21068 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

1For example, plans eligible to file as small plans

that take advantage of the simplified reporting rules

will continue to be exempt from the annual audit

requirements contained in ERISA section 103 and

will continue to be relieved of the obligation to file

certain schedules required for large plan filers (e.g.,

Schedule C—Service Provider Information).

2The amendments also delete the cross-reference

to obsolete § 2520.103–7. This provision was

removed from the Code of Federal Regulations on

July 1, 1996 (61 FR 33847).

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

29 CFR Part 2520

RIN 1210–AA52

Annual Reporting and Disclosure

Requirements

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Final rule.

SUMMARY: This document contains

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). The amendments

contained in this document are

necessary to conform the regulations to

revisions to the annual return/report

forms (Form 5500 Series) intended to

streamline the annual report required to

be 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,

which were published in the Federal

Register on February 2, 2000, 65 FR

5026, 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 amendments contained in

this document modify the reporting

requirements for certain group

insurance arrangements. The remaining

amendments are technical in nature and

are designed to clarify existing reporting

regulations. 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: Effective Date: This regulation is

effective on May 19, 2000. The

amendments generally apply to

employee benefit plan years beginning

on or after January 1, 1999.

FOR FURTHER INFORMATION CONTACT: Eric

A. Raps, Office of Regulations and

Interpretations, Pension and Welfare

Benefits Administration (PWBA), (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

generally 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.

On September 3, 1997, the

Department in conjunction with the

Internal Revenue Service and Pension

Benefit Guaranty Corporation (the

Agencies) published in the Federal

Register (62 FR 46556) proposed

changes to the Form 5500 Series. 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. In response

to public comments, the Agencies made

various adjustments to the proposed

forms and instructions. Those

comments and the changes in the forms

and instructions are discussed in the

notice of adoption of revised forms

published separately on February 2,

2000, in the Federal Register (65 FR

5026).

As part of the development of the

revised Form 5500 Series, the

Department published in the Federal

Register (63 FR 68370), on December 10,

1998, proposed amendments to the

annual reporting regulations (Part 2520

of Chapter XXV of Title 29 of the Code

of Federal Regulations) which were

necessary to implement certain of the

proposed changes to the Form 5500

Series. A number of technical

amendments to the regulations were

also proposed in order to update certain

of the reporting and disclosure

regulations. In the December 10, 1998

notice, the Department stated that the

public comments submitted in response

to the September 3, 1997 Notice of

proposed forms revisions would be

treated as part of the public record for

the Notice of proposed rulemaking, and,

to the extent those comments included

information relevant to the proposed

regulatory amendments, the Department

would treat those comments as

comments on the Notice of proposed

rulemaking to avoid the need to submit

duplicate public comments. The

Department received four comments in

response to the December 10, 1998

notice.

The Department has decided, after

reviewing the relevant comments on the

proposed amendments and proposed

form revisions, to adopt the proposed

regulatory amendments largely as

proposed with certain technical or

clarifying changes.

B. Discussion of the Final Regulation

and Comments

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

September 3, 1997 Notice of proposed

forms revisions for improving the Form

5500 Series was the development of one

Form 5500 for use by both ‘‘large plan’’

filers (plans that previously could file

the Form 5500) and ‘‘small plan’’ filers

(plans that previously could file the

Form 5500–C/R. The new Form 5500

was structured along the lines of tax

returns familiar to individual and

corporate taxpayers—-a simple 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. Although the Form

5500–C/R was eliminated, limited

financial reporting options for small

plans has been preserved.1 To

accommodate these form changes, the

regulatory amendments to § 2520.103–1

update the references to the annual

report in that section to reflect the new

structure and components of the Form

5500 Series.2

2. Section 2520.103–2

Welfare plans participating in a group

insurance arrangement (GIA) are exempt

from filing individual annual reports

under conditions set forth in

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21069

§ 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

§ 2520.104–43. The annual report

required to be filed under § 2520.103–2

must contain a completed Form 5500,

any required schedules and

attachments, 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 § 2520.103–2(b)(5).

As with the changes adopted in

§ 2520.103–1, the regulatory

amendments update the references in

§ 2520.103–2 to the annual report to

reflect the new structure and

components of the Form 5500 Series.

The regulatory amendments also

conform § 2520.103–2 to the

amendments of §§ 2520.104–21 and

2520.104–43 (described in section B.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 Series. The Schedule

D, which is described in more detail

below, is primarily intended to serve as

a multipurpose schedule for reporting

certain information on relationships

between plans and entities, including

GIAs, that are classified as ‘‘direct filing

entities’’ or DFEs.

3. Sections 2520.103–3, 2520.103–4,

2520.103–9, 2520.103–12 and 2520.103–

1(e)

(a) Common/Collective Trusts (CCTs)

and Pooled Separate Accounts (PSAs)

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 §§ 2520.103–3 and

2520.103–4, a plan investing in these

entities generally is not required to

include information regarding the

individual transactions of the entity in

the plan’s annual report. Rather, the

plan must 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 §§ 2520.103–3(c)(3) and

2520.103–4(c)(3), exempts plans and

GIAs from filing a statement of the

assets and liabilities of the CCT and/or

PSA as part of their annual report if the

bank, trust company, similar institution

or insurance carrier sponsoring the CCT

or PSA files directly with the

Department a statement of assets and

liabilities for the fiscal year of the CCT

or PSA ending with or within the plan

year for which the information is being

filed, and a list of participating plans

identified by employer identification

number (EIN), plan number and name of

plan sponsor. In such a case, the bank,

trust company, similar institution or

insurance carrier sponsoring the CCT or

PSA that files a statement of assets and

liabilities directly with the Department

must, within 120 days after the end of

the plan year of the participating plan,

transmit and certify the information

needed by the plan administrator to file

the annual report including, among

other things, the CCT’s or PSA’s annual

statement of assets and liabilities. See

§§ 2520.103–5 and 2520.103–9(b)(3)(ii).

In addition, the bank, trust company or

insurance carrier sponsoring the CCT or

PSA must furnish to the plan

administrator a certification that a copy

of its statement of assets and liabilities

has been timely filed with the

Department.

The absence of a standardized report

for CCTs and PSAs to use in filing

information directly with the

Department has made it virtually

impossible for the Department to

correlate and effectively use the data

regarding the plan assets held for

investment by CCTs and PSAs. Further,

the value of plan assets invested in

CCTs and PSAs increased between 1990

and 1996, the latest year for which

information is available, from $113.9

billion to $280 billion. The Department,

accordingly, has concluded that a

change in the current reporting rules is

needed to enable it to continue to satisfy

its research, disclosure and enforcement

responsibilities.

Under the new Form 5500 Series and

revised annual reporting regulations, as

under the current Form 5500 Series and

regulations, CCTs and PSAs may still

elect to file information on behalf of

their participating plans. Also, all CCTs

and PSAs must notify participating

plans within 120 days after the end of

the plan year whether it intends to file

a Form 5500 as a DFE, and furnish the

plan administrator with the CCT’s or

PSA’s statement of assets and liabilities

as well as additional information about

the assets held by such CCT or PSA

needed by the plan administrator to

satisfy its reporting obligations under

Title I of ERISA.

The major change in this area is the

new requirement that CCTs and PSAs

electing to file as DFEs must report

information on the Form 5500 as the

standardized reporting format for all

filers. In the case of a CCT or PSA that

elects to file as a DFE, the CCT or PSA

must complete: (i) applicable items on

the revised Form 5500; (ii) a Schedule

D to list all participating plans at any

time during the year and all CCTs,

PSAs, or investment entities described

in § 2520.103–12 (103–12 IEs) that such

CCT or PSA invested in during the year;

and (iii) 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 that elect to file as a DFE

may continue to include in its annual

report, pursuant to revised §§ 2520.103–

3 and 2520.103–4, the current value of

its interest in these entities as a single

entry on the appropriate lines in the

plan’s Schedule H (Financial

Information) 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 reports on the plan’s

Schedule H income and expense

statement the net investment gain/loss

for each class of DFE as a single entry

for each class of DFE. Schedule D (DFE/

Participating Plan Information) must be

attached to the plan’s Form 5500 to

report information about the plan’s

participation in all CCTs and PSAs,

regardless of whether they file as DFEs.

In the case of small plans with CCT

or PSA investments, regardless of

whether the CCT or PSA files as a DFE,

the small plan must file a Schedule D,

but will 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

has not changed significantly from the

current reporting requirements.

Similarly, except for the addition of

Schedule H (Part II), generally the

information that must be filed by a CCT

or PSA that elects to file as a DFE would

be substantially the same as the current

reporting requirements.

Under revised §§ 2520.103–3 and

2520.103–4, if a CCT or PSA does not

file a Form 5500 as a DFE, large

employee benefit plans must break out

their percentage interest in the

underlying assets of the CCT or PSA and

21070 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

3The Department did not extend the filing due

date for GIAs (i.e., due no later than the last day

of the seventh calendar month after the end of the

GIA fiscal year) because the GIA filing is in lieu of

the plan’s filing rather than supplementing the

plan’s filing (as is the case of filings made by CCTs,

PSAs, master trusts and 103–12IEs). GIAs, however,

are able to obtain the filing extension that is

available to plans (i.e., 21⁄2 months by timely filing

an IRS Form 5558).

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 will 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 general

investment categories on the Schedule

H (for example, 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) such that 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. Also, large plan filers

investing in CCTs and PSAs that do not

file as DFEs may 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 will 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 will be

reported on the schedule of assets held

for investment and the Schedule D).

The Department believes that these

changes to the reporting requirements

for plans investing in CCTs and PSAs is

the best available alternative for

effectively capturing the information

needed to carry out the Department’s

oversight responsibilities about the

substantial amount of plan assets held

by CCTs and PSAs, while ensuring that

there is adequate disclosure regarding

those plan investments 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.

Some commentators stated that

substantial lead time would be needed

by CCTs and PSAs to prepare for the

new reporting requirements and

suggested delaying the implementation

year. As discussed in the Notice of

Adoption of Revised Forms published

separately on February 2, 2000, in the

Federal Register (65 FR 5026), to

facilitate the transition to the new

reporting rules for DFEs, the Department

is clarifying the due date for Form 5500

DFE filings and adopting a transitional

reporting rule for DFEs, other than GIAs,

and for plans participating in DFEs,

other than GIAs. First, as to the due

date, inasmuch as the DFE filing

continues to be considered an integral

part of the annual report of each

participating plan, the plan’s annual

report will continue to be treated as not

complete unless the DFE information is

filed within the prescribed time. The

regulatory amendments clarify that, as

with the current rule for statements of

assets and liabilities, the DFE Form

5500 filing should pertain to the DFE

fiscal year ending with or within the

plan year. For example, if a DFE fiscal

year begins on July 1 and ends on June

30, and the plan year begins on January

1 and ends on December 31, the DFE’s

1999 Form 5500 filing should be for the

fiscal year of the DFE ending on June 30,

1999. The regulatory amendments also

establish the filing due date for all DFEs,

other than GIAs, as no later than 91⁄2

months after the end of the DFE’s fiscal

year.3 This structure is intended to

provide a simple and predictable filing

deadline for DFEs while also ensuring

that all DFE filings will be due on or

before the latest possible due date for

the annual report of any participating

plan.

Second, the transitional rule applies

to plans participating in CCTs or PSAs

which do not elect to file as a DFE for

their fiscal year ending in 1999. The

transitional rule waives for the 1999

plan year the requirement that large

plan filers break out their percentage

interest in the underlying assets of the

CCT or PSA that do not file as DFEs as

dollar value entries in the appropriate

categories on the asset and liability

statement contained in Schedule H

(Financial Information). Rather, for the

1999 plan year, plans may report their

interest in the CCT or PSA on the

aggregate amount lines of the plan’s

asset and liability statement (i.e., lines

1c(9) and 1c(10) of Schedule H) as of the

beginning and end of the plan year even

if the CCT or PSA does not file a Form

5500 as a DFE. Plans participating in a

CCT or PSA also are not required to

attach the CCT’s or PSA’s statement of

assets and liabilities to its 1999 filing.

(b) Master Trusts and 103–12

Investment Entities

Section 2520.103–1(e) provides for

special reporting rules for plans that

participate in master trusts. In general,

a master trust is a trust maintained by

a bank, trust company or similar

regulated financial institution to hold

the assets of more than one plan

sponsored by a single employer or by a

group of employers under common

control. Such plans must report the

value of their interest in the master

trusts as a single asset category in the

plan’s statement of assets and liabilities.

The plan’s share of master trust

earnings, and realized and unrealized

gains and losses is reported in the plan’s

statement of income, expenses and

changes in net assets for the plan year.

Under current rules, a separate annual

report for each master trust is required

to include certain information such as

the statement of assets and liabilities,

income and expense statement, service

provider information, five percent

reportable transactions schedule and

schedule of assets held for investment,

all of which are required to be

separately reported for each master trust

investment account. The amendments to

§ 2520.103–1(e) generally do not change

the information required to be reported

regarding the master trust and the

related master trust investment

accounts, but rather establish the Form

5500 Series as the standardized annual

reporting format for each master trust

investment account.

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

§ 2510.3–101. Specifically, if the 103–12

IE files certain information directly with

the Department, the plan administrator

is not required to include in the plan’s

annual report information regarding the

underlying assets and individual

transactions of the 103–12 IE. Instead,

the administrator may report regarding

the plan’s investment or units of

participation in the investment entity.

The amendments to § 2520.103–12(b) do

not change the information required to

be reported by the 103–12 IE, but rather

establish the Form 5500 Series as the

standardized reporting format.

4. Section 2520.103–5

Section 2520.103–5 implements for

certain annual reporting purposes the

requirement in section 103(a)(2) of the

Act under which insurance carriers or

other organizations which provide some

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21071

4Neither the new Form 5500 nor these regulatory

amendments change the plan sponsors’ obligations

described in § 2520.103–5.

or all of the benefits under a plan or

hold plan assets, banks or similar

institutions which hold plan assets, and

plan sponsors 4 must 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

employee benefit plans participating in

a CCT or PSA generally will be affected

by whether such CCT or PSA directly

files as a DFE, § 2520.103–5 has been

amended to clarify the notice and

information obligations CCT and PSA

sponsors have to plan administrators.

In the case of a CCT or PSA, the

amendments require that such CCT or

PSA notify its participating plans

whether 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. The notification

must be provided within the same

period of time already required by

§ 2520.103–5 (i.e., 120 days after the

close of each participating plan’s plan

year). Revised § 2520.103–5 does not

contain detailed rules relating to the

manner of the exchange of information

between the plan and the CCT or PSA.

Rather, plan administrators should

develop with the sponsors 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. The plan administrator,

however, continues to be responsible for

monitoring the conduct of the CCT or

PSA sponsor and ultimately may be

subject to Title I annual reporting

penalties if the plan’s annual report is

rejected because the CCT or PSA failed

to meet its commitment to file a DFE

Form 5500 or because of defects in the

DFE information filed by the CCT or

PSA.

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, and

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 purposes).

The proposed regulations would have

amended the reportable transactions

rules to no longer require that

participant directed transactions under

an individual account plan be reported

on the schedule of reportable

transactions. Similarly, the proposed

amendments to § 2520.103–11 would

have eliminated for such participant

directed assets the requirement to

prepare the ‘‘historical cost’’ entry on

the schedules of assets held for

investment purposes. The amendments

would not have relieved the

administrator from including in the

schedules of assets held for investment

purposes descriptions and current

values for assets held at a participant’s

or beneficiary’s direction. The

amendments are being adopted largely

as proposed.

Sections 2520.103–6 and 2520.103–

11, as amended, provide that, solely for

purposes of the reporting relief for

participant directed transactions, a

transaction will be considered

‘‘directed’’ by a participant or

beneficiary if it has been authorized by

such participant or beneficiary. The

Department in the final rule has

modified the definition of the term

‘‘directed’’ by eliminating the

requirement that the participant or

beneficiary ‘‘affirmatively’’ authorize

the transaction. The purpose of this

change is to clarify that the term

‘‘directed’’ encompasses investments

authorized through automatic

enrollments, negative investment

elections or default investment options

under the terms of the plan instrument

or instruments. This modification is

intended to respond to comments that

indicated the proposed reporting relief

under §§ 2520.103–6 and 2520.103–11

would be ineffective if plan

administrators were required to

segregate such authorized transactions

made without an ‘‘affirmative’’ direction

from a participant or beneficiary. The

Department notes, however, that these

amendments do not affect the

conditions for the fiduciary liability

relief prescribed by § 2550.404c–1

which applies to a narrower class of

transactions.

The Department is also amending

§ 2520.103–6 to include a special rule

for the reportable transaction schedule

for initial plan years. Section 2520.103–

6(b)(1) currently requires calculation of

the 5% thresholds for reportable

transactions to be calculated using

current value of assets as of the

beginning of the plan year. Concerns

have been expressed by filers that in the

case of an initial plan year the current

rule results in virtually all investment

transactions during such plan year as

being reportable transactions under

§ 2520.103–6. The Department does not

believe that this result was intended

under ERISA inasmuch as the purpose

of the reportable transaction rules is to

identify transactions relating to a

significant portion of the plan’s assets

because these transactions are likely to

pose the greatest financial risk to a plan.

Accordingly, the Department is

amending § 2520.103–6 to provide that

the current value of plan assets as of the

end of the plan year can be used for

preparing the schedule of reportable

transactions for the initial plan year.

Although the schedule of reportable

transactions and schedules of assets

held for investment purposes continue

to be required as part of the annual

report, filers are allowed to continue to

use the format prescribed by the

instructions to the Form 5500 or a

similar format for preparing the

schedules as long as the content

requirements of §§ 2520.103–6 and

2520.103–11 are met and the same size

paper as the Form 5500 is used.

6. Section 2520.103–10

Section 2520.103–10 identifies the

separate financial schedules that are

required to be included in the annual

report filed for a plan under § 2520.103–

1(a)(2) or a GIA under § 2520.103–2. The

Department is amending § 2520.103–10

to update references to the annual report

financial schedules to the schedules

associated with the new Form 5500.

Further, § 2520.103–10 is being

amended to reflect the fact that under

the new Form 5500 the use of the

revised Schedule G is mandatory for

large plans, master trust investment

accounts, 103–12 IEs and GIAs required

to report a schedule of party in interest

transactions, a schedule of loans and

fixed income obligations in default,

and/or a schedule of leases in default.

These schedules, through the 1998 plan

year, could be filed on the Schedule G

or by using a similar format and using

the same size paper as the current

Schedule G.

7. Section 2520.104–21 and Section

2520.104–43

Sections 2520.104–21 and 2520.104–

43 provide an exemption from certain

Title I reporting and disclosure

requirements for welfare plans that are

part of a GIA, as defined in paragraph

(b) of section 2520.104–21, if the GIA

files a Form 5500 Series annual report

on behalf of all the participating plans.

The annual reporting exemption is

available if the arrangement, among

other things, uses a trust (or other entity

such as a trade association) as the

21072 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

5ERISA Technical Release 92–01 (57 FR 23272

and 58 FR 45359) announced interim relief from the

trust and certain reporting requirements of ERISA

for certain contributory welfare plans. Cafeteria

plans of the individual employers participating in

a GIA may continue to rely on the trust relief in

Technical Release 92–01. Technical Release 92–01,

however, is not available to GIAs or to participant

contributions after they have been segregated from

an employer’s general assets and transmitted to the

GIA.

holder of the insurance contracts and

the conduit for payment of premiums to

an insurance company. See

§§ 2520.104–21(b)(3) and 2520.104–43.

The amendments to §§ 2520.104–21 and

2520.104–43 provide that the reporting

exemption is available only in those

cases in which the GIA utilizes a trust

as the conduit for the payment of the

premiums. The amendments also

modify the examples in paragraph (d) of

§ 2520.104–21 to reflect that change. In

the Department’s view, clarifying the

trust requirement in the reporting

exemption for GIAs conforms it with

section 403 of ERISA and § 2550.403a–

1, which do not provide a trust

exception for GIAs.5 The Department

does not envision that the amendments

will create administrative burdens for

GIAs or result in increased costs for

participating plans because the plan

assets already must be separately

accounted for and subjected to an

annual audit by an IQPA. However, the

Department has adopted a delayed

applicability date to allow a transition

period for GIAs that currently do not

use a trust. Specifically, the requirement

that GIAs must use a trust as the conduit

for the payment of all insurance

premiums to the insurance company, for

purposes of the reporting exemption

described in §§ 2520.104–21 and

2520.104–43, applies beginning with the

first reporting year commencing on or

after January 1, 2001.

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 § 2520.104–46 waives

the IQPA requirement for such small

plans. In general, small plans eligible to

file simplified reports are currently

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 are replacing the Form 5500

and the Form 5500–C/R with a single

Form 5500 for use by all filers, with

simplified reporting options for small

plans being incorporated into the

structure and components of the new

Form 5500. The final rule amends

§§ 2520.104–41 and 2520.104–46 to

conform the terms used in the

regulations to the new Form 5500.

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 current Form 5500

Series instructions provide for limited

reporting 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 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. The Department is adopting a

technical amendment to § 2520.104–44

to clarify the availability of this

exemption.

10. Section 2520.104b–10

Section 2520.104b–10 sets forth the

requirements for the summary annual

report (SAR) and prescribes formats for

such reports. The amendments to

section 2520.104b–10 conform the SAR

requirements to the new Form 5500

Series. For example, the amendments

restate the information listed in

§§ 2520.104b–10(d)(3) and 2520.104b–

10(d)(4) that is available to participants

and beneficiaries under the heading

‘‘Your Rights to Additional

Information’’ so that it is consistent with

the new Form 5500 Series.

The amendments also 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-ofcharge a copy of the Form 5500–R filed

by the plan. Under the second method

of compliance, § 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 has been eliminated, small

plans will be required to furnish a SAR

every year.

In order to facilitate compliance with

the SAR requirement, the Department

also updated its cross-reference guide to

correspond to the line items of the SAR

to the relevant line items on the new

Form 5500 and/or schedules. The crossreference guide, as before, continues to

be an appendix to § 2520.104b–10.

C. 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 of Labor

(Secretary) to prescribe by regulation

simplified reporting for pension plans

that cover fewer than 100 participants.

Section 104(a)(3) authorizes the

Secretary to exempt any welfare plan

from all or part of the reporting and

disclosure requirements of Title I of

ERISA or to provide simplified

reporting and disclosure, if the

Secretary finds that such requirements

are inappropriate as applied to such

plans. Section 110 permits the Secretary

to prescribe for pension plans

alternative methods of complying with

any of the reporting and disclosure

requirements if the Secretary finds that:

(1) The use of the alternative method is

consistent with the purposes of ERISA

and it provides adequate disclosure to

plan participants and beneficiaries, and

adequate reporting 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).

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 are addressed below.

1. General Findings

In adopting revisions to the Form

5500 Series and the amendments in this

final rule, the Department attempted to

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21073

6ERISA § 3(26) defines ‘‘current value’’ as ‘‘fair

market value where available and otherwise the 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.’’

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.

The Department makes 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 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 revisions to the Form

5500, would be inappropriate in the

context of welfare plans for the same

reasons discussed in this section C (the

streamlined form reduces filing burdens

without impairing enforcement,

research and policy needs while at the

same time providing adequate

disclosure to participants and

beneficiaries).

2. Special Findings

(a) Schedule A (Insurance Information)

Schedule A must be attached to the

annual report if any benefits under a

plan that is subject to Title I of ERISA

are provided by an insurance company,

insurance service or other similar

organization. Although most of the

Schedule A data has been retained

substantially unchanged, certain

changes were made to 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 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 interests of plan

participants, with generally accepted

accounting principles (GAAP). The

Schedule A changes adopted by the

Department are intended to be

consistent with the Financial

Accounting Standards Board 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

generally should be the same for small

and large plans, the revised Form 5500

does not provide different Schedule A

reporting standards depending on the

size of the plan.

The Department also believes that the

additional information required to be

reported on the Schedule A (i.e.,

reporting fees and commissions paid to

persons other than agents and brokers,

improved identification of the types of

insurance products, the NAIC code, and

the EIN of the insurance company (or

similar organization)) is useful to the

Department in accomplishing its

oversight responsibilities, and should

not be burdensome to plans inasmuch

as it can be provided to plans at the

same time the insurance company (or

similar organization) furnishes the other

information required by section

103(a)(2) and the related annual

reporting regulations.

(b) Schedule C (Service Provider

Information)

Schedule C must be attached to the

Form 5500 filed by large plan filers if

any person received, directly or

indirectly, $5,000 or more in

compensation from the plan for all

services rendered to 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 certain service

provider terminations to terminations of

accountants and enrolled actuaries, and

limiting the number of plan service

providers required to be individually

reported to the forty top paid service

providers at or above the $5,000

threshold. The Department notes that

trustee information already must be

disclosed in the summary plan

description (SPD), and changes in

trustees 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, although the reason for the

termination will not be required to be

reported in the case of other service

provider terminations that previously

were required to be reported, 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. With respect to limiting of

the Schedule C list of service providers

to the forty top paid providers receiving

$5,000 or more in compensation, only

54 employee benefit plans filing the

1996 Form 5500 listed 40 or more

service providers on their Schedule Cs.

Those 54 filings constituted less than

one percent of the Form 5500 filings

received. These Schedule C changes

will not, in the Department’s view,

21074 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

7 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).

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 described herein

would not affect the annual reports of

those plans.

(c) Schedule D (DFE/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 of the

new requirement for small plans on the

Schedule D to report year-end dollar

value of interests in individual 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. Similarly,

substantially all of the information that

is required to be reported by DFEs is

currently required to be filed by CCTs

and PSAs that elect to file as DFEs as

well as master trusts, 103–12 IEs and

GIAs. 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.7 The Department does not

believe that the 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 new Form 5500. 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 $2 trillion in plan assets

invested by plans in DFEs or entities

eligible to file as DFEs, and, therefore,

in the Department’s view, would be

adverse to the interests of participants

and beneficiaries in the aggregate.

(d) Schedule of Reportable Transactions

and Schedules of Assets Held for

Investment Purposes

A major underlying purpose for the

schedule of reportable transactions is to

identify significant transactions that

may reveal fiduciary misconduct.

Information on the schedule of

reportable transactions regarding

participant directed transactions is not

generally relevant to that purpose.

Similarly, historical cost information on

the schedules of assets held for

investment purposes is intended to

provide 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

held as a result of collective participant

direction generally does not provide

meaningful information on the gain or

loss to a particular participant’s account

resulting from individually directed

transactions. In light of the purposes

underlying the reporting requirements

and the additional costs and

administrative burdens to plans from

having to include this participant

directed transaction information in

these schedules, the Department

believes that the revisions to these

schedules are in the interest of

participants and beneficiaries, will

provide adequate disclosure to plan

participants and beneficiaries, and will

provide adequate reporting to the

Department.

Other Supplementary Information

Regulatory Flexibility Act

The Regulatory Flexibility Act (5

U.S.C. 601 et seq.) (RFA), imposes

certain requirements with respect to

Federal rules that are subject to the

notice and comment requirements of

section 553(b) of the Administrative

Procedure Act (5 U.S.C. 551 et seq.) and

likely to have a significant economic

impact on a substantial number of small

entities. If an agency determines that a

final rule is likely to have a significant

economic impact on a substantial

number of small entities, section 604 of

the RFA requires the agency to present

a final regulatory flexibility analysis at

the time of the publication of the notice

of final rulemaking describing the

impact of the rule on small entities.

Small entities include small businesses,

organizations, and governmental

jurisdictions.

For purposes of analysis under the

RFA, the Pension and Welfare Benefits

Administration (PWBA) considers a

small entity to be an employee benefit

plan with fewer than 100 participants.

The basis for this definition is found in

section 104(a)(2) of ERISA, which

permits the Secretary to prescribe

simplified annual reports for pension

plans which cover fewer 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 sections 104(a)(2) and 104(a)(3), the

Department has previously issued

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.

The definition of small entity used for

the purpose of regulatory flexibility

analysis differs from a definition of

small business based on size standards

promulgated by the Small Business

Administration (SBA) (13 CFR 121.201)

pursuant to the Small Business Act (5

U.S.C. 631 et seq.). Because of this,

PWBA consulted with the SBA’s Office

of Advocacy on the use of its definition

for purposes of the RFA analysis, and

sought comments on the size standard

used for purposes of its analysis and the

estimated impact of the proposal on

small entities. No comments were

received which addressed the size

standard under the RFA or the

estimated impact on small entities.

PWBA has conducted a final

regulatory flexibility analysis which

takes into account both the general and

specific findings specified in section C

of this preamble as well as the public

comments on the September 3, 1997

Notice of proposed forms revisions and

the December 10, 1998 Notice of

proposed rulemaking. This analysis is

summarized below.

(1) The Department is promulgating

this 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). The

extensive revision of the Form 5500 was

undertaken for the purpose of

streamlining and simplifying the form,

and facilitating the implementation of

an updated and efficient electronic

processing system for Form 5500 filings.

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21075

(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: (a) the use of

the alternative method is consistent

with the purposes of ERISA and

provides adequate disclosure to

participants and beneficiaries and

adequate reporting to the Secretary, (b)

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 (c) the application of the

statutory reporting and disclosure

requirements would be adverse to the

interests of plan participants in the

aggregate.

The Department finds 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 will

relieve plans of all sizes from increased

costs and unreasonable burdens that

would otherwise arise 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, made 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

adopted 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 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 final rule small

plans will continue to be exempt from

reporting service provider information

and supplying the report of an

independent qualified public

accountant. In addition, the conforming

rules generally preserve the more

limited reporting for small plans which

is presently in effect.

(4) The 1995 Form 5500 filings

indicate that there are approximately

662,000 small pension and welfare

benefit plans required to file Form 5500

under Title I of ERISA. Because a

significant number of insured or

unfunded welfare plans with fewer than

100 participants are currently exempt

from Form 5500 filing requirements and

will continue to be exempt under the

proposed revisions to the Form 5500

Series, other data sources must be

consulted in order to assess the number

of small plans impacted by the

regulation in the context of a credible

universe estimate. The 1996 Medical

Expenditure Panel Survey, as tabulated

by the Agency for Health Care Policy

and Research, indicates the number of

establishments offering health and other

welfare plans. Using 1995 Census

Bureau data on the ratio of firms to

establishments, this establishmentbased plan count can be converted to

the number of welfare plans offered by

firms. Adjusting this number to allow

for multiemployer plans (in which two

or more firms participate in a given

plan), and for the number of welfare

plans with 100 or more participants,

yields an estimate of 6 million small

welfare plans. The final rule, therefore,

will impact only 662,000, or 11 percent

of 6 million small plans.

(5) The revisions to the Form 5500 are

expected to result in aggregate savings

of $64 million per year for all plans

completing and filing the form. Of this

total, savings of $59 million (an 11

percent reduction) is attributable to

large plans, and saving of $5 million (a

3 percent reduction) is attributable to

small plans. While the revision of the

form is expected to be beneficial to all

plans, the savings by small plans is

smaller relative to the large plan savings

for two principal reasons. First, the

reporting requirements for small plans

are generally more limited under

existing regulations. This is illustrated

by the fact that 81 percent of all filers

are small plans, while these small plans

represent only 23 percent of total

burden cost. As a consequence, current

annual reporting requirements for small

plans included fewer elements that

might have been considered for revision

or elimination.

In addition, although burden is

expected to be reduced in the aggregate

for all small plan filers, under certain

circumstances the revisions of the form

will result in the reporting of additional

information by some small plan filers,

offsetting to some degree the aggregate

reduction in burden. Under the filing

requirements in effect prior to

implementation of this final rule, small

plans were required to file a Form 5500–

C at least once every three years, and the

less detailed Form 5500–R in the two

intervening years. While the ratio of

Form 5500–R to Form 5500–C filings

has varied from year to year, on average

about 55% of all annual small plan

filings have been on the Form 5500–R

(45% on the Form 5500–C) because

many small plans elected to file the

Form 5500–C each year. Under this final

rule, the more limited reporting for

small plans is generally maintained, but

the Form 5500–C/R is eliminated,

increasing to some extent the burden for

those who would have filed Form 5500–

R for two of every three years, and

offsetting the burden decrease for Form

5500–C filers. These changes for small

plan filers are taken into account in the

aggregate cost estimates.

(6) Costs for revisions to automated

systems are not expected to impact

small plans because it is assumed that

small plans generally do not develop

software to be used for preparation and

filing of Form 5500. Although small

plans seek the assistance of service

providers for preparation and filing of

the Form 5500, as noted below, the

Department assumes that those service

providers will not pass on to the small

plans their development costs, or the

fees they pay for software support if

they purchase software from other

developers.

(7) Completion of the Form 5500

requires a mixture of professional and

clerical skills. As noted below, the

burden estimate study indicated that

about 90% of filers purchase services of

service providers to file Form 5500,

although filer resources are normally

required to prepare documents for the

service providers, review information

submitted, and sign the form even when

service providers maintain records and

prepare the form. Both provider fees and

filer time are included in the cost

estimates presented here, based on

information reported in the survey. It is

assumed that these practices will not

change as a result of the revisions to the

Form 5500 Series.

(8) No significant alternatives to the

final 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

21076 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

8The OMB conditions were published in the

Federal Register on December 10, 1998 (63 FR

68370) in the preamble to the proposed

amendments to the Department of Labor reporting

regulations that would conform them to the

previously published proposed form changes. The

conditions, as stated in footnote number 1 to that

preamble, 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

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.

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, consistent with

the mandates of the Paperwork

Reduction Act (PRA) and the President’s

priorities. Therefore, this notice is

‘‘significant’’ and subject to OMB review

under Executive Order 12866(3)(f)(4).

Accordingly, the Department has

undertaken an assessment of the costs

and benefits of this regulatory action.

This analysis follows the description of

ERISA’s annual reporting requirements

and the development of the new Form

5500.

Background

Under part 1 of Title I of 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 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 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 adequate reporting 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 the report of an

independent qualified public

accountant) generally constitutes

compliance with the limited exemption

and alternative method of compliance

set forth by regulation in § 2520.103–

1(b). As stated in this preamble, the

Department has made 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

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 800,000

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.

The Form 5500 as revised by the

Agencies in response to comments

received on the proposal and

information presented at the public

hearing, was submitted to the Office of

Management and Budget (OMB) for

approval under the PRA 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. At the same time, a draft

version of 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 PRA review, OMB gave

conditional PRA approval to the new

Form 5500 on August 26, 1998. The

approval was conditioned on the

Agencies making minor technical

adjustments to the form 8 and soliciting

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21077

H regarding the inapplicability of the ‘‘short plan

year’’ provisions of 29 CFR 2520.104–50 to Direct

Filing Entity Form 5500s filed for GIAs and 103–

12 IEs.

9To allow filers more time to transition to the

new computer scannable formats for the Form 5500

Series and EFAST, the Agencies announced on

March 22, 2000, that, for filers whose 1999 Form

5500 Series would be due on or before July 31,

2000, the deadline for filing has been extended to

October 16, 2000. See PWBA News Release USDL

00–16, dated March 22, 2000, for details on the

transition-year automatic extension.

10There are 13 schedules as part of the new Form

5500 package—five pension schedules, seven

financial schedules, and one fringe benefit

schedule. The pension Schedules are: Schedule B

(Actuarial Information), Schedule E (ESOP Annual

Information), Schedule R (Retirement Plan

Information), Schedule T (Qualified Pension Plan

Coverage Information), and Schedule SSA (Annual

Registration Statement Identifying Separated

Participants With Deferred Vested Benefits). The

financial Schedules are: Schedule A (Insurance

Information), Schedule C (Service Provider

Information), Schedule D (DFE/Participating Plan

Information); Schedule G (Financial Transaction

Schedules), Schedule H (Financial Information),

Schedule I (Financial Information-Small Plan) and

Schedule P (Annual Return of Fiduciary of

Employee Benefit Trust). The fringe benefit

schedule is Schedule F (Fringe Benefit Plan Annual

Information Return). The new schedules are

Schedules D, H, I, R and T; the schedules that have

been revised are Schedules A, C and G; and the

schedules that have either not been revised or have

undergone minimal changes are Schedules B, E, F,

P and SSA.

11The survey was designed and conducted by a

survey research organization and received prior

approval by OMB under control number 1210–0109

based on the Department’s submission of the

information collection request.

public comments on computer

scannable versions of the new form. On

June 28, 1999, the Agencies published a

Federal Register notice (64 FR 34686)

soliciting public comments on the draft

computer scannable versions of the new

form developed by two vendors who

were competing for the contract to

install the ERISA Filing Acceptance

System (EFAST). Contracts were

initially awarded to two national

computer firms to competitively

develop this system and the computer

scannable versions of the new Form

5500. The Agencies subsequently

selected the vendor to process the final

scannable version of the new Form

5500. Although the reformatting of the

form approved by OMB on August 26,

1998 to a computer scannable form

affects the appearance and length of the

new form, the data elements have not

been affected. See the EFAST Internet

site at www.efast.dol.gov and the Notice

of Adoption of Revised Forms

(published separately on February 2,

2000 in the Federal Register (65 FR

5026)) for information on filing the 1999

Form 5500.9

The final Form 5500 to be used for

1999 and later plan years incorporates

the new structure as proposed (i.e., a

short form that serves both as a simple

registration statement and a checklist

that guides each filer to the more

detailed schedules that are applicable to

the filer’s specific type of plan). The

new structure allows filers to assemble

and file a ‘‘customized’’ report, and also

allows the Agencies to maintain a less

costly and more efficient processing

system.10 Because information reported

to the Department is also subject to

ERISA’s disclosure provisions, the

Department in this final rule 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.

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 burdens over the

life of the forms while enhancing the

ability to protect benefits with timely

and accurate information.

Overview of Costs and Benefits of the

Regulation

This regulation conforms the

reporting and disclosure regulations of

Title I of ERISA to the revisions made

to the Form 5500 for the purpose of

streamlining and simplifying the form,

and reduces burdens while ensuring

that both the Department and

participants have sufficient information

to protect participant rights under

ERISA. The Department has assessed

the costs and benefits of the final

regulation relative to the costs of annual

reporting in the current environment.

The benefits and costs of the statutory

annual reporting requirements and

current practices are included in the

baseline and are, therefore, not

considered benefits or costs of the final

regulation.

The baseline net costs of the annual

reporting requirements include the

benefits which arise from the use of a

standardized reporting form, the costs of

maintaining certain records,

communicating with professional

service providers, and completing and

mailing the form each time it is required

to be filed. The unit cost of completing

and filing the form is known to be

highly variable due to the very large

number of filer types (e.g., defined

benefit and defined contribution

pension plans, fully insured and trustfunded welfare plans, small and large

plans, etc.) with differing data

requirements. In addition, assessment of

a baseline cost was further complicated

by differing methodologies used by the

Department and by the Internal Revenue

Service for estimating the burden of the

Form 5500 for PRA purposes. The PRA

burden is relevant because it is assumed

that the baseline cost of the annual

reporting requirement is the total cost of

the PRA burden prior to the revision of

the form. The cost of the regulation is

assumed to be the estimated cost of the

PRA burden for preparing and filing the

Form 5500 as revised, plus the

estimated cost of any automated system

changes for filers and service providers

to implement the revisions to the Form

5500, less the baseline PRA cost.

The Agencies solicited comments on

the burden estimates of the proposed

changes to the Form 5500 in September

of 1997. The comments indicated that

the burden estimates were too low. In

order to address these comments, and in

an effort to develop a consistent

approach to the estimation of the

burden of the form, the Agencies

undertook an evaluation of their burden

estimation methodologies for the

purpose of developing a revised and

uniform methodology. The Agencies

have subsequently adopted the

methodological approach developed in

the course of this study.

The results of the study, which

involved the input of employee benefits

professionals and a survey of actual

plan sponsor and service provider filers

of the Form 5500,11 supply the basis of

both the baseline cost shown here, as

well as the estimated cost of completing

and filing the revised Form 5500 for

those portions attributable to the

Department under Title I of ERISA. The

additional economic cost of automated

system change was estimated based on

a separate consultation with a small

number of entities which either

develop, purchase, or offer automated

systems for annual reporting by

employee benefit plans. The burden

methodology study addressed the time

required by filers and service providers

to maintain necessary records and

complete the form, but did not address

the potential cost of adjustments which

may be required for automated systems

to alter output format for consistency

with the changes made to the

organization of the information on the

form. While these costs would not

necessarily be borne by plans or by

respondents to the information

collection provisions of the regulation,

costs of this nature are expected to be

incurred and are appropriately

accounted for in the analysis of the

21078 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

12Estimate based on the total assets held by

private pension plans in 1999 as reported by the

Federal Reserve Board and the percentage of all

plan assets reported to be invested in these entities

in 1995 Form 5500 filings.

impact of this final regulation. The

findings of these surveys are discussed

in greater detail in the discussion of

costs below.

The principal benefit of the regulation

arises from the streamlining of the form,

the elimination and clarification, where

possible, of elements known to

contribute to errors or confusion, and

the improved organization of the form,

which are expected to result in direct

savings for filers. Other benefits less

readily quantifiable include the

availability of more complete

information on the large volume of

assets held by DFEs, and support of a

simplified and expedited system for

processing the Form 5500 that provides

better and faster enforcement as well as

better and faster disclosure.

The net benefits of the revisions of the

Form 5500 attributable to the

Department are estimated at

approximately $59 million in the first

year of implementation, and

approximately $64 million in each

subsequent year. The savings figure is

somewhat lower in the first year due to

the costs of automated system

modifications, which are expected to

amount to approximately $5 million.

The total baseline cost of completion of

the portions of the Form 5500 attributed

to the Department is estimated at $717.8

million, while the cost of completion of

the revised Form 5500 is estimated at

$653.7 million. This estimate of savings

does not yet take into account

additional and potentially significant

savings which may be realized in

connection with the implementation of

EFAST.

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, disclosure to

participants and beneficiaries, 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 Simplified Employee Pensions

(SEPs), or those eligible for limited

reporting options (such as certain

Internal Revenue 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 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. In

other words, the revised instructions

will allow filers to go directly to the

instructions which apply to them, and

bypass those which do not apply.

Based on the elimination of certain

information and reformatting of the

Form 5500 Series, the burden of

preparing and filing the form is

estimated to be reduced by almost 9

percent per year over the life of the

form. As noted earlier, the savings is

estimated to amount to $64 million per

year, before adjustment for additional

costs expected to be incurred for

automated system changes.

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 asset information with plans

and to use the DFE data more effectively

for enforcement, disclosure and research

purposes with respect to the

approximately $2 trillion in plan assets

presently held by DFEs or entities

eligible to file as DFEs.12 Improved data

is expected to contribute to the

meaningful analysis of the assets of

pension plans because approximately 45

percent of private pension assets are

held by DFEs or entities eligible to file

as DFEs.

The revisions are also designed to

support and facilitate EFAST, the

processing system being developed to

simplify and expedite the processing of

the Form 5500. This new system will

rely on electronic filing with automatic

error detection, and optical scanning

technology and optical character

recognition to computerize the paper

forms, resulting in increasing

efficiencies in processing and

corresponding reductions in the

government’s 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 the overall

reduction in the information submitted.

Costs of the Regulation

The baseline costs of annual reporting

consist of a number of elements such as

the time and cost of maintaining records

for the purpose of reporting on Form

5500, the time and cost of hiring service

providers such as accountants and

administrators to complete all or part of

work necessary to maintain appropriate

records and complete and file the form,

time required to communicate with and

review the work of service providers,

and time required to complete and file

the form manually or through

automation. The variability of these

elements is dependent upon choices

made by filers as well as the nature and

size of their plans.

In order to develop an accurate

estimate of baseline cost to file Form

5500, among other reasons, the Agencies

involved in the revision of the Form

5500 engaged a survey research firm to

conduct a survey of filers. Because of

the wide variation in filing behavior and

requirements among sponsors and

service providers, the survey included a

sample intended to be reasonably

representative of the filer universe,

rather than a probability sample, which

would have been substantial in size

thereby resulting in a survey which

would have been very costly to conduct.

A very large sample was not considered

likely to result in more reliable data in

any event because neither sponsors nor

service providers tend to maintain

detailed records of the time required or

costs of preparing and filing Form 5500.

The methodology for the survey was

developed by the contractor with input

from experts who are familiar with

reporting requirements and who file

Form 5500 professionally. Survey

respondents were asked to report

sponsor burden in hours, and service

provider burden in actual dollars spent

for purchased services. The survey

showed that about 90 percent of filers

employ service providers for the

completion and filing of Form 5500. The

baseline survey, which referred to the

1997 Form 5500 (the latest available at

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21079

13The average rate used for this estimate is based

on average labor hour rates for lawyers,

accountants, budget analysts and financial

managers from the 1998 Employment Cost Index

and the 1997 Occupational Employment Statistics

Survey (Bureau of Labor Statistics) as adjusted for

estimated overhead and profit margin.

the time the survey was initiated) after

application of actual responses across

filer categories, indicated that 2,131,261

sponsor hours and $557,907,442 in fees

were expended annually in the

completion of the Department’s

elements of the Form 5500. The total

cost of $717,752,000, which includes

the cost represented by the sponsor

hours, is calculated using an assumed

average rate of $75 per burden hour.13

The change in burden for the 1999

Form 5500 was estimated by means of

a second survey of the respondents

which focused on the changes made to

the form. The relationship between

hours and costs was assumed to remain

constant. After application of responses

across filer categories, the second phase

of the survey indicated a reduction from

the baseline sponsor hours to 1,817,412

and a reduction from the baseline cost

to $517,367,000. The total cost of filing

the 1999 Form 5500 was therefore

estimated at $653,673,000, including the

hours at a rate of $75 per hour. It is the

Department’s view that these estimates,

while somewhat different from those

presented at the time of the proposal,

represent reasonable current estimates

of the cost of the baseline and regulation

due to the design of the survey and its

reliance on a representative group of

actual filers.

As noted, however, filers who rely on

automated recordkeeping and document

production systems for completion of

the Form 5500 may be expected to incur

other costs to reconfigure output for

consistency with the new organization

of the form. Although maintenance of

automated systems is not required, it is

assumed that sponsors and service

providers who currently make use of

automated systems due to their

improved efficiency will revise and

continue to make use of such systems in

the future. In order to establish a basis

for the estimate of the cost of these

revisions, the Department arranged for

the conduct of a separate survey of a

total of 9 software developers and

service providers that either offer

software to complete Form 5500 or

services which incorporate a software

package either developed internally or

purchased from an outside software

developer.

These respondents were asked to

describe the nature of the changes that

would be required, and either the

magnitude and nature of their costs to

make changes or the fees they would

charge in order to recover their costs.

Most respondents indicated that system

updating is a relatively constant

process, but that substantial additional

work would be required for 1999

principally to modify system output.

Developers indicated that they

anticipated charging either a one-time

fee to their system purchasers, or a

percentage increase in the maintenance

fees charged to system purchasers.

Based on the information collected in

the survey, those system purchasers are

predominantly service providers to

plans. Service provider responses to the

survey appeared to indicate in general

that additional fees charged to them for

system programming and maintenance

would not necessarily be passed on to

plans.

This may be explained in several

ways, including the fact that service

providers may view the investment in

software revision as an investment to be

used for future earnings, that they may

be in a position to spread such increases

over many clients resulting in a small

rate of profit reduction per client, that

they may expect to readily recover the

investment in efficiency gains arising

from the streamlining of the form and

electronic filing, and the fact that

existing service provider fees are based

on a complex set of factors not

necessarily directly related to the

service provider’s direct cost of

providing a specific service such as the

completion of Form 5500.

Based on the ratios of the numbers of

plans per automated system reported by

respondent, reported estimates of

charges to recover reprogramming costs,

and the number of plans estimated to

make use of service providers for the

completion and filing of Form 5500, it

is estimated that developers and

providers will invest approximately $5

million in reprogramming efforts prior

to implementation of the revised Form

5500.

Paperwork Reduction Act Statement

This final regulation imposes no new

information collection requirements in

addition to the information collection

requirements associated with the

submission of the Form 5500 Series

(OMB control numbers 1210–0110 and

1210–0089) and the ERISA Summary

Annual Report (OMB Control number

1210–0040).

Small Business Regulatory Enforcement

Fairness Act

This final rule is subject to the

provisions of the Small Business

Regulatory Enforcement Fairness Act of

1996 (5 U.S.C. 801 et seq.) and is being

transmitted to Congress and the

Comptroller General for review. The

final rule, however, is not a ‘‘major

rule,’’ as that term is defined in 5 U.S.C.

804, because it is not likely to result in

(1) an annual effect on the economy of

$100 million or more; (2) a major

increase in costs or prices for

consumers, individual industries, or

federal, State or local government

agencies, or geographic regions; or (3)

significant adverse effects on

competition, employment, investment,

productivity, innovation, or on the

ability of United States-based

enterprises to compete with foreignbased enterprises in domestic or export

markets.

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 final regulation does 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.

Executive Order 13132 Statement

This final rule does not have

federalism implications because it has

no substantial direct effect on the States,

on the relationship between the national

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. Section 514 of

ERISA provides, with certain exceptions

specifically enumerated, that the

provisions of Titles I and IV of ERISA

supercede any and all laws of the States

as they relate to any employee benefit

plan covered under ERISA. This final

rule, therefore, does not affect the States

or change the relationship or

distribution of power between the

national government and the States.

Further, this final rule implements

certain revisions to annual reporting

and disclosure regulations which have

been in effect in similar form for many

years. The amendments incorporated in

this final rule do not alter the

fundamental requirements of the statute

with respect to the reporting and

disclosure requirements for employee

benefit plans, and as such have no

implications for the States or the

relationship or distribution of power

between the national government and

the States.

Statutory Authority

This regulation is adopted pursuant to

the authority in sections 101, 103, 104,

109, 110, 111, 504 and 505 of ERISA

21080 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

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.

In view of the foregoing, Part 2520 of

Chapter XXV of Title 29 of the Code of

Federal Regulations is amended as set

forth below:

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 the phrase ‘‘section

104(a)(1)(A)’’ in paragraph (a)

introductory text to read ‘‘section

104(a)(1)’’, revising the introductory text

of paragraph (b), paragraph (b)(1), the

first sentence of paragraph (b)(2)(i),

paragraphs (b)(4), (c), (d) and the first

sentence of paragraph (e) and by adding

a paragraph (f) to read as follows:

§ 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 §§ 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

(DFE/Participating Plan Information),

Schedule G (Financial Transaction

Schedules), Schedule H (Financial

Information), Schedule R (Retirement

Plan Information), and the other

financial schedules described in

§ 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 § 2520.103–5(c).

Although the statement of assets and

liabilities referred to in § 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 §§ 2520.103–3

and 2520.103–4 for 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 §§ 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 (DFE/

Participating Plan Information),

Schedule I (Financial Information—

Small Plan), and Schedule R

(Retirement Plan Information). See the

instructions for this form.

(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

plans with fewer than 100 participants

under paragraph (c) of this section) that

was 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 and master trust

investment accounts. * * *

(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.

3.–4. Section 2520.103–2 is amended

by revising paragraph (b)(1), the first

sentence of paragraph (b)(2)(i) and

paragraph (b)(4) and by adding

paragraph (c) to read as follows:

§ 2520.103–2 Contents of the annual report

for a group insurance arrangement.

* * * * *

(b) Contents. (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 (DFE/

Participating Plan Information),

Schedule G (Financial Transaction

Schedules), Schedule H (Financial

Information), and the other financial

schedules described in § 2520.103–10.

See the instructions for this form.

(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. * * *

* * * * *

(4) In the case of 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 in 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 § 2520.103–5(c).

Although the statement of assets and

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21081

liabilities referred to in § 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 §§ 2520.103–3 and 2520.103–4 for

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

§ 2520.104–43(b)(2) for when the terms

‘‘group insurance arrangement’’ or

‘‘trust or other entity’’ shall be,

respectively, used in place of the terms

‘‘plan’’ and ‘‘plan administrator.’’

* * * * *

(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 or other entity

described in § 2520.104–43(b) maintains

an original copy, with all required

signatures, as part of the trust’s or

entity’s records.

5.–6. Section 2520.103–3 is amended

by revising paragraphs (a) and (c) to

read as follows:

§ 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), 110 and 505 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

required to be filed under §§ 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 § 2520.103–9,

shall include in its annual report:

information required by the instructions

to Schedule H (Financial Information)

or Schedule I (Financial Information—

Small Plan) 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 (DFE/

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

§ 2520.103–9, shall include in its annual

report: information required by the

instructions to Schedule H (Financial

Information) or Schedule I (Financial

Information—Small Plan) 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 (DFE/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) to read as

follows:

§ 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), 110 and 505 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 required to be filed

under § 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 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 § 2520.103–9,

shall include in its annual report:

information required by the instructions

to Schedule H (Financial Information)

or Schedule I (Financial Information—

Small Plan) 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 (DFE/

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

§ 2520.103–9, shall include in its annual

report: information required by the

instructions to Schedule H (Financial

Information) or Schedule I (Financial

Information—Small Plan) 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 (DFE/

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

paragraphs (c)(2)(ii) and (c)(2)(iii), as

paragraphs (c)(2)(iii) and (c)(2)(iv),

21082 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

revising all references in the section to

the term ‘‘section 104(a)(1)(A)’’ to read

‘‘section 104(a)(1)’’, revising paragraphs

(c)(1)(ii) and (c)(2)(i) and adding new

paragraphs (c)(1)(iii), and (c)(2)(ii) to

read as follows:

§ 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 a Form 5500

report pursuant to § 2520.103–9 for the

participating plan’s 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 Employer Identification

Number (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 § 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 filing

due date for such account in accordance

with the Form 5500 instructions, 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) of the

Act and § 2520.104a–5 or § 2520.104a–

6;

(iii) Holds assets of a plan in a pooled

separate account and does not file a

Form 5500 report pursuant to

§ 2520.103–9 for the participating plan’s

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 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

and any other identifying number

assigned by the insurance carrier to the

separate account,

(D) A statement that a filing pursuant

to § 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) of the

Act and § 2520.104a–5 or § 2520.104a–

6.

* * * * *

(2) * * *

(i) In a common or collective trust that

files a Form 5500 report pursuant to

§ 2520.103–9 for the participating plan’s

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 and any other identifying number

assigned by the bank, trust company, or

similar institution,

(D) A statement that a filing pursuant

to § 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 filing due date for such trust

in accordance with the Form 5500

instructions, 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) of the Act and §§ 2520.104a–

5 or 2520.104a–6.

(ii) In a common or collective trust

that does not file a Form 5500 report

pursuant to § 2520.103–9 for the

participating plan’s 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 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 and any other

identifying number assigned by the

bank, trust company or similar

institution,

(D) A statement that a filing pursuant

to § 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) of the Act and §§ 2520.104a–

5 or 2520.104a–6.

* * * * *

9. Section 2520.103–6 is amended by

redesignating paragraph (b)(1) as

paragraph (b)(1)(i), revising paragraphs

(a) and (b)(1)(ii), and adding paragraph

(f) to read as follows:

§ 2520.103–6 Definition of reportable

transaction for Annual Return/Report.

(a) General. For purposes of preparing

the schedule of reportable transactions

described in § 2520.103–10(b)(6), and

subject to the exceptions provided in

§§ 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) Except as provided in paragraphs

(c)(2) and (d)(1)(vi) of this section

(relating to assets acquired or disposed

of during the plan year), with respect to

schedules of reportable transactions for

the initial plan year of a plan, ‘‘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 participantdirected 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 if it has

been authorized by such participant or

beneficiary.

10. Section 2520.103–9 is revised to

read as follows:

§ 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

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21083

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

§§ 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

§§ 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

Employer Identification Number of the

plan sponsor as will be reported 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 (DFE/

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 bank or insurance

company which maintains 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:

§ 2520.103–10 Annual report financial

schedules.

(a) General. The administrator of a

plan filing an annual report pursuant to

§ 2520.103–1(a)(2) or the report for a

group insurance arrangement pursuant

to § 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 § 2520.103–11)

with assets aggregated and identified by:

(A) Identity of issue, borrower, lessor

or similar party to the transaction

(including a notation as to whether such

party is known to be a party in interest);

(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.

(ii) Except as provided in the Form

5500 and the instructions thereto, 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 § 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) Except as provided in the Form

5500 and the instructions thereto, 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.

(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

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 § 2520.103–6.

(c) Format requirements for certain

schedules. See the instructions to the

Form 5500 ‘‘Annual Return/Report of

Employee Benefit Plan’’ as to the format

requirement for the schedules referred

to in paragraphs (b)(1), (b)(2) or (b)(6) of

this section.

12. Section 2520.103–11 is amended

by revising paragraph (a) and adding

paragraph (d) to read as follows:

§ 2520.103–11 Assets held for investment

purposes.

(a) General. For purposes of preparing

the schedule of assets held for

investment purposes described in

§ 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

purposes 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 if it has

been authorized by such participant or

beneficiary.

13. Section 2520.103–12 is amended

by revising the last two sentences of

paragraph (a), revising paragraph (b),

and also adding a new paragraph (f) to

read as follows:

§ 2520.103–12 Limited exemption and

alternative method of compliance for annual

reporting of investments in certain entities.

(a) * * * The plan is not required to

include in its annual report any

information regarding the underlying

assets or individual transactions of the

entity, provided the information

described in paragraph (b) regarding the

entity is reported directly to the

Department on behalf of the plan

administrator on or before the filing due

date for the entity in accordance with

21084 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

the instructions to the Form 5500

Annual Return/Report. 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

§§ 2520.104a–5 and 2520.104a–6.

(b) The following information must be

filed regarding the entity described in

paragraph (c) of this section:

(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 (DFE/

Participating Plan Information),

Schedule G (Financial Transaction

Schedules), Schedule H (Financial

Information), and the schedules

described in § 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

§ 2520.103–1(b)(5).

* * * * *

(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),

and adding paragraph (e) to read as

follows.

§ 2520.104–21 Limited exemption for

certain group insurance arrangements.

* * * * *

(b) * * *

(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

which 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. The trade association holds the

insurance contracts. 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. 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 to an independent insurance

brokerage firm acting as the agent of the

insurance company. 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) of this section 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, § 2520.104–43.

(4) The facts are the same as

paragraph (d)(2) of this section 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, § 2520.104–

43.

(e) Applicability date. For purposes of

paragraph (b)(3) of this section, the

arrangement may continue to use an

entity (such as a trade association) as

the conduit for the payment of

insurance premiums to the insurance

company for reporting years of the

arrangement beginning before January 1,

2001.

15. Section 2520.104–41 is amended

by revising paragraphs (b) and (c) to

read as follows:

§ 2520.104–41 Simplified annual reporting

requirements for plans with fewer than 100

participants.

* * * * *

(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 § 2520.103–1(d) may

file the simplified annual report

described in paragraph (c) of this

section in lieu of the annual report

described in § 2520.103–1(b).

(c) Contents. The administrator of an

employee pension or welfare benefit

plan described in paragraph (b) of this

section shall file, in the manner

described in § 2520.104a–5 and 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 (DFE/

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) to read as follows:

§ 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 § 2520.103–2 has been

filed with the Secretary of Labor in

accordance with §§ 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’’ or

‘‘trust or other entity’’ shall be used in

place of the terms ‘‘plan’’ and ‘‘plan

administrator,’’ as applicable, in

§§ 2520.103–3, 2520.103–4, 2520.103–6,

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations 21085

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),

revising the period at the end of

paragraph (b)(2) to a semicolon, and

adding the word ‘‘and’’ after such semicolon, adding paragraph (b)(3), and

revising paragraph (c)(1) to read as

follows:

§ 2520.104–44 Limited exemption and

alternative method of compliance for annual

reporting by unfunded plans and 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

under Code section 403(b)(7) as the sole

funding vehicle for providing pension

benefits.

(c) * * *

(1) Completing certain items of the

annual report relating to financial

information and transactions entered

into by the plan as described in 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) to read as

follows:

§ 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

§ 2520.104–41.

* * * * *

19. Section 2520.104b–10 is amended

by revising the phrase in the first

sentence of paragraph (a) ‘‘paragraphs

(b) and (g)’’ to read ‘‘paragraph (g)’’, by

removing and reserving paragraph (b),

and by revising paragraph (c)

introductory text and paragraph (f) to

read as follows.

§ 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.

* * * * *

§ 2520.104b–10 [Amended]

20. 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), in the list under

the heading ‘‘Your Rights to Additional

Information’’ items 1. through 8. are

revised and items 9. and 10. are added

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 or classified as

uncollectible;

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), in the list under

the heading ‘‘Your Rights to Additional

Information’’ items 1. through 7. are

revised and items 8. and 9. as added 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 or classified as

uncollectible;

7. transactions in excess of 5 percent

of the plan assets;

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 to read 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.

21. The appendix to § 2520.104b–10 is

revised to read as follows:

21086 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Rules and Regulations

APPENDIX TO § 2520.104b–10—THE SUMMARY ANNUAL REPORT (SAR) UNDER ERISA: A CROSS-REFERENCE TO

THE ANNUAL REPORT

SAR Item Form 5500 Large Plan Filer Line Items Form 5500 Small Plan Filer Line

Items

A. PENSION PLAN

1. Funding arrangement ............................................ Form 5500—9a ........................................................ Same.

2. Total plan expenses .............................................. Sch. H—2j ................................................................ Sch. I—2i.

3. Administrative expenses ....................................... Sch. H—2i(5) ........................................................... Not applicable.

4. Benefits paid .......................................................... Sch. H—2e(4) .......................................................... Sch. I—2e.

5. Other expenses ..................................................... Sch. H—Subtract the sum of 2e(4) & 2i(5) from 2j Sch. I—2h.

6. Total participants ................................................... Form 5500—7f ......................................................... Same.

7. Value of plan assets (net):

a. End of plan year ............................................. Sch. H—1l [Col. (b)] ................................................. Sch. I—1c [Col. (b)].

b. Beginning of plan year ................................... Sch. H—1l [Col. (a)] ................................................. Sch. I—1c [Col. (a)].

8. Change in net assets ............................................ Sch. H—Subtract 1l [Col. (a)] from 1l[Col. (b)] ........ Sch. I—Subtract 1c [Col. (a) from 1c

[Col. (b)].

9. Total income .......................................................... Sch. H—2d ............................................................... Sch. I—2d.

a. Employer contributions ................................... Sch. H—2a(1)(A) & 2a(2) if applicable .................... Sch. I—2a(1) & 2b if applicable.

b. Employee contributions .................................. Sch. H—2a(1)(B) & 2a(2) if applicable .................... Sch. I—2a(2) & 2b if applicable.

c. Gains (losses) from sale of assets ................. Sch. H—2b(4)(C) ..................................................... Not applicable.

d. Earnings from investments ............................. Sch. H—Subtract the sum of 2a(3), 2b(4)(C) and

2C from 2d.

Sch. I –2c.

10. Total insurance premiums ................................... Total of all Schs. A –5b ........................................... Total of all Schs. A—5b.

11. Funding deficiency:

a. Defined benefit plans ..................................... Sch. B—10 ............................................................... Same.

b. Defined contribution plans ............................. Sch. R—6c, if more than zero ................................. Same.

B. WELFARE PLAN

1. Name of insurance carrier ..................................... All Schs. A—1(a) ..................................................... Same.

2. Total (experience rated and non-experienced

rated) insurance premiums.

All Schs. A—Sum of 8a(4) and 9(a) ........................ Same.

3. Experience rated premiums .................................. All Schs. A—8a(4) ................................................... Same.

4. Experience rated claims ........................................ All Schs. A—8b(4) ................................................... Same.

5. Value of plan assets (net):

a. End of plan year ............................................. Sch H.—1l [Col. (b)] ................................................. Sch. I—1c [Col. (b)].

b. Beginning of plan year ................................... Sch H.—1l [Col. (a)] ................................................. Sch. I—1c [Col. (a)].

6. Change in net assets ............................................ Sch. H—Subtract 1l [Col. (a)] from 1l [Col. (b)] ...... Sch. I—Subtract 1c [Col. (a)] from

1c [Col. (b)].

7. Total income .......................................................... Sch. H—2d ............................................................... Sch. I—2d.

a. Employer contributions ................................... Sch. H—2a(1)(A) & 2a(2) if applicable .................... Sch. I—2a(1) & 2b if applicable.

b. Employee contributions .................................. Sch. H—2a(1)(B) & 2a(2) if applicable .................... Sch. I—2a(2) & 2b if applicable.

c. Gains (losses) from sale of assets ................. Sch. H—2b(4)(C) ..................................................... Not applicable.

d. Earnings from investments ............................. Sch. H—Subtract the sum of 2a(3), 2b(4)(C) and

2c from 2d.

Sch. I –2c.

8. Total plan expenses .............................................. Sch. H—2j ................................................................ Sch. I—2i.

9. Administrative expenses ....................................... Sch. H—2i(5) ........................................................... Not applicable.

10. Benefits paid ........................................................ Sch. H—2e(4) .......................................................... Sch. I—2e.

11. Other expenses ................................................... Sch. H—Subtract the sum of 2e(4) & 2i(5) from 2j Sch. I—2h.

Signed at Washington, D.C., this 12th day

of April, 2000.

Leslie Kramerich,

Acting Assistant Secretary, Pension and

Welfare Benefits Administration, U.S.

Department of Labor.

[FR Doc. 00–9611 Filed 4–18–00; 8:45 am]

BILLING CODE 4510–29–P