98-32659. Proposed Revisions to Certain Regulations Regarding Annual Reporting and Disclosure Requirements  

  • [Federal Register Volume 63, Number 237 (Thursday, December 10, 1998)]
    [Proposed Rules]
    [Pages 68370-68390]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 98-32659]
    
    
    
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    Part VI
    
    
    
    
    
    Department of Labor
    
    
    
    
    
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    Pension and Welfare Benefits Administration
    
    
    
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    29 CFR Part 2520
    
    
    
    Proposed Revisions to Certain Regulations Regarding Annual Reporting 
    and Disclosure Requirements; Proposed Rule
    
    Federal Register / Vol. 63, No. 237 / Thursday, December 10, 1998 / 
    Proposed Rules
    
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    DEPARTMENT OF LABOR
    
    Pension and Welfare Benefits Administration
    
    29 CFR Part 2520
    
    RIN 1210-AA52
    
    
    Proposed Revisions to Certain Regulations Regarding Annual 
    Reporting and Disclosure Requirements
    
    AGENCY: Pension and Welfare Benefits Administration, Labor.
    
    ACTION: Notice of proposed rulemaking
    
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    SUMMARY: This document contains proposed amendments to Department of 
    Labor (Department) regulations relating to the annual reporting and 
    disclosure requirements under part 1 of Title I of the Employee 
    Retirement Income Security Act of 1974, as amended (ERISA or the Act). 
    In part, the amendments contained in this document are necessary to 
    conform the regulations to the previously published revisions to the 
    annual return/report forms (Form 5500 Series) filed by administrators 
    of employee pension and welfare benefit plans under part 1 of Title I 
    of ERISA. The regulatory amendments, in conjunction with the revisions 
    to the Form 5500 Series, are intended to reduce the annual reporting 
    burdens on employee benefit plans while ensuring that the Department 
    has access to the information it needs to carry out its administrative 
    and enforcement responsibilities under ERISA and that participants and 
    beneficiaries have access to the information they need to protect their 
    rights and benefits under ERISA. Other proposed amendments contained in 
    this document would modify the reporting requirements for certain group 
    insurance arrangements. The remaining amendments are technical in 
    nature and are designed to either simplify or clarify the existing 
    reporting regulations. If adopted, the amendments will affect the 
    financial and other information required to be reported and disclosed 
    by employee benefit plans filing Form 5500 Series reports under part 1 
    of Title I of ERISA.
    
    DATES: Written comments on the proposed regulations must be received by 
    the Department on or before February 8, 1999.
    
    ADDRESSES: Interested persons are invited to submit written comments 
    (preferably three copies) concerning the proposals herein to: Office of 
    Regulations and Interpretations, Room N-5669, Pension and Welfare 
    Benefits Administration, U.S. Department of Labor, 200 Constitution 
    Avenue, N.W., Washington, DC 20210, ATTENTION: Proposed Amendments to 
    Annual Reporting Regulations. All written comments should clearly 
    reference the relevant proposed amendment(s). All submissions will be 
    open to public inspection in the Public Disclosure Room, Pension and 
    Welfare Benefits Administration, Room N-5638, 200 Constitution Avenue, 
    N.W., Washington, D.C.
    
    FOR FURTHER INFORMATION CONTACT: Eric A. Raps, Office of Regulations 
    and Interpretations, Pension and Welfare Benefits Administration, (202) 
    219-8515 (not a toll-free number).
    
    SUPPLEMENTARY INFORMATION:
    
    A. Background
    
        Under Titles I and IV of ERISA, and the Internal Revenue Code, as 
    amended, pension and other employee benefit plans are generally 
    required to file annual return/reports concerning, among other things, 
    the financial condition and operations of the plan. These annual 
    reporting requirements can be satisfied by filing the Form 5500 Series 
    in accordance with its instructions and related regulations. The Form 
    5500 Series is the primary source of information concerning the 
    operation, funding, assets and investments of pension and other 
    employee benefit plans. In addition to being an important disclosure 
    document for plan participants and beneficiaries, the Form 5500 Series 
    is a compliance and research tool for the Department, and a source of 
    information and data for use by other federal agencies, Congress, and 
    the private sector in assessing employee benefit, tax, and economic 
    trends and policies.
        During the last two years, the Department's Pension and Welfare 
    Benefits Administration (PWBA), the Internal Revenue Service and the 
    Pension Benefit Guaranty Corporation (the Agencies) have conducted an 
    extensive review of the Form 5500 Series in an effort to streamline the 
    information required to be reported and the methods by which the 
    information is filed and processed. A Notice of Proposed Forms 
    Revisions soliciting public comments on proposed revision of the Form 
    5500 Series was published in the Federal Register on September 3, 1997 
    (62 FR 46556). The Agencies' proposal replaced the Form 5500, Form 
    5500-C and Form 5500-R with one Form 5500 intended to streamline the 
    report and the methods by which it is filed. Concurrent with the 
    development of the new forms, the Agencies are also developing a new 
    computerized system to process the Form 5500 (the ERISA Filing 
    Acceptance System or ``EFAST''). The new computerized processing system 
    is designed to simplify and expedite the receipt and processing of the 
    new Form 5500 by relying on computer scannable forms and electronic 
    filing technologies. The overall proposal is intended to streamline and 
    improve the Form 5500 Series and lower the administrative burdens and 
    costs incurred by the more than 800,000 employee benefit plans that 
    file the Form 5500 Series each year. A public hearing on the proposed 
    forms revisions was held on November 17, 1997, and written comments on 
    the proposal were received until the public record was closed on 
    December 3, 1997. The Agencies received over 60 public comments and 
    received oral testimony from employer groups, employee representatives, 
    financial institutions, service organizations and others on the form 
    streamlining proposal. On February 4, 1998, the Department announced 
    that, in response to public comments, the implementation of the new 
    Form 5500 would be delayed until the 1999 plan year.
        Public reaction to the September 3, 1997 Notice of Proposed Forms 
    Revisions was generally supportive of the new streamlined structure of 
    the Form 5500 Series. The Agencies, accordingly, decided to adopt the 
    new reporting structure largely as proposed. In response to public 
    comments, the Agencies made various adjustments to the proposed forms 
    and instructions where consistent with the purposes of the Form 5500 
    and the objectives of the streamlining project. A revised Form 5500 was 
    submitted to the Office of Management and Budget (OMB) for approval 
    under the Paperwork Reduction Act and a Notice was published in the 
    Federal Register on June 24, 1998 (63 FR 34493) which provided a 30-day 
    opportunity to submit comments to OMB on the new Form 5500 submission. 
    The new Form 5500 was also made available on PWBA's internet site 
    (http://www.dol.gov/dol/pwba) as part of the Agencies' commitment to 
    make information about the new forms available to plans and their 
    service providers at the earliest opportunity. Following its Paperwork 
    Reduction Act review, OMB gave conditional Paperwork Reduction Act 
    approval to the new Form 5500 on August 26, 1998. The approval is 
    conditioned on the Agencies soliciting public comments on the computer 
    scannable version of the new form after its development and making 
    minor technical adjustments to
    
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    the form.1 After the computer scannable versions of the new 
    forms and electronic filing options are developed as part of the EFAST 
    project, the Agencies intend to publish a Federal Register notice 
    soliciting public comments. The final computer scannable version of the 
    forms which will be required to be used for 1999 plan year filings will 
    be published in the Federal Register following the Agencies' evaluation 
    of public comments.
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        \1\ The conditions regarding form changes involved (i) 
    consolidating the separate reporting of long-term and short-term 
    corporate debt instruments into one line item for all corporate debt 
    instruments on the Schedule H (Income and Expense Statement), (ii) 
    adding a clarifying instructional statement to the text on line 5 of 
    Schedule R, (iii) bolding instructional text on line 3 of Schedule 
    T, (iv) adding a statement to the Schedule C instructions that 
    trades and businesses (whether or not incorporated) are ``persons'' 
    required to be reported as service providers, and (v) clarifying the 
    instructions for line 3b(2) of Schedule H regarding the 
    inapplicability of the ``short plan year'' provisions of 29 CFR 
    2520.104-50 to Direct Filing Entity Form 5500s filed for group 
    insurance arrangements and investment entities described in 29 CFR 
    2520.103-12 (103-12 IEs) .
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        The proposed amendments published herein to the Department's annual 
    reporting regulations (Part 2520 of Chapter XXV of Title 29 of the Code 
    of Federal Regulations) are intended, in major part, to make the 
    technical and conforming changes to the regulations necessary to 
    implement the new Form 5500 Series. As stated in the September 3, 1997 
    Notice of Proposed Forms Revisions, the new Form 5500 Series will not 
    become effective as an alternative method of compliance and limited 
    exemption from the reporting and disclosure requirements of part 1 of 
    Title I of ERISA until these regulations are issued in final form.
    
    B. Request for Comments
    
        Interested persons are invited to submit written comments 
    (preferably three copies) concerning the proposals herein to: Office of 
    Regulations and Interpretations, Room N-5669, Pension and Welfare 
    Benefits Administration, U.S. Department of Labor, 200 Constitution 
    Avenue, N.W., Washington, DC 20210, Attention: Proposed Amendments To 
    Annual Reporting Regulations. All written comments should clearly 
    reference the relevant proposed amendment(s). All submissions will be 
    open to public inspection in the Public Disclosure Room, Pension and 
    Welfare Benefits Administration, Room N-5638, 200 Constitution Avenue, 
    N.W., Washington, D.C.
        The regulatory amendments proposed herein do not involve revisions 
    to the Form 5500 Series itself and generally do not announce changes to 
    the annual reporting requirements for employee benefit plans in 
    addition to those described in the previously published forms 
    revisions. The Agencies in developing the revisions to the Form 5500 
    Series previously considered the comments submitted in response to the 
    September 3, 1997 Notice of Proposed Forms Revisions and the June 24, 
    1998 Notice. Those comments will be treated as part of the public 
    record for this Notice of Proposed Rulemaking, and, to the extent those 
    comments include information relevant to the regulatory amendments 
    proposed herein, the Department will treat those comments as comments 
    on this Notice of Proposed Rulemaking to avoid the need to submit 
    duplicate public comments.
    
    C. Discussion of the Proposal
    
    1. Section 2520.103-1
    
        Section 2520.103-1 generally describes the content of the Form 5500 
    Series as a limited exemption and alternative method of compliance. One 
    of the central changes announced in the Notice of Proposed Forms 
    Revisions for improving the Form 5500 Series and reducing the reporting 
    burden on filers was the development of one Form 5500 for use by both 
    ``large plan'' filers (plans that previously filed the Form 5500) and 
    ``small plan'' filers (plans that previously were eligible to file the 
    Form 5500-C/R) that was structured along the lines of tax returns 
    familiar to individual and corporate taxpayers `` a simple one-page 
    main form with basic information necessary to identify the plan for 
    which the report is filed that guides each filer to those schedules 
    applicable to the filer's specific type of plan. The Form 5500-C/R is 
    being eliminated, but limited financial reporting options for small 
    plans are being maintained.2 To accommodate these form 
    changes, the proposed regulatory amendments would update the references 
    in Sec. 2520.103-1 to the annual report to reflect the new structure of 
    the Form 5500.3
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        \2\ For example, plans eligible to file as small plans that take 
    advantage of the simplified reporting rules would continue to be 
    exempt from the annual audit requirements contained in ERISA 
    Sec. 103 and would continue to be relieved of the obligation to file 
    certain schedules required for large plan filers (e.g., Schedule C 
    --Service Provider Information).
        \3\ The proposal also would delete the cross-reference to 
    obsolete Sec. 2520.103-7. This provision was removed from the Code 
    of Federal Regulations on July 1, 1996 (61 FR 33847).
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    2. Section 2520.103-2
    
        Welfare plans participating in a group insurance arrangement (GIA) 
    are exempt from filing individual annual reports under Sec. 2520.104-43 
    provided that the trust, trade association, or other entity which holds 
    the insurance contracts and acts as a conduit for the payment of 
    insurance premiums files an annual report for the entire arrangement. 
    Section 2520.103-2 prescribes the contents of the annual report for 
    GIAs in order for the participating plans to be eligible for the 
    exemption described in Sec. 2520.104-43. The annual report required to 
    be filed under Sec. 2520.103-2 must contain a completed Form 5500, 
    including any required schedules, a report by an independent qualified 
    public accountant (IQPA), and separate financial statements if prepared 
    by the IQPA in order to form the opinion required by Sec. 2520.103-
    2(b)(5). The Department is proposing amendments to Sec. 2520.103-2 that 
    are consistent with the changes proposed for Sec. 2520.103-1, as 
    applicable, and Secs. 2520.104-21 and 2520.104-43 (described in section 
    C.7 of this preamble). Of particular note for GIAs is the addition of a 
    new Schedule D (DFE/Participating Plan Information) to the Form 5500. 
    The Schedule D is intended to serve as a multipurpose schedule for 
    reporting certain information on relationships between plans and 
    entities that are classified as ``Direct Filing Entities'' or DFEs, 
    including investment entities covered under Sec. 2520.103-12, master 
    trust investment accounts, common or collective trusts (CCTs), pooled 
    separate accounts (PSAs), and GIAs. In the case of GIAs, the new 
    Schedule D would be a standardized form that GIAs would be required to 
    use to satisfy the current requirement to file a list of participating 
    plans. (See discussions below of CCTs, PSAs, master trusts and 103-12 
    investment entities for more information on applicable requirements for 
    plans and entities required to file the new Schedule D).
    
    3. Sections 2520.103-3, 2520.103-4, 2520.103-9, 2520.103-12 and 
    2520.103-1(e)
    
    (a) Common/Collective Trusts and Pooled Separate Accounts
        Section 2520.103-3 provides an exemption from certain annual 
    reporting requirements for plan assets held in a CCT maintained by a 
    bank, trust company or similar institution. Section 2520.103-4 provides 
    a similar exemption for plan assets held in a PSA maintained by an 
    insurance carrier. Pursuant to Secs. 2520.103-3 and 2520.103-4, a plan 
    investing in these entities generally need not include information 
    regarding the individual transactions of the entity in the plan's 
    annual report. Rather, the plan must
    
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    include in its annual report certain information regarding: (i) the 
    current value of the plan's units of participation in the CCT or PSA, 
    (ii) transactions involving the acquisition and disposition of units of 
    participation in the CCT or PSA, and (iii) a statement of the assets 
    and liabilities of the CCT or PSA. Further, the Department, pursuant to 
    Sec. 2520.103-9, exempts plans from including a statement of the assets 
    and liabilities of the CCT and/or PSA with their annual report if the 
    bank, trust company or insurance carrier sponsoring the CCT or PSA, 
    respectively, files its statement of assets and liabilities directly 
    with the Department and certain other conditions are met. The statement 
    of assets and liabilities of a CCT and PSA is not required to be 
    reported in a standardized format. The absence of standardized 
    reporting for CCTs and PSAs has made it virtually impossible for the 
    Department to correlate and effectively use the data regarding the 
    approximately 226.2 billion dollars in plan assets held by CCTs and 
    PSAs. The Department has concluded that a change in the current 
    reporting rules is needed to enable it to continue to satisfy its 
    research and enforcement responsibilities.
        Under the proposed forms revisions, as under the current Form 5500 
    Series, CCTs and PSAs may elect to file information on behalf of their 
    participating plans. As noted above, the revisions to the Form 5500 
    Series include a new Schedule D (DFE/Participating Plan Information). 
    The Schedule D is a standardized schedule for filing certain 
    information on relationships between plans and CCTs and PSAs (as well 
    as other entities that are classified as ``Direct Filing Entities'' or 
    DFEs, including investment entities covered under Sec. 2520.103-12, 
    master trust investment accounts, and GIAs). In the case of a CCT or 
    PSA that elects to file as a DFE, the CCT or PSA would be required to 
    complete: (1) applicable items on the revised Form 5500; (2) one or 
    more Schedules D (to list all participating plans at any time during 
    the year and all CCTs, PSAs, or investment entities described in 
    Sec. 2520.103-12 (103-12 IEs) that the CCT or PSA invested in during 
    the year; and (3) a Schedule H (Financial Information) (formerly 
    referred to as the Schedule FIN in the September 3, 1997 Federal 
    Register Notice of Proposed Forms Revisions).
        A large plan investing in one or more CCTs or PSAs which file as a 
    DFE would report the value of its respective interests in each of these 
    entities as a single entry on the appropriate lines in the plan's asset 
    and liability statement as of the beginning and end of the plan year. A 
    large plan investing in a CCT or PSA which files as a DFE also would 
    report on the plan's Schedule H income and expense statement the net 
    investment gain/loss for the DFE as part of a single entry for each 
    class of DFE. As indicated previously, the new Schedule D (DFE/
    Participating Plan Information) would be added to the Form 5500. The 
    Schedule D would be required to be attached to the plan's Form 5500 to 
    report information about the plan's participation in CCTs and PSAs.
        In the case of small plans with CCT or PSA investments, regardless 
    of whether the CCT or PSA files directly with the Department, the small 
    plan would file a Schedule D, but would report total assets and total 
    income, respectively, on single line items of the small plan Schedule I 
    financial statements without separate Schedule I financial statement 
    reporting on CCT or PSA investments.
        Thus, the reporting for large plans investing in CCTs and PSAs that 
    elect to file as DFEs and for small plan filers would not change 
    significantly from the current reporting requirements. Similarly, 
    except for the addition of Schedule H (Part II), generally the 
    information that would be filed by a CCT or PSA that elects to file as 
    a DFE would be substantially the same as the current reporting 
    requirements with the major change being that the information would be 
    required to be filed on the Form 5500 as the standard reporting format 
    for all filers.
        If a CCT or PSA does not file a Form 5500 as a DFE, large employee 
    benefit plans would be required to break out their percentage interest 
    in the underlying assets of the CCT or PSA and report that interest as 
    a dollar value in the appropriate categories on the asset and liability 
    statement contained in Schedule H (Financial Information). The failure 
    by a large plan to break out its allocated interest in a CCT or PSA on 
    the asset and liability statement contained in Schedule H when the CCT 
    or PSA does not file as a DFE would be considered a failure by the plan 
    administrator to file a complete Form 5500. The Department does not 
    envision this as imposing a substantial additional burden on large plan 
    filers because there is only a small number of other general investment 
    categories on the Schedule H, such as: interest bearing cash; U.S. 
    government securities; corporate debt instruments; corporate stock; 
    partnership/joint venture interests; real estate; loans; registered 
    investment companies, other assets; and employer securities. Further, 
    the currently required asset and liability statement of the CCT or PSA 
    should provide for many filers most of the detail needed to break the 
    assets and liabilities into these categories. Furthermore, large plan 
    filers investing in CCTs and PSAs that do not file as DFEs would still 
    report the net investment gain/loss with respect to their participation 
    in a CCT or PSA as part of single entries on Part II of the Schedule H 
    (income and expense statement) and would continue to report their 
    interest in a CCT or PSA on the Form 5500 financial schedules (other 
    than Part I of Schedule H) in the same general manner as under current 
    rules (e.g., current value of the units of participation in CCTs and 
    PSAs would be reported on the schedule of assets held for investment 
    and the Schedule D).
        The Department believes that changing the reporting requirements 
    for plans investing in CCTs and PSAs is the only viable alternative for 
    capturing the information needed to carry out its oversight 
    responsibilities about plan assets and ensuring that there is adequate 
    disclosure of plan investment information to plan participants and 
    beneficiaries. The Department, therefore, is exercising its regulatory 
    authority under sections 103(b)(4), 104(a)(3), 110 and 505 to modify 
    the reporting requirements with respect to plans that participate in 
    CCTs and PSAs. The Department views the proposed changes as important 
    and necessary in light of the dramatic growth in the value of plan 
    assets held by CCTs and PSAs. For example, the value of plan assets 
    invested in CCTs and PSAs increased between 1990 and 1995, the latest 
    year for which information is available, from $113.9 billion to $226.2 
    billion. In order to minimize the costs and paperwork burdens on CCTs 
    and PSAs associated with this proposal, it is anticipated that 
    processing improvements would be implemented in the near future so this 
    information could be filed with the Department either via magnetic 
    media (magnetic tapes, floppy diskettes) or other electronic means.
    (b) 103-12  Investment Entities and Master Trusts
        Section 2520.103-1(e) provides for special reporting rules for 
    plans that participate in a master trust. In general, a master trust is 
    a trust maintained by a bank or similar institution to hold the assets 
    of several plans that are all sponsored by a single employer or by 
    several employers which are under common control. Such plans must 
    report the value of their interest in the
    
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    master trust as a single asset category in the plan's statement of 
    assets and liabilities. The plan's share of earnings, realized and 
    unrealized gains and losses of the master trust is reported in the 
    plan's statement of income, expenses and changes in net assets for the 
    plan year. A separate annual report for the master trust is required 
    under current rules. The proposed amendments to Sec. 2520.103-1(e) do 
    not change the information required to be reported regarding the master 
    trust, but rather establish the Form 5500 Series as the standard 
    reporting format for master trusts.
        Similarly, section 2520.103-12 provides an exemption and 
    alternative method of reporting for plans investing in certain 
    investment entities the assets of which are deemed to include plan 
    assets under section 2510.3-101. Under the alternative method, the plan 
    administrator need not include in the plan's annual report any 
    information regarding the underlying assets and individual transactions 
    of the 103-12 investment entity. Instead, the administrator is required 
    to report only the value of the plan's investment or units of 
    participation in the investment entity. As a condition to using this 
    alternative, however, certain information must be filed by the 103-12 
    investment entity directly with the Department. The proposed amendments 
    to Sec. 2520.103-12(b) do not change the information required to be 
    reported by the 103-12 investment entity, but rather establish the Form 
    5500 Series as the standard reporting format.
    
    4. Section 2520.103-5
    
        Section 2520.103-5 implements section 103(a)(2) of the Act. Section 
    103(a)(2) of the Act requires insurance carriers or other organizations 
    which provides some or all of the benefits under a plan or holds plan 
    assets, banks or similar institutions which holds plan assets, and plan 
    sponsors to transmit and certify to the accuracy and completeness of 
    such information as is needed by the plan administrator to comply with 
    the requirements of Title I of the Act. Because the filing requirements 
    for a plan participating in a CCT or PSA generally will be affected by 
    whether such CCT or PSA directly files with the Department, section 
    2520.103-5 is proposed to be modified to conform to the new direct 
    filing entity (DFE) reporting regime and ensure that administrators 
    have adequate advance knowledge about their reporting responsibilities.
        In the case of a CCT or PSA, the proposed amendments would require 
    that such CCT or PSA notify its participating plans of whether or not 
    it intends to file a Form 5500 as a DFE, and to furnish the plan 
    administrator with the information about the assets held by such CCT or 
    PSA, respectively, needed by the plan administrator to satisfy its 
    obligations under Title I of ERISA. These notifications must be made 
    within the same period of time for transmitting information already 
    required by existing Sec. 2520.103-5 (i.e., 120 days after the close of 
    each participating plan's plan year). The proposal does not contain any 
    detailed rules relating to the manner of the exchange of information 
    between the plan and the CCT or PSA. The Department has decided to let 
    the plan administrator develop with the sponsor of the CCT or PSA a 
    suitable procedure whereby the plan administrator can establish to his 
    or her satisfaction that the administrator and the Department will 
    receive all of the required information in a timely fashion. This does 
    not, of course, relieve the plan administrator of the responsibility to 
    monitor the conduct of the CCT or PSA sponsor and to obtain whatever 
    financial information concerning the CCT or PSA that is necessary for 
    the administrator to satisfy his or her obligations under ERISA.
        The proposed forms revisions did not affect the information 
    required from plan sponsors and the Department is not proposing any 
    amendment to the plan sponsors' obligations described in Sec. 2520.103-
    5.
    
    5. Section 2520.103-6 and Section 2520.103-11
    
        Section 2520.103-6 sets forth the definition of reportable (5%) 
    transactions for the Form 5500. Section 2520.103-11 provides rules for 
    preparing the schedule of assets held for investment purposes and the 
    schedule of assets held for investment purposes that were both acquired 
    and disposed of within the same plan year (hereinafter collectively 
    referred to as the schedules of assets held for investment). The new 
    Form 5500 as proposed would have eliminated for large plan filers the 
    requirement to file with their annual report a schedule of reportable 
    (5%) transactions (line 27d of the current Form 5500) and schedules of 
    assets held for investment (line 27a of the current Form 5500). 
    Although the Department proposed in September 1997 to remove the 
    requirement to submit the line 27a and line 27d schedules as part of 
    the annual report, the proposal attempted to preserve affected 
    participants' access to the information by providing them with the 
    right to request and receive reportable transaction information and a 
    detailed list of investments. In developing the proposed forms 
    revisions, the Department estimated that fewer than 60,000 plans out of 
    the over 800,000 pension and welfare benefit plans that file an annual 
    report would be affected by this aspect of the proposal. Because the 
    60,000 affected plans are larger plans, the filing of schedules 
    detailing plan investments often involves substantial amounts of paper. 
    As proposed, the new Form 5500 would still have required a financial 
    statement reflecting assets on an aggregate rather than individual 
    basis, and the affected plans would have still have been subject to an 
    annual audit by an IQPA. Finally, there did not seem to be a 
    substantial need for the schedules to be on file at the Department's 
    public disclosure room because the Department receives only a small 
    number of requests per year for copies, and the Department could make a 
    request for copies from the plan administrator on behalf of any plan 
    participants or beneficiaries.
        The Department, however, received public comments on the proposal 
    that raised serious concerns about adverse consequences of eliminating 
    these schedules from the annual report. In light of those comments and 
    testimony received at the November 17, 1997 hearing on the proposed 
    forms revisions, the Department has decided not to adopt this change. 
    The Department nonetheless believes that it is possible to make a 
    number of modifications to these schedules to eliminate certain burdens 
    associated with the production of information that is already available 
    to participants and beneficiaries. Accordingly, the proposal amends the 
    reportable transactions rules to no longer require that transactions 
    effected at the affirmative direction of participants or beneficiaries 
    under an individual account plan be taken into account when completing 
    the schedule of reportable transactions. Because of the administrative 
    burdens and recordkeeping complexity associated with compiling 
    aggregate cost of assets for which investment decisions are directed by 
    participants and beneficiaries, the proposal also eliminates for such 
    participant directed assets the requirement to prepare the ``historical 
    cost'' entry on the schedules of assets held for investment. The 
    proposal would not relieve the administrator from including in the 
    schedules of assets held for investment descriptions and current values 
    for assets held at a participant's or beneficiary's direction. Finally, 
    the IQPA's opinion must cover the schedule
    
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    of reportable transactions and schedules of assets held for investment.
        The proposed regulation would also provide that, solely for 
    purposes of this reporting relief, a transaction will be considered 
    ``directed'' by a participant or beneficiary to the extent that the 
    individual, in fact, affirmatively authorized the investment of the 
    asset allocated to his or her account. This reporting relief is broader 
    than the fiduciary liability relief prescribed by Sec. 2550.404c-1 that 
    applies to a narrower class of transactions in which participants and 
    beneficiaries exercise control over the assets involved in the 
    transaction.
        Because the proposal retains the schedule of reportable 
    transactions and schedules of assets held for investment as part of the 
    annual report primarily to meet participant disclosure concerns, not to 
    satisfy research and enforcement needs, the Department is not requiring 
    use of a standardized computer scannable form for the schedule of 
    reportable transactions or schedules of assets held for investment 
    (unlike the Schedule G which will be mandatory for the other financial 
    transaction schedules). Rather, administrators would be allowed to use 
    any format for preparing the schedule of reportable transactions and 
    schedules of assets held for investment as long as the content 
    requirements of Secs. 2520.103-6 and 2520.103-11 are met and the same 
    size paper as the Form 5500 is used (electronic filing requirements for 
    these schedules will be developed as part of the, previously described, 
    EFAST project).
        The Department is also proposing to amend section 2520.103-6 to 
    include a special rule for the reportable transaction schedule for 
    initial plan years. Section 2520.103-6(b)(1)(i) currently requires that 
    the 5% thresholds for reportable transactions be calculated using 
    current value of assets as of the beginning of the initial plan year. 
    Concerns have been expressed by filers that in most cases the current 
    rule results in virtually all investment transactions during the 
    initial plan year being reportable transactions under section 2520.103-
    6. The Department does not believe that this result was intended under 
    ERISA inasmuch as the purpose of the reportable transaction rules was 
    to identify transactions relating to a significant portion of the 
    plan's assets because these transactions may pose the greatest 
    financial risk to a plan. Accordingly, the Department is proposing that 
    the current value of plan assets for purposes of preparing the schedule 
    of reportable transactions for the initial plan year would be the 
    current value of plan assets at the end of the initial plan year.
    
    6. Section 2520.103-10
    
        Section 2520.103-10 identifies the financial schedules that are 
    required to be included with the filing of the Form 5500. The 
    Department is proposing to amend Sec. 2520.103-10 to conform it to the 
    new Form 5500 and other regulatory amendments described elsewhere in 
    this preamble. Accordingly, as proposed, Sec. 2520.103-10 would be 
    amended to update references to the annual report financial schedules 
    to conform the references to the schedules associated with the new Form 
    5500.
        Further, under the proposal, the use of the revised Schedule G will 
    be mandatory for the schedule of party in interest transactions, 
    schedule of obligations in default, and schedule of leases in default. 
    These schedules are now required by lines 27b, 27c, 27e and 27f of the 
    current Form 5500 and may be filed using a similar format and using the 
    same size paper as the current Schedule G. Because the Department will 
    be developing and implementing a new system to simplify and expedite 
    the receipt and processing of the Form 5500 Series by using optical 
    scanning technology and optical character recognition, it would not be 
    possible for the Department to process Schedule G information and 
    include such information in our data base unless the use of Schedule G 
    is mandatory. The proposed Schedule G would have to be attached to the 
    Form 5500 of a large plan, master trust investment account or 103-12 IE 
    to report loans or fixed income obligations in default or determined to 
    be uncollectible as of the close of the reporting year (Part I of 
    Schedule G), leases in default or classified as uncollectible during 
    the plan year (Part II of the Schedule G) and nonexempt transactions 
    (Part III of the Schedule G).
        The proposed changes to the schedule of reportable transactions and 
    the schedules of assets held for investment (which are not included on 
    the new Schedule G) are discussed in paragraph C.5 of this preamble.
    
    7. Section 2520.104-21 and Section 2520.104-43
    
        Section 2520.104-21 provides an exemption from certain Title I 
    reporting and disclosure requirements for welfare plans that are part 
    of a group insurance arrangement (GIA) as defined in paragraph (b) of 
    that regulation.4 The exemption is available for welfare 
    plans which have fewer than 100 participants and which are part of a 
    GIA, if the arrangement, among other things, uses a trust (or other 
    entity such as a trade association) as the holder of the insurance 
    contracts and the conduit for payment of premiums to an insurance 
    company. See Sec. 2520.104-21(b)(3). Section 2520.104-43 provides plans 
    (regardless of whether such plans have 100 or more participants) with 
    relief from filing the annual report in cases where the GIA described 
    in Sec. 2520.104-21 files a Form 5500 report on behalf of all the 
    participating plans. The Department is proposing to amend 
    Secs. 2520.104-21 and 2520.104-43 to provide that the exemptions would 
    only be available in those cases in which the GIA utilizes a trust as 
    the conduit for the payment of the premiums. The proposal also would 
    modify the examples in paragraph (d) of Sec. 2520.104-21 to reflect 
    these changes. The Department believes that interpreting the reporting 
    exemption as providing GIAs with an exemption from the substantive 
    requirement to hold plan assets in trust is not in the interest of 
    participants and beneficiaries, and needs correction. Indeed, adoption 
    of the proposed amendment would conform the reporting regulations for 
    GIAs with ERISA Sec. 403 and Sec. 2550.403a-1, which do not provide a 
    trust exception for GIAs. The Department does not envision that the 
    proposed amendment will create administrative burdens for GIAs or 
    result in increased costs for participating plans because the plan 
    assets collected and held by the intermediary entity must be separately 
    accounted for under current law. 5 The Department is also 
    proposing that this
    
    [[Page 68375]]
    
    change, if adopted, would be effective for plan years beginning after 
    Dec. 31, 1998, to coincide with the 1999 plan year implementation of 
    the new Form 5500.
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        \4\ For example, section 2520.104-21 provides relief to certain 
    welfare plans from the requirement to file a copy of the summary 
    plan description and descriptions of material modifications in the 
    terms of a plan or changes in the information required to be 
    included in the summary plan description. Section 1503 of The 
    Taxpayer Relief Act of 1997 (TRA 97), Pub. L. 105-34 (enacted August 
    5, 1997), amended ERISA by repealing the requirement to file the 
    aforementioned documents with the Department. A separate notice of 
    proposed rulemaking will be published by the Department to conform 
    these regulations to TRA 97.
        \5\ The proposed amendment, if adopted, also would be consistent 
    with the enforcement policy in ERISA Technical Release 92-01 (TR 92-
    01) (57 FR 23272 and 58 FR 45359). TR 92-01 announced interim relief 
    from the trust and certain reporting requirements of ERISA for 
    certain contributory welfare plans. TR 92-01, however, does not 
    apply to Sec. 2520.104-21 GIAs or to participant contributions after 
    they have been segregated from an employer's general assets and 
    transmitted to an intermediary account. Thus, if the proposed 
    amendment is adopted as a final rule, participating cafeteria plans 
    may continue to rely on the enforcement policy contained in TR 92-01 
    until participant contributions are transmitted to the GIA, but the 
    GIA would be required to hold plan assets in trust.
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    8. Sections 2520.104-41 and 2520.104-46
    
        Section 2520.104-41 provides a simplified method of annual 
    reporting for plans with fewer than 100 participants and Sec. 2520.104-
    46 waives the IQPA requirement for such small plans. In general, small 
    plans eligible to file simplified reports are required to file the Form 
    5500-C every third plan year and the Form 5500-R (an abbreviated 
    version of the Form 5500-C) for the two intervening plan years. As 
    indicated previously, the Agencies have proposed to replace the Form 
    5500 and the Form 5500-C/R with an improved single Form 5500 for use by 
    both large and small plan filers, with simplified reporting options for 
    small plans incorporated into the new restructured forms. This proposal 
    would amend Secs. 2520.104-41 and 2520.104-46 to conform the terms in 
    the regulations to the new Form 5500 Series.
    
    9. Section 2520.104-44
    
        Section 2520.104-44 contains a limited exemption and alternative 
    method of compliance for annual reporting by certain unfunded and 
    insured plans. The Department has received inquiries from the public 
    about the reporting requirements for pension plans exclusively using a 
    tax deferred annuity arrangement under Internal Revenue Code section 
    403(b)(1) and/or a custodial account for regulated investment company 
    stock under Internal Revenue Code section 403(b)(7). The current Form 
    5500 Series instructions provide for limited reporting for these types 
    of pension plans. The Department has previously expressed its view that 
    such plans are not subject to the IQPA audit requirements as part of 
    their annual reporting obligations under Title I of ERISA. See the 
    Department's Information Letter issued to Gary H. Friedman (dated 
    November 15, 1996). The Department, therefore, is proposing to make 
    conforming technical amendments to Sec. 2520.104-44 to clarify the 
    annual reporting obligations of such plans.
    
    10. Section 2520.104b-10
    
        Section 2520.104b-10 sets forth the requirements for the summary 
    annual report (SAR) and prescribes the formats for such reports. The 
    proposed amendments to section 2520.104b-10 would make the SAR 
    requirements conform to the new Form 5500 Series (e.g., by referring to 
    the modified list of the attached statements and schedules to the Form 
    5500). The proposed amendments also would address the elimination of 
    the Form 5500-R. Under current SAR rules, administrators of small plans 
    are not required to prepare and furnish a SAR for those plan years in 
    which a Form 5500-R is filed if one of the two following methods of 
    compliance is met. Under the first method of compliance, plans must 
    furnish participants (and beneficiaries receiving benefits under a 
    pension plan) with a copy of the filed Form 5500-R as a substitute for 
    furnishing the SAR. Under the second method, plans are required to 
    notify participants and such beneficiaries in writing of their right 
    upon written request to receive free-of-charge a copy of the Form 5500-
    R filed by the plan. Under the second method of compliance, 
    Sec. 2520.104b-10(b)(2)(ii) permits active participants to be notified 
    by posting the notice at worksite locations in a manner reasonably 
    calculated to ensure disclosure of the information. The Form 5500-R 
    furnished under either method of compliance must be accompanied by a 
    prescribed notice. Because the Form 5500-R is proposed to be 
    eliminated, small plans will be required to furnish a SAR every year 
    rather than every third year. Although the reporting statistics 
    indicate that approximately 50 percent of small filers file the Form 
    5500-C every year and, therefore, would not be eligible for the 
    alternative method of compliance, the Department seeks comments as to 
    the burdens associated of complying with proposed Sec. 2520.104b-10, if 
    any, for small plan filers who would no longer be able to file a Form 
    5500-R. The proposed amendments to Secs. 2520.104b-10(d)(3) and 
    2520.104b-10(d)(4) also restate the information available to 
    participants and beneficiaries under the heading ``Your Rights to 
    Additional Information'' so that it is consistent with the new Form 
    5500 Series. These proposed changes are expected to improve the process 
    by which information is disclosed to participants and beneficiaries of 
    small plans which currently file the Form 5500-R.
        The existing regulations contain a cross-reference guide as an 
    appendix. The purpose of this guide is to correspond the line items of 
    the SAR to the line items on the Form 5500 and Form 5500-C. The 
    Department intends to publish as part of the final regulation a revised 
    appendix to conform it to the final version of the new Form 5500 and 
    associated schedules.
    
    D. Findings Regarding the New Form 5500 as a Limited Exemption and 
    Alternative Method of Compliance
    
        Section 104(a)(2)(A) of the Act authorizes the Secretary to 
    prescribe by regulation simplified reporting for pension plans that 
    cover fewer than 100 participants. Section 104(a)(3) authorizes the 
    Secretary to exempt any welfare plan from all or part of the reporting 
    and disclosure requirements of Title I of ERISA or to provide 
    simplified reporting and disclosure, if the Secretary finds that such 
    requirements are inappropriate as applied to such plans. Section 110 
    permits the Secretary to prescribe for pension plans alternative 
    methods of complying with any of the reporting and disclosure 
    requirements if the Secretary finds that: (1) the use of the 
    alternative method is consistent with the purposes of ERISA and it 
    provides adequate disclosure to plan participants and beneficiaries and 
    to the Secretary; (2) application of the statutory reporting and 
    disclosure requirements would increase costs to the plan or impose 
    unreasonable administrative burdens with respect to the operation of 
    the plan; and (3) the application of the statutory reporting and 
    disclosure requirements would be adverse to the interests of plan 
    participants in the aggregate.
        For purposes of Title I of ERISA, the filing of a completed Form 
    5500 (including any required statements, schedules, and IQPA report) 
    generally constitutes compliance with the limited exemption and 
    alternative method of compliance in 29 CFR 2520.103-1(b). As indicated 
    in the preamble to the notice of proposed forms revisions, the 
    Department stated that the findings required under ERISA sections 
    104(a)(3) and 110 relating to the use of the Form 5500, as revised, as 
    an alternative method of compliance and limited exemption from the 
    reporting and disclosure requirements of part 1 of Title I of ERISA 
    would be separately addressed as part of the rulemaking that would 
    amend the reporting regulations necessary to implement the new Form 
    5500 Series.
    
    1. General Findings
    
        As reflected in the revisions to the Form 5500 Series and the 
    amendments proposed herein, a number of changes are being proposed 
    which affect the information required to be reported and disclosed on 
    the Form 5500 Series. The Department, in the proposed amendments, has 
    attempted to balance the needs of participants, beneficiaries and the 
    Department to obtain
    
    [[Page 68376]]
    
    information necessary to protect ERISA rights and interests with the 
    needs of administrators to minimize costs attendant with the reporting 
    of information to the federal government. In view of these changes, the 
    Department proposes to make the following findings under sections 
    104(a)(3) and 110 of the Act with regard to the utilization of the 
    revised Form 5500 (and revised statements and schedules required to be 
    attached to the Form 5500) as an alternative method of compliance and 
    limited exemption pursuant to 29 CFR 2520.103-1(b).
        The use of the revised Form 5500 as an alternative method of 
    compliance is consistent with the purposes of Title I of ERISA and 
    provides adequate disclosure to participants and beneficiaries and 
    adequate reporting to the Secretary. While the information required to 
    be reported on or in connection with the revised Form 5500 deviates, in 
    some respects, from that delineated in section 103 of the Act, the 
    information essential to ensuring adequate disclosure and reporting 
    under Title I of ERISA is required to be included on or as part of the 
    Form 5500, as revised.
        The use of Form 5500 as an alternative method of compliance 
    relieves plans subject to the annual reporting requirements from 
    increased costs and unreasonable administrative burdens by providing a 
    standardized format which facilitates reporting, eliminates duplicative 
    reporting requirements, and simplifies the content of the annual report 
    in general. The Form 5500, as revised, is intended to further reduce 
    the administrative burdens and costs attributable to compliance with 
    the annual reporting requirements.
        Taking into account the above, the Department has determined that 
    application of the statutory annual reporting and disclosure 
    requirements without the availability of the Form 5500 would be adverse 
    to the interests of participants in the aggregate. The revised Form 
    5500 provides for the reporting and disclosure of basic financial and 
    other plan information described in section 103 in a uniform, 
    efficient, and understandable manner, thereby facilitating the 
    disclosure of such information to plan participants.
        Finally, the Department has determined under section 104(a)(3) that 
    a strict application of the statutory reporting requirements, without 
    taking into account the proposed revisions to the Form 5500, would be 
    inappropriate in the context of welfare plans for the reasons discussed 
    in this preamble and the preamble to the notice announcing the proposed 
    forms revisions.
    
    2. Special Findings
    
    (a) Schedule A (Insurance Information)
        Schedule A must be attached to the annual report if any pension or 
    welfare benefits under any ERISA covered plan are provided by, or if 
    the plan holds any investment contracts with, an insurance company or 
    other similar organization. Although most of the Schedule A data has 
    been retained substantially unchanged, certain changes were made to the 
    Schedule A to more closely conform the Schedule A to recent accounting 
    industry changes on ``current value'' financial reporting of 
    investment-type contracts with insurance companies,6 and to 
    collect: (i) better identifying information on the type of insurance 
    contracts and type of insured benefits being reported and (ii) the 
    insurer's employer identification number and National Association of 
    Insurance Commissioners' (NAIC) code. In general, under the current 
    Form 5500 Series, the financial reporting required for insurance 
    products is not identical to the reporting for other financial 
    products.7 In the interest of the efficient administration 
    of ERISA, the Department has attempted to align the reporting and 
    disclosure requirements, where possible and to the extent consistent 
    with the best interests of plan participants, with generally accepted 
    accounting principles (GAAP). The Schedule A changes proposed by the 
    Department are intended to be consistent with the Financial Accounting 
    Standards Board (FASB) Statement of Financial Accounting Standards No. 
    110 (FAS 110) and No. 126 (FAS 126) and American Institute of Certified 
    Public Accountants Statement of Position 94-4 (SOP 94-4), which 
    generally require the disclosure of the fair value of investment 
    contracts with insurance companies (except for certain investment 
    contracts held by defined benefit pension plans and ``fully benefit 
    responsive'' contracts held by defined contribution pension and welfare 
    plans with assets of $100 million or less). Because it is the 
    Department's view that the Schedule A reporting requirements are 
    equally important for small as well as large plans, the proposal would 
    not provide different Schedule A reporting standards depending on the 
    size of the plan. The Department also believes that the additional 
    information being required to identify the type of insurance product 
    purchased and NAIC code and EIN of the insurance company (or similar 
    organization) from which the product was sold are helpful to the 
    Department being able to accomplish its oversight responsibilities, and 
    will not be burdensome to plans inasmuch as this information should be 
    readily available.
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        \6\ ERISA Sec. 3(26) defines ``current value'' as fair market 
    value where available and otherwise fair value as determined in good 
    faith by a trustee or named fiduciary pursuant to the terms of the 
    plan and in accordance with the regulations of the Secretary, 
    assuming an orderly liquidation at the time of such determination.
        \7\ See, for example, the instructions for line 31c(16) of the 
    1997 Form 5500.
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    (b) Schedule C (Service Provider Information)
        Schedule C must be attached to the Form 5500 filed by large plan 
    filers if any person who rendered services to the plan received 
    directly or indirectly $5,000 or more in compensation from the plan 
    during the plan year. The major changes to the Schedule C involve 
    eliminating the requirement to annually identify plan trustees, 
    limiting the current requirement to explain service provider 
    terminations to terminations of accountants and enrolled actuaries, and 
    limiting the number of plan service providers required to be reported 
    to the forty top paid service providers at or above the $5,000 
    threshold. The Department notes that trustee and plan administrator 
    information already must be disclosed in the summary plan description 
    (SPD), and changes in trustees and plan administrators must be 
    disclosed in a summary of material modification (SMM). SPDs and SMMs 
    must be furnished automatically, whereas the Form 5500 is required to 
    be disclosed only on request. Further, to the extent a service provider 
    receives $5,000 or more in compensation from the plan, comparing the 
    list of service providers on Schedule Cs from year to year will allow a 
    participant or beneficiary to determine whether a particular service 
    provider (such as an investment manager, trustee, or custodian) was 
    terminated. Similarly, comparing annual Schedule A filings will provide 
    information on changes in insurers. With respect to limiting of 
    Schedule C list of service providers to the forty top paid providers 
    receiving $5,000 or more in compensation, only approximately 100 
    employee benefit plans filing the 1994 Form 5500 listed more than 40 
    service providers on their Schedule Cs. Those 100 filings constituted 
    less than one percent of the Form 5500 filings received. These Schedule 
    C changes will not, in the Department's view, result in inadequate 
    disclosure to participants and beneficiaries in large plans. Because 
    Schedule C is not required to be filed by small plans, the Schedule C 
    changes
    
    [[Page 68377]]
    
    described herein would not affect the annual reports of those plans.
    (c) Schedule D (Direct Filing Entity/Participating Plan Schedule)
        As indicated previously, the new DFE reporting rules were developed 
    in an effort to improve the reporting requirements for plans 
    participating in CCTs, PSAs, master trusts, 103-12 IEs and GIAs. With 
    the exception for small plans of the Schedule D requirement to report 
    year-end dollar value of interests in CCTs, PSAs, master trusts and 
    103-12 IEs, substantially all of the information that would be required 
    to be reported by employee benefit plans under the new DFE reporting 
    regime is currently required to be reported. Compare the new Form 5500 
    Series with the 1997 Form 5500 and Form 5500-C/R instructions for line 
    6e and page 4 instructions for additional information that must be 
    reported for plans participating in CCTs, PSAs, master trusts, 103-12 
    IEs, and group insurance arrangements. Similarly, substantially all of 
    the information that would be required to be reported by DFEs is 
    currently required to be filed by CCTs, PSAs, MTIAs, 103-12IEs and 
    GIAs. Compare the new Form 5500 Series with the 1997 Form 5500 and Form 
    5500-C/R page 6 instructions on filing requirements for CCTs, PSAs, 
    master trusts and 103-12 IEs, and the Form 5500 line 1 instructions for 
    GIAs.8 Thus, the Department believes that the major change 
    in reporting with respect to DFEs is that information must be reported 
    in a standardized format using the Form 5500 and associated schedules. 
    The Department does not believe the proposed new DFE rules should 
    result in material cost increases or administrative burdens for plans. 
    Further, direct reporting by CCTs, PSAs, 103-12 IEs and GIAs continues 
    to be optional. To the extent there are cost or burden increases being 
    passed through to the plan by the entity, plans can evaluate those 
    annual reporting implications when deciding whether to participate in a 
    CCT, PSA, 103-12 IE or GIA. The information that is available to be 
    disclosed to participants and beneficiaries under the current annual 
    reporting regime would not be reduced under the proposed forms 
    revision. Finally, as indicated previously, continuation of the current 
    rules would result in inadequate reporting to the Department, would 
    mean that the Department would continue to be unable to correlate and 
    effectively use the data regarding the more than $1 trillion in plan 
    assets invested by plans in DFEs, and, therefore, would be adverse to 
    the interests of participants and beneficiaries in the aggregate.
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        \8\ In the case of GIAs, the current rules require use of a Form 
    5500. For master trusts and 103-12 IEs, the Form 5500 instructions 
    already require the filer either use the Form 5500 and schedules or 
    report information in the same format using the same categories as 
    those specified in the Form 5500. In the case of CCTs and PSAs, the 
    Department does not believe imposing similar formatting requirements 
    should involve any significant additional burden. The Department 
    also believes that there will be minimal additional burden in 
    requiring CCTs and PSAs that elect to file as a DFE to report income 
    and expenses on Schedule H (Part II).
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    (d) Schedule of Reportable Transactions and Schedules of Assets Held 
    For Investment
        With regard to exclusion of certain participant directed 
    transactions under an individual account plan from the schedule of 
    reportable transactions, and the deletion of the requirement to include 
    historical cost information in the schedules of assets held for 
    investment on those transactions, the Department believes, on the basis 
    of its enforcement experience, that the revised schedules will still 
    result in adequate reporting to the Department and will not hamper its 
    ability to identify fiduciary violations. The underlying purpose for 
    the schedule of reportable transactions is to identify significant 
    transactions that may reveal fiduciary misconduct. In general, 
    individualized information on participant directed transactions is not 
    especially relevant to that purpose. Similarly, historical cost on the 
    schedules of assets held for investment is intended to provide 
    individualized information on the investment gain/loss performance of 
    the specific assets or classes of assets. The plan's aggregate gain or 
    loss on a class of assets does not provide meaningful information on 
    the gain or loss to a particular participant's account resulting from 
    individually directed transactions. For those reasons, the Department 
    does not believe having this information on the annual report is useful 
    in targeting its enforcement cases, but including this participant 
    directed transaction information in these schedules will result in 
    additional costs and administrative burdens to plans. In light of the 
    purposes underlying the reportable transaction schedule and the 
    historical cost requirement, the Department believes that these 
    schedules will still provide adequate disclosure to plan participants 
    and beneficiaries.
    
    Other Supplementary Information
    
    Regulatory Flexibility Act
    
        The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) imposes 
    certain requirements with respect to Federal rules that are subject to 
    the notice and comment requirements of section 553(b) of the 
    Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are 
    likely to have a significant economic impact on a substantial number of 
    small entities. If an agency determines that a proposed rule is likely 
    to have a significant economic impact on a substantial number of small 
    entities, section 603 of the RFA requires that the agency present an 
    initial regulatory flexibility analysis at the time of the publication 
    of the notice of proposed rulemaking describing the impact of the rule 
    on small entities, and seeking public comment on such impact. Small 
    entities include small businesses, organizations, and governmental 
    jurisdictions.
        For purposes of analysis under the RFA, PWBA proposes to continue 
    to consider a small entity to be an employee benefit plan with fewer 
    than 100 participants. The basis of this definition is found in section 
    104(a)(2) of the Employee Retirement Income Security Act of 1974 
    (ERISA), which permits the Secretary of Labor to prescribe simplified 
    annual reports for pension plans which cover less than 100 
    participants. Under section 104(a)(3), the Secretary may also provide 
    for simplified annual reporting and disclosure if the statutory 
    requirements of part 1 of Title I of ERISA would otherwise be 
    inappropriate for welfare benefit plans. Pursuant to the authority of 
    ERISA section 104(a)(3), the Department has previously issued at 
    Secs. 2520.104-20, 2520.104-21, 2520.104-41, 2520.104-46 and 2520.104b-
    10 certain simplified reporting provisions and limited exemptions from 
    reporting and disclosure requirements for small plans, including 
    unfunded or insured welfare plans covering fewer than 100 participants 
    and which satisfy certain other requirements.
        Further, while some large employers may have small plans, in 
    general, most small plans are maintained by small employers. Thus, PWBA 
    believes that assessing the impact of this proposed rule on small plans 
    is an appropriate substitute for evaluating the effect on small 
    entities. The definition of small entity considered appropriate for 
    this purpose differs, however, from a definition of small business 
    which is based on size standards promulgated by the Small Business 
    Administration (SBA) (13 CFR 121.201) pursuant to the Small Business 
    Act (15 U.S.C. 631 et seq.). PWBA, therefore, requests comments on the 
    appropriateness of the size standard used in evaluating the
    
    [[Page 68378]]
    
    impact of this proposed rule on small entities. PWBA has consulted with 
    the SBA Office of Advocacy concerning use of this participant count 
    standard for RFA purposes. See 13 CFR Sec. 121.902(b)(4).
        On this basis, however, PWBA has preliminarily determined that this 
    rule will not have a significant economic impact on a substantial 
    number of small entities. In support of this determination, and in an 
    effort to provide a sound basis for this conclusion, although not 
    required, PWBA considers the elements of an initial regulatory 
    flexibility analysis to be as follows:
        (1) The Department is promulgating this proposed rule to amend the 
    regulations relating to the annual reporting and disclosure 
    requirements of section 103 of ERISA to conform existing regulations to 
    revisions to the annual return/report forms (Form 5500 Series).
        (2) Section 103 of ERISA requires every employee benefit plan 
    covered under part 1 of Title I of ERISA to publish and file an annual 
    report concerning, among other things, the financial conditions and 
    operations of the plan. Section 109 of ERISA authorizes the Secretary 
    to prescribe forms for the reporting of information that is required to 
    be submitted as part of the annual report.
        The Secretary may also prescribe alternative methods of complying 
    with reporting and disclosure requirements if the Secretary finds that: 
    the use of the alternative method is consistent with the purposes of 
    ERISA and provides adequate disclosure to participants and 
    beneficiaries and the Secretary, application of the statutory reporting 
    and disclosure requirements would increase costs to the plan or impose 
    unreasonable administrative burdens with respect to the operation of 
    the plan, and the application of the statutory reporting and disclosure 
    requirements would be adverse to the interests of plan participants in 
    the aggregate.
        The Department proposes to find that use of the Form 5500 as 
    revised constitutes an alternative method of compliance which is 
    consistent with these conditions. Generally, the Department believes 
    that use of the revised Form 5500 would relieve plans of all sizes from 
    increased costs and unreasonable burdens by providing a standard format 
    which facilitates reporting required by the statute, eliminates 
    duplicative reporting requirements, and streamlines the content of the 
    annual report.
        (3) The Department, in conjunction with the IRS and PBGC, proposed 
    a number of changes to the existing Form 5500 Series in an effort to 
    reduce paperwork burdens and costs and enhance the utility of the 
    annual report forms generally. The regulatory amendments proposed 
    herein are designed to ease the burden of plans, both large and small, 
    in complying with the reporting and disclosure requirements of ERISA. 
    The regulatory amendments proposed do not directly affect the number of 
    small plans required to comply with the annual reporting requirements 
    or change existing small plan limited exemptions from reporting 
    requirements. Thus, for example, under the proposal small plans would 
    continue to be exempt from reporting service provider information and 
    supplying the report of an independent qualified public accountant. In 
    addition, the conforming rules as proposed generally preserve the more 
    limited reporting for small plans which is presently in effect.
        (4) Based on information available from 1993 Form 5500 filings, the 
    Department estimates that there are approximately 6.7 million small 
    pension and welfare benefit plans that are covered under Title I of 
    ERISA. About 6 million of these plans with fewer than 100 participants 
    are insured or unfunded welfare benefit plans, which are currently 
    exempt from Form 5500 filing requirements and will continue to be 
    exempt under the proposed revisions to the Form 5500 Series. The 
    proposed rules therefore, will have no impact on these small plans. 
    Thus, approximately 700,000 small plans, or about 9% of all small 
    plans, are required to file the existing Form 5500 Series, and will be 
    impacted by the proposed rules conforming existing regulations to the 
    revised Form 5500 Series.
        (5) The revisions to the Form 5500 Series are estimated to impose 
    no additional filing burden on small plans than that of the current 
    forms over the existing three-year filing cycle. In fact, a comparison 
    of the burden associated with the existing reporting requirements with 
    the revisions to the Form 5500 Series indicates an overall reduction in 
    the burden for small plans based on the number of data elements 
    required to be reported for each.
        Under current filing requirements, small plans must file a Form 
    5500-C at least once every three years and file the less detailed Form 
    5500-R in the two intervening years. While the ratio of Form 5500-R to 
    Form 5500-C filings varies from year-to-year, on average about 55% of 
    all annual small plan filings are on the Form 5500-R and 45% are on the 
    Form 5500-C because many small plans annually file the Form 5500-C.
        The burden associated with completion of the Form 5500 Series can 
    be divided into two steps: reading the instructions and completing the 
    individual line items. The revised Form 5500 Series requires small 
    plans to provide more line item information than the Form 5500-R, but 
    less information than the Form 5500-C. The burden associated with 
    completion of all required items on the revised form is estimated to be 
    5% greater than the Form 5500-R and 32% less than the Form 5500-C. 
    Based on a ratio of the Form 5500-R to Form 5500-C filings of 55% to 
    45%, the proposed revisions to the Form 5500 Series are estimated to 
    result in an average reduction of 15% in the burden associated with 
    completion of the revised form items.
        The more efficient format of the revisions to the Form 5500 Series, 
    with most of the information broken out into separate schedules, should 
    also reduce the time required to read the instructions because filers 
    will be able to skip over the instructions for schedules that do not 
    apply to them. It is, however, expected that all filers will require 
    additional time in the initial year of filing to thoroughly read the 
    instructions and to familiarize themselves with the revised Form 5500 
    Series. It is, therefore, assumed in the initial year of filing the 
    revised Form 5500 Series that additional time required for instruction 
    reading will result in an overall burden (including the reduction for 
    line items) that on average will be 26% greater than the annual burden 
    for completion of the Form 5500-C/R. It is assumed that most filers 
    will not require this additional time in subsequent years, and that the 
    average reduction will be the 15% based on the reduction in the number 
    of line items.
        When the higher burden associated with instruction reading is pro-
    rated over a three-year period (corresponding with the existing three-
    year cycle of Form 5500-C and Form 5500-R filings) the annual burden 
    imposed by the proposed revisions to the Form 5500 Series for the 
    typical filer is estimated to be 2% less than that of the Form 5500-C/
    R. When the initial year burden is pro-rated over a 10-year period, the 
    proposed revision to the Form 5500 Series is estimated to result in an 
    11% reduction in the annual burden for small plans.
        Entry of the information required by the Form 5500-C/R is made from 
    financial and other records maintained
    
    [[Page 68379]]
    
    by plans. Sound accounting and general business practices would 
    generally dictate that all or most of these records be maintained even 
    in the absence of a reporting requirement. To the extent that specific 
    records are kept only for reporting purposes it is assumed that small 
    plans currently maintain on an annual basis all records necessary to 
    complete the Form 5500-C because of the existing requirement that a 
    Form 5500-C (which requires both beginning and ending year financial 
    data) must be filed at least once every three years. The reduced 
    reporting requirements of the proposed revisions to the Form 5500 
    Series compared to the current Form 5500-C, therefore, should not 
    increase and may potentially reduce the overall recordkeeping burden 
    for small plans.
        Completion of the Form 5500-C/R requires a mixture of professional 
    and clerical skills. It is assumed that this mixture will not change as 
    a result of the revisions to the Form 5500 Series. The cost savings, 
    therefore, should correspond to the savings in burden hours. For 
    sponsors using third-party administrators (TPAs) to complete all or 
    part of the Form 5500 Series, additional costs attributable to 
    instruction reading and understanding the revisions of the Form 5500 
    Series are expected to be negligible. However, any savings in this area 
    for plan sponsors are expected to be offset by additional costs charged 
    by TPAs to modify automated system software to accommodate the proposed 
    revisions to the Form 5500 Series. The elimination of the Form 5500-R 
    may increase burdens for these small filers because under the proposal 
    they will be required to furnish SARs on an annual basis and without 
    the accommodations found in the existing regulations at Sec. 2520.104b-
    10(b). The Department solicits comments from interested parties on this 
    aspect of the proposal.
        (6) No Federal rules have been identified that duplicate, overlap 
    or conflict with the proposed rule.
        (7) No significant alternatives to the proposed rule which would 
    minimize the impact on small entities have been identified, although 
    the review and proposed revision of the Form 5500 Series were 
    undertaken to reduce paperwork burden for all filers while maintaining 
    the more limited reporting for small plans. The Department believes it 
    has minimized the economic impact of the forms revision and conforming 
    rules on small plans to the extent possible while recognizing plan 
    participants' and the Department's need for information to protect 
    participant rights under Title I of ERISA, and needs of other 
    interested parties for timely statistical information on employee 
    benefit plans.
        The Department invites interested persons to submit comments 
    regarding its preliminary determination that the proposal will not have 
    a significant economic impact on a substantial number of small 
    entities. The Department also requests comments from small entities 
    regarding what, if any, special problems they might encounter if the 
    proposal were to be adopted, and what changes, if any, could be made to 
    minimize those problems. To avoid duplication of comments, comments 
    submitted in response to the September 3, 1997 Notice of Proposed 
    Revision of Annual Information Return/Report (62 FR 46556) and the June 
    24, 1998 request for comments will be treated as comments on this 
    Notice of Proposed Rulemaking.
    
    Executive Order 12866 Statement
    
        Under Executive Order 12866, the Department must determine whether 
    the regulatory action is ``significant'' and therefore subject to the 
    requirements of the Executive Order and subject to review by the Office 
    of Management and Budget (OMB). Under section 3(f), the order defines a 
    ``significant regulatory action'' as an action that is likely to result 
    in a rule (1) having an annual effect on the economy of $100 million or 
    more, or adversely and materially affecting a sector of the economy, 
    productivity, competition, jobs, the environment, public health or 
    safety, or State, local or tribal governments or communities (also 
    referred to as ``economically significant''); (2) creating serious 
    inconsistency or otherwise interfering with an action taken or planned 
    by another agency; (3) materially altering the budgetary impacts of 
    entitlement grants, user fees, or loan programs or the rights and 
    obligations of recipients thereof; or (4) raising novel legal or policy 
    issues arising out of legal mandates, the President's priorities, or 
    the principles set forth in the Executive Order.
        Pursuant to the terms of the Executive Order, it has been 
    determined that this regulatory action creates a novel method of 
    statutory compliance consistent with the President's priorities that 
    will reduce paperwork and regulatory compliance burdens on businesses, 
    including small businesses and organizations, and make better use of 
    scarce federal resources, in accord with the mandates of the Paperwork 
    Reduction Act and the President's priorities. Therefore, this notice is 
    ``significant'' and subject to OMB review under Executive Order 
    12866(3)(f)(4).
        Under Part 1 of Title I ERISA, administrators of pension and 
    welfare benefit plans (collectively referred to as employee benefit 
    plans) are required to file annual returns/reports concerning their 
    financial condition and operations. ERISA section 104(a)(2)(A) 
    authorizes the Secretary of Labor to prescribe by regulation simplified 
    reporting for pension plans that cover fewer than 100 participants. 
    Section 104(a)(3) authorizes that Secretary to exempt any welfare plan 
    from all or part of the reporting and disclosure requirements of Title 
    I or to provide simplified reporting and disclosure if the Secretary 
    finds that such requirements are inappropriate as applied to such 
    plans. Section 110 permits the Secretary to prescribe for pension plans 
    alternative methods of complying with any of the reporting and 
    disclosure requirements if the Secretary finds that: (1) the use of the 
    alternative method is consistent with the purposes of ERISA and 
    provides adequate disclosure to plan participants and beneficiaries and 
    to the Secretary; (2) application of the statutory reporting and 
    disclosure requirements would increase costs to the plan or impose 
    unreasonable administrative burdens with respect to the operation of 
    the plan; and (3) the application of the statutory reporting and 
    disclosure requirements would be adverse to the interests of plan 
    participants in the aggregate.
        For purposes of Title I of ERISA, the filing of a completed Form 
    5500 (including any required statements, schedules, and report of an 
    independent qualified public accountant) generally constitutes 
    compliance with the limited exemption and alternative method of 
    compliance set forth by regulation in Sec. 2520.103-1(b). As stated in 
    this preamble, the Department is proposing to make the determination 
    that application of the statutory annual reporting and disclosure 
    requirements without the availability of the Form 5500 as revised would 
    be adverse to the interests of participants in the aggregate. The use 
    of the new Form 5500 as an alternative method of compliance would 
    relieve plans subject to the annual reporting requirements from 
    increased costs and unreasonable administrative burdens by providing a 
    standardized format which facilitates reporting, eliminates duplicative 
    reporting requirements, and simplifies the content of the annual report 
    in general.
        The Form 5500 Series serves as the primary source of information 
    concerning the operation, funding, assets and investments of pension 
    and other employee benefit plans. The Form 5500 is not only an 
    important disclosure
    
    [[Page 68380]]
    
    document for participants and beneficiaries, but also a compliance and 
    research tool for the Department and a source of information and data 
    for use by other federal agencies, Congress, and the private sector in 
    assessing employee benefit, tax, and economic trends and policies.
        The Pension and Welfare Benefits Administration, the Internal 
    Revenue Service, and the Pension Benefit Guaranty Corporation have 
    conducted an extensive review of the Form 5500 Series in an effort to 
    streamline the information required to be reported and the methods by 
    which the information is filed and processed. A proposed revision of 
    the Form 5500 Series was published in the Federal Register on September 
    3, 1997 (62 FR 46556). The proposal was designed to lower the 
    administrative burdens and costs incurred by the more than 900,000 
    employee benefit plans that annually file the Form 5500 Series. A 
    public hearing on the proposed revision was held on November 17, 1997, 
    and written comments on the proposal were received until the public 
    record was closed on December 3, 1997. On February 4, 1998, the 
    Department announced that, in response to public comments, the 
    implementation of the new Form 5500 would be delayed until the 1999 
    plan year. A revised Form 5500 was submitted to the Office of 
    Management and Budget (OMB) for approval under the Paperwork Reduction 
    Act and a Notice was published in the Federal Register on June 24, 1998 
    (63 FR 34493) which provided a 30-day opportunity to submit comments to 
    OMB on the new Form 5500 submission. The new Form 5500 was also made 
    available on PWBA's internet site (http://www.dol.gov/dol/pwba) as part 
    of the Agencies' commitment to make information about the new forms 
    available to plans and their service providers at the earliest 
    opportunity. Following its Paperwork Reduction Act review, OMB gave 
    conditional Paperwork Reduction Act approval to the new Form 5500 on 
    August 26, 1998. As discussed in paragraph A (Background) of this 
    preamble, the approval is conditioned, in part, on the Agencies 
    soliciting public comments on the computer scannable version of the new 
    form after its development and making minor adjustments to the form. 
    The final computer scannable version of the forms, which must be used 
    for 1999 plan years, will be published in the Federal Register 
    following the Agencies' evaluation of public comments. The amendments 
    proposed in this Notice of Proposed Rulemaking are intended to make 
    technical changes to the Department's reporting regulations, and 
    conform them to requirements of the Form 5500 Series, as revised.
        Because information reported to the Department is also subject to 
    ERISA's disclosure provisions, the Department in this proposal has 
    attempted to balance the needs of participants, beneficiaries and the 
    Department to obtain information necessary to protect ERISA rights and 
    interests with the needs of administrators to minimize costs attendant 
    with the reporting of information to the federal government.
    
    Costs
    
        The cost and burden associated with the annual reporting 
    requirement for any given plan will vary according to a limited number 
    of factors, including whether and to what extent underlying records are 
    maintained electronically or manually, whether and to what extent the 
    Form 5500 is reproduced electronically or completed manually, and 
    whether and to what extent these activities are performed in-house by 
    the plan sponsor or purchased from service providers. However, little 
    information is available with respect to the actual distribution of 
    plans within these ranges. Consideration of the potential cost impact 
    of the proposed revisions to the Form 5500 Series results, therefore, 
    in estimates which are based on a number of assumptions concerning the 
    costs of automated systems and system modifications, the numbers and 
    types of users of automated systems, and the numbers and types of users 
    of the services of third-party administrators.
        The Department believes that the revisions to the Form 5500 will 
    generally impose the greatest additional cost on plan administrators 
    whose systems for storing and producing Form 5500 data are most 
    completely automated, and the least additional cost on those least 
    automated. For this reason, a distinction is made here between ``full-
    service automated systems'' and ``basic automated systems.'' A full-
    service automated system is considered to be a sophisticated system 
    which stores and manipulates the data needed for completion of the 
    form, and which also summarizes and prints the data in the Form 5500 
    format. A basic automated system generally stores financial data, flags 
    the types of transactions required to be reported on the Form 5500, and 
    facilitates completion of the form, but does not configure output in 
    Form 5500 format.
        Both types of systems are expected to require certain modifications 
    in their data storage features, due to the proposed changes in the 
    groupings of financial data on the form. However, while the output of 
    basic systems may be expected to require some revision to facilitate 
    efficient completion of the form, reconfiguration of the existing 
    output of full-service systems to conform with the revised Form 5500 
    format is considered likely to require substantial system 
    modifications.
        For purposes of this discussion of potential costs, it has been 
    assumed that the Form 5500 reproduction capability represents one-half 
    of the cost of the complete system, and that basic automated systems 
    sell for approximately one-half of the cost of full-service automated 
    systems. Modification (in contrast to initial purchase) of the output 
    capability of a full-service system is assumed to equal one-third of 
    the cost of the original system. On this basis, the full-service system 
    cost can be adjusted by a factor of .165 to arrive at the cost increase 
    attributable to modifying output capability. Several other assumptions 
    underlying the costs estimated here are specifically identified where 
    applicable.
        The Department believes that the primary purchasers of full-service 
    automated systems are third-party administrators (TPAs) serving 
    substantial numbers of clients, and banks and trust companies managing 
    master trust investment accounts (MTIAs). Such full-service systems 
    have been developed by only a small number of vendors. The known cost 
    of one such system consists of an initial fee of $11,000 and an 
    additional annual fee of $2,000. Given the stated assumptions 
    concerning the costs for the output capability and the modification of 
    output capability as percentages of original cost, the cost of system 
    redesign passed along from vendors to TPA purchasers is estimated to 
    amount to an initial fee of $1,815 plus an increased annual fee of 
    $333. Assuming a ten-year redesign cycle, and ten-year depreciation of 
    the initial fee increase, the annual increase would amount to $182 plus 
    the $333 annual fee, or $515.
        This annual increase may be multiplied by the number of TPA 
    purchasers which are assumed to be of sufficient size to warrant the 
    purchase and modification of these systems to arrive at a total annual 
    cost. Fifty-five TPAs with at least 50 client plans were identified for 
    this purpose by tabulating the number of unique employer identification 
    numbers for plan administrators among 1993 annual reports in which the 
    plan administrator
    
    [[Page 68381]]
    
    was different from the plan sponsor. The resulting estimate of the 
    annual cost of system modifications for TPAs using full-service systems 
    is $28,325.
        Banks and trust companies providing master trust services to plans 
    are also assumed to purchase or develop in-house automated systems to 
    both complete Direct Filing Entity (DFE) reports filed with the 
    Department and to provide plan financial data to plan sponsors filing 
    Form 5500 reports. Data from 1993 Form 5500 filings indicate a total of 
    160 such banks and trust companies managing MTIAs for approximately 
    24,000 plans filing Form 5500 reports completed by the plan sponsor. 
    Assuming the same $515 annual cost increase for managers of MTIAs, 
    their modification cost is estimated at $82,400.
        Users of basic automated systems are believed to include smaller 
    TPAs and large plan sponsors that complete Form 5500 in-house. It is 
    assumed that the TPAs and plan sponsors using these systems would 
    either purchase redesigned software from vendors or incur direct costs 
    to modify software developed in-house. Modification costs would likely 
    vary, but are expected to be roughly equivalent to the cost to the 
    Department of modifying the internal system which configures balance 
    sheet and income statement data in Form 5500 format. This cost is 
    estimated to be equal to 2.7% of the initial cost of the system.
        Based on the known cost of a full-service automated system, and the 
    assumption that basic systems are available for one-half the cost of 
    full-service systems, the basic system might be purchased for $5,500 
    plus a $1,000 annual fee. A 2.7% increase in the cost attributable to 
    changes in the financial schedule would result in a fee increase of 
    $148.50 plus $27 per year. Depreciation of the initial fee over a ten-
    year period would result in an annual cost of about $42.
        Because the number of plan sponsors which rely, either directly or 
    indirectly, on a basic automated system is unknown, certain assumptions 
    are made for the purpose of estimating a cost of modifying basic 
    automated systems. It is assumed that two principal types of filers 
    will either purchase such systems from vendors or pay an equivalent 
    cost for modifying systems developed in-house: small TPAs completing 
    Form 5500 in their clients' behalf, and sponsors of self-insured or 
    partially insured, partially self-insured plans with at least 100 
    participants which complete the forms in-house. Small plan filers which 
    complete the forms in-house and large fully-insured filers are excluded 
    from this estimate because it is believed that these filers will not 
    rely on automated systems.
        The number of plans which have Form 5500 completed by a TPA is 
    derived from the review of 1993 Form 5500 data where the plan 
    administrator differs from the plan sponsor. The total count of such 
    plans in 1993 was 28,900. Subtracting the 18,300 plans previously 
    considered as clients of large TPAs leaves 10,600 plans serviced by 
    small TPAs. Assuming an average client base of 20 plans for these 
    smaller TPAs results in an estimate of approximately 530 TPAs. Given 
    the assumption of $42 for the annual increase in costs, these TPAs 
    would incur an estimated cost increase of $22,180 for system 
    modifications.
        The number of 1993 plan filings which did not show a different plan 
    sponsor and plan administrator, which have at least 100 participants, 
    and which are not fully-insured was 45,500. Of these, 37,000 plans were 
    sponsored by sponsors of single plans; 8,500 sponsored multiple plans, 
    totaling 30,000 plans. It is assumed that sponsors of multiple plans 
    require systems which handle multiple records, and that systems which 
    do not require multiple records will be less costly to modify. The 
    8,500 sponsors are expected to incur a $42 annual cost for modifying 
    multiple-plan systems, for a total of $357,000. The 37,000 plans which 
    do not require multiple-record capability are expected to incur one-
    half of the annual cost of multiple-record system modification, or $21 
    per plan, for a total of $777,000.
        As summarized below, the annual cost estimated on the basis of the 
    stated assumptions to be incurred as a result of modification of 
    automated systems to produce or complete Form 5500 is $1.3 million.
    
               Estimated Number of Form 5500 Series Filings Completed With Assistance of Automated Systems
    ----------------------------------------------------------------------------------------------------------------
                                         Number of      Annual per     Total annual    Ten-year cost  Total ten-year
                                           plans        plan costs         costs         per plan          costs
    ----------------------------------------------------------------------------------------------------------------
    Large TPAs (full service
     systems).......................          18,300           $1.55         $28,325          $15.50        $283,250
    MTIAs (full service systems)....          24,000            3.43          82,400           34.30         823,200
    Small TPAs (basic systems)......          10,600            2.09          22,180           20.90         221,800
    Large Plans Administered In-
     House--One Plan................          37,000           21.00         777,000          210.00       7,770,000
    Large Plans Administered In-
     House--Multiple Plans..........          30,000           11.90         357,000          119.00       3,570,000
                                     -------------------------------------------------------------------------------
          Total.....................         119,900           10.12       1,266,905          101.20      12,668,250
    ----------------------------------------------------------------------------------------------------------------
    
        Further, it is estimated that other resources will be required in 
    the initial year of implementation of the revised forms. As a result of 
    the change in information required to be reported by plans with fewer 
    than 100 participants, average time for small plans to complete the 
    Department's data elements is assumed to increase from 51.4 minutes for 
    existing Form 5500-C filers and 33.6 minutes for Form 5500-R filers (an 
    annual average of 41.6 minutes over the existing three-year filing 
    cycle for plans with fewer than 100 participants which are not 
    otherwise exempt from filing requirements) to 52.4 minutes for the 
    revised form. This increase in the initial year is based on the 
    assumption that filers will require additional time for reviewing 
    instructions to the revised form. The time required for small plan 
    filers to complete the Form 5500 is estimated to be 35.2 minutes in 
    subsequent years.
        Additional time will also be required in the year of implementation 
    of the revised form for DFEs such as common/collective trusts, pooled 
    separate accounts, master trusts, 103-12 investment entities, and group 
    insurance arrangements to complete the Form 5500 Series in the 
    standardized format. Existing rules specify the types of information to 
    be filed by DFEs or reported to plan sponsors, but do not require the 
    use of a standard format for reporting purposes. It is estimated that 
    DFEs will expend approximately 8,429 hours per year in preparing and 
    filing plan and asset information in the standardized format and 
    providing certifications to participating plans concerning whether or 
    not they will file directly with the Department. Corresponding costs 
    may be passed on
    
    [[Page 68382]]
    
    to plans which participate in a DFE in the form of increased fees.
    
    Benefits
    
        The revision of the Form 5500 Series was undertaken in an effort to 
    simplify and streamline the annual return/report, and reduce the 
    reporting burden on filers. The new form is intended to reduce the 
    total amount of information to be reported by many plans by eliminating 
    information that is not useful for enforcement, research, or other 
    statutorily mandated missions. The revisions are also designed to 
    eliminate redundant items and revise questions that have historically 
    produced filing errors. The revisions also generally require welfare 
    plans to complete fewer items than pension plans, and small plans to 
    complete fewer items than large plans.
        The revisions eliminate the Form 5500-C/R, but maintain limited 
    financial reporting similar to the existing Form 5500-R for small 
    plans. Plans currently exempt from filing a return/report (such as 
    certain small unfunded/insured welfare plans and certain SEPs), or 
    those eligible for limited reporting options (such as certain Code 
    section 403(b) plans) will continue to be eligible for that annual 
    reporting relief.
        The revisions restructure the Form 5500 along the lines familiar to 
    individual and corporate taxpayers--a simple one-page main form with 
    basic information necessary to identify the plan for which the report 
    is filed, along with a checklist of the schedules being filed which are 
    applicable to the filer's plan type. The structure should aid filers by 
    allowing them to assemble and file a return that is customized to their 
    plan. Instructions to the form have been reorganized with the intention 
    that they be easier to use due to grouping on the basis of the 
    schedules to be attached. The revised instructions will allow filers to 
    go directly to the instructions which apply to them, and avoid those 
    which do not apply.
        Based on the elimination of certain information and reformatting of 
    the Form 5500 Series, the burden of preparing and distributing the form 
    is estimated to be reduced by between 12% and 13% per year over the 
    ten-year life of the form. Assuming an hourly cost ranging from $20 to 
    $25 per hour for preparation of the form, the burden hour reduction is 
    expected to result in a reduction in filer costs which ranges from $1.7 
    million to $2.1 million per year over the life of the form.
        The revisions also establish the Form 5500 as the standardized 
    reporting format for DFEs. The DFE reporting rules were intended to 
    simplify the annual reporting requirements for participating plans and 
    eliminate confusion regarding the reporting obligations of plans which 
    participate in DFEs. Standardization of the information reported by 
    DFEs is expected to allow the Department to correlate and effectively 
    use the data for enforcement and research purposes with respect to the 
    over $1 trillion in plan assets held by DFEs.
        The revisions are also designed to support and facilitate the 
    processing system currently in developmental stages to simplify and 
    expedite the processing of the Form 5500 Series. This new system is 
    planned to rely on electronic filing with automatic error detection, 
    and optical scanning technology and optical character recognition to 
    computerize the paper forms, resulting in reductions in government 
    processing costs. Implementation of the single form with multiple 
    schedules is also expected to reduce the government's costs to process 
    the forms, due to an overall reduction in the number of pages on which 
    the information will be submitted.
        The Department believes that the current action conforming rules 
    related to annual reporting obligations for employee benefit plan 
    administrators to the new Form 5500 Series is consistent with the 
    principles set forth in the Executive Order in that it will reduce 
    costs and paperwork burden over the life of the forms while enhancing 
    the ability to protect benefits with timely and accurate information.
    
    Paperwork Reduction Act Statement
    
        The Agencies, as part of their continuing efforts to reduce 
    paperwork and respondent burden, invite the general public and Federal 
    agencies to comment on proposed and/or continuing collections of 
    information in accordance with the Paperwork Reduction Act of 1995 (PRA 
    95) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested data 
    are provided in the desired format, reporting burden (time and 
    financial resources) is minimized, collection instruments are clearly 
    understood, and the impact of collection requirements on respondents is 
    properly assessed. The Agencies solicited comments on the information 
    collection request (ICR) included in this proposed regulatory action as 
    part of the proposed revision of the Form 5500 Series published in the 
    Federal Register on September 3, 1997 (62 FR 46556). A public hearing 
    on the proposed revision was held on November 17, 1997, and written 
    comments on the proposal were received until the public record was 
    closed on December 3, 1997. The Agencies received public comments 
    stating that, although acknowledging that the forms revisions will 
    reduce plan administration costs, estimates of the time required to 
    collect the information and prepare the forms and related schedules 
    were low resulting in underestimated burden calculations. The Agencies 
    are currently exploring approaches to developing a revised burden 
    estimation methodology in an effort to respond to those concerns. On 
    February 4, 1998, the Department announced that, in response to public 
    comments, the implementation of the new Form 5500 would be delayed 
    until the 1999 plan year. A new and revised Form 5500 was submitted to 
    the Office of Management and Budget (OMB) for approval under the 
    Paperwork Reduction Act which was made available on PWBA's internet 
    site. A Comment Request published in the Federal Register on June 24, 
    1998, 63 FR 34493, provided the public with a 30-day opportunity to 
    submit comments to OMB on the new Form 5500 submission. Following OMB's 
    review, OMB gave conditional Paperwork Reduction Act approval to the 
    new Form 5500 on August 26, 1998. As discussed in paragraph A 
    (Background) of this preamble, the approval is conditioned, in part, on 
    the Agencies soliciting public comments on the computer scannable 
    version of the new form after its development and making minor 
    adjustments to the form. The final computer scannable version of the 
    forms, which will be required to be used for 1999 plan years, will be 
    published in the Federal Register following the Agencies' evaluation of 
    public comments. In order to avoid unnecessary duplication of public 
    comments, the supplementary PRA 95 information published in the 
    September 3, 1997 Notice of Proposed Forms Revisions and the June 24, 
    1998 Comment Request is incorporated herein by this reference in its 
    entirety, and comments submitted in response to these Federal Register 
    publications will be treated as comments on this Notice of Proposed 
    Rulemaking. A copy of the ICR may be obtained by contacting the office 
    listed under the heading ``Addressee For PRA 95 Comments.''
        The Department has submitted a copy of the proposed information 
    collection to the Office of Management and Budget (OMB) in accordance 
    with 44 U.S.C. Sec. 3507(d) of the PRA 95 for its review of its 
    information collections. The Department is particularly interested in 
    comments which:
    
    [[Page 68383]]
    
         Evaluate whether the proposed collection of information is 
    necessary for the proper performance of the functions of the agency, 
    including whether the information will have practical utility;
         Evaluate the accuracy of the agency's estimate of the 
    burden of the proposed collection of information, including the 
    validity of the methodology and assumptions used;
         Enhance the quality, utility, and clarity of the 
    information to be collected; and
         Minimize the burden of the collection of information on 
    those who are to respond, including through the use of appropriate 
    automated, electronic, mechanical, or other technological collection 
    techniques or other forms of information technology, e.g., permitting 
    electronic submission of responses.
        Comments should be sent to the Office of Information and Regulatory 
    Affairs, OMB, Room 10235, New Executive Office Building, Washington, 
    D.C. 20503; Attention: Desk Officer for the Pension and Welfare 
    Benefits Administration. Although comments may be submitted through 
    February 8, 1999, OMB requests that comments be received within 30 days 
    of publication of the Notice of Proposed Rulemaking to ensure their 
    consideration.
        Addressee for PRA 95 Comments: Written comments regarding only PRA 
    95 and the ICR should be sent to Gerald B. Lindrew, U.S. Department of 
    Labor, PWBA/OPR, Room N-5647, 200 Constitution Avenue, N.W., 
    Washington, DC 20210, telephone 202-219-4784 (this is not a toll-free 
    number). Written comments must be submitted on or before February 8, 
    1999, to be assured of consideration.
        I. PRA 95 Background: The Department is proposing to amend its 
    annual reporting regulations to conform them to the Agencies' revision 
    of the Form 5500 Series in a effort to streamline and simplify this 
    annual report.
        II. PRA 95 Current Actions: The amendments contained in this 
    document are necessary to conform the Department's annual reporting 
    regulations to the new Form 5500 Series for which OMB gave conditional 
    Paperwork Reduction Act approval on August 26, 1998. As described in 
    paragraph A of this preamble, the approval is conditioned, in part, on 
    the Agencies soliciting public comments on the computer scannable 
    version of the new form after its development and making minor 
    adjustments to the form. See the Notice of Proposed Forms Revisions 
    published in the Federal Register on September 3, 1997 (62 FR 46556), 
    the Comment Request published in the Federal Register on June 24, 1998 
    (63 FR 34493) and PWBA's internet site for the new Form 5500 that was 
    submitted to OMB for approval under the Paperwork Reduction Act.
        As indicated in paragraphs C.3 and C.4 of this preamble, the 
    proposed amendments would modify the reporting rules for plans 
    investing in CCTs and PSAs, and add a new information collection item 
    with a small additional burden to existing requirements for CCTs and 
    PSAs. Under existing rules, CCTs and PSAs must provide certain 
    information to each participating plan's administrator including (i) a 
    copy of the annual statement of assets and liabilities for its fiscal 
    year that ends with or within the plan year of such plan and (ii) the 
    value of the plan's units of participation. This information must be 
    certified as accurate and complete and must be provided by the CCT and 
    PSA within 120 days after the close of the plan year for each 
    participating plan. A participating plan is required to include with 
    their annual report a copy of the CCT's or PSA's statement of assets 
    and liabilities unless such CCT or PSA files it directly with the 
    Department and certain other conditions are met. In such a case, the 
    CCT or PSA must certify to the plan administrator that a copy of its 
    statement of assets and liabilities has been filed with the Department. 
    A PSA's and CCT's statement of assets and liabilities is not required 
    to be reported in a uniform format or manner. In addition, under the 
    existing rules a participating plan must report the current value of 
    its interest in a CCT or PSA at the beginning and end of its plan year 
    regardless of whether the CCT or PSA files directly with the 
    Department.
        Under the proposal, CCTs and PSAs which elect to file directly with 
    the Department, like other DFEs, must use a standardized form. In the 
    case of a CCT or PSA that intends to file as a DFE, the proposed 
    amendments would require that such CCT or PSA notify its participating 
    plans of its intention to do so. In the case of a CCT or PSA that does 
    not file as a DFE, the proposed amendments would require that such CCT 
    or PSA notify its participating plans of this fact and furnish the 
    information needed about its assets (i.e., break out their interest in 
    the CCT or PSA into general asset categories such as stocks, debt, real 
    estate, etc.) so the participating plan can satisfy its own annual 
    reporting obligations. These notifications must be made within the same 
    time period for transmitting information already required under the 
    existing rules (i.e., 120 days after the close of the plan year for 
    each participating plan).
        The impact of these proposed changes with respect to CCTs and PSAs 
    and plans which participate in these entities has been estimated and 
    included in the total estimated burden for this ICR under PRA 95. The 
    total additional burden imposed by standardization of reporting and 
    modification of the certification requirement for CCTs and PSAs is 
    estimated at 2,725 hours per year. This includes only a nominal 
    adjustment for the change in the certification requirement. The 
    Department believes that the certification will be based on a decision 
    made once per year for each CCT or PSA. CCTs or PSAs that file as a DFE 
    are under current rules required to certify essentially the same 
    substantive information as would be required under the new DFE rules. 
    The requirement to certify that the entity is filing as a DFE within 
    120 days after the end of the participating plans year-ends should be a 
    brief statement that should not impose any measurable burden in 
    addition to that resulting from the current requirements. In the case 
    of CCTs and PSAs that do not file as a DFE, the entities under current 
    rules already must certify various substantive information to their 
    participating plans within 120 days after the plans' year-ends. Adding 
    to the certification a brief statement that the entity is not filing as 
    a DFE should not impose any measurable burden in addition to that 
    resulting from the current requirements. In this regard, the Department 
    anticipates that the requirement to certify information sufficient to 
    enable the participating plans' to report beginning and end of year 
    values for their interests in the underlying assets of such CCTs or 
    PSAs should not be a burden inasmuch as plans participating in CCTs and 
    PSAs already are required to report the current value of their units of 
    participation in CCTs and PSAs as of the beginning and end of the plan 
    year. The proposed rulemaking would also explicitly require an 
    information collection item in Secs. 2520.103-1(f), 2520.103-2(c), 
    2520.103-9(d) and 2520.103-12(f) for entities filing electronically by 
    requiring that such entities maintain an original copy of the filing 
    with all required signatures as part of the entity's records. The 
    Department believes that no additional burden associated with such 
    record maintenance will arise inasmuch as plans and direct filers 
    routinely maintain copies of all such filings to satisfy other 
    statutory obligations.
    
    [[Page 68384]]
    
    Finally, the proposed amendments to Sec. 2520.104b-10 may add a burden 
    that is associated with the elimination of the Form 5500-R filing. 
    Specifically, such plans will be required to provide SARs on an annual 
    basis and may not use the alternative method of compliance currently 
    provided in Sec. 2520.104b-10(b).
        Type of Review: Revision of a currently approved collection.
        Agency: Pension and Welfare Benefits Administration.
        OMB Number: Currently approved under OMB No.1210-0016; A new number 
    will be assigned to the revised Form 5500 and schedules which will be 
    published on the form and schedules used by DOL, IRS and PBGC.
        Title: Form 5500 Series.
        Affected Public: Individuals or households; Business or other for-
    profit; Not-for-profit institutions.
        Form Number: DOL/IRS/PBGC Form 5500 and Schedules.
        Total Respondents: 801,934.
        Total Responses: 801,934.
        Frequency of Response: Annually.
        Estimated Time per Response, Estimated Burden Hours, Total Annual 
    Burden: PWBA and IRS burden estimates are based on different estimation 
    methodologies resulting in total burden estimate ranges from 1.71 
    million burden hours (using the PWBA methodology) to 8.46 million 
    burden hours (using the IRS methodology) for preparing the Form 5500 
    Series report and sending it to the government. See the Notice of 
    Proposed Forms Revisions published in the Federal Register on September 
    3, 1997 (62 FR 46556) for detailed information on the burden estimates.
    
    Small Business Regulatory Enforcement Fairness Act
    
        This notice of proposed rulemaking, when finalized, will be subject 
    to the provisions of the Small Business Regulatory Enforcement Fairness 
    Act of 1996 (5 U.S.C. 801 et. seq.) and will be transmitted to Congress 
    and the Comptroller General for review.
    
    Unfunded Mandates Reform Act
    
        For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
    104-4), as well as Executive Order 12875, this notice of proposed 
    rulemaking, if finalized, would not include any Federal mandate that 
    may result in expenditures by State, local or tribal governments, and 
    would not impose an annual burden exceeding $100 million on the private 
    sector.
    
    Statutory Authority
    
        This regulation is proposed pursuant to the authority in sections 
    101, 103, 104, 109, 110, 111, 504 and 505 of ERISA and under Secretary 
    of Labor's Order No. 1-87, 52 FR 13139, April 21, 1987.
    
    List of Subjects in 29 CFR Part 2520
    
        Accountants, Disclosure requirements, Employee benefit plans, 
    Employee Retirement Income Security Act, Pension plans, Pension and 
    welfare plans, Reporting and recordkeeping requirements, and Welfare 
    benefit plans.
    
        For the reasons set out in the preamble, Part 2520 of Chapter XXV 
    of Title 29 of the Code of Federal Regulations is proposed to be 
    amended as follows:
    
    PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE
    
        1. The authority citation for Part 2520 continues to read as 
    follows:
    
        Authority: Secs. 101, 102, 103, 104, 105, 109, 110, 111(b)(2), 
    111(c), and 505, Pub. L. 93-406, 88 Stat. 840-52 and 894 (29 U.S.C. 
    1021-1025, 1029-31, and 1135); Secretary of Labor's Order No. 27-74, 
    13-76, 1-87, and Labor Management Services Administration Order 2-6.
        Sections 2520.102-3, 2520.104b-1 and 2520.104b-3 also are issued 
    under sec. 101(a), (c) and (g)(4) of Pub. L. 104-191, 110 Stat. 1936, 
    1939, 1951 and 1955 and, sec. 603 of Pub. L. 104-204, 110 Stat. 2935 
    (29 U.S.C. 1185 and 1191c).
    
        2. Section 2520.103-1 is amended by revising paragraphs (b) 
    introductory text, (b)(1), the first sentence of (b)(2)(i), paragraphs, 
    (b)(4), (c), (d) and the first sentence of paragraph (e) as follows:
    
    
    Sec. 2520.103-1  Contents of the annual report.
    
    * * * * *
        (b) Contents of the annual report for plans with 100 or more 
    participants electing the limited exemption or alternative method of 
    compliance. Except as provided in paragraph (d) of this section and in 
    Secs. 2520.103-2 and 2520.104-44, the annual report of an employee 
    benefit plan covering 100 or more participants at the beginning of the 
    plan year which elects the limited exemption or alternative method of 
    compliance described in paragraph (a)(2) of this section shall include:
        (1) A Form 5500 ``Annual Return/Report of Employee Benefit Plan'' 
    and any statements or schedules required to be attached to the form, 
    completed in accordance with the instructions for the form, including 
    Schedule A (Insurance Information), Schedule B (Actuarial Information), 
    Schedule C (Service Provider Information), Schedule D (Direct Filing 
    Entity/Participating Plan Information), Schedule G (Financial 
    Transactions Schedule), Schedule H (Financial Information), Schedule R 
    (Retirement Plan Information), and the other financial schedules 
    described in Sec. 2520.103-10. See the instructions for this form.
        (2) * * *
        (i) A statement of assets and liabilities at current value 
    presented in comparative form for the beginning and end of the year. * 
    * *
    * * * * *
        (4) In the case of a plan, some or all of the assets of which are 
    held in a pooled separate account maintained by an insurance company, 
    or a common or collective trust maintained by a bank or similar 
    institution, a copy of the annual statement of assets and liabilities 
    of such account or trust for the fiscal year of the account or trust 
    which ends with or within the plan year for which the annual report is 
    made as required to be furnished to the administrator by such account 
    or trust under Sec. 2520.103-5(c). Although the statement of assets and 
    liabilities referred to in Sec. 2520.103-5(c) shall be considered part 
    of the plan's annual report, such statement of assets and liabilities 
    need not be filed with the plan's annual report. See Secs. 2520.103-3 
    and 2520.103-4 for the reporting requirements for plans some or all of 
    the assets of which are held in a pooled separate account maintained by 
    an insurance company, or a common or collective trust maintained by a 
    bank or similar institution.
    * * * * *
        (c) Contents of the annual report for plans with fewer than 100 
    participants. Except as provided in paragraph (d) of this section and 
    in Secs. 2520.104-43 and 2520.104a-6, the annual report of an employee 
    benefit plan which covers fewer than 100 participants at the beginning 
    of the plan year shall include a Form 5500 ``Annual Return/Report of 
    Employee Benefit Plan'' and any statements or schedules required to be 
    attached to the form, completed in accordance with the instructions for 
    the form, including Schedule A (Insurance Information), Schedule B 
    (Actuarial Information), Schedule D (Direct Filing Entity/Participating 
    Plan Information), Schedule I (Financial Information--Small Plan), and 
    Schedule R (Retirement Plan Information).
        (d) Special rule. If a plan has between 80 and 120 participants 
    (inclusive) as of the beginning of the plan year, the plan 
    administrator may elect to file the same category of annual report 
    (i.e., the annual report for plans with 100 or more participants under 
    paragraph (b) of this section or the annual report for
    
    [[Page 68385]]
    
    plans with fewer than 100 participants under paragraph (c) of this 
    section) that it filed for the previous plan year.
        (e) Plans which participate in a master trust. The plan 
    administrator of a plan which participates in a master trust shall file 
    an annual report on Form 5500 in accordance with the instructions for 
    the form relating to master trusts. * * *
        3. Section 2520.103-1 is further amended by adding a new paragraph 
    (f) as follows:
    
    
    Sec. 2520.103-1  [Amended]
    
    * * * * *
        (f) Electronic filing. The Form 5500 ``Annual Return/Report of 
    Employee Benefit Plan'' may be filed electronically or through other 
    media in accordance with the instructions accompanying the form, 
    provided the plan administrator maintains an original copy, with all 
    required signatures, as part of the plan's records.
        4. Section 2520.103-2 is amended by revising paragraph (b)(1), the 
    first sentence of (b)(2)(i) and paragraph (b)(4) as follows:
    
    
    Sec. 2520.103-2  Contents of the annual report for a group insurance 
    arrangement.
    
    * * * * *
        (b) * * *
        (1) A Form 5500 ``Annual Return/Report of Employee Benefit Plan'' 
    and any statements or schedules required to be attached to the form, 
    completed in accordance with the instructions for the form, including 
    Schedule A (Insurance Information), Schedule C (Service Provider 
    Information), Schedule D (Direct Filing Entity/Participating Plan 
    Information), Schedule G (Financial Transactions Schedule), Schedule H 
    (Financial Information), and the other financial schedules described in 
    Sec. 2520.103-10.
        (2) * * *
        (i) A statement of all trust assets and liabilities at current 
    value presented in comparative form for the beginning and end of the 
    year. * * *
    * * * * *
        (b)(4) In the case of a Form 5500 annual report filed under this 
    section for a group insurance arrangement some or all of the assets of 
    which are held in a pooled separate account maintained by an insurance 
    carrier, or a common or collective trust maintained by a bank, trust 
    company or similar institution, a copy of the annual statement of 
    assets and liabilities of such account or trust for the fiscal year of 
    the account or trust which ends with or within the plan year for which 
    the annual report is made as required to be furnished by such account 
    or trust under Sec. 2520.103-5(c). Although the statement of assets and 
    liabilities referred to in Sec. 2520.103-5(c) shall be considered part 
    of the group insurance arrangement's annual report, such statement of 
    assets and liabilities need not be filed with its annual report. See 
    Secs. 2520.103-3 and 2520.103-4 for the reporting requirements for 
    plans some or all of the assets of which are held in a pooled separate 
    account maintained by an insurance company, or a common or collective 
    trust maintained by a bank or similar institution, and see 
    Sec. 2520.104-43(b)(2) for when the terms ``group insurance 
    arrangement'' and ``trust'' shall be, respectively, used in place of 
    the terms ``plan'' and ``plan administrator.''
    * * * * *
        5. Section 2520.103-2 is further amended by adding a new paragraph 
    (c) as follows:
    
    
    Sec. 2520.103-2  [Amended]
    
    * * * * *
        (c) Electronic filing. The Form 5500 ``Annual Return/Report of 
    Employee Benefit Plan'' may be filed electronically or through other 
    media in accordance with the instructions accompanying the form, 
    provided the trust maintains an original copy, with all required 
    signatures, as part of the trust's records.
        6. Section 2520.103-3 is amended by revising paragraphs (a) and (c) 
    as follows:
    
    
    Sec. 2520.103-3  Exemption from certain annual reporting requirements 
    for assets held in a common or collective trust.
    
        (a) General. Under the authority of sections 103(b)(3)(G), 
    103(b)(4), 104(a)(2)(B), 104(a)(3), and 110 of the Act, a plan whose 
    assets are held in whole or in part in a common or collective trust 
    maintained by a bank, trust company, or similar institution which meets 
    the requirements of paragraph (b) of this section shall include as part 
    of the annual report to be filed under Secs. 2520.104a-5 or 2520.104a-6 
    the information described in paragraph (c) of this section. Such plan 
    is not required to include in its annual report information concerning 
    the individual transactions of the common or collective trust. This 
    exemption has no application to assets not held in such trusts.
    * * * * *
        (c) Contents. (1) A plan which meets the requirements of paragraph 
    (b) of this section, and which invests in a common or collective trust 
    that files a Form 5500 report in accordance with Sec. 2520.103-9, shall 
    include in its annual report: information required by the instructions 
    to Schedule H (Financial Information) about the current value of and 
    net investment gain or loss relating to the units of participation in 
    the common or collective trust held by the plan; identifying 
    information about the common or collective trust including its name, 
    employer identification number, and any other information required by 
    the instructions to the Schedule D (Direct Filing Entity/Participating 
    Plan Information); and such other information as is required in the 
    separate statements and schedules of the annual report about the value 
    of the plan's units of participation in the common or collective trust 
    and transactions involving the acquisition and disposition by the plan 
    of units of participation in the common or collective trust.
        (2) A plan which meets the requirements of paragraph (b) of this 
    section, and which invests in a common or collective trust that does 
    not file a Form 5500 report in accordance with Sec. 2520.103-9, shall 
    include in its annual report: information required by the instructions 
    to Schedule H (Financial Information) about the current value of the 
    plan's allocable portion of the underlying assets and liabilities of 
    the common or collective trust and the net investment gain or loss 
    relating to the units of participation in the common or collective 
    trust held by the plan; identifying information about the common or 
    collective trust including its name, employer identification number, 
    and any other information required by the instructions to the Schedule 
    D (Direct Filing Entity/Participating Plan Information); and such other 
    information as is required in the separate statements and schedules of 
    the annual report about the value of the plan's units of participation 
    in the common or collective trust and transactions involving the 
    acquisition and disposition by the plan of units of participation in 
    the common or collective trust.
        7. Section 2520.103-4 is amended by revising paragraphs (a) and (c) 
    as follows:
    
    
    Sec. 2520.103-4  Exemption from certain annual reporting requirements 
    for assets held in an insurance company pooled separate account.
    
        (a) General. Under the authority of sections 103(b)(3)(G), 
    103(b)(4), 104(a)(2)(B), 104(a)(3), and 110 of the Act, a plan whose 
    assets are held in whole or in part in a pooled separate account of an 
    insurance carrier which meets the requirements of paragraph (b) of this 
    section shall include as part of the annual report to be filed under 
    Sec. 2520.104a-5 or Sec. 2520.104a-6 the information described in 
    paragraph (c)
    
    [[Page 68386]]
    
    of this section. Such plan is not required to include in its annual 
    report information concerning the individual transactions of the pooled 
    separate account. This exemption has no application to assets not held 
    in such a pooled separate account.
    * * * * *
        (c) Contents. (1) A plan which meets the requirements of paragraph 
    (b) of this section, and which invests in a pooled separate account 
    that files a Form 5500 report in accordance with Sec. 2520.103-9, shall 
    include in its annual report: information required by the instructions 
    to Schedule H (Financial Information) about the current value of, and 
    net investment gain or loss relating to, the units of participation in 
    the pooled separate account held by the plan; identifying information 
    about the pooled separate account including its name, employer 
    identification number, and any other information required by the 
    instructions to the Schedule D (Direct Filing Entity/Participating Plan 
    Information); and such other information as is required in the separate 
    statements and schedules of the annual report about the value of the 
    plan's units of participation in the pooled separate accounts and 
    transactions involving the acquisition and disposition by the plan of 
    units of participation in the pooled separate account.
        (2) A plan which meets the requirements of paragraph (b) of this 
    section, and which invests in a pooled separate account that does not 
    file a Form 5500 report in accordance with Sec. 2520.103-9, shall 
    include in its annual report: information required by the instructions 
    to Schedule H (Financial Information) about the current value of the 
    plan's allocable portion of the underlying assets and liabilities of 
    the pooled separate account and the net investment gain or loss 
    relating to the units of participation in the pooled separate account 
    held by the plan; identifying information about the pooled separate 
    account including its name, employer identification number, and any 
    other information required by the instructions to the Schedule D 
    (Direct Filing Entity/Participating Plan Information); and such other 
    information as is required in the separate statements and schedules of 
    the annual report about the value of the plan's units of participation 
    in the pooled separate account and transactions involving the 
    acquisition and disposition by the plan of units of participation in 
    the pooled separate account.
        8. Section 2520.103-5 is amended by redesignating paragraph 
    (c)(1)(iii) as paragraph (c)(1)(iv), redesignating paragraph 
    (c)(2)(iii) as (c)(2)(iv), redesignating paragraph (c)(2)(ii) as 
    paragraph (c)(2)(iii), revising paragraphs (c)(1)(ii) and (c)(2)(i) and 
    adding new paragraphs (c)(1)(iii), and (c)(2)(ii) as follows:
    
    
    Sec. 2520.103-5  Transmittal and certification of information to plan 
    administrator for annual reporting purposes.
    
    * * * * *
        (c) * * *
        (1) * * *
        (ii) Holds assets of a plan in a pooled separate account and files 
    the Form 5500 report pursuant to Sec. 2520.103-9 for a plan year--
        (A) A copy of the annual statement of assets and liabilities of the 
    separate account for the fiscal year of such account ending with or 
    within the plan year for which the participating plan's annual report 
    is made,
        (B) A statement of the value of the plan's units of participation 
    in the separate account,
        (C) The EIN of the separate account, entity number required for 
    purposes of completing the Form 5500, and any other identifying number 
    assigned by the insurance carrier to the separate account,
        (D) A statement that a filing pursuant to Sec. 2520.103-9(c) will 
    be made for the separate account (for its fiscal year ending with or 
    within the participating plan's plan year) on or before the date upon 
    which such plan's annual report is required to be filed in accordance 
    with Secs. 2520.104a-5 or 2520.104a-6, and
        (E) Upon request of the plan administrator, any other information 
    that can be obtained from the ordinary business records of the 
    insurance carrier and that is needed by the plan administrator to 
    comply with the requirements of section 104(a)(1)(A) of the Act and 
    Sec. 2520.104a-5 or Sec. 2520.104a-6.
        (iii) Holds assets of a plan in a pooled separate account and does 
    not file the Form 5500 report pursuant to Sec. 2520.103-9, for a plan 
    year--
        (A) A copy of the annual statement of assets and liabilities of the 
    separate account for the fiscal year of such account that ends with or 
    within the plan year for which the annual report is made,
        (B) A statement of the value of the plan's units of participation 
    in the separate account,
        (C) The EIN of the separate account and any other identifying 
    number assigned by the insurance carrier to the separate account,
        (D) A statement that a filing pursuant to Sec. 2520.103-9(c) will 
    not be made for the separate account for its fiscal year ending with or 
    within the participating plan's plan year, and
        (E) Upon request of the plan administrator, any other information 
    that can be obtained from the ordinary business records of the 
    insurance carrier and that is needed by the plan administrator to 
    comply with the requirements of section 104(a)(1)(A) of the Act and 
    Sec. 2520.104a-5 or Sec. 2520.104a-6.
    * * * * *
        (2) * * *
        (i) In a common or collective trust that files the Form 5500 report 
    pursuant to Sec. 2520.103-9, for a plan year--
        (A) A copy of the annual statement of assets and liabilities of the 
    common or collective trust for the fiscal year of such trust ending 
    with or within the plan year for which the participating plan's annual 
    report is made,
        (B) A statement of the value of the plan's units of participation 
    in the common or collective trust,
        (C) The EIN of the common or collective trust, entity number 
    assigned for purposes of completing the Form 5500, any other 
    identifying number assigned by the bank, trust company, or other 
    institution to the common or collective trust,
        (D) A statement that a filing pursuant to Sec. 2520.103-9(c) will 
    be made for the common or collective trust (for its fiscal year ending 
    with or within the participating plan's plan year) on or before the 
    date upon which the annual report for such plan is required to be filed 
    in accordance with Secs. 2520.104a-5 or 2520.104a-6, and
        (E) Upon request of the plan administrator, any other information 
    that can be obtained from the ordinary business records of the bank, 
    trust company or similar institution and that is needed by the plan 
    administrator to comply with the requirements of section 104(a)(1)(A) 
    of the Act and Secs. 2520.104a-5 or 2520.104a-6.
        (ii) In a common or collective trust that does not file the Form 
    5500 ``Annual Return/Report of Employee Benefit Plan'', pursuant to 
    Sec. 2520.103-9, for a plan year--
        (A) A copy of the annual statement of assets and liabilities of the 
    common or collective trust for the fiscal year of such account that 
    ends with or within the plan year for which the annual report is made,
        (B) A statement of the value of the plan's units of participation 
    in the common or collective trust,
        (C) The EIN of the common or collective trust, and any other
    
    [[Page 68387]]
    
    identifying number assigned by bank, trust company or similar 
    institution to the common or collective trust,
        (D) A statement that a filing pursuant to Sec. 2520.103-9(c) will 
    not be made for the common or collective trust for its fiscal year 
    ending with or within the participating plan's plan year, and
        (E) Upon request of the plan administrator, any other information 
    that can be obtained from the ordinary business records of the bank, 
    trust company or similar institution and that is needed by the plan 
    administrator to comply with the requirements of section 104(a)(1)(A) 
    of the Act and Secs. 2520.104a-5 or 2520.104a-6.
    * * * * *
        9. Section 2520.103-6 is amended by revising paragraphs (a) and 
    (b)(1)(ii), and adding paragraph (f) as follows:
    
    
    Sec. 2520.103-6  Definition of reportable transaction for Annual 
    Return/Report.
    
        (a) General. For purposes of preparing the schedule of reportable 
    transactions described in Sec. 2520.103-10(b)(6), and subject to the 
    exceptions provided in Secs. 2520.103-3, 2520.103-4 and 2520.103-12, 
    with respect to individual transactions by a common or collective 
    trust, pooled separate account, or a 103-12 investment entity, a 
    reportable transaction includes any transaction or series of 
    transactions described in paragraph (c) of this section.
        (b) * * *
        (1) * * *
        (ii) With respect to schedules of reportable transactions for the 
    initial plan year of a plan, the term ``current value'' shall mean the 
    current value, as defined in section 3(26) of the Act, of plan assets 
    at the end of a plan's initial plan year.
    * * * * *
        (f) Special rule for certain participant-directed transactions. 
    Participant or beneficiary directed transactions under an individual 
    account plan shall not be taken into account under paragraph (c)(1) of 
    this section for purposes of preparing the schedule of reportable 
    transactions described in this section. For purposes of this section 
    only, a transaction will be considered directed by a participant or 
    beneficiary only to the extent that such individual, in fact, 
    affirmatively authorized the investment of the asset allocated to his 
    or her account.
        10. Section 2520.103-9 is revised as follows:
    
    
    Sec. 2520.103-9  Direct filing for bank or insurance carrier trusts and 
    accounts.
    
        (a) General. Under the authority of sections 103(b)(4), 104(a)(3), 
    110 and 505 of the Act, an employee benefit plan, some or all of the 
    assets of which are held in a common or collective trust or a pooled 
    separate account described in section 103(b)(3)(G) of the Act and 
    Secs. 2520.103-3 and 2520.103-4, is relieved from including in its 
    annual report information about the current value of the plan's 
    allocable portion of assets and liabilities of the common or collective 
    trust or pooled separate account and information concerning the 
    individual transactions of the common or collective trust or pooled 
    separate account, provided that the plan meets the requirements of 
    paragraph (b) of this section, and, provided further, that the bank or 
    insurance carrier which holds the plan's assets meets the requirements 
    of paragraph (c) of this section.
        (b) Application. A plan whose assets are held in a common or 
    collective trust or a pooled separate account described in section 
    103(b)(3)(G) of the Act and Secs. 2520.103-3 and 2520.103-4, provided 
    the plan administrator, on or before the end of the plan year, provides 
    the bank or insurance carrier which maintains the common or collective 
    trust or pooled separate account with the plan number, and name and EIN 
    of the plan sponsor as it will be indicated on the plan's annual 
    report.
        (c) Separate filing by common or collective trusts and pooled 
    separate accounts. The bank or insurance carrier which maintains the 
    common or collective trust or pooled separate account in which assets 
    of the plan are held shall file, in accordance with the instructions 
    for the form, a completed Form 5500 ``Annual Return/Report of Employee 
    Benefit Plan'' and any statements or schedules required to be attached 
    to the form for the common or collective trust or pooled separate 
    account, including Schedule D (Direct Filing Entity/Participating Plan 
    Information) and Schedule H (Financial Information). See the 
    instructions for this form. The information reported shall be for the 
    fiscal year of such trust or account ending with or within the plan 
    year for which the annual report of the plan is made.
        (d) Method of filing. The Form 5500 ``Annual Return/Report of 
    Employee Benefit Plan'' may be filed electronically or through other 
    media in accordance with the instructions accompanying the form, 
    provided the common or collective trust or pooled separate account 
    maintains an original copy, with all required signatures, as part of 
    its records.
        11. Section 2520.103-10 is revised to read as follows:
    
    
    Sec. 2520.103-10  Annual report financial schedules.
    
        (a) General. The administrator of a plan filing an annual report 
    pursuant to Sec. 2520.103-1(a)(2) or the report for a group insurance 
    arrangement pursuant to Sec. 2520.103-2 shall, as provided in the 
    instructions to the Form 5500 ``Annual Return/Report of Employee 
    Benefit Plan,'' include as part of the annual report the separate 
    financial schedules described in paragraph (b) of this section.
        (b) Schedules. (1) Assets held for investment.  (i) A schedule of 
    all assets held for investment purposes at the end of the plan year 
    (see Sec. 2520.103-11) with assets aggregated and identified by:
        (A) Identity of issue, borrower, issuer or similar party;
        (B) Description of investment including maturity date, rate of 
    interest, collateral, par or maturity value;
        (C) Cost; and
        (D) Current value, and, in the case of a loan, the payment schedule 
    (e.g., fully amortized, partly amortized with a final lump sum 
    payment).
        (ii) In the case of assets or investment interests of two or more 
    plans maintained in one trust, all entries on the schedule of assets 
    held for investment purposes that relate to the trust shall be 
    completed by including the plan's allocable portion of the trust.
        (2) Assets acquired and disposed within the plan year. (i) A 
    schedule of all assets acquired and disposed of within the plan year 
    (see Sec. 2520.103-11) with assets aggregated and identified by:
        (A) Identity of issue, borrower, issuer or similar party;
        (B) Descriptions of investment including maturity date, rate of 
    interest, collateral, par or maturity value;
        (C) Cost of acquisitions; and
        (D) Proceeds of dispositions.
        (ii) In the case of assets or investment interests of two or more 
    plans are maintained in one trust, all entries on the schedule of 
    assets held for investment purposes that relate to the trust shall be 
    completed by including the plan's allocable portion of the trust.
        (3) Party in interest transactions. A schedule of each transaction 
    involving a person known to be a party in interest except do not 
    include:
        (i) A transaction to which a statutory exemption under part 4 of 
    title I applies;
        (ii) A transaction to which an administrative exemption under 
    section 408(a) of the Act applies; or
        (iii) A transaction to which the exemptions of section 4975(c) or 
    4975(d) of the Internal Revenue Code (Title 26 of the United States 
    Code), applies.
        (4) Obligations in default. A schedule of all loans or fixed income 
    obligations
    
    [[Page 68388]]
    
    which were in default as of the end of the plan year or were classified 
    during the year as uncollectible.
        (5) Leases in default. A schedule of all leases which were in 
    default or were classified during the year as uncollectible.
        (6) Reportable transactions. A schedule of all reportable 
    transactions as defined in Sec. 2520.103-6.
        (c) Format requirements for certain schedules. (1) There is no 
    specific format requirement for the schedules described in paragraphs 
    (b)(1), (b)(2) or (b)(6) of this section provided such schedules are 
    filed with the required information using the same size paper as the 
    Form 5500.
        (2) Except as provided in paragraph (c)(1) of this section, such 
    paragraph shall not apply to the Form 5500 and the statements and 
    schedules required to be filed with such form.
        12. Section 2520.103-11 is amended by revising paragraph (a) and 
    adding paragraphs (d) as follows:
    
    
    Sec. 2520.103-11  Assets held for investment purposes.
    
        (a) General. For purposes of preparing the schedule of assets held 
    for investment purposes described in Sec. 2520.103-10(b)(1) and (2), 
    assets held for investment purposes include those assets described in 
    paragraph (b) of this section.
    * * * * *
        (d) Special rule for certain participant-directed transactions. 
    Cost information may be omitted from the schedule of assets held for 
    investment, for assets described in paragraphs (b)(1)(i) and (b)(1)(ii) 
    of this section, only with respect to participant or beneficiary 
    directed transactions under an individual account plan. For purposes of 
    this section only, a transaction will be considered directed by a 
    participant or beneficiary only to the extent that such individual, in 
    fact, affirmatively authorized the investment of the asset allocated to 
    his or her account.
        13. Section 2520.103-12 is amended by revising the last sentence of 
    paragraph (a), revising paragraph (b), and also adding a new paragraph 
    (f) as follows:
    
    
    Sec. 2520.103-12  Limited exemption and alternative method of 
    compliance for annual reporting of investments in certain entities.
    
        (a) * * * The information described in paragraph (b), however, 
    shall be considered as part of the annual report for purposes of the 
    requirements of section 104(a)(1) of the Act and Secs. 2520.104a-5 and 
    2520.104a-6.
        (b) The entity described in paragraph (c) of this section shall 
    file, in accordance with the instructions for the form:
        (1) 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 (Direct Filing Entity/Participating 
    Plan Information), Schedule G (Financial Transactions Schedule), 
    Schedule H (Financial Information), and the financial schedules 
    described in Sec. 2520.103-10(b)(1) and (b)(2). See the instructions 
    for this form. The information reported shall be for the fiscal year of 
    such entity ending with or within the plan year for which the annual 
    report of the plan is made.
        (2) A report of an independent qualified public accountant, 
    regarding the financial statements and schedules described in paragraph 
    (b)(1) of this section which meets the requirements of Sec. 2520.103-
    1(b).
        (c) * * *
    * * * * *
        (f) Method of filing. The Form 5500 ``Annual Return/Report of 
    Employee Benefit Plan'' may be filed electronically or through other 
    media in accordance with the instructions accompanying the form 
    provided the entity described in paragraph (c) of this section 
    maintains an original copy, with all required signatures, as part of 
    its records.
        14. Section 2520.104-21 is amended by revising paragraphs (b)(3) 
    and (d) as follows.
    
    
    Sec. 2520.104-21  Limited exemption for certain group insurance 
    arrangements.
    
    * * * * *
        (b) * * *
        (2) * * *
        (3) Uses a trust (or other entity such as a trade association) as 
    the holder of the insurance contracts and uses a trust as the conduit 
    for payment of premiums to the insurance company.
    * * * * *
        (d) Examples. (1) A welfare plan has 25 participants at the 
    beginning of the plan year. It is part of a group insurance arrangement 
    of a trade association and provides benefits to employees of two or 
    more unaffiliated employers, but not in connection with a multiemployer 
    plan as defined in the Act. Plan benefits are fully insured pursuant to 
    insurance contracts purchased with premium payments derived half from 
    employee contributions (which the employer forwards within three months 
    of receipt) and half from the general assets of each participating 
    employer. Refunds to the plan are paid to participating employees 
    within three months of receipt as provided in the plan and as described 
    to each participant upon entering the plan. A trust acts as a conduit 
    for payments, receiving premium payments from participating employers 
    and paying the insurance company. The plan appoints the trade 
    association as its plan administrator. The association, as plan 
    administrator, provides summary plan descriptions to participants and 
    beneficiaries, enlisting the help of participating employers in 
    carrying out this distribution, and also holds the insurance contracts. 
    The plan administrator also makes copies of certain plan documents 
    available to the plan's principal office and such other places as 
    necessary to give participants reasonable access to them. The plan 
    administrator files with the Secretary an annual report covering 
    activities of the plan, as required by the Act and such regulations as 
    the Secretary may issue. The exemption provided by this section applies 
    because the conditions of paragraph (b) have been satisfied.
        (2) Assume the same facts as paragraph (d)(1) of this section 
    except that the premium payments for the insurance company are paid 
    from the trust through an independent insurance brokerage firm. The 
    trade association is the holder of the insurance contract. The plan 
    appoints an officer of the participating employer as the plan 
    administrator. The officer, as plan administrator, performs the same 
    reporting and disclosure functions as the administrator in paragraph 
    (d)(1) of this section, enlisting the help of the association in 
    providing summary plan descriptions and necessary information. The 
    exemption provided by this section applies.
        (3) The facts are the same as paragraph (d)(1), except the welfare 
    plan has 125 participants at the beginning of the plan year. The 
    exemption provided by this section does not apply because the plan had 
    100 or more participants at the beginning of the plan year. See, 
    however, Sec. 2520.104-43.
        (4) The facts are the same as paragraph (d)(2), except the welfare 
    plan has 125 participants. The exemption provided by this section does 
    not apply because the plan had 100 or more participants at the 
    beginning of the plan year. See, however, Sec. 2520.104-43.
        15. Section 2520.104-41 is amended by revising paragraphs (b) and 
    (c) as follows:
    
    
    Sec. 2520.104-41  Simplified annual reporting requirements for plans 
    with fewer than 100 participants.
    
    * * * * *
    
    [[Page 68389]]
    
        (b) Application. The administrator of an employee pension or 
    welfare benefit plan which covers fewer than 100 participants at the 
    beginning of the plan year and the administrator of an employee pension 
    or welfare benefit plan described in Sec. 2520.103-1(d) may file the 
    simplified annual report described in paragraph (c) of this section in 
    lieu of the annual report required to be filed pursuant to section 
    104(a)(1)(A) of the Act and Sec. 2520.104a-5.
        (c) Contents. The administrator of an employee pension or welfare 
    benefit plan described in paragraph (b) of this section shall file, in 
    accordance with the instructions for the form, a completed Form 5500 
    ``Annual Return/Report of Employee Benefit Plan'' and any statements or 
    schedules required to be attached to the form, including Schedule A 
    (Insurance information), Schedule B (Actuarial Information), Schedule D 
    (Direct Filing Entity/Participating Plan Information), Schedule I 
    (Financial Information--Small Plan), and Schedule R (Retirement Plan 
    Information). See the instructions for this form.
        16. Section 2520.104-43 is amended by revising paragraphs 
    (b)(1)(ii) and (b)(2) as follows:
    
    
    Sec. 2520.104-43  Exemption from annual reporting requirement for 
    certain group insurance arrangements.
    
    * * * * *
        (b) * * *
        (1) * * *
        (ii) an annual report containing the items set forth in 
    Sec. 2520.103-2 has been filed with the Secretary of Labor in 
    accordance with Secs. 2520.104a-6 by the trust or other entity which is 
    the holder of the group insurance contracts by which plan benefits are 
    provided.
        (2) For purposes of this section, the terms ``group insurance 
    arrangement'' and ``trust'' shall be used in place of the terms 
    ``plan'' or ``plan administrator,'' as applicable, in Secs. 2520.103-3, 
    2520.103-4, 2520.103-6, 2520.103-8, 2520.103-9 and 2520.103-10.
    * * * * *
        17. Section 2520.104-44 is amended by revising the second sentence 
    of paragraph (a)(2), removing the word ``and'' at the end of paragraph 
    (b)(1)(iii), substituting a semi-colon for the period at the end of 
    paragraph (b)(2), adding paragraph (b)(3), and revising paragraph 
    (c)(1) as follows:
    
    
    Sec. 2520.104-44  Limited exemption and alternative method of 
    compliance for annual reporting by unfunded plans and by certain 
    insured plans.
    
        (a) * * *
        (2) * * * An employee pension benefit plan which meets the 
    requirements of paragraph (b)(2) or (b)(3) of this section is not 
    required to comply with the annual reporting requirements described in 
    paragraph (c) of this section.
        (b) * * *
        (3) A pension plan using a tax deferred annuity arrangement under 
    section 403(b)(1) of the Internal Revenue Code (Title 26 of the United 
    States Code) and/or a custodial account for regulated investment 
    company stock established under Code section 403(b)(7) as the sole 
    funding vehicle for providing pension benefits.
        (c) * * *
        (1) Completing certain items of the annual report as prescribed by 
    the instructions to the Form 5500 ``Annual Return/Report of Employee 
    Benefit Plan'' and accompanying schedules;
    * * * * *
        18. Section 2520.104-46 is amended by revising paragraph (d)(1) as 
    follows:
    
    
    Sec. 2520.104-46  Waiver of examination and report of an independent 
    qualified public accountant for employee benefit plans with fewer than 
    100 participants.
    
    * * * * *
        (d) Limitations. (1) The waiver described in this section does not 
    affect the obligation of the plan described in paragraph (b)(1) or 
    (b)(2) of this section to file the Form 5500 ``Annual Return/Report of 
    Employee Benefit Plan'' and all applicable financial schedules and 
    statements as prescribed by the instructions to the form. See 
    Sec. 2520.104-41.
    * * * * *
        19. Section 2520.104b-10 is amended as follows.
        a. In the first sentence of paragraph (a), the phrase ``paragraphs 
    (b) and (g)'' is revised to read ``paragraph (g)''.
        b. Remove and reserve paragraph (b).
        20. Paragraph (c) introductory text and the first sentence of 
    paragraph (f) of section 2520.104b-10 are revised as follows:
    
    
    Sec. 2520.104b-10  Summary Annual Report.
    
    * * * * *
        (c) When to furnish. Except as otherwise provided in this paragraph 
    (c), the summary annual report required by paragraph (a) of this 
    section shall be furnished within nine months after the close of the 
    plan year.
    * * * * *
        (f) Furnishing of additional documents to participants and 
    beneficiaries. A plan administrator shall promptly comply with any 
    request by a participant or beneficiary for additional documents made 
    in accordance with the procedures or rights described in paragraph (d) 
    of this section.
    * * * * *
        21. Section 2520.104b-10 is further amended as follows.
        a. The following sentence from paragraph (d)(3) under the heading 
    ``Basic Financial Statement'' is removed:
    
    [For plans filing form 5500K, omit separate entries for employer 
    contributions and employee contributions and insert instead 
    ``contributions by the employer and employees of ($ )''].
        b. In paragraph (d)(3), the list under the heading ``Your Rights to 
    Additional Information'' (after the introductory text but before the 
    language ``To obtain a copy of the full annual report * * *'') is 
    revised to read as follows:
    * * * * *
        1. an accountant's report;
        2. financial information and information on payments to service 
    providers;
        3. assets held for investment;
        4. fiduciary information, including non-exempt transactions between 
    the plan and parties-in-interest (that is, persons who have certain 
    relationships with the plan);
        5. loans or other obligations in default or classified as 
    uncollectible;
        6. leases in default;
        7. transactions in excess of 5 percent of the plan assets;
        8. insurance information including sales commissions paid by 
    insurance carriers;
        9. information regarding any common or collective trusts, pooled 
    separate accounts, master trusts or 103-12 investment entities in which 
    the plan participates, and
        10. actuarial information regarding the funding of the plan.
    * * * * *
        c. In paragraph (d)(4), the list under the heading ``Your Rights to 
    Additional Information'' (after the introductory text but before the 
    language ``To obtain a copy of the full annual report * * *'') is 
    revised as follows:
    * * * * *
        1. an accountant's report;
        2. financial information and information on payments to service 
    providers;
        3. assets held for investment;
        4. fiduciary information, including non-exempt transactions between 
    the plan and parties-in-interest (that is, persons who have certain 
    relationships with the plan);
        5. loans or other obligations in default or classified as 
    uncollectible;
        6. leases in default;
        7. transactions in excess of 5 percent of the plan assets;
    
    [[Page 68390]]
    
        8. insurance information including sales commissions paid by 
    insurance carriers; and
        9. information regarding any common or collective trusts, pooled 
    separate accounts, master trusts or 103-12 investment entities in which 
    the plan participates.
    * * * * *
        d. The last sentence of both paragraphs (d)(3) and (d)(4) under the 
    heading ``Your Rights to Additional Information'' are revised as 
    follows:
        ``Requests to the Department should be addressed to: Public 
    Disclosure Room, Room N5638, Pension and Welfare Benefits 
    Administration, U.S. Department of Labor, 200 Constitution Avenue, 
    N.W., Washington, D.C. 20210.''
        e. The last sentence of the undesignated paragraph following 
    paragraph (e)(2) is removed.
    
        Signed at Washington, DC, this 4th day of December, 1998.
    Meredith Miller,
    Deputy Assistant Secretary for Policy Pension and Welfare Benefits 
    Administration, U.S. Department of Labor.
    [FR Doc. 98-32659 Filed 12-9-98; 8:45 am]
    BILLING CODE 4510-29-P
    
    
    

Document Information

Published:
12/10/1998
Department:
Pension and Welfare Benefits Administration
Entry Type:
Proposed Rule
Action:
Notice of proposed rulemaking
Document Number:
98-32659
Dates:
Written comments on the proposed regulations must be received by the Department on or before February 8, 1999.
Pages:
68370-68390 (21 pages)
RINs:
1210-AA52: Revision of the Form 5500 Series and Implementing and Related Regulations Under the Employee Retirement Income Security Act of 1974 (ERISA)
RIN Links:
https://www.federalregister.gov/regulations/1210-AA52/revision-of-the-form-5500-series-and-implementing-and-related-regulations-under-the-employee-retirem
PDF File:
98-32659.pdf
CFR: (20)
29 CFR 2520.104-43(b)(2)
29 CFR 2520.104b-10(b)(2)(ii)
29 CFR 103
29 CFR 2520.103-1
29 CFR 2520.103-2
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