[Federal Register Volume 62, Number 170 (Wednesday, September 3, 1997)]
[Notices]
[Pages 46556-46663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22878]



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_______________________________________________________________________

Part II

Department of Labor



Pension and Welfare Benefits Administration

Department of the Treasury



Internal Revenue Service

Pension Benefit Guaranty Corporation
_______________________________________________________________________



Proposed Revision of Annual Information Return/Reports; Notice

Federal Register / Vol. 62, No. 170 / Wednesday, September 3, 1997 / 
Notices

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

DEPARTMENT OF THE TREASURY

Internal Revenue Service

PENSION BENEFIT GUARANTY CORPORATION


Proposed Revision of Annual Information Return/Reports

AGENCIES: Department of Labor, Department of the Treasury, Pension 
Benefit Guaranty Corporation.

ACTION: Notice of proposed forms revisions.

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SUMMARY: This document contains a proposal by the Department of Labor, 
the Internal Revenue Service, and the Pension Benefit Guaranty 
Corporation (the Agencies) to streamline and simplify the annual 
return/report forms (the Form 5500 Series) filed for employee pension, 
welfare and fringe benefit plans under the Employee Retirement Income 
Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986, as 
amended (the Code).
    Dates, Written Comments and Public Hearing: The Agencies invite 
interested persons to submit written comments regarding the revised 
forms. Written comments (preferably 4 copies) should be submitted to: 
Office of Regulations and Interpretations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor, Room N-5669, 200 Constitution 
Ave., NW, Washington, DC 20210, Attention: Proposed Forms Revisions. 
Written comments on the revised forms must be received by the 
Department of Labor on or before November 3, 1997, and should include a 
reference to the relevant form, question, and related instruction.
    A joint public hearing on the proposed revised forms will be held 
on November 17 and (if necessary) November 18, 1997, beginning at 10:00 
a.m., in the Auditorium, Frances Perkins Building, U.S. Department of 
Labor, 200 Constitution Ave., NW, Washington, DC. Any interested person 
who wishes to present oral testimony at the hearing should submit on or 
before November 3, 1997 a written request to be heard, including a 
statement of the topics to be discussed. The request should be 
submitted to the Office of Regulations and Interpretations at the 
address above: Attention: Form 5500 Revisions Hearing. An agenda 
indicating the order of presentation of oral comments will be prepared. 
In the absence of special circumstances, each commentator will be 
allotted 10 minutes for his or her presentation. Information about the 
agenda may be obtained on or after November 3, 1997 by contacting 
George M. Holmes, Jr., Pension and Welfare Benefits Administration, 
U.S. Department of Labor, (202) 219-8515. Individuals not listed in the 
agenda will be allowed to make oral comments at the hearing to the 
extent time permits. Those individuals who make oral comments at the 
hearing should be prepared to answer questions regarding their 
comments. The hearing will be transcribed. All submissions will be open 
to public inspection in the Public Disclosure Room, Pension and Welfare 
Benefits Administration, Room N-5638, 200 Constitution Ave., NW, 
Washington, DC 20210.
    The Agencies intend that, if adopted, the revised forms will be 
effective for plan years beginning on or after January 1, 1998.

FOR FURTHER INFORMATION CONTACT: George M. Holmes, Jr., Pension and 
Welfare Benefits Administration, U.S. Department of Labor, (202) 219-
8515, for questions relating to the proposed Form 5500 as well as 
Schedules A, C, D, G, FIN and FIN-SP. James Flannery, Internal Revenue 
Service, (202) 622-6214, for questions relating to Schedules B, E, F, 
P, PEN, Q, and SSA. James J. Bloch, Pension Benefit Guaranty 
Corporation, (202) 326-4080 (x3530), for questions relating to line 10 
of Schedule PEN as well as questions regarding information requirements 
under Title IV of ERISA. For further information on any item not 
mentioned above, contact Mr. Holmes. The telephone numbers referenced 
above are not toll-free numbers.

SUPPLEMENTARY INFORMATION: Under part 1 of Title I of ERISA, Title IV 
of ERISA, and the Code, as amended, administrators of pension and 
welfare benefit plans (collectively employee benefit plans) subject to 
those provisions are required to file return/reports annually 
concerning, among other things, the financial condition and operations 
of the plans. Employers sponsoring certain fringe benefit plans and 
other plans of deferred compensation that are not subject to Title I of 
ERISA are also required under the Code to file certain information 
annually with the IRS. These annual reporting requirements are 
satisfied generally by filing the Form 5500 Series in accordance with 
its instructions and the related regulations.
    The existing Form 5500 Series includes the Form 5500 Annual Return/
Report of Employee Benefit Plan (with 100 or more participants), Form 
5500-C Return/Report of Employee Benefit Plan (with fewer than 100 
participants), Form 5500-R Registration Statement of Employee Benefit 
Plan (with fewer than 100 participants), and the statements and 
schedules required to accompany the forms. Currently, plans with fewer 
than 100 participants file the longer Form 5500-C at least every third 
year, and the shorter Form 5500-R registration statement in the two 
intervening years. The Form 5500-EZ Annual Return of One-Participant 
(Owners and Their Spouses) Retirement Plan is specifically excluded 
from consideration in this publication.
    In an effort to simplify and streamline the annual return/report 
and to reduce the reporting burden on filers, the agencies have 
developed 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). The new form 
is intended to:
    <bullet> Reduce the total amount of information required to be 
reported for many plans by eliminating information that is not useful 
to accomplish enforcement, research, or other statutorily mandated 
missions;
    <bullet> Provide plans using simple tax qualification structures 
and financial operations with correspondingly streamlined annual 
reporting requirements;
    <bullet> Allow large and small pension plan filers to report 
information on coverage requirements for qualified plans in accordance 
with the three-year testing cycle permitted under Rev. Proc. 93-42, 
1993-2 C.B. 540;
    <bullet> Target reporting requirements so that welfare plans 
generally complete fewer items than pension plans, and small plans 
complete fewer items than large plans;
    <bullet> Establish the Form 5500 as the standardized reporting 
format for all so-called ``direct filing entities''--common/collective 
trusts, pooled separate accounts, master trusts, 103-12 investment 
entities, and group insurance arrangements;
    <bullet> Eliminate redundant items and improve questions that 
historically produced frequent technical filing errors; and
    <bullet> Reduce government and filer costs associated with filing, 
receiving and processing annual reports, speed government processing, 
and enable plans and their service providers to establish more 
streamlined record keeping and filing support systems.
    The proposal eliminates the Form 5500-C/R, but maintains limited 
financial reporting similar to the Form

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5500-R for small plans. Further, plans that are currently exempt from 
filing a return/report (such as certain small unfunded/insured welfare 
plans and certain SEPs) or that are eligible for limited reporting 
options (such as certain Code section 403(b) plans) will continue to be 
eligible for that annual reporting relief.
    The proposal restructures the Form 5500 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 along with a checklist to indicate the 
schedules being filed applicable to the filer's specific type of plan. 
For most plans, the basic identifying information does not change from 
year to year and pre-printing this information should ease reporting 
burdens and reduce filing errors. The Agencies are evaluating the 
feasibility of pre-printing the basic identifying information on the 
Form 5500 after the first full filing-year cycle under the new computer 
scannable forms discussed below. The structure of the proposed form 
should also aid filers by allowing them to assemble and file a report 
that is ``customized'' to their type of plan. The Agencies are also 
publishing as part of this proposal revised filing instructions that 
are intended to be easier to use, including a quick reference chart 
with guidelines on which schedules must be filed for each type of Form 
5500 filer (large and small pension plans, large and small welfare 
plans, Direct Filing Entities and fringe benefit plans).
    Taking into consideration the Agencies' enforcement, research and 
policy needs, as well as the Department of Labor's participant/public 
disclosure obligations, the Agencies believe this restructuring, and 
the other revisions of the Form 5500 discussed below, will reduce the 
burdens and costs attributable to compliance with the annual reporting 
requirements.
    Although this publication concerns proposed revisions of the Form 
5500 Series, the Agencies believe meaningful burden hour and cost 
reductions can be achieved only through integrated implementation of 
changes to the government's system to process the forms. Accordingly, 
the Department of Labor is preparing a Request for Proposal (RFP) for a 
contractor to develop and implement a new system to simplify and 
expedite the receipt and processing of the Form 5500 Series. The new 
system is to rely on electronic filing with optical scanning technology 
and optical character recognition to computerize the paper forms. Under 
the new system, the paper forms will have to be reformatted to be 
computer scannable. While the reformatting will affect the appearance 
and length of the form, the actual number of data elements will not be 
affected. The new system is also to be developed in a way that should 
substantially increase the percentage of plans filing their Form 5500 
via electronic filing as a more efficient alternative to even scannable 
forms. A mock-up of a scannable Form 5500 is being published with the 
printed versions of the proposal. The scannable mock-up, however, does 
not necessarily reflect the way the final scannable forms will look. 
The final appearance will depend on the scanning technology selected 
for use in the new form processing system. Details on the processing 
system will be available as the RFP is finalized.

Overview of Forms Revisions

    To assist interested parties in reviewing the revised forms, an 
overview of the Agencies' proposed changes to the Form 5500 Series is 
set forth below.
    As noted above, by eliminating certain questions and developing new 
schedules, the Form 5500 itself has been revised into a short one-page 
form that serves both as a simple registration statement and as a 
``packing list'' for attaching relevant schedules. The proposed Form 
5500 constitutes eight basic questions that identify: (i) The type of 
annual report being filed, (ii) the plan on whose behalf it is being 
filed, and (iii) what schedules and how many of each are being filed as 
attachments to the Form 5500.
    Under the proposal, there is a total of thirteen schedules--five 
pension schedules, seven financial schedules, and one fringe benefit 
schedule:
    Pension Schedules: Schedule B (Actuarial Information), Schedule E 
(ESOP Information), Schedule PEN (Pension Plan Information), Schedule Q 
(Qualified Pension Plan Coverage Information), and Schedule SSA 
(Separated Vested Participant Information);
    Financial Schedules: Schedule A (Insurance Information); Schedule C 
(Service Provider Information); Schedule D (Direct Filing Entity/
Participating Plan Information); Schedule FIN (Financial Information); 
Schedule FIN-SP (Financial Information--Small Plan); Schedule G 
(Financial Transactions) and Schedule P (Trust Fiduciary Information).
    Fringe Benefit Schedule: Schedule F (Fringe Benefit Plan 
Information).
    Below is a description of the five new schedules being established 
as part of this proposal (Schedules D, FIN, FIN-SP, PEN, and Q), the 
three existing schedules being revised (Schedules A, C, and G), and a 
statement of the reasons why the Agencies are proposing to leave the 
remaining five schedules (Schedules B, E, F, P, and SSA) unchanged.

1. Schedule A (Insurance Information)

    Schedule A must be attached to the Form 5500 if any pension or 
welfare benefits under the plan (whether small or large) are provided 
by, or if the plan has any investment contracts with, an insurance 
company or other similar organization. Although most of the Schedule A 
data collection has been retained substantially unchanged, several 
significant revisions are being proposed which are designed to collect 
better information about insurance products, including conforming the 
Schedule A to recent accounting industry changes on ``current value'' 
financial reporting of investment-type contracts with insurance 
companies, and requiring: (i) Information on a plan year as opposed to 
insurance contract year basis; (ii) better identification of the type 
of insurance contracts and type of insured benefits being reported; and 
(iii) insurer's EIN (employer identification number) and NAIC (National 
Association of Insurance Commissioners) code.

2. Schedule C (Service Provider Information)

    Schedule C must be attached to the Form 5500 filed by large plans 
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 proposal limits the schedule to the 40 top paid service 
providers at or above the $5,000 threshold. Further, the proposal also 
eliminates the separate requirement to file a Schedule C to identify 
annually plan trustees and limits the current requirement to file a 
Schedule C to explain service provider terminations to accountants and 
enrolled actuaries. Small plans would continue to be exempt from the 
Schedule C.

3. Schedule D (Direct Filing Entity/Participating Plan Schedule)

    The Schedule D is a new standardized form for filing information on 
relationships between plans and master trust investment accounts 
(MTIAs), common/collective trusts (CCTs), insurance company pooled 
separate accounts (PSAs), investment entities covered under 29 CFR 
2520.103-12 (103-12 IEs), and group insurance arrangements (GIAs), 
collectively known as ``Direct Filing Entities'' or

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``DFEs.'' Currently, if a group insurance arrangement files a Form 5500 
on behalf of the participating plans under the Department of Labor 
regulation at 29 CFR 2520.104-43, the individual plans participating in 
the GIA are exempt from filing a Form 5500 or 5500-C/R. Plans currently 
participating in the other DFEs (MTIAs, 103-12 IEs, CCTs and PSAs) 
generally must file a Form 5500 or 5500-C/R; however, if the DFE files 
certain financial information directly on behalf of the administrators 
of all participating plans, the plans are allowed to limit the 
information in their separate Form 5500 or Form 5500-C/R because the 
DFE's filing is considered part of each participating plan's annual 
report. These DFE reporting rules were developed in an effort to 
simplify the annual reporting requirements for the participating plans. 
The absence of a standardized reporting format for DFE filings, 
however, makes it impossible for the Department to correlate and 
effectively use the data regarding approximately $1 trillion in plan 
assets reported by plans and DFEs. Accordingly, the proposal 
establishes the new Form 5500 as the standardized annual reporting 
format for all DFEs.
    Under the proposal, MTIAs and 103-12 IEs would be required to 
complete: (1) Applicable items on the streamlined Form 5500; (2) a 
Schedule A for each insurance contract held by the DFE; (3) a Schedule 
C to list DFE service providers receiving compensation from the DFE; 
(4) one or more Schedules D to list all participating plans at any time 
during the year and all CCTs, PSAs or 103-12 IEs that the MTIA or 103-
12 IE invested in during the year; (5) a Schedule FIN financial 
statement; (6) one or more Schedules G listing certain financial 
transactions; and (7) for 103-12 investment entities, a report of an 
independent qualified public accountant. Large plans that invest in 
MTIAs and 103-12 IEs would continue to report the value of their 
interests in these entities on one line in the plan's Schedule FIN as 
of the beginning and end of the plan year and as a single entry for net 
investment gain/loss.
    Under the proposal, as under the current Form 5500 Series, CCTs and 
PSAs could elect to file information as a DFE. If a CCT or PSA elects 
to file, they would be required to complete (1) applicable items on the 
streamlined Form 5500; (2) one or more Schedules D to list all 
participating plans at any time during the year and all CCTs, PSAs, or 
103-12IEs that the CCT or PSA invested in during the year; and (3) a 
Schedule FIN financial statement. Large plans investing in a CCT or PSA 
that files as a DFE would report the value of their interests in these 
entities on one line in the plan's Schedule FIN as of the beginning and 
end of the plan year and as a single entry for their net investment 
gain/loss during the year. If the CCT or PSA does not file a Form 5500 
as a DFE, employee benefit plans would have to break out their 
percentage interest in the underlying assets of the CCT or PSA and 
report the dollar value in the appropriate categories in the Schedule 
FIN statement of assets and liabilities (and would still report the net 
investment gain/loss as a single entry on the Schedule FIN income and 
expense statement).
    Both large and small plans would have to file a Schedule D listing 
the MTIAs, 103-12 IEs, CCTs and PSAs in which they participated, and 
would be required to list CCTs and PSAs regardless of whether the CCT 
or PSA filed as a DFE. Reports of small plans filing the Schedule FIN-
SP are not expected to be otherwise significantly affected by these 
changes.
    GIAs that file a Form 5500 (including applicable schedules and 
attachments) on behalf of their participating plans under the 
Department of Labor regulation at 29 CFR 2520.104-43, would be required 
to file a Schedule D listing the participating plans.
    The Department is specifically soliciting comments from interested 
parties on how these DFE changes can be implemented in a manner that 
minimizes the impact on plan administrators and DFEs, including 
suggestions about the use of electronic filing options and delayed 
effective dates. The Department will also be publishing a separate 
Notice of Proposed Rulemaking on regulatory amendments needed to 
accommodate the DFE changes.

4. Schedules FIN (Financial Information)/ FIN-SP (Financial 
Information--Small Plan)

    The proposal essentially incorporates the financial statements from 
the current Form 5500 (lines 31 and 32) as part of a new Schedule FIN 
(``Financial Information''). For small plan filers, the proposal 
includes a new Schedule FIN-SP (``Financial Information--Small Plan'') 
that maintains simplified financial statements similar to the current 
Form 5500-R and adds a limited number of specific investment categories 
that must be separately reported. The proposal also incorporates into 
the Schedules FIN and FIN-SP ``yes/no and amount'' questions focused on 
key compliance issues/enforcement areas involving investments, 
financial transactions, and handling of plan assets. The Schedule FIN 
also includes revised versions of the current Form 5500 questions on 
the accountant's opinion and report. Current regulatory exemptions, 
simplified reporting, and alternative methods of compliance for annual 
financial reporting by certain welfare and pension plans are expected 
to remain unchanged.<SUP>1</SUP> Since the proposal eliminates various 
questions from the current Form 5500 Series that dealt with Title I 
compliance, the Department of Labor also developed an ERISA compliance 
quick checklist to help plan administrators and other fiduciaries 
comply with Title I requirements. The checklist is to be in the Form 
5500 instruction package, but its use is to be voluntary, and it would 
not be filed with the Form 5500.
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    \1\ For example, there is no change in the waiver of the 
independent qualified public accountant requirements in 29 CFR 
2520.104-41 and 2520.104-46, or the small plan exemptions from the 
Schedule C (service provider information), the schedules of loans, 
leases or fixed income obligations in default and nonexempt 
transactions (revised Schedule G).
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5. Schedule G (Financial Transactions)

    Use of the Schedule G would be mandatory for the schedules now 
required by lines 27b, 27c, 27e, and 27f of the current Form 5500. The 
proposed Schedule G would have to be attached to the Form 5500 of a 
large plan, MTIA 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 
Schedule G), and to report nonexempt prohibited transactions (Part III 
of Schedule G). Large plans can aggregate participant loans in default 
as one item on Part I of the plan's Schedule G when certain 
requirements are met, including each loan being fully secured by the 
participant's account balance in the plan. Small plans are not required 
to file a Schedule G.
    The proposal eliminates from the Form 5500 the schedules of assets 
held for investment purposes (line 27a of the current Form 5500) and 
the schedule of reportable (5%) transactions (line 27d of the current 
Form 5500). The requirement to report this information is eliminated, 
but the records needed to generate the information on the current 
schedule of reportable transactions and schedules of assets would have 
to be maintained, and administrators of large plans would have to 
prepare and disclose that information, on request, to participants and 
other authorized parties under sections 104(b)(2) and

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104(b)(4) of ERISA.<SUP>2</SUP> To satisfy that disclosure obligation, 
however, transactions effected at the affirmative direction of 
participants in defined contribution plans could be excluded from the 
definition of ``transaction'' for the schedule of reportable 
transactions, and no ``historical cost'' entry would be needed for such 
transactions on the schedules of assets. The disclosure would have to 
be presented in an understandable and non-misleading format. Because 
the schedules of assets and reportable transactions would not be part 
of the plan's annual report, the accountant's opinion required under 
ERISA 103(a)(3)(A) would not have to cover that information, but the 
underlying books and records of the plan would continue to be subject 
to the audit requirement.<SUP>3</SUP> The Department of Labor will 
publish a Notice of Proposed Rulemaking on regulatory amendments 
necessary to accommodate these changes.
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    \2\ Participants and beneficiaries would be entitled to request, 
and receive automatically, the schedules of assets and schedule of 
reportable transactions that relate to the ``latest'' annual report 
of the plan. Other disclosure rights and obligations may arise based 
on facts and circumstances, in addition to those specified in ERISA 
section 104(b).
    \3\ The general statutory provisions and fiduciary duties 
regarding maintenance of plan records would also continue to apply 
to participant directed transactions.
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6. Schedule PEN (Pension Plan Information)

    The Schedule PEN is a new schedule that is required to be filed by 
both tax qualified and nonqualified pension benefit plans that are 
required to file Form 5500, other than annuity arrangements and 
custodial accounts under Code section 403(b)(1) and 403(b)(7), and 
individual retirement accounts/annuities under section 408. The purpose 
of Schedule PEN is to report certain information on participant 
coverage, plan distributions and funding, and the adoption of 
amendments increasing the value of benefits in a defined benefit 
pension plan. As part of a publication describing various voluntary 
compliance programs administered by the Employee Plans function, the 
IRS is also developing a compliance checklist to help pension plan 
sponsors and administrators comply with the tax qualification 
requirements of the Code and Title II of ERISA.

7. Schedule Q (Qualified Pension Plan Coverage Information)

    The Schedule Q is a new schedule for reporting qualified plan 
coverage information for qualified pension plans, including plans 
maintained by employers that operate QSLOBs, and for employers 
participating in multiple-employer plans. For a plan that is tested 
under the three-year testing cycle rule in Rev. Proc. 93-42, Schedule Q 
must be filed for the first year in the plan's testing year cycle. 
Schedule Q need not be filed for the subsequent years in the cycle if 
the employer is permitted to rely on the earlier year's testing. If the 
employer does not or cannot use the three-year testing rule in Rev. 
Proc. 93-42, Schedule Q must be filed annually. The adoption of this 
new schedule eliminates the separate Form 5500-C/R filing requirement 
that now applies to employers participating in plans that currently 
file Form 5500 as a ``multiple-employer plan (other).'' This schedule 
replaces separate statements currently required regarding the coverage 
of plans that must be disaggregated under section 1.410(b)-7 of the 
Income Tax Regulations.

8. Other Schedules

    The Schedule B (Actuarial Information) and Schedule SSA (Separated 
Participants With Deferred Vested Benefits) were not revised because 
both were recently revised and it did not appear productive to propose 
further revisions at this time. The Schedule F (Fringe Benefit Plan 
Information) also was not revised because Code section 6039D mandates 
collection of the information reported on that schedule. Lastly, the 
Schedule E (ESOP Annual Information) was not revised because it is 
filed only by ESOPs and the IRS was not aware of substantial interest 
in changing the schedule. The Agencies welcome suggestions for making 
these schedules simpler. It is anticipated that the final version of 
these schedules will be revised at a minimum to reflect changes in law 
and other appropriate updates.

9. Quick Reference Chart

    The Agencies developed a quick reference chart for the Form 5500 
instructions that indexes the schedules required from each major class 
of filer. That chart is reproduced below:

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[GRAPHIC] [TIFF OMITTED] TN03SE97.001



BILLING CODE 4510-29-C

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10. Miscellaneous Changes

    Various other changes were made as part of the substantial 
restructuring of the Form 5500 Series being proposed. Several of the 
more significant miscellaneous changes include: (1) Expanded 
utilization of codes to report plan features information on pension and 
welfare benefit plans; (2) elimination of the CUSIP (Committee on 
Uniform Securities Identification Procedures) issuer number; (3) 
simplification of requirements on reporting the total number of plan 
participants and participant subgroups; (4) deletion of LM numbers 
(file numbers on Labor Organization Annual Report Forms); and (5) 
addition of a line for the name, EIN, and classification code of a 
``Preparer.''

Other Supplementary Information:

Regulations Relating to the Proposed Forms

    For purposes of Title I of ERISA, the filing of a completed Form 
5500 (including required statements, schedules, and independent 
qualified public accountant report) generally constitutes compliance 
with the limited exemption and alternative method of compliance in 29 
CFR 2520.103-1(b). The Department intends to propose amendments to 
2520.103-1 and other annual reporting regulations to accommodate the 
form changes proposed herein. The Department will discuss the findings 
required under 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 as part of that rulemaking. The forms, 
schedules, and instructions proposed in this notice 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 such regulations are issued in final form.

Paperwork Reduction Act

    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. Currently, the Agencies are soliciting comments 
concerning the proposed revision of the Form 5500 Series, pursuant to 
Part 1 of Title 1 and Title IV of ERISA and the Internal Revenue Code.

DATES: Written comments must be submitted on or before November 3, 1997 
to be assured of consideration.

ADDRESSES: Interested parties are invited to submit written comments 
regarding the Form 5500 Series annual reporting requirements of any or 
all of the Agencies. Send comments to Mr. Gerald B. Lindrew, U.S. 
Department of Labor, PWBA/OPR, Room N-5647, 200 Constitution Avenue, 
N.W., Washington, DC 20210, telephone 202-219-4782 (this is not a toll-
free number). All comments will be shared among the Agencies.

Supplementary Paperwork Reduction Act Information:

I. Background:

    The Agencies have undertaken a revision of the Form 5500 Series in 
an effort to streamline and simplify this annual report.

II. Current Actions

    The Agencies have developed a single streamlined Form 5500 for use 
by both large and small plan filers. The Forms 5500-C and 5500-R have 
been eliminated; in general, small plans will submit information 
similar to the current 5500-C/R data collections.
    Type of Review: Revision of a currently approved collection.
    Agencies: Pension and Welfare Benefits Administration (OMB No. 
1210-0016); Internal Revenue Service (OMB No. 1545-0710); Pension 
Benefit Guaranty Corporation (OMB No. 1212-0026).
    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: The total number of annual Form 5500 filers is 
approximately 901,400. Of that total, only 801,934 filings are for 
employee benefit plans subject to the Department of Labor's 
jurisdiction under Title I of ERISA. The remaining 99,466 are made to 
comply with IRS requirements for fringe benefit plans under Code 
section 6039D, pension plans maintained outside the United States, and 
One-Participant (Owners and Their Spouses) Retirement Plans. 
Accordingly, the Labor Department's total respondents is 801,934 and 
the IRS's is 901,400.
    Total Responses: See ``Total Respondents'' Above.
    Frequency of Response: Annually.
    Estimated Time per Response, Estimated Burden Hours, Total Annual 
Burden: See below for each Agency.
    Calculation of Burden: PWBA and IRS burden estimates are based on 
different estimation methodologies (see below). The 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 (including schedules) and sending it 
to the government.
    Both the IRS and the PWBA methodologies exclude certain activities 
from the calculation of ``burden.'' If the activity is performed for 
any reason other than compliance with the federal tax administration 
system (in the case of the IRS method) or the Title I annual reporting 
requirements (in the case of the PWBA method), it was not counted as 
part of the paperwork burden. For example, most businesses or financial 
entities maintain, in the ordinary course of business, detailed 
accounts of assets and liabilities, and income and expenses for the 
purposes of operating the business or entity. In addition, the activity 
is only counted as a burden once if performed for both tax and Title I 
purposes. These recordkeeping activities were not included in the 
calculation of burden because prudent business or financial entities 
normally have that information available for reasons other than federal 
tax or Title I annual reporting. Only time for gathering and processing 
information associated with the tax/annual reporting systems, and 
learning about the law, was included.
    Three major differences exist between the IRS and PWBA 
methodologies. First, the IRS uses a methodology developed for 
estimating the paperwork burden imposed on individual and business 
taxpayers as a result of the federal tax return system to calculate 
burdens associated with the Form 5500 information return. The details 
and time estimates of PWBA's methodology were developed specifically 
for the Form 5500 Series. Second, the IRS includes burden figures for 
learning about statutory tax reporting requirements and certain tax-
related recordkeeping (e.g., depreciation accounting) in its estimate. 
PWBA has concluded plan administrators' obligations to keep financial 
records necessary to complete the Department of Labor portions of the 
Form 5500 result from usual and customary management practices for any 
financial entity, not as a result of ERISA annual reporting 
requirements.

[[Page 46563]]

The Department of Labor solicits comments on whether or not any 
recordkeeping beyond that which is usual and customary is necessary to 
complete the Department of Labor portions of the Form 5500. PWBA has 
also designed the instruction package for the Form 5500 so that filers 
generally will be able to complete the Labor Department portions of the 
Form 5500 by reading the instructions without needing to refer to the 
statute or regulations. The Labor Department solicits comments on 
whether the Form 5500 instructions are generally sufficient to enable 
filers to complete the Labor Department portions of the Form 5500 
without needing to refer to the statute or regulations. PWBA, 
therefore, has included a burden for reading the instructions in its 
PRA calculations, and finds there is no recordkeeping burden 
attributable to the Form 5500 Series. Third, PWBA does not include 
burdens for completing the Schedule E (ESOP Annual Information); 
Schedule F (Fringe Benefit Plan Annual Information) and Schedule P 
(Annual Return of Fiduciary of Employee Benefit Trust) because these 
are exclusively IRS schedules. The different methodologies and the IRS 
inclusion of burden for learning about the law, tax recordkeeping, and 
Schedules E, F and P, result in the Agencies having different total 
burden estimates. Presented below is a chart showing the total burden 
of the streamlined Form 5500 Series (including schedules) using the 
PWBA and IRS methodologies.

                                                   DOL and IRS Estimates of Total Annual Burden Hours                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Preparing/                                                                                                   
                                           Filing the                                                                                                   
                                            Form 5500                                                                                                   
                 Agency                      Series       Learning The Law Necessary To Complete    Recordkeeping Necessary to Complete    Total Annual 
                                           (including              The Form 5500 Series                    the Form 5500 Series            Burden Hours 
                                             reading                                                                                                    
                                          instructions)                                                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
IRS....................................       8,458,478  6,544,940..............................  33,682,567............................  \1\ 48,686,004
DOL....................................   \2\ 1,706,550  Legal rules are described in the Form    Financial records needed to complete    \2\ 1,706,550 
                                                          5500 instructions so filers do not       DOL portions of Form 5500 are kept as                
                                                          need to refer to statute or              usual and customary business practice                
                                                          regulations to complete DOL portions     not solely to complete the Form 5500.                
                                                          of the Form 5500.                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This does not equal the total of the other three IRS columns due to rounding.                                                                       
\2\ This does not include IRS Schedules E, F and P.                                                                                                     

    There is no separate PBGC entry on the chart because, as explained 
below, its share of the paperwork burden is very small relative to that 
of IRS and DOL.

Paperwork and Respondent Burden

    So that interested parties may better understand the burden 
associated with this information collection, the Agencies are 
presenting information on how they estimate burden. These burden 
estimates vary according to the Agencies' respective statutory 
authorities to collect information via questions in the Form 5500 
Series, the information collections for which they are responsible, the 
methodologies they use, and the categories of burden they measure. 
Based on the Agencies' burden estimates, and taking into account 
differences in statutory responsibility and methodology, the proposed 
revision to the Form 5500 Series is estimated to reduce total burden by 
12 to 13.6 percent annually over the 10-year life of the form.

Department of Labor

    Burden Estimation Methodology: The DOL uses a matrix involving a 
series of mathematical calculations to estimate burdens associated with 
preparing, sending and learning about the Form 5500 Series report. 
Burden hour calculations are determined by identifying groups of plans 
within the universe of filers that have similar reporting requirements 
and grouping them into categories based on those annual reporting 
requirements. Under the current estimating scheme, the universe is 
divided into three basic plan types: defined benefit pension plans, 
defined contribution pension plans, and welfare plans. Each of these 
major plan types is then further subdivided into multiemployer and 
single-employer plans, and within multiemployer and single-employer 
plans into self-insured plans, fully insured plans, and split-funded 
plans. Since the filing requirements differ substantially for smaller 
and larger plans, the plan types are further divided by plan size. For 
smaller plans (those with fewer than 100 participants) the 
multiemployer/single-employer distinction is not retained because there 
are so few small multiemployer plans. Thus, for larger plans, 
calculations are prepared for fifteen different plan types, and for 
smaller plans, calculations are prepared for nine different plan types.
    In addition to separating plans by type and size, to make the 
burden hour calculations manageable and more meaningful, individual 
questions on the form are grouped by the type of information requested. 
The grouping of items include the following categories: (1) 
Instructions and plan identification information; (2) plan operation 
information; (3) financial/fiduciary information; (4) plan 
qualification and tax information; (5) minimum funding questions; (6) 
plan assets with financial schedules (including Schedules C and G); (7) 
Schedule A; (8) Schedule B; and (9) Schedule SSA.
    Each group of related items is reviewed and an estimate of the time 
needed to complete that group is developed. When items in a category 
are required by more than one Agency, the estimated time required by 
each type of plan filing is allocated among the Agencies for that 
particular category of items. This allocation is based on whether only 
a single item in a group is required by more than one agency or whether 
several or all of the items are required by more than one agency. Since 
filers must read not only the instruction to particular categories but 
also general instructions pertaining to the general filing requirements 
for small and large plans, a burden is assessed for the instructions on 
the particular group and as a whole. This burden is included within the 
plan identification category.
    This methodology is designed to approximate the burden actually 
imposed on filers. Thus, a plan's reporting burden is defined in terms 
of the specific items and schedules it must comply with and will depend 
on its size, funding method and investment structures. On the average, 
it is estimated that the total completion time of the proposed Form 
5500 Series in its

[[Page 46564]]

first year will range from 1.12 hours per plan for the simplest Form 
5500 report to 4.55 hours per plan for the most complex Form 5500 
filing. For example, the annual report for a large fully insured 
welfare plan not subject to Internal Revenue Code section 6039D would 
consist of only a few questions on Form 5500 and a Schedule A 
(Insurance Information). The requirement that this plan provide very 
limited information on the Form 5500 would be reflected in the 
estimates of reporting burden time. By contrast, a large defined 
benefit pension plan intended to be tax qualified and utilizing a trust 
fund and investing in insurance contracts would submit an annual report 
completing almost all the line items of the Form 5500, plus Schedules A 
(Insurance Information), Schedule B (Actuarial Information), Schedule C 
(Service Provider Information), Schedule D (DFE/Participating Plan 
Information), Schedule FIN (Financial Statements), Schedule PEN 
(Pension Plan Information), Schedule Q (Qualified Pension Plan 
Information), and the independent accountant's report. The Department's 
methodology attempts to capture, through its categorization, these 
different reporting burdens, while remaining general and manageable 
enough to provide meaningful estimates of the characteristics of the 
reporting scheme which lead to significant differences in the burdens 
placed on different types of filers. As noted above, PWBA has not 
attributed a recordkeeping burden to the Form 5500 in its Paperwork 
Reduction Act analysis because it has concluded that plan 
administrators' obligations to keep financial records necessary to 
complete the Department of Labor portions of the Form 5500 result from 
usual and customary management practices for any financial entity, not 
as result of ERISA annual reporting requirements.
    Under the forms revisions the reduction in the Department of Labor 
burden for the 1998 reporting year results from (1) adjustments 
(changes in the Paperwork Reduction Act regarding calculation of burden 
hours vs. costs and changes in assumptions used in prior year 
calculations) and (2) program changes (revised information reporting 
requirements). On the basis of the above methodology, approximately 
1,706,550 (in its initial year) and 1,329,471 (in subsequent years) 
total hours will be needed to complete all information items on the 
annual reports required by all three Agencies and the Social Security 
Administration. Of this total, 752,555 (initial year) and 566,462 
(subsequent years) burden hours have been allocated to DOL.
    Estimated Time per Response, Estimated Burden Hours, Total Annual 
Burden (per DOL methodology and based on 801,934 respondents.):

           [Figures are in hours, unless otherwise specified]           
------------------------------------------------------------------------
                                   Year 1        Year 2        Year 3   
------------------------------------------------------------------------
Time per response range                                                 
 (completion of entire form)                                            
 \1\..........................     1.12-4.55      .55-4.55      .55-4.55
Time per response range                                                 
 (completion of DOL portion of                                          
 form)........................      .67-1.88      .39-1.88      .39-1.88
                               -----------------------------------------
      Total burden hours \1\..     1,706,550     1,329,471     1,329,471
      Total DOL burden hours..       752,555       566,462       566,462
      Total burden hour cost                                            
       range (millions) \1\                                             
       \2\....................    $90.4-99.0    $82.9-89.5    $82.9-89.5
      Total DOL burden hour                                             
       cost range (millions)..    $29.0-32.8    $25.3-28.1    $25.3-28.1
------------------------------------------------------------------------
\1\ This does not include IRS Schedules E, F and P.                     
\2\ This includes the start-up costs associated with upgrading automated
  systems to accommodate the new Form. These costs have been distributed
  pro-rata over the expected ``life'' of the new Form, 10 years.        

    Estimated Share of Total Form 5500 Series Preparation Burden: 44 
percent (initial year) and 43 percent in subsequent years.
    Estimated Reduction in Burden Due to Streamlining Project: 12 
percent annually over the estimated 10-year life of the Form; this 
figures includes an increase in burden in the first year due to start-
up costs and system changes to adjust to the new form.

Department of the Treasury

    Burden Estimation Methodology: IRS's estimates of business taxpayer 
burden are calculated using a series of mathematical models that were 
developed from regression analysis of survey data on the amount of time 
that partnerships, corporations, and their paid tax preparers spend 
performing activities that are necessary to meet tax filing 
requirements. These activities, which correspond to the Paperwork 
Reduction Act's definition of burden (44 U.S.C. 3502(2)), are: (1) 
Recordkeeping, (2) learning about tax law, (3) preparing tax forms, and 
(4) copying, assembling, and sending tax forms to IRS. A burden 
equation for each activity takes into account basic characteristics of 
tax forms and instructions, form and line usage by taxpayers, and 
characteristics of the taxpayer populations using the forms. Certain 
activities, however, have been excluded from the definition of burden. 
If the activity is performed for any reason other than compliance with 
the federal tax administration system, it is not counted as part of the 
tax paperwork burden. For example, most businesses maintain detailed 
accounts of income and expenses, and profit and loss, for the purpose 
of operating the business. These recordkeeping activities were not 
included in the definition of burden, despite the fact that there are 
some businesses, particularly those which do not borrow funds from 
banks, that prepare this type of information only to meet business tax 
requirements. Prudent businesses normally have that information 
available for reasons other than federal taxes. Only the time for 
gathering and processing information associated solely with the tax 
system, such as depreciation accounting and the review of tax returns 
prepared by professional tax advisors, was included.
    The data used to construct the burden models for business taxpayers 
were obtained from a survey of 4,000 corporations and partnerships and 
their paid tax preparers. These businesses were sent a questionnaire 
that requested information on how much time they spent performing 
activities that they undertook for the express purpose of meeting their 
tax filing requirements. Multiple linear regression analysis was used 
to identify variables that correlated with time spent on taxes. Through 
careful model specification, more than 100 variables that were likely 
to have a causal relation with time spent were tested. Some of the 
predictor variables in the final burden models include (for a given 
form): (1) The total number of

[[Page 46565]]

annual taxpayer responses filed, (2) the fraction of taxpayers using 
paid preparers, (3) the total number of line items on the form, (4) the 
total number of references to the Internal Revenue Code and regulations 
appearing on the form and its instructions, and (5) the total number of 
attachments requested that are IRS forms. The accuracy of the burden 
estimates that result from the models reflect the quality of survey 
data obtained from taxpayers. While every effort was made to obtain 
valid burden information from a representative sample of taxpayers, the 
accuracy of the data depended on their ability and conscientiousness in 
reporting accurately their tax activity times.
    The business burden models predict by type of activity (i.e., 
recordkeeping, learning, obtaining materials, locating/using a 
preparer, preparing, sending) and by preparer (paid vs. self) the 
average business taxpayer paperwork burden to file a given form. The 
total burden for all business taxpayers filing the form is obtained by 
summing the burden over all activities, which results in the total 
burden for each taxpayer, and then multiplying by the total number of 
taxpayer responses submitted during the tax year. It should be 
emphasized that the taxpayer burden models predict the average 
paperwork burden borne by the population that file a given form. For 
any form, the distribution of time burden across the filing population 
may vary considerably. For example, the size of the business completing 
the form or the complexity of its tax situation will have a direct 
bearing on the amount of time spent. This is especially true for the 
Form 5500 burden estimates, since large plans will complete different 
portions of the schedules for Form 5500 and will therefore have a 
different paperwork burden than small plans. The burden models 
necessarily represent a substantial simplification of a very complex 
situation involving the interaction of the tax system and diverse 
income and revenue generating tax entities.
    Estimated Time per Response, Estimated Burden Hours, Total Annual 
Burden (per IRS methodology and based on 901,400 respondents):
    The time needed to complete and file the forms listed below 
reflects the combined requirements of the IRS, Department of Labor, 
Pension Benefit Guaranty Corporation, and the Social Security 
Administration as calculated by the IRS using the IRS methodology. 
These times will vary depending on individual circumstances. The 
estimated average times are:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Copying,                                        
                                      Recordkeeping      Learning about the   Preparing the form    assembling, and       Total time per    Total annual
                                                          law or the form                           sending the form         response       burden hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 5500........................  11 hr 14 min.......  5 hr 26 min........  6 hr 47 min........  16 min.............  23 hr 43 min.......    21,381,208
Sch A............................  17 hr 56 min.......  ...................  17 min.............  ...................  18 hr 14 min.......     4,521,787
Sch B Part 1.....................  30 hr 37 min.......  3 hr 16 min........  3 hr 55 min........  ...................  37 hr 48 min.......     3,402,000
Sch B Part 2.....................  16 hr 1 min........  1 hr 23 min........  1 hr 43 min........  ...................  19 hr 7 min........        57,360
Schedule C.......................  4 hr 47 min........  ...................  5 min..............  ...................  4 hr 52 min........       486,000
Schedule D.......................  2 hr 23 min........  ...................  2 min..............  ...................  2 hr 26 min........        10,935
Sch E (Non-leveraged)............  1 hr 12 min........  12 min.............  13 min.............  ...................  1 hr 37 min........         8,100
Schedule E (Leveraged)...........  10 hr 2 min........  1 hr 41 min........  1 hr 56 min........  ...................  13 hr 39 min.......        27,320
Schedule F.......................  2 hr 52 min........  24 min.............  28 min.............  ...................  3 hr 44 min........       208,880
Schedule G.......................  9 hr 49 min........  24 min.............  34 min.............  ...................  10 hr 47 min.......         6,993
Schedule P.......................  1 hr 55 min........  30 min.............  33 min.............  ...................  2 hr 58 min........     2,095,680
Sch PEN I........................  2 hr 52 min........  ...................  3 min..............  ...................  2 hr 55 min........       627,800
Sch PEN II.......................  9 hr 34 min........  ...................  9 min..............  ...................  9 hr 43 min........     1,535,950
Sch Q............................  11 hr 43 min.......  3 hr 53 min........  4 hr 14 min........  ...................  19 hr 50 min.......     1,408,833
Sch FIN..........................  32 hr 17 min.......  53 min.............  1 hr 28 min........  ...................  34 hr 38 min.......     2,355,520
Sch FIN-SP.......................  9 hr 5 min.........  42 min.............  53 min.............  ...................  10 hr 40 min.......     8,550,938
Sch SSA..........................  5 hr 30 min........  6 min..............  11 min.............  ...................  5 hr 47 min........     2,000,700
  Total..........................  ...................  ...................  ...................  ...................  ...................    48,686,004
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated Share of Total Form 5500 Series Burden: 56%.
    Estimated Reduction in Burden Due to Streamlining Project: 13.6%.

Pension Benefit Guaranty Corporation

    Burden Estimation Methodology: PBGC's share of the Form 5500 
paperwork burden is very small relative to that of IRS and DOL. The 
paperwork burden allocated to PBGC includes a portion of the general 
instructions, basic plan identification information, a portion of 
Schedule B, and item 10 on Schedule PEN.
    PBGC follows DOL's methodology for computing estimates of its share 
of the Form 5500 paperwork burden. To estimate the PBGC-allocated 
burden associated with the general instructions and plan identification 
items, PBGC simply applies its applicable percentage to the burden 
estimates computed by DOL.
    PBGC shares a portion of the burden associated with Schedule B with 
IRS. To estimate the PBGC-allocated burden associated with the shared 
items on Schedule B, PBGC modifies the burden estimates computed by IRS 
so that they conform to the DOL methodology, and simply applies its 
applicable percentage to the modified burden estimate.
    Estimated Share of Total Form 5500 Series Burden: 18,600 hours and 
$2.6 million dollars per year.
    Estimated Reduction in Burden Due to Streamlining Project: The 
PBGC's share of Form 5500 burden is higher than in previous years 
because the Agencies have increased PBGC's percentage of the overall 
burden to more accurately reflect PBGC's use of Form 5500 information. 
In particular, PBGC has been allocated a larger share of Schedule B 
burden than in the past because of PBGC's concern with plan funding. 
Thus, although some PBGC-related items have been eliminated from the 
streamlined Form 5500, PBGC's share of the Form 5500 burden is higher 
than when it was last reported in 1994.

Request for Comments

    In addition to the specific questions throughout this notice, the 
Agencies are particularly interested in comments that:
    <bullet> Evaluate whether the proposed collection of information is 
appropriate for the type of disclosure required of the respondents, 
including whether the information will have practical utility;

[[Page 46566]]

    <bullet> 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 (which appear above);
    <bullet> Propose ways to enhance the quality, utility, and clarity 
of the information to be collected; and
    <bullet> Propose ways to 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 submissions of responses.
    In addition, the Agencies are interested in comments that:
    <bullet> Evaluate the Agencies' respective burden estimation 
methodologies;
    <bullet> Assess the need for and accuracy of the IRS's and 
Department of Labor's respective estimates of recordkeeping and 
learning about the law burdens attributable to this filing requirement; 
and
    <bullet> Estimate capital or start-up costs and costs of operation, 
maintenance, and purchase of services to comply with this filing 
requirement.
    Comments submitted in response to this notice will be summarized 
and included in the request for Office of Management and Budget 
approval of the information collection request. All comments will 
become a matter of public record.

Statutory Authority

    Accordingly, pursuant to the authority in sections 101, 103, 104, 
109, and 4065 of ERISA, and sections 6039D and 6058 of the Code, it is 
proposed that the Form 5500 Series Annual Return/Report Forms and the 
instructions thereto be revised as set forth below.

    Signed at Washington, D.C. this 21st day of August, 1997.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S. 
Department of Labor.
Evelyn A. Petschek,
Assistant Commissioner, Employee Plans and Exempt Organizations, 
Internal Revenue Service.
David M. Strauss,
Executive Director, Pension Benefit Guaranty Corporation.

BILLING CODE 4510-29-P

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[FR Doc. 97-22878 Filed 9-2-97; 8:45 am]
BILLING CODE 4510-29-C