October 14, 2011 

Elizabeth A. Goodman Ann E. Junkins 

Senior Employee Benefits Law Specialist 

Employee Benefits Security 

Management and Program Analyst 

Internal Revenue Service 

Administration 

U.S. Department of Labor 

200 Constitution Avenue, Room N5655 

8100 Corporate Drive 

Hyattsville, MD 20785-2231 

Washington, DC 20210 

Re: Reporting of PBGC Premium Payments on Form 5500, Schedule H 

Dear Ms. Goodman and Ms. Junkins: 

The American Academy of Actuaries1 Pension Committee would like to express its 

concern regarding what we believe to be an error in the instructions for Form 5500, 

Schedule H on the reporting of premium payments made to the Pension Benefit Guaranty 

Corporation (PBGC) from qualified defined benefit plan assets. The committee 

understands that efforts already may be underway to address this error and respectfully 

requests guidance from the Department of Labor (DOL) and/or the Internal Revenue 

Service (IRS) for the public regarding this issue. 

The Pension Committee appreciates the efforts of the DOL and the IRS to improve the 

reporting of information on Form 5500 and to provide clear instructions to plan 

administrators and their service providers that assist in the preparation of these filings. In 

recent years prior to 2009, the Form 5500 instructions were silent as to the appropriate 

place to report PBGC premium payments made from plan assets. The prevailing practice 

was to report PBGC premiums paid from plan assets as “other” administrative expenses. 

Beginning with the 2009 plan year (and continuing with the 2010 plan year), the 

Schedule H instructions were modified to include, among other things, an explicit 

instruction that PBGC premium payments should be reported on Line 2l as a transfer of 

assets from the plan. The committee believes this is not an appropriate place for reporting 

PBGC premium payments on Schedule H, that a more appropriate line exists for such 

purpose, and that the instruction regarding PBGC premium reporting was placed 

inadvertently in the wrong location in the instructions. 

1 The American Academy of Actuaries is a 17,000-member professional association whose mission is to 

serve the public and the U.S. actuarial profession. The Academy assists public policymakers on all levels 

by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The 

Academy also sets qualification, practice, and professionalism standards for actuaries in the United States 
Furthermore, members of the accounting profession have begun requesting that actuaries 

and other service providers assisting clients with preparation of Form 5500 change their 

entries on Schedule H to comply with the current instructions. This creates a conflict for 

those service providers and plan administrators who believe that the instructions do not 

represent an appropriate reporting of this permissible use of plan assets. 

We encourage the DOL and the IRS to review the Schedule H instructions in light of the 

comments provided in this letter and amend accordingly the Schedule H instructions for 

the 2011 plan year. In addition, given the close proximity of the extended filing due date 

for Form 5500 for the calendar 2010 plan year, we encourage the DOL and the IRS to 

issue informal guidance to the benefits community advising that the instructions for 

Schedule H will change and that they will accept reporting of PBGC premiums on either 

Line 2l or Line 2(i)(4), as discussed below. This clarification must be made to resolve 

potential conflicts between plan administrators, their auditors, and other service providers 

that could delay the issuance of audited financial statements or require paid preparers of 

Form 5500, Schedule H to prepare this schedule in a manner they believe could generate 

additional questions to plan administrators and sponsors from the DOL and the IRS. 

Changes to the Schedule H Instructions in 2009 

In 2009, the instructions for Line 2l of Schedule H (“Transfers of assets”) were modified 

to read as follows: 

“Include in these reconciliation figures all transfers of assets into or out of the 

plan resulting from, among others things, mergers and consolidations. A transfer 

of assets or liabilities occurs when there is a reduction of assets or liabilities with 

respect to one plan and the receipt of these assets or assumption of these liabilities 

by another plan. A transfer is not a shifting of one plan’s assets or liabilities from 

one investment to another. A transfer is not a distribution of all or a part of an 

individual participant’s account balance that is reportable on IRS Form 1099-R, 

Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, 

IRAs, Insurance Contracts, etc., (see the instructions for line 2e). Transfers out at 

the end of the plan year should be reported as occurring during the year. Include 

premium payments to the PBGC when paid from plan assets [emphasis 

added].” 

The last sentence was newly added for the 2009 reporting instructions. Other than that, 

the instructions for Line 2l were unchanged from 2008. 

PBGC premiums paid from the trust do not meet the definition of a transfer of plan assets 

contained within the Line 2l instructions, as they do not in any way relate to the shifting 

of benefit liabilities from one plan to another. They also do not represent the direct 

shifting of benefit liabilities from the plan sponsor to the PBGC. 

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The committee believes PBGC premiums paid from plan assets most appropriately are 

reported on Line 2i(4) as “Other” administrative expenses. Given that the instructions for 

Line 2i(4) appear immediately prior to those for Line 2l, the committee believes it is a 

simple placement error that the instructions for reporting PBGC premium payments were 

included in the Line 2l instructions. The committee further believes it is likely the 

intention of the DOL and the IRS that PBGC premiums be reported on Line 2i(4) as 

administrative expenses rather than as an asset transfer. 

Issues for Plan Administrators, Paid Preparers, and Auditors 

Independent qualified public accountants frequently ask to review a draft of the Form 

5500 filing prior to issuance of their audit opinion on a plan’s financial statements. Some 

accounting firms recently have been requesting that PBGC premiums be reported on Line 

2l of Schedule H, as indicated in the published instructions. It is understandable that 

accountants expect to see entries on Schedule H that are in compliance with the published 

instructions, and plan administrators and paid preparers want to comply with the 

published instructions as well. In this instance, however, it appears to many that the 

published instructions are clearly inappropriate, raising issues for plan administrators and 

paid preparers who may feel compelled to comply with a reporting requirement they 

believe to misrepresent the actual operations of the plan. 

In addition, Line 5b of Schedule H requires the reporting of identifying information for 

plans receiving a transfer of assets or liabilities from the plan for which Schedule H is 

being filed. The committee is concerned that reporting the PBGC premium payments in 

Line 2l, as instructed, will trigger an inquiry when the Form 5500 submission is reviewed 

regarding why a receiving plan is not reported on Line 5b. There is also concern that the 

IRS will infer that an entry for PBGC premiums on Line 2l is an indication that Form 

5310-A may have been due and, as a result, trigger an inquiry into the reasons why no 

such filing was made. 

Each of the matters addressed above adds to the administrative burden facing plan 

administrators and potentially causes the DOL and the IRS to devote valuable time and 

resources to resolving issues that do not, in fact, exist. 

Request for Correction and Guidance 

If, upon review of this matter, the DOL and the IRS find that the 2009 and 2010 Schedule 

H instructions do indeed contain a placement error and PBGC premiums should correctly 

be reported on Line 2i(4), the committee encourages every effort to make this correction 

when the 2011 Form 5500 instructions are issued. The committee further recommends 

that the DOL and the IRS issue immediate guidance to the retirement plans community 

indicating that for 2009 and 2010 plan year filings (and for 2011 if the instructions cannot 

be corrected before issuance), the agencies will accept the reporting of PBGC premium 

payments from plan assets on either Line 2l (per the official instructions) or Line 2i(4). 

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Given the nearness of the October 17, 2011, extended filing due date for 2010 calendar 

plan year Form 5500 returns, we encourage the DOL and the IRS to explore means of 

providing informal guidance, such as a special edition of the IRS’s Employee Plans 

News, that allows plan administrators, paid preparers, and accountants with relief to 

report PBGC premiums on either line until further instructions are issued. 

We appreciate the DOL and the IRS giving consideration to these requests. Please contact 

Jessica M. Thomas, the Academy’s senior pension policy analyst (202-785-7868, 

thomas@actuary.org) if you have any questions or would like to discuss these items 

further. 

Respectfully submitted, 

John H. Moore, FSA, MAAA, EA, FCA 

Chair, Pension Committee 

American Academy of Actuaries 

Cc: David Gustafson 

Chief Policy Actuary 

Pension Benefit Guaranty Corporation 

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