstanding the fact that the plans' assets are held by an insurance company or a custodian rather than a trustee. However, the Departments anticipate that any rules that would permit 403(b) plans to participate in a DCG would require a DCG to consist of only 403(b) plans because it does not appear to be possible for a 403(b) plan to meet the commonality requirements of SECURE Act section 202 with 401(a) plans participating in a DCG. There may be other unique complications with properly structuring a DCG reporting option for 403(b) plans that need to be identified and addressed. Accordingly, before exercising any regulatory authority to permit 403(b) plans to participate in a DCG, the Departments request comments on how such an arrangement would be implemented. The Departments are particularly interested in comments (1) concerning whether a 403(b) plan DCG should include (a) only 403(b) plans consisting of only Code section 403(b)(1) annuity contracts offered by the same insurance company or of only Code section 403(b)(7) custodial accounts maintained by the same custodian, or (b) a group of 403(b) plans, each of which consist of both annuity contracts under Code section 403(b)(1) offered by the same insurance company and custodial accounts under Code section 403(b)(7) maintained by the same custodian, (2) concerning arrangements described in (1)(b) above, (a) views on how the SECURE Act's investment commonality requirement would be met given that, unlike trustees in 401(a) plans, the insurance companies and custodians that hold plan assets in 403(b) plans also are responsible for deciding the investments available under the plan, and (b) views on how the common plan administrator requirement will be satisfied if the insurance company and custodian are not related entities.

g. No DCG Participation by Multiemployer Plans or MEPs

With respect to the condition in the proposal that prohibited multiemployer plans and MEPs from being part of DCG reporting arrangements, the September 2021 proposal solicited public comments on whether the final rule should include multiemployer plans and MEPs, and if so, what conditions should apply to DCG reporting arrangements that would include such plans. Two commenters supported the restrictions on the ability of multiemployer plans' and MEPs' to participate in a DCG. One representative of audit professionals cited complicating audit procedures as a reason for such exclusion. No comments raised substantial concerns or proposed alternatives. The DOL and IRS do not believe that section 202 of the SECURE Act was focused on allowing groups of multiemployer plans or MEPs, which already file a single Form 5500 that covers all of the employers that participate in the plan, to file a single consolidated Form 5500 covering the group of multiemployer plans or MEPs. Further, the DOL and IRS are concerned that allowing a single consolidated Form 5500 in the case of such plans, for example, in the case of a group of multiemployer section 401(k) plans, could result in an undesirable reduction in transparency and financial accountability. Accordingly, the DOL and IRS retain this restriction in the final forms revisions.

h. Form 5558 Extension for DCG Reporting Arrangements

The September 2021 proposal did not expressly allow for plans participating in a DCG reporting arrangement to use a single filing of a Form 5558 to obtain an extension of the due date for their annual return report. The proposal did, however, request public comments on that issue. The current Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, is the IRS Form used by a plan sponsor to apply for an extension of time to file a Form 5500 series return, Form 8955-SSA, and Form 5330. The commenters expressed concerns that requiring a separate Form 5558 for each participating employer would be burdensome, be likely to result in inadvertent mistakes by plan sponsors who were relying on the DCG to satisfy their plan's annual reporting obligations, and not be necessary to ensure appropriate accountability. The commenters on this issue recommended that the Agencies permit a DCG reporting arrangement to file a single Form 5558 requesting an extension of time to file the Form 5500 for all plans that participate in the DCG reporting arrangement. The commenters further recommend that a list of participating employers' EINs and plan numbers be attached to the single Form 5558. The Agencies agreed that the commenters' recommendation would reduce burdens and still provide appropriate accountability. Accordingly, the final forms revisions permit a DCG reporting arrangement to file a single Form 5558 for an extension of time to file a Form 5500 return that includes a list of the individual plans participating in the DCG reporting arrangement covered by the single Form 5558 request for an extension. Form 5558 is also revised to allow electronic filing with EFAST2.

i. No Form 5500-SF or Form 5500-EZ Filing Options for DCGs

The September 2021 proposal noted the Departments' expectation that savings for plans relying on a DCG filing compared to plans filing separately would generally only begin to emerge when the DCG collectively exceeds an aggregate participant count of 100 participants. In other words, it was not expected that a DCG filing would provide meaningful cost savings for plans, as compared to the plans filing their own annual report, in the case of DCG arrangements with an aggregate participant count of under 100 participants. Rather, it was expected in such cases involving participant counts of under 100 participants that the individual plans would likely qualify to file on Form 5500-SF and that they would likely find it more cost effective to file their own separate Form 5500-SF rather than relying on a DCG filing.^[37] Accordingly, the proposed rule did not provide any “small plan” option for a DCG consolidated annual report. The September 2021 proposal, however, solicited comments on whether stakeholders expect there to be “small” DGCs, whether a “small” DCG alternative should be made available, and what the content requirements for such an alternative should be, e.g., whether the content of the “small” DCG annual return/report should include Schedule I instead of Schedule H, whether it should include the IQPA audit report on the DCG trust, and whether it should include the Schedule C.^[38] One commenter opposed simplified DCG reporting as a general matter and also specifically opposed allowing DCGs to file as small plan filers, citing a lack of transparency regarding plan information that could occur should that be permitted.

The final forms revisions do not include an option under which such a “small” DCG could file as a small plan filer. The final rule also does not adopt a separate DCG reporting arrangements for one-participant plan sponsors. Two commenters provided input regarding whether the IRS should establish a separate DCG reporting arrangement for one-participant plan sponsors that file the Form 5500-EZ. One commenter did not think any of their clients currently filing Form 5500-EZ would be interested in participating in a DCG reporting arrangement. This is because investments in the commenter's clients' one-participant plans are typically customized to meet the needs of the single participant and differ from investment alternatives under a plan with participant-directed investments. Another commenter encouraged the IRS to develop a DCG reporting arrangement for Form 5500-EZ filers—particularly a structure under which Form 5500-EZ filers would be permitted to file as part of a group consisting only of Form 5500-EZ filers. As discussed in the September 2021 proposal, the IRS views the current Form 5500-EZ as a simple and streamlined method for one-participant plan sponsors to satisfy the annual reporting requirement under Code section 6058. Consequently, creating a separate DCG reporting arrangement for one-participant plan sponsors would not effectively reduce filing burdens and would be unlikely to generate the administrative efficiencies and cost-savings that were the purpose behind the inclusion of a consolidated group filing structure in the SECURE Act. The information requested on the Schedule DCG that is required to be completed by each individual plan participating in a DCG reporting arrangement would be almost identical to the information requested on the current Form 5500-EZ. Additionally, the IRS would incur significant costs and use substantial resources to develop and process a separate DCG reporting arrangement for the Form 5500-EZ filers. The IRS will continue evaluating and communicating with stakeholders to determine if it is in their best interests to have a DCG reporting arrangement for one-participant plan sponsors in the future and will consider revisiting its decision not to have a DCG reporting arrangement for Form 5500-EZ filers, if stakeholders demonstrate a significant demand for this structure.

2. Schedule MEP (Multiple-Employer Pension Plan Information) and MEP Reporting

Consistent with the proposal, the final rule adds a new Schedule MEP (Multiple-Employer Pension Plan Information) to the Form 5500 Annual Return/Report, and also adds a limited number of additional data items elsewhere on the Form 5500 relevant to MEPs. The Schedule MEP will generally consolidate SECURE Act related reporting for a MEP filer in one easily identifiable schedule. The Schedule MEP will report information specific to MEPs, including the ERISA section 103(g) participating employer information and aggregate account information.^[39] Questions intended to satisfy the SECURE Act's reporting requirements for PEPs and questions to link the Form PR (Pooled Employer Registration) and the Form 5500 for each plan operated by a PPP will also be on the Schedule MEP. A new checkbox will be added to the Form 5500 (Part II, line 10a(5)) to indicate that Schedule MEP is attached to the Form 5500. The Schedule MEP will require information consistent with that which was required to be reported via attachment for 2021 and 2022 forms revisions, but will also accommodate certain SECURE Act 2.0 changes related to 403(b) plans, and will be largely consistent with the changes set forth in the proposal to create a new Schedule MEP. As discussed in more detail in later sections of the preamble, the DOL took into account commenters' input on certain items of information proposed on part III of Schedule MEP.

Schedule MEP, Part I, like the other schedules to the Form 5500, requires filers to enter identifying information (which must match the information entered on the Form 5500) and to indicate the plan type by checkbox. The instructions provide general definitions for purposes of annual reporting for the various categories of pension plans that must complete the Schedule MEP. The different types of MEP checkbox choices set forth in Part I of Schedule MEP are: (a) group or association retirement plans within the meaning of 29 CFR 2510.3-55(b) ( i.e., association retirement plans); (b) professional employer organization plans within the meaning of 29 CFR 2510.3-55(c) ( i.e., PEO plans): (c) pooled employer plans within the meaning of ERISA section 3(43) (PEPs); and (d) other MEPs covering the employees of two or more employers that are not single or multiemployer plans for annual reporting purposes. Multiemployer plans, as defined under section 3(37) of ERISA, are not required to complete the Schedule MEP.^[40]

Schedule MEP, Part II includes a repeating line item on which all MEPs would report information under ERISA section 103(g) regarding participating employers, including employer/plan sponsor name, EIN, the percentage of total contributions to the plan or arrangement by each participating employer, and, for defined contribution plans only, the aggregate account balances information the SECURE Act added to ERISA section 103(g). That information is currently collected for MEPs as a non-standard attachment to the Form 5500 and Form 5500-SF, including, pursuant to the SECURE Act, the new data element added by the Final Rule Phase I to require reporting of the aggregate account balances for each participating employer in defined contribution MEPs only. Thus, the final forms revisions continue the provision in the September 2021 proposal and Final Rule Phase I confirming that defined benefit MEPs are not required to report the aggregate account balances. Also, consistent with the September 2021 proposal, Part II includes special instructions and questions 2(e) through 2(g) for “working owners” (see 29 CFR 2510.3-55(d)(2)) or other individuals who are participants or beneficiaries who are no longer associated with a participating employer or participating employer plan.^[41]

Schedule MEP, Part III is comprised of only the two questions that were added to the annual report by the Final Rule Phase I as information reported via non-structured attachment ( i.e., for form years 2021 and then until further notice). This final forms revisions transfers that data collection from being reported on a non-structured attachment to being reported on the Schedule MEP, Part III, Line 3. On Line 3, PEPs are required to indicate whether they are in compliance with the Form PR registration requirements and provide the Ack ID number for their latest Form PR filing.^[42]

Two commenters expressed support for a separate Schedule MEP. One commenter pointed out that a new Schedule MEP makes it possible to systematically track and evaluate recently established plan types; significantly improves the disclosure and reporting regime for all plans (including MEPs), and eases access to, and use of, Form 5500 information. Another commenter agreed, noting that a new Schedule MEP is consistent with changes necessary under the SECURE Act. Some commenters opposed a Schedule MEP as singling out PEPs for special reporting requirements that are not imposed on other MEPs. Others did not object to the idea of a Schedule MEP in general but expressed concern about some elements of Part III of the proposed Schedule MEP.^[43] Comments raising concerns with reporting on Form PR compliance were addressed in the Final Rule Phase I,^[44] and will not be revisited here as this final forms revisions notice simply transfers those questions regarding Form PR compliance from being answered in a non-standard attachment to the Schedule MEP without substantive change to the questions ( i.e., simply renumbering to conform to the Schedule MEP format). The remaining comments on other questions proposed in 2021 for Schedule MEP, Part III are set forth below.

In the Final Rule Phase I, the DOL stated it read certain commenter's questions as primarily directed at issues that may arise in the context of a standardized Schedule MEP structure for reporting this information. One commenter said that the instructions to Part II should be clarified. The amounts listed in line 2c and line 2f must equal 100% (with a permitted variance of less than 1% due to rounding). The amounts listed in line 2d and 2g must equal the amount listed on line 1l(b) of the Schedule H or on line 1c(b) of the Schedule I (with a permitted variance of less than 1% of the amount from Schedule H or Schedule I due to rounding). Another commenter requested clarification of the requirement to report the “Percentage of Total Contributions for the Plan Year” on line 2c (element 3 for the 2021 non-standard attachment). Specifically, the commenter asked whether the total of all participating employers must equal 100 percent, and whether it will cause red flags with the DOL/IRS if it does not. They also asked whether filers should round the percentage entry for each employer to decimal places, and if so, how many. Two commenters noted that the information on participating plans will be reported in a structured format on Schedule MEP and recommended DOL consider implementing checks within the filing system to ensure these summations are valid before accepting filings to reduce errors and align with the instructions. The Agencies have taken into account these comments in designing the form and developing appropriate instructions and edit tests consistent with principles on rounding set forth in the 2021 Final Forms Revisions.^[45] The DOL also reiterates that the SECURE Act expressly states that the aggregate account balances information should be determined as the sum of the account balances of the employees of the employer and the beneficiaries of such employees. In the DOL's view, an end-of-year valuation is an appropriate reporting requirement, as it will provide the most up-to-date value for the plan year covered by the Form 5500 report. The final instructions for the 2023 Form 5500 include directions to that effect. Further, rounding to the nearest dollar, as with the financial reporting on other parts of the Form 5500 and schedules, will be used for data entered on Schedule MEP. The final instructions to 2021 Form 5500 were revised to provide this clarification as well.^[46]

Some commenters opposed new PEP specific questions arguing that their inclusion without specific guidance on PEP's administrative duties under section 3(44)(C) is beyond the scope of Congress' directive to the Agencies (specifically DOL) and also not supported by the text of the SECURE Act. For example, one commenter said that the question regarding whether the PPP operating the plan is in compliance with the PPP registration statement is ambiguous and unclear, including due to pending agency rulemakings ( e.g., IRS one bad apple guidance). That commenter, and others, also indicated that, while the SECURE Act adds specific disclosures for PEPs, it does not include a special reporting standard for PEPs. They claimed subjecting a PEP to heightened reporting requirements, when other plans treated as single plans are not, is arbitrary and unsupported by statute. As indicated below, the final Schedule MEP, Part III, includes only questions already added in 2021 and 2022 by the Final Rule Phase I regarding Form PR compliance for reasons articulated in the Final Rule Phase I.

The largest number of commenters expressed a concern with adding questions regarding prohibited transactions before guidance is issued, with one saying ERISA section 3(44)(D) specifically provides for a good faith reliance standard before ERISA section 3(44)(C) statutory guidance is issued. One commenter said that Schedule H already requires the disclosure of any nonexempt transactions with any party-in-interest and noted that adding required disclosures on the subject on the Schedule MEP would be burdensome on businesses, including small businesses entering the PEP service provider market. Four commenters said that adding Part III, Line 6, of the proposed Schedule MEP provides little benefit and that this line should not be added before issuing additional guidance. Five commenters said not to add questions before DOL addresses the issues raised in the RFI related to PEPs, which specifically requested information relating to conflicts and prohibited transaction exemptions (PTEs). One commenter argued that the prohibited transaction rules are complex. Requiring a disclosure that boils complex legal opinions down to a few sentences will likely result in many disclosures that are confusing and potentially misleading. One commenter had very specific concerns for PEO compliance with Part III of Schedule MEP, saying it introduces requirements that would apply only to a subset of multiple-employer retirement plans. That commenter said that the proposed rule would have the effect of establishing different sets of reporting requirements for PEOs, depending on whether the PEO is sponsoring a MEP or acting as a PPP for a PEP. For the latter, the proposed Schedule MEP would require completion of Part III of Schedule MEP. Among other requirements, the commenter noted that, as proposed, Part III would have obligated a PEP to indicate whether the PPP has complied with the registration requirements for PPPs and to indicate whether certain services were provided by an affiliate and, if relying on a PTE for the use of an affiliate, to identify the prohibited transaction exemption. Finally, two commenters pointed out that the instructions for the proposed Part III PPP questions included a reporting requirement related to “affiliates or other related parties” to the PPP that did not define “other related parties.” They noted that to the extent that “related party” is intended to encompass any entity in which the PPP may have an interest which may affect its best judgement as a fiduciary, this is a very intensive facts and circumstances inquiry for which even DOL itself will not issue advisory opinions.

After considering the public comments, the DOL decided to not include some questions originally proposed for Part III on the final Schedule MEP. Some questions regarding Form PR compliance were already added to the Schedule MEP, Part III, by the Final Rule Phase I on 2021 form changes. This final forms revision transfers those two PEP specific questions from Form 5500, Part I, Line A checkbox instructions to Schedule MEP, Part III, Line 3a and Line 3b, starting with the 2023 Form 5500 Annual Return/Report. The specific changes to accomplish this transfer can be found in Appendix A, which sets forth the new Schedule MEP and related instructions, and Appendix F, dealing with conforming and other miscellaneous changes to forms and instructions.

In the September 2021 proposal, the DOL solicited comments on enhancing fee transparency, specifically on whether more tailored questions should be added, in addition to those already on the Schedules C and H, to report fee and expense information on PEPs and other MEPs, including information on how fees and expenses are allocated among participating employers and among covered participants and beneficiaries. Two commenters expressed opposition to more questions on fees and expenses. One simply opined that currently required fee and expense reporting and disclosure is sufficient for MEPs. The second commenter provided a more detailed comment stating that in the case of a defined benefit MEP, generating and reporting an expense amount per participant would be particularly unhelpful because expenses do not reduce or affect the benefit to which a participant is entitled, and requiring disclosure of expenses with respect to each employer would require that this amount be calculated, as it is not currently a metric used or found useful by such plans. One commenter supporting the DOL's proposal for more disclosures on fees and expenses, noting that research suggests that for multiple-employer plans disclosure about services provided by affiliates, as well as comprehensive disclosure about the allocation of fees and expenses, is critical for effective monitoring and oversight. The commenter identified a variety of PEO situations involving PEO MEPs, saying it is necessary to consider how the bundling of services and costs for a variety of HR services may affect the required disclosures on Form 5550. The commenter noted that PEOs may offer various benefits, including retirement plans, health insurance, workers' compensation, and unemployment insurance policies. In this capacity, the PEO may pay itself or an affiliated entity for the provision of administrative or investment services to a plan, charge a markup on rates that the “pool” can obtain, and pay itself insurance broker fees. This commenter noted that individual client employers, meanwhile, may have limited ability and incentive to monitor their PEO-sponsored benefit plans, particularly if the fees for various HR services and benefits are bundled, and if leaving a PEO entails high switching costs. This final forms revision does not include such additional PEP and other MEP specific disclosures, but does include some enhancement of fee disclosures on administrative expenses for all filers, including MEP and PEP filers. Those enhancements are discussed below in the section on breaking out certain administrative expense categories on Schedule H.

Further, as finalized for the 2021 Forms and instructions, the Schedule MEP and related Form 5500 and Form 5500-SF instructions will provide that all PEPs, similar to the current rule for multiemployer plans (and for DCGs as provided elsewhere in this final rule), file the Form 5500 regardless of whether they would otherwise be eligible to file the Form 5500-SF. Making the filings across plan types more uniform provides more consistent and informed oversight of collective retirement arrangements. Small PEPs, like other small plans that file the Form 5500, could file the Schedule I instead of the Schedule H and its financial attachments, are not required to complete the Schedule C or Schedule G, and may file without having an IQPA audit and attaching an IQPA report if the PEP meets the conditions for the small plan audit waiver.

One commenter noted that while PEPs currently can only be offered as 401(a) plans, there are legislative proposals that, if enacted, would allow for 403(b) plan PEPs.^[47] The commenter urged agencies to finalize the Schedule MEP and instructions in a way that would make it easy for 403(b) plan PEPs to fill out Form 5500, should that bill be enacted into law. As noted above in the overview section, the SECURE Act 2.0 of 2022 (SECURE Act 2.0), which was modeled in some aspects on H.R. 2954, was signed into law on December 29, 2022, and included changes to the Code and ERISA that would permit 403(b) plans meeting certain criteria to participate in PEPs for plan years beginning after December 31, 2022. This final forms revision amends the definition of a PEP in the Schedule MEP instructions to reflect that change.

3. Internal Revenue Code Compliance Questions

A limited number of new IRS tax compliance questions are being added to the forms, schedules, and instructions beginning with the 2023 plan year reports, including questions on the new Schedule DCG that are answered at the individual plan level (not the DCG level). The changes are largely unchanged from the September 2021 proposal and are in three major areas:

• Add a nondiscrimination and coverage test question to Form 5500-SF, Schedule R, and new Schedule DCG. The question asks if the employer aggregated plans in testing whether the plan satisfied the nondiscrimination and coverage tests of Code sections 401(a)(4) and 410(b).^[48]

• Add a question to Form 5500-SF, Schedule R, and new Schedule DCG, for section 401(k) plans, asking whether, if applicable, the plan sponsor used the design-based safe harbor rules or the “prior year” or “current year” ADP test.

• Add a question to Form 5500-SF, Form 5500-EZ, Schedule R, and new Schedule DCG asking whether the employer is an adopter of a pre-approved plan that received a favorable IRS Opinion Letter, the date of the favorable Opinion Letter, and the Opinion Letter serial number.^[49]

a. Revisions to IRS Tax Compliance Questions for Coverage, Nondiscrimination Testing, and Safe Harbor Status

With respect to adding tax compliance questions, fifteen commenters submitted views on additional IRS tax compliance questions and other IRS-related changes that were included in the September 2021 proposal. Some of those commenters strongly supported the IRS including the tax compliance questions and recommended adding more questions. Other commenters recommended revising the IRS compliance questions to capture more accurately the information sought and to streamline data capture. One commenter recommended specifically that questions relating to coverage and nondiscrimination testing reflect that a plan may comply with nondiscrimination testing using multiple testing methods for different portions of the plan. The IRS revised the questions and instructions to gather information with respect to different testing methods used for different portions of the plan.

One commenter recommended exempting multiple-employer 401(k) plans from answering nondiscrimination questions because these plans may have many participating employers, each of which is required to pass nondiscrimination testing separately. The commenter further noted that participating employers in a MEP, including in a PEP, may use different methods to separately satisfy nondiscrimination requirements. The IRS revised the instructions to exempt MEPs and PEPs from answering certain nondiscrimination questions.

That same commenter also recommended simplifying the nondiscrimination questions by asking whether a plan uses ADP or ACP testing without regard to whether the testing is based on prior-year or current-year testing. The IRS is not adopting this recommendation. This nondiscrimination testing information enables the IRS to more precisely select issues and returns for audits and assists IRS agents in performing pre-audit analysis and preparing initial audit information and document requests.

One commenter expressed concern that completing the Code section 410(b) coverage and ADP test results reported on a Form 5500 may not match the Form 5500 reporting period. The IRS believes that the plan's coverage and nondiscrimination tests (such as the ADP test) must be reported for the plan year for which those tests are completed. For each plan year, a 401(k) plan that is not a safe harbor plan is required to perform ADP testing. In calendar-year 401(k) plans, the current-year ADP test for a plan year is usually performed around the end of January of the following plan year. The due date for filing Form 5500 for the plan year is the last day of the 7th calendar month after the end of the plan year, so the IRS expects that testing data will be available for reporting on the Form 5500 for that plan year.

The final revisions include an additional nondiscrimination and coverage test question for the 2023 Form 5500 and Form 5500-SF. The question asks whether a plan maintained by an employer that has aggregated plans in its testing group satisfies the nondiscrimination and coverage tests of Code sections 401(a)(4) and 410(b). Adding this question allows the IRS to identify plans that have an increased risk of being non-compliant. The question is also helpful to the IRS in performing pre-audit analysis and allows the IRS to focus audit inquiries on information that is specifically relevant to the plan sponsor. This question also reflects an increased need to gather specific testing-group information in light of the elimination of optional coverage and nondiscrimination demonstrations under the IRS determination letter process. See Rev. Proc. 2012-6, 2012-1 I.R.B. 235, and Announcement 2011-82, 2011-52 I.R.B. 1052.

The final revisions also include an additional question on the Form 5500 and Form 5500-SF, with respect to section 401(k) plans, that asks whether the plan sponsor used a design-based safe harbor approach or, if applicable, the “prior year” or “current year” ADP test. Adding this question will allow the IRS to distinguish between section 401(k) plans that use ADP testing and those that use designed-based safe harbor approaches. This question will also help the IRS perform pre-examination analysis and, for design-based safe harbor plans, verify whether safe harbor contributions comply with the terms of the plan and applicable safe harbor requirements.

b. Revisions to IRS Compliance Questions for Pre-Approved Plan Adopters

One commenter recommended that the IRS eliminate or delay a new question included in the NPFR requiring disclosure by the adopter of a pre-approved plan document of the date and serial number of the pre-approved plan document's favorable opinion letter, on the grounds that this information is not currently maintained in the adopter's recordkeeping systems. Further, the commenter urged that, if this question is added, that it be significantly delayed. The IRS does not agree with either of these recommendations. The IRS believes that a pre-approved plan document provider should make pre-approved plan information, including a favorable IRS opinion letter date and serial number, available to each adopting employer. Accordingly, the favorable opinion letter should be readily available when an adopting employer prepares a Form 5500 series return. Pre-approved plan information provided in response to the new question will assist the IRS in determining if the plan document is up to date for all required law changes.

Accordingly, the final forms revisions include an additional question on the Form 5500, Form 5500-SF, and Form 5500-EZ, which asks whether the employer is an adopter of a pre-approved plan that received a favorable IRS opinion letter, and the date and serial number of the favorable IRS opinion letter. This question will help the IRS identify whether an employer has adopted a pre-approved plan and to determine whether the plan was timely adopted and amended.

In addition, one commenter requested clarification in the instructions regarding whether an employer that makes modifications to a pre-approved plan document loses reliance on the favorable IRS opinion letter and, accordingly, is no longer a pre-approved plan adopter. The IRS agrees with the recommendation and revises the instructions to clarify that, pursuant to Revenue Procedure 2017-41, 2017-29 IRB 92, an adopting employer is an employer that adopts a pre-approved plan offered by a provider, including a plan that is word-for-word identical to, or a minor modification of, a plan of a mass submitter. If a pre-approved plan is modified in such a way as to lose reliance on the favorable IRS opinion letter for that plan, then the plan is treated as an individually designed plan and, consequently, the adopting employer is no longer a pre-approved plan adopter.

c. Trust Questions are Removed From the 2023 Form 5500 Series

As discussed in the NPFR, adding trust questions to the Form 5500 series would enable the Agencies to focus on compliance concerns more efficiently for retirement plan trusts, including those for PEPs and DCG reporting arrangements. The Agencies received several comments regarding the new trust questions. Some commenters agreed that information about trusts should be reported on the Form 5500 and recommended adding an additional trust question to increase transparency if plans utilize multiple trusts. Some commenters expressed concerns about administrative costs and burdens of answering the new trust questions, because trust EINs often are not used and distributions are typically reported under a service provider EIN, and requested that these questions either be eliminated or made optional. Additionally, commenters noted that certain plans that are required to file a Form 5500 do not have a trust, such as 403(b) plans subject to Title I of ERISA. For those plans, the plan sponsor cannot confirm the trust's EIN or whether the IRS has deactivated the trust's EIN. One commenter also expressed concern that the plan's trust EIN is not an item of information currently maintained in most recordkeeping systems. Another commenter requested elimination of the trust questions because Announcement 2007-63, 2007-30 IRB 236, eliminated the employee benefit trust reporting requirement that had been included in the now-discontinued Schedule P (Form 5500), Annual Return of Fiduciary of Employee Benefit Trust. Some commenters expressed concerns that trust questions do not fit the business model for insurance companies that provide recordkeeping services for retirement plans. Many of these commenters' clients utilize insurance company products, such as contracts with separate accounts, and do not have trusts. One commenter recommended that plans should be directed to skip these questions if the plans have engaged an insurance company to provide both insurance contract and recordkeeping services, because the trust-related questions do not fit an insurance-contract-only arrangement. One commenter requested clarification that leaving the trust questions blank in such cases would not increase the probability of an audit.

Under Announcement 2007-63, the IRS elected to treat a plan's Form 5500 series return as a filing for the plan's trust for purposes of starting the statute of limitations period under Code section 6501(g)(2). After consideration of all comments, the IRS has decided not to add trust questions to the 2023 Form 5500 series return. However, the IRS intends to continue evaluating possible alternative approaches for reporting trust information.

d. Declining To Add Certain New 403(b) Plan Questions To Form 5500 and Form 5500-SF

One commenter recommended adding two new questions to the Form 5500 and Form 5500-SF for 403(b) plans that would ask whether the 403(b) plan has notified all newly eligible participants of their eligibility to participate in the plan, and whether the 403(b) plan has communicated eligibility requirements annually to all eligible employees. This sort of additional annual reporting on 403(b) plans was not included in the September 2021 proposal, and would benefit from more public comment on the merits of asking such questions as part of an annual filing. Accordingly, although the Departments will continue to consider the relative costs and benefits of annual reporting on those subjects, such questions are not being added to the 2023 Form 5500 and Form 5500-SF.

e. Declining To Add New Questions for Qualified Plan Loan Offsets

Three commenters recommended adding qualified plan loan offset questions to Schedule H. Commenters expressed concerns that qualified plan loan offsets are a leading cause of premature distributions from 401(k) plans and other similar defined contribution retirement plans, but that these loan offsets are not separately reported on Form 5500. A plan loan offset occurs when, pursuant to loan terms, a participant's benefit is reduced to repay the loan. A plan loan offset is treated as a distribution for tax purposes. Form 1099-R and its instructions already provide information for plan distributions including qualified plan loan offsets (as qualified plan loan offsets are reported using Distribution Code M).

The Agencies note that in 2019 the Government Accountability Office recommended that DOL, in coordination with IRS, revise the Form 5500 to require plan sponsors to report qualified plan loan offsets as a separate line item distinct from other types of distributions to better identify the incidence and amount of loan offsets in 401(k) plans nationwide. In 2021, DOL advised GAO that a project to improve Form 5500 data reporting was being reopened and that the specifics of the project were still under development. As noted above, that Form 5500 general improvement project is on DOL's semi-annual agenda, and the DOL expects to focus on that project once final actions implementing the September 2021 proposal are completed.

The IRS considered the public comments submitted on this issue and concluded that it does not need this information on Form 5500 for compliance audit purposes. The September 2021 proposal did not include a proposed addition of a line item to report loan offsets for Form 5500 or Form 5500-SF filers. The DOL believes public comments on a proposal should be the next step and does not believe it is in a position to adopt such an annual reporting requirement as part of this final forms revisions notice. Accordingly, the Agencies are not adding such a question to the 2023 Form 5500, but DOL intends to consider GAO's recommendations and those of the public commenters noted above in connection with evaluating the specifics of its general Form 5500 improvement project.

4. Participant-Count Methodology for Determining Eligibility for Small Plan Simplified Reporting Options for Individual Account Plans

Both Form 5500 and 5500-SF and their instructions are being revised to reflect a change in the reporting methodology related to the number of participants used in the current threshold ( i.e., less than 100 participants) for determining when a defined contribution pension plan may file as a small plan. This change in methodology also includes eligibility for the waiver of the requirement for small plans to have an audit and include the report of an independent qualified public accountant (IQPA) with their annual report.

The September 2021 proposal included a proposed change to the method of counting participants for determining when a defined contribution pension plan would be eligible for small plan reporting options, including the conditional waiver from the IQPA audit and report requirements. Currently, defined contribution pension plans determine whether they may file as small plans and whether they qualify for an audit waiver based on the number of participants with plan accounts as of the beginning of the plan year and on the number of participants who are eligible to elect to have contributions made under a section 401(k) qualified cash or deferred arrangement, even if they have not elected to participate and do not have an account balance in one of these plans. Specifically, the Form 5500 instructions currently instruct filers to “[u]se the number of participants required to be entered in line 5 of the Form 5500 to determine whether a plan is a “small plan” or “large plan.” Individual account plan filers are instructed to include on line 5 any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan. The instructions explain that “[t]his includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement.” ^[50] The “Who May File” section of the Form 5500-SF Instructions lists among the eligibility conditions for filing the Form 5500-SF that: “The plan (a) covered fewer than 100 participants at the beginning of the plan year . . . ” and instructs filers to “see instructions for line 5 on counting the number of participants.” Those instructions instruct pension plan filers to include in their participant count “any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement . . . .” ^[51]

Under the September 2021 proposal, instead of using all those eligible to participate, filers would look to the number of participants/beneficiaries with account balances as of the beginning of the plan year (the first plan year would use an end- of- year measure). This change was proposed partly in light of section 112 of the SECURE Act, which provides that long-term, part-time workers that have reached specified minimum age requirements and worked at least 500 hours in each of three consecutive 12-month periods must be permitted to make elective contributions to a Code section 401(k) qualified cash or deferred arrangement for plan years beginning on or after January 1, 2024.^[52] This could add to the number of participants who are eligible to, but might not, elect to participate in a plan, and carry the unintended consequence of having more plans with fewer than 100 active participants being subject to more extensive and costly annual reporting obligations applicable to large plans merely as a result of a statutory requirement to offer plan participation to long-term part-time workers. The policy underlying the proposed change was to reduce expenses for small employers to establish and maintain a retirement plan, and as a consequence, encourage more employers to offer workplace-based retirement savings plans to their employees.^[53]

The DOL received nearly 100 comment letters that included the issue of counting participants for plan audits, a large majority of those comments commented solely, or mainly, on this issue. Approximately one-third of those commenters, primarily benefit plan auditors and associations of audit professionals, opposed the September 2021 proposal with some commenters asking the DOL to, at a minimum, delay its implementation. The auditors and related associations argued the risks associated with this proposal exceed any potential savings. Generally, the commenters opposing the proposal expressed two main concerns: (1) small plans are particularly vulnerable to control, compliance, and operations errors, and it would leave them without adequate protections; and (2) it would discourage employers from encouraging eligible employees to participate in their plans in order to avoid an audit requirement.

Several commenters suggested that the DOL reevaluate the small plan audit waiver to consider adding additional conditions for eligibility to address control, compliance, and operations errors that are not currently addressed by the exemption and, at the least, make auto-enrollment a condition for eligibility for the waiver should this proposal go forward. Commenters also suggested the development of a cost-effective alternative to the IQPA audit for small plans that would focus more on operational and compliance issues rather than financial statements, with several suggestions for different types of periodic compliance assessments. Some commenters expressed concern with the timing of the proposal, stating that the pandemic has left small plans at heightened risk because of plan disruptions and difficulty hiring staff.

Conversely, about two-thirds of all commenters on audit issues, made up primarily of small plan sponsors, third party administrators (TPAs), and associations representing employers supported the September 2021 proposed changes. A few commenters also mentioned that employers could increase their contributions rather than incur the expense of an audit. Commenters also stated that the current audit requirement deters plan formation and results in inconsistent treatment of plans and that the proposal provides a clear and logical way for participants to be counted which will prevent counting mistakes and does not require new data elements. TPA commenters also took issue with auditor comments regarding TPA knowledge of ERISA and their ability to help plans with compliance and expressed a belief the auditor comments are self-serving because of the potential for business loss under the proposal. One commenter stated TPAs often know ERISA, the Code, and DOL regulations better than auditors and provide better value than an audit. Additionally, many small plan sponsors disputed auditor assertions that employers would discourage participation in their plans to avoid the audit. Several commenters argued that the expense and continual rising costs of getting an audit outweighs the benefit of an audit for small plans and that eliminating the audit will encourage smaller employers to establish retirement plans.

Several commenters suggested delaying changes not related to the SECURE Act to lessen cost and administrative burden impacts on plans that already will be making changes associated with the SECURE Act and, in some cases, to make it part of a larger Form 5500 reform project. However, others recommended immediate implementation because of their belief that no additional data elements would be required for forms in order to implement the change.

After considering the public comments, the Agencies decided to adopt the proposed counting method change for defined contribution individual account plans by adding a new line item on both the Form 5500 and Form 5500-SF for defined contribution pension plans to report participants with account balances at the beginning of the plan year (there already is a line item for reporting the number of participants with account balances at the end of the plan year). Instead of using all those eligible to participate, defined contribution plan filers will look at the number of participants/beneficiaries with account balances as of the beginning of the plan year (the first plan year would use an end- of- year measure) when determining if they are eligible for small plan reporting options, e.g., the Form 5500-SF. Conforming changes are also made to the short plan year filings and the “80-120” Participant Rule instructions to reflect this new counting method. See Appendix C for details on changes to forms and instructions related to this audit-related participant counting method change.

The DOL believes it is striking the right balance among the interest in providing secure retirement savings for participants and beneficiaries, the interest in minimizing costs and burdens on small pension plans and the sponsors of those plans, and the interest in promoting the establishment of retirement plans, especially by small businesses, to provide a workplace retirement savings option for their employees.

As described in greater detail in the regulatory impact analysis, making this revision to participant counting methods would be expected to reduce expenses for a significant number of plans. That analysis estimates that there would be a reduction of 19,442 large plan filings for defined contribution pension plans. Each plan would save an estimated $7500 (or more) on audit expenses. The reduction in expenses could encourage more employers to offer workplace-based retirement savings plans to their employees and might free up resources for more generous employer contributions.

With respect to concerns that small employers may seek to avoid enrolling otherwise eligible employees in order to avoid an audit, the DOL has seen no evidence, other than conjecture on the part of some commenters, indicating that employers would purposely discourage enrollment in their plans if this change is implemented. However, the DOL does take commenters' concerns regarding this issue seriously and notes that in addition to enforcement actions the DOL and individuals have available under Section 502 of ERISA in cases where participants are denied benefits, Section 510 of ERISA specifically provides protections to participants against employers interfering with their rights to attainment of benefits by making it unlawful.

Some commenters suggested an alternative to the proposal that would ensure that eligible participants are provided with opportunities to enroll in their retirement plans, such as making automatic enrollment a condition for eligibility for the small plan audit waiver, at least for defined contribution plans. The DOL declines to implement such a condition as part of this regulatory action. The proposal did not include any provision similar to what the commenter suggested. Current statutory provisions on automatic enrollment permit, but do not require, automatic enrollment for any size defined contribution retirement plan.^[54] In the DOL's view, such a substantial departure from current statutory and regulatory provisions governing automatic enrollment, even if in the context of an additional condition for the small plan audit waiver, would require at least an opportunity for public comment and possibly a statutory amendment to alter the voluntary nature of that plan feature.

As to commenter concerns about compliance errors that might go undetected without an audit, that concern applies broadly to all small plans that are eligible for the audit waiver, not just on the plans that will be newly eligible for the conditional small plan audit waiver based on the new counting methodology. The DOL does not believe that it would be appropriate to eliminate the audit waiver for all small plans. Rather, the DOL concluded many years ago that a conditional audit waiver struck an appropriate balance for small plans.^[55] Also, under the new counting methodology, plans with equal numbers of active participants would be treated similarly rather than one plan with fewer than 100 active participants being eligible for the audit waiver while another with an equal number of active participants being required to pay for an audit simply because in the latter case there are enough eligible but not participating employees to push the participant count to 100 or above.

5. Additional Defined Benefit Plan Reporting Improvements

On August 29, 2022, PBGC published a Proposed Submission of Information Collection for OMB Review at 87 FR 52822 (Aug. 29, 2022). PBGC received one comment, in support of the collection of information. On November 4, 2022, PBGC published a Submission of Information Collection for OMB Review at 87 FR 66762 (Nov. 4, 2022).

a. Schedule R Modifications

In summary, and as described in more detail below, the changes to Schedule R, line 19 and its instructions, include the following: (1) modify Schedule R, line 19a, to require that all defined benefit pension plans (except DFEs) with 1,000 or more participants at the beginning of the plan year show the end-of-year distribution of assets, broken down in seven reconfigured categories of plan assets, and provide clarification concerning classification of atypical investments; (2) modify Schedule R, line 19b, to change the available categories for current average duration; and (3) eliminate Schedule R, line 19c.

i. Line 19a—Percentage of Plan Assets Held by Category

Currently, line 19a of Schedule R requires that all defined benefit plans (except DFEs) that have 1,000 or more participants at the beginning of the plan year provide a breakdown of plan assets by reporting the percent of assets held in five categories of investments, with the percentages reported reflecting the asset allocation as of the beginning of the plan year. Currently, the five categories of investments are: Stock, Investment-Grade Debt, High-Yield Debt, Real Estate, and Other.

In the solicitation for public comment, PBGC proposed to reconfigure the categories to: Public Equity; Private Equity; Investment-Grade Debt and Interest Rate Hedging Assets; High-Yield Debt; Real Assets; Cash or Cash Equivalents; and Other. In addition, for certain investments, PBGC proposed to modify the instructions to clarify how certain atypical investments should be categorized for this purpose. For example, as currently drafted, it is not clear whether cash equivalents should be included in the “Investment-Grade Debt” category or in the “Other” category. Similarly, it is not clear whether infrastructure investments should be included in the “Real Estate” or the “Other” category. No comments were received. By expanding the list of categories and modifying the instructions, the more detailed information should be reported consistently, which will enable PBGC to better model important characteristics of plan portfolios. Accordingly, the Agencies are adopting these changes as proposed.

PBGC also proposed to modify the instructions for line 19a so that the percentages reported reflect the asset allocation as of the end of the plan year instead of the beginning of the plan year. No comments were received. Having more recent information will lead to better projections and more accurate analysis by PBGC, and because the Form 5500 isn't due until several months after the end of the plan year, this change should not create any timing issues for filers. Accordingly, the Agencies are adopting this change as proposed.

ii. Line 19b—Average Duration

Currently, line 19b of Schedule R requires applicable filers to check the box that shows the average duration of the plan's combined Investment-Grade and High-Yield Debt portfolio. In the solicitation for public comments, PBGC proposed changes to line 19b (average duration) and its instructions. Under modified line 19b, applicable filers would be required to check a box to indicate the average duration of the plan's Investment-Grade Debt and Interest Rate Hedging Assets portfolio, thereby replacing the current requirement to check the box that shows the average duration of the plan's combined Investment-Grade and High-Yield Debt portfolio. The average duration ranges were also adjusted from multiple 3-year periods to multiple 5-year periods, with the last choice being a period of 15 or more years. No comments were received. Accordingly, the Agencies are adopting this change as proposed.

iii. Line 19c—Duration Measure

Line 19c currently asks for the duration measure used to calculate line 19b. PBGC has proposed to eliminate line 19c in the solicitation for public comment. Because the alternative duration measures do not provide meaningfully different results, PBGC has proposed to eliminate line 19c. No comments were received. Accordingly, the Agencies are adopting this change as proposed.

b. Schedule SB Modifications

In summary, and as described in more detail below, the changes to Schedule SB include the following: (1) modify Schedule SB, line 6 (Target Normal Cost), and its instructions, to address a possible, albeit unlikely, situation in which the amount reported on line 6c would not be consistent with IRS regulations and the statute if the calculation was done in accordance with the instructions, (2) change the current instructions for line 26a to revise a line reference, and (3) change the current instructions for the Schedule SB, line 26b attachment (projected benefit payments), for situations where a plan assumes some, or all, benefits are paid in a lump sum, and uses the annuity substitution rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to determine the funding target.

1. Line 6—Target Normal Cost

The Schedule SB for the 2022 plan year requires that two components of target normal cost be reported: (1) the present value of current plan year benefit accruals reduced by mandatory employee contributions, but not below zero, and (2) the expected plan-related expenses. Those items are summed up and reported as the target normal cost on line 6c. In the solicitation for public comment, PBGC proposed modifications to Schedule SB, line 6 (Target Normal Cost), and its instructions, to address a possible, albeit unlikely, situation in which line 6c (Target Normal Cost) reported on Schedule SB would not be consistent with IRS regulations and the statute if lines 6a and 6b were determined in accordance with the current line 6 instructions. This situation would arise only if (1) a plan requires mandatory employee contributions and (2) the mandatory employee contributions for the plan year exceed the present value of benefits accruing during the plan year. PBGC's proposed changes to lines 6a and 6c of the instructions, and to line 6c of the Form, will rectify this situation by requiring that the amount to be reported in line 6a is the present value of expected benefit accruals ( i.e., not reduced by mandatory employee contributions) and by modifying the instructions for line 6c to require reporting the sum of lines 6a and 6b, “reduced (but not below zero) by any mandatory employee contributions expected to be made during the plan year.” No comments were received. Accordingly, the Agencies are adopting this change as proposed.

2. Line 26a—Schedule of Active Participant Data

The current instructions for Line 26a of Schedule SB provide that a plan reporting 1,000 or more active participants on line 3d, column (1), must also provide average compensation data. However, the correct line reference should be to line 3c, column (1). Accordingly, the Agencies are adopting this change with this final rule.

3. Line 26b—Projected Benefit Payments (Attachment)

Line 26b of Schedule SB currently requires plans covered by Title IV of ERISA that have 1,000 or more participants as of the valuation date to provide a 50-year projection of expected benefit payments and that, for purposes of the projection, benefits are assumed to be paid in the form assumed for valuation purposes. In the solicitation for comments, PBGC noted that, in situations where a plan assumes some, or all, benefits are paid as a lump sum, but uses the annuity substitution rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to determine the funding target, those instructions suggest projected benefits be shown in a different form of payment than what was used to determine the funding target. To clarify that this was not the intent, PBGC proposed changing the instructions to provide that, in such situations, the attachment may show projected benefits payable in the annuity form instead of in the form of payment assumed for valuation purposes. PBGC did not receive any comments. Accordingly, the Agencies are adopting this change as proposed.

4. Schedule H Schedules of Assets Changes and Breakout Categories for Administrative Expense

a. Deferring Schedules of Asset Changes for Re-Proposal as Part of DOL's General Form 5500 Improvement Project

The September 2021 proposal included revisions to the content requirements for the “Schedule of Assets Held for Investment” and the “Schedule of Assets Held and Disposed of within the Plan Year” to modernize the data elements required to be reported about a plan's investments and to require that the schedules be filed electronically in a structured format so that they are data-minable. The proposed changes were designed to improve the consistency, transparency, and usability of information reported regarding plan investments. For example, there is no efficient method for the DOL to identify all of the ERISA plans that invest in a specific investment such as a collective investment trust, mutual fund, or limited partnership. Better data about plan investments would assist the DOL, IRS, and the PBGC more effectively and efficiently provide oversight, assist with compliance, and enforce the provisions of ERISA and the Code. Standardizing an electronic format for the plan's investment schedules would allow data aggregation and review, which could be used both by the DOL and IRS for enforcement and oversight, but also by private sector organizations.

The Agencies received several comments in response to this proposed change. While many commenters supported establishing a standardized electronic format for the plan's investment schedules, some said that further consultation with stakeholder groups is needed, especially custodians who would likely be called upon to provide asset information needed to satisfy the proposed new data elements on the Schedules of Assets. Several commenters requested delaying the effective date to give sufficient lead time for filers and service providers to implement the changes and update the recordkeeping systems. Some commenters opposed the proposed change, expressing concerns about potential burdens and costs associated with creating a mandatory electronic filing requirement for the Schedules of Assets, especially for large plans where information is not currently provided in a data-capturable format. Two commenters provided extensive comments regarding reordering and regrouping the data elements of the proposed Schedules of Assets to minimize confusion and variability in the data entries. Some commenters raised concerns regarding the proposed new checkbox to identify if an asset is a hard-to-value asset. Three commenters requested clarification and made suggestions on proposed elements to add legal entity and other industry and regulatory identifiers for investment assets. The Agencies also received comments on other proposed elements, including the checkboxes to identify if an asset is a designated investment alternative or qualified default investment alternative in a defined contribution plan.

After considering the public comments, the Agencies decided that the improved transparency and financial accountability goals of the September 2021 proposal would best be furthered by using the public comments to refine the Schedule of Asset changes and include them in the proposal that is part of the more general Form 5500 improvement project currently on the DOL semi-annual regulatory agenda.

b. Schedule H Breakout of Administrative Expenses Paid by the Plan

The final forms revisions update Schedule H to add new breakout categories to the “Administrative Expenses” category of the Income and Expenses section of the Schedule H balance sheet. As discussed in the NPFR, the Agencies have determined that to get a better picture of plan expenses, particularly those related to service providers, more detail in this category is warranted. The data element breakouts for Administrative Expenses will now be “Salaries and allowances,” “Contract administrator fees,” “Recordkeeping fees,” “IQPA audit fees,” “Investment advisory and investment management fees,” “Bank or trust company trustee/custodial fees,” “Actuarial fees,” “Legal fees,” “Valuation/appraisal fees,” “Other Trustee fees/expenses,” and “Other expenses.”

Commenters complained that the new breakout categories are unnecessary and burdensome, and add layers of expense and difficulty to Form 5500 filing without added useful information. The commenters argued that the DOL should justify, both on a substantive and economic basis, which breakouts are useful for the purpose of the annual return/report and eliminate those that are not useful. One commenter asserted that the proposed changes lack clarity, would require substantial additional information, and provide very little lead time to adjust systems and processes. Another commenter claimed that adding additional break-out categories to the expenses lines will significantly and unnecessarily heighten the risk of frivolous litigation because the plaintiffs' bar focuses on these lines for purposes of bringing litigation in connection with 401(k) fees. Another commenter expressed concerns with the two categories of data element breakouts to report fees related to trusts, saying the DOL should provide additional clarity on reporting by bank trustees vs. individual trustees, and also suggested that trustee fees exclude reporting of pass-through entity trustee fees relating to custody of assets.

Transparency and improved reporting of fees and expenses is an ongoing objective for the DOL and an important goal for continuing to improve the Form 5500 as a tool for financial transparency and accountability among employee benefit plans.

The new breakouts will also supplement and allow for some cross-testing of amounts that should be recorded as a payment of direct compensation to a service provider on line 2 of Schedule C, to the extent that the service provider receives more than $5,000 from the plan during the year. Since those amounts are already required to be reported on the Schedule C, it should be a relatively straightforward exercise in arithmetic to sum up the Schedule C entries for purposes of reporting them on the Schedule H expense statement. Also, the total currently reported on the Schedule H should include all of the items that would be reported in the new breakouts, so plans should already have collected and recorded those payments to satisfy current Schedule H requirements. To the extent filers believe that they may have challenges in classifying particular payments into one of the breakout categories, the instructions will provide that the administrator can use any reasonable method of classifying expenses into appropriate categories (although the categories are sufficiently distinct that the DOL does not expect plans to face significant difficulty in this area). Also, other than IQPA audit fees and bank or trust company trustee/custodial fees, the new breakouts are similar to breakouts of plan expenses that were reported for many years until the detail of expense reporting on the Schedule H was reduced as part of a paperwork reduction and reporting simplification project implemented with the 1999 Form 5500 in connection with the implementation of the first stage of the EFAST filing system.^[56] The DOL did not observe plans having difficulty with this level of reporting at that time, and improvements in systems and technologies for plan administration since that time presumably should make it easier to report the required level of detail on expenses paid by the plan.

5. Miscellaneous and Conforming Changes for Forms and Instructions

Various other technical, formatting, and conforming changes to the forms, schedules, and instructions are being adopted as part of this final forms revisions notice. The changes primarily are needed to reflect the new DCG consolidated reporting option and the new Schedule MEP for multiple-employer pension plans, including PEPs, and Schedule MB to clarify special financial assistance reporting requirements for multiemployer plans. A conforming change was made to the Form 5500 instructions for the “Limited Pension Plan Reporting” option for IRA-based plans to require IRA-based MEPs relying on the option to complete the Schedule MEP, which replaced a participating employer and PEP reporting attachment requirement for Part I, Line A of the 2022 Form 5500 that applied to such IRA-based MEPs. Other technical and conforming changes include minor technical amendments applicable to plan years starting after December 31, 2022, to update several line instructions for Form 5500-SF and Schedules H and I for information reported by plans regarding plan benefits payments and unpaid required minimum distributions.^[57]

The instructions defining what constitutes a MEP for purposes of the Form 5500 include conforming changes in appropriate places throughout to include references to PEPs, DCGs, Schedule MEP, and Schedule DCG. The Form 5500 instructions for Part I, DFE box, are being updated to add a code for DCGs, which would include an instruction to check the DFE box and enter the DCG code. Entries for the Schedule MEP and Schedule DCG would be added to the checkbox list on the Form 5500 pension schedules. DCG filers would have to check that they are adding the Schedule DCG and enter the number of Schedule DCG attached. The Form 5500-SF instructions are being amended to add DCGs to those types of filers that are not permitted to file a Form 5500-SF, but must instead file the Form 5500, with all required schedules and attachments. The Form 5500 and Schedule D instructions are being revised to state that PEPs and DCGs cannot use master trust investment account (MTIA) reporting designed for master trust investments of affiliated plans. This is because the purpose of the MTIA provisions is to provide an annual reporting structure for groups of affiliated plans ( e.g., separate plans of controlled group members) that utilize master trusts for the collective investment of the assets of the affiliated plans. The DOL does not believe that separate PEPs or plans in DCGs are “affiliated” in the way that was envisioned for MTIA reporting and may in fact create an overly complex and undesirable lack of transparency if used in the case of PEPs and DCGs.

In the September 2021 proposal, the Agencies specifically requested comments on whether the final rule should require more detailed reporting regarding fee and expense information on the Form 5500, noting that useful comments would include, for example, suggestions on how to improve reporting of direct and indirect service provider compensation, generally and in particular with respect to PEPs, other MEPs, and DCG reporting arrangements (including information about how the fees and expenses are allocated among participating plans, employers, and plan participants and beneficiaries, as applicable). Another example of an area of interest on fee information is whether the Form 5500 would be an appropriate vehicle for collecting information on fees charged to participants or alternate payees by a retirement plan—including plan service provider fees the plan passes on to participants—for review and qualification of domestic relations orders.^[58]

This final forms revisions notice also amends the Form 5500 and Form 5500-SF instructions and makes conforming changes to the other parts of the forms, schedules, and instructions to implement the changes described above to the participant count methodology for individual account plans for determining whether such plans have to file as a large plan and whether they have to attach an IQPA report.

III. Paperwork Reduction Act Statement

In accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C. 3506(c)(2)(A)), the Agencies solicited comments concerning the information collection requests (ICRs) included in the revision of the Form 5500 Annual Return/Report.^[59] At the same time, the Agencies also submitted ICRs to the Office of Management and Budget (OMB), in accordance with 44 U.S.C. 3507(d).

The Agencies did not receive comments that specifically addressed the paperwork burden analysis of the information collection requirement contained in the proposed rule.

In connection with publication of the final regulations and final forms revision, the Agencies are submitting ICRs to OMB requesting a revision of the collections of information under OMB Control Numbers 1210-0110 (DOL), 1545-1610 (IRS), 1212-0057 (PBGC) and 1210-0040 (DOL for SAR) reflecting the final regulations and instruction changes being finalized in this document. The Agencies will notify the public when OMB approves the ICRs.

A copy of the ICRs may be obtained by contacting the PRA addressee shown below or at www.RegInfo.gov. PRA ADDRESSEE: Address requests for copies of the ICRs to James Butikofer, Office of Research and Analysis, U.S. Department of Labor, Employee Benefits Security Administration, 200 Constitution Avenue NW, Room N-5655, Washington, DC 20210 or email: [e-mail]. ICRs submitted to OMB also are available at http://www.RegInfo.gov.

The burden analysis is based on data from the 2020 Form 5500 filings (the latest year for which complete data are available). The burden analysis includes the burden of the current information collection and adjusts it for changes made by the final rule and final forms revisions. Burden estimates consider the change in plan counts due to the creation of PEPs and DCGs, with an increase in MEPs and a decrease in single-employer plans, reflecting some single-employer plans moving to PEPs or filing as a DCG. The burden also includes the additional burden from the changes to the 2023 Form 5500 and related schedules.

The Agencies' burden estimation methodology excludes certain activities from the calculation of “burden.” If the activity is performed for any reason other than compliance with the applicable Federal tax administration system or the Title I annual reporting requirements, it was not counted as part of the paperwork burden. For example, most businesses or financial entities maintain, in the ordinary course of business, detailed accounts of assets and liabilities, and income and expenses for the purposes of operating the business or entity. These recordkeeping activities were not included in the calculation of burden because prudent business or financial entities normally have that information available for reasons other than Federal tax or Title I annual reporting. Only time for gathering and processing information associated with the tax return/annual reporting systems, and learning about the law, was included. In addition, an activity is counted as a burden only once if performed for both tax and Title I purposes. The Agencies also have designed the instruction package for the Form 5500 Annual Return/Report so that filers generally will be able to complete the Form 5500 Annual Return/Report by reading the instructions without needing to refer to the statutes or regulations. The Agencies, therefore, have considered in their PRA calculations the burden of reading the instructions and find there is no recordkeeping burden attributable to the Form 5500 Annual Return/Report.

A summary of paperwork burden estimates follows. As noted above, these estimates include the burden of the overall Form 5500 information collection for all three agencies and makes adjustments for the final revisions to the instructions included in this document. It also reflects updates to the Summary Annual Report for DOL.

Agency: DOL-EBSA.

Type of Review: Revision of existing collection.

Title of Collection: Annual Information Return/Report of Employee Benefit Plan.

OMB Control Number: 1210-0110.

Affected Public: Individuals or households; Private Sector—Business or other for-profit; Not-for-profit institutions.

Forms: Form 5500 and Schedules.

Total Respondents: 839,382.

Total Responses: 845,028.

Frequency of Response: Annually.

Estimated Total Burden Hours: 2,872,410.

Total Annualized Costs: 0.

Agency: Department of Treasury—IRS.

Type of Revision: Revision of existing collection.

Title of Collection: Annual Return/Report of Employee Benefit Plan.

OMB Control Number: 1545-1610.

Affected Public: Individuals or households; Private Sector—Business or other for-profit; Not-for-profit institutions.

Forms: Form 5500 and Schedules.

Total Respondents: 984,008.

Total Responses: 984,008.

Frequency of Response: Annually.

Estimated Total Burden Hours: 1,878,544.

Total Annualized Costs: 0.

Agency: PBGC.

Type of Revision: Revision of existing collection.

Title of Collection: Annual Information Return/Report.

OMB Control Number: 1212-0057.

Affected Public: Individuals or households; Private Sector—Business or other for-profit; Not-for-profit institutions.

Forms: Form 5500 and Schedules.

Total Respondents: 25,260.

Total Responses: 25,260.

Frequency of Response: Annually.

Estimated Total Burden Hours: 15,089.

Total Annualized Costs: 0.

Agency: DOL-EBSA.

Type of Revision: Revision of existing collection.

Title of Collection: Summary Annual Report Requirement.

OMB Control Number: 1210-0040.

Affected Public: Not-for-profit institutions, Businesses or other for- profits.

Total Respondents: 809,901.

Total Responses: 178,211,549.

Frequency of Response: Annually.

Estimated Total Burden Hours: 1,114,751.

Total Annualized Costs: $18,423,119.

The DOL solicited comments regarding whether or not any recordkeeping beyond that which is usual and customary is necessary to complete the Form 5500 Annual Return/Report. No comments were received on this issue. Comments were also solicited on whether the Form 5500 Annual Return/Report instructions are generally sufficient to enable filers to complete the Form 5500 Annual Return/Report without needing to refer to the statutes or regulations. No comments were received on this issue.

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

	Pension plans
	Large	Small, filing Form 5500	Small, filing 5500-SF
Form 5500	1 hr, 50 min	1 hr, 19 min
Sch A	2 hr, 52 min	2 hr, 52 min
Sch MB	8 hr, 52 min	8 hr, 40 min	8 hr, 40 min.
Sch SB	6 hr, 38 min	6 hr, 49 min	6 hr, 49 min.
Sch C	2 hr, 51 min
Sch D	1 hr, 39 min	20 min
Sch G	14 hr, 49 min
Sch H	7 hr, 40 min
Sch I		2 hr, 6 min
Sch R	1 hr, 43 min	1 hr, 7 min
Form 5500-SF			2 hr, 35 min.
	Welfare plans that include health benefits
	Large	Small, unfunded, combination unfunded/fully insured, or funded with a trust 5500-SF
Form 5500	1 hr, 45 min	1 hr, 14 min.
Sch A	3 hr, 40 min	2 hr, 43 min.
Sch C	3 hr, 38 min
Sch D	1 hr, 52 min	20 min
Sch G	11 hr, 0 min
Sch H	8 hr, 36 min
Sch I		1 hr, 56 min.
Form 5500-SF		2 hr, 35 min.
	Welfare plans that do not include health benefits
	Large	Small, Filing Form 5500	Small, Filing Form 5500-SF
Form 5500	1 hr, 45 min	1 hr, 14 min
Sch A	3 hr, 40 min	2 hr, 43 min
Sch C	3 hr, 38 min
Sch D	1 hr, 52 min	20 min
Sch G	11 hr, 0 min
Sch H	8 hr, 36 min
Sch I		1 hr, 56 min
Form 5500-SF			2 hr, 35 min.

	Direct filing entities
	Master trusts	CCTs	PSAs	103-12 IEs	GIAs	DCGs
Form 5500	1 hr, 50 min	1 hr, 29 min	1 hr, 24 min	1 hr, 33 min	1 hr, 22 min	1 hr, 50 min.
Sch A	2 hr, 54 min	2 hr, 48 min	2 hr, 46 min	2 hr, 52 min	2 hr, 53 min	2 hr, 52 min.
Sch C	3 hr, 1 min	1 hr, 1 min	29 min	1 hr, 22 min	51 min	2 hr, 42 min.
Sch D	1 hr, 30 min	47 min	34 min	49 min	41 min	1 hr, 39 min.
Sch G	12 hr, 32 min			5 hr, 42 min		11 hr, 6 min.
Sch H	8 hr, 7 min	7 hr, 36 min	7 hr, 33 min	8 hr, 17 min	7 hr, 38 min	8 hr, 36 min.
Sch DCG						1 hr, 33 min.

The aggregate hour burden for the Form 5500 Annual Return/Report (including schedules and short form) is estimated to be 4.3 million hours annually shared between the DOL, IRS, and the PBGC. The hour burden reflects filing activities carried out directly by filers. Presented below is a chart showing the total hour burden of the revised Form 5500 Annual Return/Report separately allocated across the DOL, the IRS, and the PBGC.

Table 2—Hour Burden Distribution per Agency

	Hour burden
	DOL	IRS	PBGC
Pension Large Plans	691,355	329,297	2,412
Pension Small Plans	937,892	1,070,054	12,601
Welfare Large Plans	1,065,746	17,755
Welfare Small Plans	84,446	36,342
DFEs	89,588	50,756	76
EZ Filers		374,340
January 2013 Revision	630
2014 CSEC Revision	2,753
Total Agency Burden	2,872,410	1,878,544	15,089

IV. Appendices

The Agencies have included the following appendices to provide more detailed illustrations and explanations of the changes, which will be implemented for the 2023 Forms 5500, expected to be available for filing on January 1, 2024:

(1) Appendix A—a facsimile of Schedule MEP (Multiple-Employer Pension Plan) and its instructions;

(2) Appendix B—a facsimile of Schedule DCG (Individual Plan Information) and its instructions;

(3) Appendix C—a description of changes in participant count reporting and counting methodology;

(4) Appendix D—description of changes to Schedule R, Form 5500-SF Instructions to add new Code compliance questions;

(5) Appendix E—description of additional defined benefit plan reporting improvements;

(6) Appendix F—description of miscellaneous other changes to the Form 5500, Form 5500-SF, and schedules and instructions, including a description of changes to breakout categories for administrative expenses in Schedule H.^[60]

Consistent with the Agencies' annual updates to the forms, the final versions may include technical corrections, additions, and formatting adjustments that do not require further notice and comment under the PRA, the APA, or any relevant Executive Order.

Consistent with the proposal, to implement some of the proposed revisions to the forms, the DOL is publishing separately today in the Federal Register proposed amendments to the DOL's annual reporting regulations. That document includes a discussion of the findings required under sections 104 and 110 of ERISA that are necessary for the DOL to adopt the Form 5500 Annual Return/Report, including the Form 5500-SF, if revised as proposed herein, as an alternative method of compliance, limited exemption, and/or simplified report under the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA.

V. Statutory Authority

Pursuant to the authority in sections 101, 103, 104, 109, 110 and 4065 of ERISA and sections 6058 and 6059 of the Code, the Form 5500 Annual Return/Report and the instructions thereto are amended as set forth herein.

Signed at Washington, DC.

Lisa M. Gomez,

Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor.

Eric Slack,

Director, Employee Plans, Tax Exempt and Government Entities Division, Internal Revenue Service.

Gordon Hartogensis,

Director, Pension Benefit Guaranty Corporation.

Footnotes

1.  ERISA sections 103 and 104 broadly set out the content and filing requirements for the annual report under Title I of ERISA. The Form 5500 Annual Return/Report and the DOL's implementing regulations are promulgated through notice and comment rulemaking under general ERISA regulatory authority and specific ERISA provisions authorizing limited exemptions to these requirements and simplified reporting and disclosure for welfare plans under ERISA section 104(a)(3), simplified annual reports under ERISA section 104(a)(2)(A) for pension plans that cover fewer than 100 participants, and alternative methods of compliance for all pension plans under ERISA section 110. The Form 5500 Annual Return/Report filings are also information collections for the Agencies, subject to a separate clearance process under the Paperwork Reduction Act (PRA).

2.  Source: U.S. Department of Labor, EBSA calculations using the 2021 Medical Expenditure Panel Survey, Insurance Component (MEPS-IC), the Form 5500 and 2019 Census County Business Patterns.

3.  Source: U.S. Department of Labor, EBSA calculations using non-health welfare plan Form 5500 filings and projecting non-filers using estimates based on the non-filing health universe.

4.  Source: U.S. Department of Labor, EBSA. Private Pension Plan Bulletin: Abstract of 2020 Form 5500 Annual Reports.

5.  Source: U.S. Department of Labor, EBSA calculations using the Auxiliary Data for the March 2021 Annual Social and Economic Supplement to the Current Population.

6.  EBSA projected ERISA covered pension, welfare, and total assets based on the 2020 Form 5500 filings with the U.S. Department of Labor (DOL), reported SIMPLE assets from the Investment Company Institute (ICI) Report: The U.S. Retirement Market, Second Quarter 2022, and the Federal Reserve Board's Financial Accounts of the United States Z1 September 9, 2022.

7.  Estimates are based on 2020 Form 5500 filings. Welfare plans with fewer than 100 participants that are unfunded or insured (do not hold assets in trust) are generally exempt from filing a Form 5500. Therefore, while DOL estimates there are 2.5 million health plans and 673,000 non-health welfare plans, respectively only 63,000 and 21,000 of these plans filed a 2020 Form 5500.

8.  The SECURE Act was enacted December 20, 2019, as Division O of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94).

9.   See / www.reginfo.gov/​public/​do/​eAgendaViewRule?​pubId=​202204&​RIN=​1210-AB97.

10.  As noted in the September 2021 proposal, the DOL has a separate regulatory project on its semi-annual agenda in coordination with the IRS and PBGC to: (i) modernize the financial and other annual reporting requirements on the Form 5500 Annual Return/Report; (ii) continue an ongoing effort to make investment and other information on the Form 5500 Annual Return/Report more data mineable; and (iii) consider potential changes to group health plan annual reporting requirements, among other improvements that would enhance the Agencies' ability to collect employee benefit plan data in a way that best meets the needs of compliance projects, programs, and activities. See www.reginfo.gov for more information.

11.  EFAST2 is an all-electronic system designed by the Agencies to simplify and expedite the submission, receipt, and processing of the Form 5500 and Form 5500-SF. Under EFAST2, filers choose between using EFAST2-approved vendor software or an EFAST website (IFILE) to prepare and submit the Form 5500 or Form 5500-SF. Completed forms are submitted via the internet to EFAST2 for processing. EFAST2 is operated by a private sector government contractor on behalf of the Agencies. Each year the EFAST2 system is rolled over for the coming year's annual return/report filings; for example, the system must be updated to reflect changes from the 2022 plan year return/report filings to the 2023 plan year return/report filings. That rollover process is governed by a contractual development schedule with deadlines designed to ensure that forms and instructions changes are smoothly integrated into the EFAST2 system and the products developed by private software developers to provide filing services to employee benefit plans. Integration of the regulatory and EFAST2 processes is less complicated in years that do not involve material changes to the forms or instructions. These processes, however, are more complex when the Agencies make substantial changes to the forms and instructions.

12.  DOL sought comments through a Request for Information published on July 31, 2019, on “open” MEP structures (those without the need for any commonality among the participating employers or other genuine organization relationship unrelated to participation in the plan) being treated as one multiple-employer plan for purposes of compliance with ERISA. The DOL does not have any current plan to take further action regarding defined contribution open MEPs due to the SECURE Act provisions permitting PEPs as a type of open MEP.

13.  After the final rule had been submitted to OMB on November 21, 2022, for review under Executive Order 12866, the SECURE Act 2.0 of 2022 (SECURE Act 2.0) was signed into law on December 29, 2022, as Division T of the Consolidated Appropriations Act, 2023, H.R. 2617, as amended. Section 106 of the SECURE Act 2.0 amended ERISA section 3(43) and added a new subparagraph 15 to Code section 403(b) to permit 403(b) PEPs for plan years beginning after December 31, 2022. This notice of final forms revision includes certain SECURE 2.0 updates to the definition of a PEP in the Schedule MEP instructions and general instructions for Form 5500 and Form 5500-SF.

14.  29 U.S.C. 1002(43).

15.  In establishing a PEP as a new type of multiple-employer plan, the SECURE Act in section 101(c) specifically referred to plans maintained by employers that have a common interest other than having adopted the plan. For example, the DOL's recent final association retirement plan regulation, at 29 CFR 2510.3-55, published July 31, 2019, clarified and expanded the types of arrangements that could be treated as MEPs under Title I of ERISA to include plans established and maintained by a bona fide group or association of employers or by a professional employer organization (PEO). The SECURE Act provision excluding a “plan maintained by employers that have a common interest” from the definition of a PEP does not preclude employers with a common interest other than participating in the plan from establishing or participating in a PEP. Rather, in the Departments' view, the SECURE Act provision means that if a group of employers with a common interest other than participating in the plan establish a MEP based on a common interest among the employers, e.g., an association retirement plan under the DOL's regulation, the MEP will not be subject to the SECURE Act requirements for a plan to be a PEP.

16.  Like other pooled plan providers, pooled plan providers for 403(b) PEPs authorized in SECURE Act 2.0 are subject to the Form PR registration requirements.

17.  SECURE Act Section 101(d).

18.  SECURE Act Section 101(e)(1).

19.  The SECURE Act Section 202 appears to use the terms “combined,” “aggregated,” and “consolidated” interchangeably when directing the Departments to develop a new alternative method for the Form 5500 Annual Report/Return for DCGs. This final rule generally uses the term “consolidated” to describe the DCG reporting arrangement filing.

20.  SECURE Act Section 202(c).

21.  After the final rule had been submitted to OMB on November 21, 2022, for review under Executive Order 12866, the SECURE Act 2.0 of 2022 (SECURE Act 2.0) was signed into law on December 29, 2022, as Division T of the Consolidated Appropriations Act, 2023, H.R. 2617, as amended. The SECURE Act 2.0 includes a specific direction to the DOL and the Treasury Department on audit requirements for the DCG consolidated Form 5500 reporting option. Specifically, section 345 of SECURE Act 2.0 provides that with respect to the IQPA audit provisions in section 103 of ERISA “any opinions required by section 103(a)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(a)(3)) shall relate only to each individual plan which would otherwise be subject to the requirements of such section 103(a)(3).” This final forms revisions notice and the related final rule notice being published concurrently include DCG plan-level audit provisions that are consistent with the SECURE Act 2.0 direction.

22.  See also discussion in DOL-only final rule being published concurrently in this issue of the Federal Register titled “Annual Reporting and Disclosure” that adopts a new regulatory section at 29 CFR 2520.104-51 to set forth, for ERISA Title I purposes, the DCG eligibility and plan participation conditions.

23.  Section 403(a) of ERISA states that, except as provided in ERISA section 403(b), all assets of an employee benefit plan shall be held in trust by one or more trustees. The issue of Code section 403(b) plans' ability to participate in a DCG is discussed in detail in a subsequent part of this Federal Register notice.

24.  One commenter appears to have misunderstood the SECURE Act provision giving the DOL the discretionary authority to decide whether to provide a simplified reporting option for MEPs with fewer than 1,000 participants in total as long as each participating employer has fewer than 100 participants. The SECURE Act did not establish a new audit threshold for MEPs. Rather, section 101 of the SECURE Act amended ERISA section 104(a)(2)(A) to permit the Secretary of Labor to prescribe by regulation simplified reporting for MEPs subject to ERISA section 210(a) with fewer than 1,000 participants in total, as long as each participating employer has fewer than 100 participants. The DOL explained in the September 2021 proposal that it was not proposing to amend the current reporting rules to establish a “simplified report” for such plans. The DOL asked interested stakeholder for comments on why MEPs should be subject to different reporting requirements than single-employer plans that cover fewer than 1,000 participants and, if they thought there were reasons for different treatment, to identify appropriate conditions and limitations for such a simplified report that would ensure transparency and financial accountability comparable to that for other large retirement plans. Thus, contrary to the commenter's suggestion, there is no 1,000 participant audit threshold for MEPS. Further, the SECURE Act's grant of discretionary authority for MEPs does not include DCG reporting arrangements.

25.  In the September 2021 proposal, the Departments noted that, historically, IRS conditions applicable to many pre-approved plans required that employers who used what was known as a “master” plan were required to use the same trust or custodial account, whereas each employer had a separate trust or custodial account in a “prototype plan.” Under the proposal, the “same trust” requirement for the consolidated report would have been satisfied by the same trust structure historically used by employers using “master” plans. The proposal also provided that use of sub-trusts of the DCG trust would be permitted, but that separate plans using a separate trust for investments would not be permitted. The final rule changes the proposal's restrictions on single trusts and sub-trusts.

26.  As discussed below, the final forms revisions and the related amendment to the DOL annual reporting regulations includes a change in the methodology of counting participants for purposes of determining eligibility for certain simplified reporting options for small plans, which is based on whether the individual has an account balance rather than whether the individual is eligible to participate in the plan, even if the individual does not choose to participate. Thus, plans participating in the DCG will be able to rely on that new counting methodology for determining whether the plan is able to use the conditional audit waiver.

27.  See, 29 CFR 2520.104-41; 29 CFR 2520.104-46.

28.  Section 104(a)(2) of ERISA sets forth reporting requirements for employee benefit plans and includes a grant of regulatory authority to the DOL to provide for simplified annual reporting by small pension plans. Section 103(a)(3)(A) of ERISA permits the DOL Secretary to waive audit requirements for small plans that are eligible for simplified reporting under Section 104(a)(2).

29.  Some commenters did cite duplication of audit procedures at the trust and plan level, but with the removal of the trust level audit in this final rule, that objection is rendered moot.

30.  Section 101 of the SECURE Act amended ERISA section 103(g) for MEPs. Section 103(g) of ERISA requires that the annual return/report of a MEP generally include a list of participating employers and a good faith estimate of the percentage of total contributions made by each participating employer during the plan year. The SECURE Act amended section 103(g) to expand the participating employer information that must be reported on the Form 5500 Annual Return/Report by requiring reporting of the aggregate account balances attributable to each employer in the plan (determined as the sum of the account balances of the employees of each employer and the beneficiaries of such employees), and applied section 103(g) to retirement plans that currently meet the definition of a MEP under ERISA section 210(a), including any pooled employer plans, for plan years beginning on or after January 1, 2021. With respect to a pooled employer plan, section 103(g) further requires that the annual return/report must include identifying information for the person designated under the terms of the plan as the pooled plan provider.

31.  Form 8955-SSA is an IRS form used to satisfy the reporting requirements of Code section 6057(a). The information reported on Form 8955-SSA is transmitted to the Commissioner of Social Security, as required by Code section 6057(d). The Social Security Administration (SSA) is then able to provide this information, in accordance with section 1131(a) of the Social Security Act, to individuals and beneficiaries who apply or are eligible for social security benefits or hospital insurance benefits. Form 8955-SSA currently can be filed electronically through the IRS “Filing Information Returns Electronically” (FIRE) System, which provides for data transmittal to SSA. Thus, Form 8955-SSA is not part of this final rulemaking.

32.  ERISA section 402 requires that such instrument shall provide for one or more named fiduciaries who jointly or severally have authority to control and manage the operation and administration of the plan. Section 402 of ERISA further provides that the term “named fiduciary” means a fiduciary who is named in the plan instrument, or who, pursuant to a procedure specified in the plan, is identified as a fiduciary (A) by a person who is an employer or employee organization with respect to the plan or (B) by such an employer and such an employee organization acting jointly.

33.  H.R. Report No. 116-65 Part 1 at pages 81-82 (2019).

34.  As an alternative interpretation of Section 202 of the SECURE Act, a commenter suggested considering brokerage windows a “valuable service to a participant offered through a broker dealer, rather than an investment or investment option,” as supposedly consistent with DOL guidance that brokerage windows are not designated investment alternatives. The DOL does not believe that this is a viable interpretation of the SECURE Act, especially if the brokerage window “service” allows for non-uniform investment options for different participating plans. Such an interpretation could authorize a DCG reporting arrangement to have plans that only provide a “brokerage window” service and effectively read out of the statute the requirement that participating plans have the same investment or investment options.

35.  29 CFR 2520.103-1(c)(2) sets forth conditions for small pension plans to be eligible to file the Form 5500-SF, including requirements in 29 CFR 2520.103-1(c)(2)(ii)(C) that focus on whether the plan's investments are in assets that have a readily determinable fair market value. The regulation generally defines assets that have a readily determinable fair market value as shares issued by an investment company registered under the Investment Company Act of 1940; investment and annuity contracts issued by any insurance company (subject to certain state business qualification and valuation disclosures), bank investment contracts issued by a bank or similar financial institution (See, 29 CFR 2550.408b-4(c)) subject to annual valuation disclosures, 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 (See 29 CFR 2550.408b-4(c)) by an insurance company, by a registered broker-dealer under, or by any other organization authorized to act as a trustee for individual retirement accounts under Code section 408; and any loan meeting the requirements of ERISA section 408(b)(1), and the regulations issued thereunder.

36.  Several commenters argued that it is a permissible reading of the statute to say that Congress by requiring the “same trustee” meant to include plans that lack a trustee because having “no trustee” is the “same trustee” ( i.e., none). The Departments are not prepared to conclude that the identical plan conditions in the SECURE Act can reasonably be read to say that a plan having no trustee is the same as that plan having the same trustee or trustees as other plans participating in the DCG.

37.  See Section III.A.1 of the September 2021 proposal, which discussed the Departments' view that creating a consolidated group filing for employers required to file a Form 5500-EZ is similarly unlikely to generate administrative efficiencies for those employers, as compared to continuing to file separately.

38.  Since the aggregate participant count of the entire DCG would be less than 100, there could be no “large plans” participating in such a “small” DCG, so the issue of an individual audit for a participating large plan would not arise.

39.  The requirement to add the aggregate account balance and the new PEP information was already implemented beginning with the 2021 forms pursuant to the Final Rule Phase I. The change being adopted in this final forms revision is to have the information reported in standardized format on the Schedule MEP itself, rather than as a non-standard attachment to the Form 5500.

40.  Multiemployer defined benefit pension plans are required to provide on Form 5500, Schedule R (Retirement Plan Information), identifying information and the percentage of contributions for those plans that are five percent or more contributors for the plan year being reported.

41.  As noted above, the September 2021 proposal included changes that would have transferred to the DOL Form M-1 (Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)) (Form M-1) participating employer information for multiple-employer welfare arrangements that are required to file the Form M-1. The public comments on the proposal were mixed. Some supported the reporting of participating employer information by MEWAs, including plan and non-plan MEWAs, and the transfer of the reporting requirement to the Form M-1 for MEWAs that are group health plans and non-plan MEWAs that provide benefits consisting of medical care. Others, however, opposed both the collection in general and the transfer to the Form M-1 citing alleged absence of statutory authority to require such reporting either as part of the Form 5500 or the Form M-1 and privacy concerns with the reported information being included in the web available copies of filed Form 5500 and Form M-1 reports. After considering the public comments, the DOL decided to defer any transfer of the reporting requirement to the Form M-1 and to consider that change as part of the Agencies' broader Form 5500 improvement project. The DOL's semi-annual regulatory agenda describes the improvement project as including potential changes to group health plan annual reporting requirements. The DOL concluded that changes to the current requirements relating MEWA reporting of participating employer information would be better considered as part of that broader initiative. The Department, however, does not agree with the commenters who claimed the DOL lacked statutory or regulatory authority to require MEWA plans, including multiple employer group health plans, to report participating employer information as part of the Form 5500. The DOL's position on its legal authority was set forth in the September 2021 proposal. Accordingly, multiple-employer welfare plans required to file a Form 5500 are required to continue to report the participating employer information as an attachment to the Form 5500.

42.  Ack ID is the acknowledgement code generated by the IRS in response to a completed filing for the most recent Form PR submitted. The instructions to the Form PR advise the pooled plan provider that it must keep, under ERISA section 107, the electronic receipt for the Form PR filing as part of the records of each pooled employer plan operated by the pooled plan provider.

43.  Several had more general concerns regarding audits of PEPs that were previously addressed in the 2021 Final Forms Revisions. See Final Rule Phase I, 86 FR 73976, 73977 fn.7 and related text (Dec. 29, 2021).

44.  86 FR 7396, (Dec. 29, 2021).

45.  The 2021 Final Forms Revisions provided that, for the 2021 reporting year, it would be acceptable for filers to round to the nearest whole number similar to rounding conventions that apply to the Form 5500 financial statements and schedules. It further stated that to the extent the filer's concern is whether rounding could result in the total reported percentage either slightly above or slightly below 100 percent, the filer can indicate that on the non-standard attachment as part of its filing.

46.  The DOL understands from some comments on the proposal that, depending on the treatment of receivables and forfeitures by the plan, the sum of the account balances of the employees of each employer and the beneficiaries of such employees may not match the net asset value reported on Schedule H or I. The DOL believes that the aggregate account balance information should be calculated and reported in accordance with the statutory direction in the SECURE Act. Filers can attach an explanatory statement to the extent they wish to explain any difference between that sum and other total asset values reported on the Form 5500.

47.  The commenter points to the Securing a Strong Retirement Act of 2021, H.R. 2954 § 103, as an example of such legislation.

48.  This question was on Schedule T before that schedule was eliminated from the Form 5500 Annual Return/Report beginning with 2005 plan year filings.

49.  The list of plan characteristics codes for Lines 8a and 8b of Form 5500 and Lines 9a and 9b of Form 5500-SF are being amended to add “403(b)” after “403(a),” to read as follows: “3D: Pre-approved pension plan—A pre-approved plan under sections 401, 403(a), 403(b), and 4975(e)(7) of the Code that is subject to a favorable opinion letter from the IRS.”

50.  2021 Form 5500 instructions at page 19.

51.  2021 Form 5500-SF instructions at pages 4, 11.

52.  Under section 125 of SECURE Act 2.0, this three year measurement period is reduced to two years with the effect that long-term, part-time workers must be treated as meeting the time in service requirements to participate in Code section 401(k) qualified cash or deferred arrangements and, as added by section 125 of the SECURE Act 2.0, Code section 403(b) plans once they have worked two consecutive years (with at least 500 hours of service per year) effective for plan years starting on or after January 1, 2025.

53.  See 86 FR 51284 at pages 51298-99 (DOL discusses burden change and how it is consistent with policy goal of “pension plan establishment and maintenance, particularly in the small business community . . .”).

54.  See 29 CFR 2550.404c-1, ERISA Section 404(c) Plans.

55.  The Department notes that these final forms revisions do not prohibit any particular plan or DCG provider from conducting annual or periodic audits or other agreed upon reviews of compliance issues.

56.   See 1998 Form 5500, line 32(g).

57.  As noted above, SECURE Act 2.0 was enacted subsequent to the September 2021 proposal. Section 107 of the SECURE Act 2.0 amends Code Section 401(a)(9) to increase the age at which required minimum distributions are required, from age 72 currently to age 75 by 2032. The instructions to the Form 5500, 5500-SF, and Schedules DCG, H and I have been updated accordingly to reflect language that refers to a statutory applicable age rather than a fixed age.

58.  See Government Accountability Office (GAO) Report GAO 20-541, “Retirement Security: DOL Could Better Inform Divorcing Parties About Dividing Savings,” which recommended that “EBSA should explore ways to collect information on fees charged to participants or alternate payees by a retirement plan—including plan service provider fees the plan passes on to participants—for review and qualification of domestic relations orders and evaluate the burden of doing so. For example, DOL could consider collecting fee information as part of existing reporting requirements in the Form 5500.”

59.  86 FR 51488.

60.  Consistent with prior year practice, “information-only” copies of the forms, schedules, and instructions may be published earlier than January 1, 2024.