Private Pensions: Government Actions Could Improve the Timeliness and Content of Form 5500 Pension Information
Published: 2005-06-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Form 5500 is the primary source of information for both the federal government and the private sector regarding the operation, funding, assets, and investments of private pension and other employee benefit plans. Currently, the Department of Labor (Labor) requires about 3 years to provide certain usable Form 5500 information to the public, leading to complaints that the information is not timely. We have prepared this report under the Comptroller General's authority, and it is intended to assist Congress in improving the timeliness and content of Form 5500 information. This report is addressed to the congressional committees of jurisdiction. It examines: (1) the information reported on the form and how it is used, (2) factors that affect the timeliness of Form 5500 information, and (3) issues affecting the content of the form.
section_title: What GAO Found
paragraphs: Detailed information on private pension plans is reported on the Form 5500, and Labor, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) use the information for compliance, research, and public disclosure purposes. Information collected on the form includes basic plan identifying information as well as detailed information including assets and liabilities, insurance, and financial transactions. The principal users of Form 5500 Reports--Labor, IRS, and PBGC--use the reports primarily as a compliance tool to identify actual and potential violations of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. Other federal agencies and policy researchers also use Form 5500 information. Statutory reporting requirements, processing issues, and current Labor practices affect the timeliness of the release of Form 5500 information, resulting in a 3 year lag, in some cases, in releasing certain usable computerized Form 5500 information to the non-principal federal agencies and others. First, under the current statutory reporting requirements, filers can have up to 285 days after the end of the plan year to file their Form 5500. Second, 98 percent of filings are in a paper format. These take more than three times as long as electronic filings to process and have twice as many errors. Third, the release of the Form 5500 information in the research file--the Form 5500's most practical form--is further delayed because Labor waits until all filings for that plan year are processed, which can take up to 2 years. Despite the efforts of Labor, IRS, and PBGC to improve its content, the Form 5500 lacks key information. These agencies have taken certain steps to improve the content of the Form 5500, such as reviewing the Form 5500 annually to ensure that the form is collecting all the information required by law. However, the form still lacks key information that could better assist Labor, IRS, and PBGC in identifying and tracking all plans over time and monitoring multiemployer plans. Federal and private sector researchers also told us the form could collect better plan financial information, such as 40l(k) plan fees. In addition, federal agency officials told us certain information could be reported earlier than the current filing deadline, such as information on a plan's funding status, as well as its assets and liabilities.

section_title: Letter
paragraphs: The Form 5500 Report is the primary source of information for both the  federal government and the private sector regarding the operation,  funding, assets, and investments of private pension plans and other  employee benefit plans. The Department of Labor (Labor), the Internal  Revenue Service (IRS), and the Pension Benefit Guaranty Corporation  (PBGC) jointly developed the Form 5500 so employee benefit plans could  satisfy annual reporting requirements under the Employee Retirement  Income Security Act of 1974 (ERISA) and the Internal Revenue Code  (IRC). Over 700,000 private pension plans must file the Form 5500  annually, representing over $4.4 trillion in assets and covering over 100  million participants.
Labor, IRS, and PBGC use the Form 5500 to collect information for their  various roles in regulating and monitoring private pension plans. Labor  enforces ERISA’s reporting and disclosure provisions and fiduciary  responsibility standards, which among other things, concern the type and  extent of information provided to the federal government and plan  participants and how pension plans are operated in the interests of plan  participants. IRS enforces standards that relate to such matters as how  employees become eligible to participate in benefit plans, how they  become eligible to earn rights to benefits, and how much, at a minimum,  employers must contribute. PBGC insures the benefits of participants in  defined benefit private pension plans.
We have prepared this report under the Comptroller General’s authority,  and it is intended to assist the Congress in improving the timeliness and  content of Form 5500 pension information. As it may prove helpful in the  deliberations of committees with jurisdiction over pension issues, we have  addressed this report to each of these committees. Recent changes in  private pension finance have highlighted the need for timely and useful  Form 5500 information. Since 2000, private pension underfunding in  defined benefit plans has increased dramatically, and additional severe  losses may be on the horizon. Consequently, we placed PBGC’s single- employer insurance program on our high-risk list of programs that present  significant vulnerabilities to the federal government, and policy makers  have given their attention to ways to strengthen and stabilize plan  funding.
In 1999, Labor, IRS, and PBGC implemented a new computerized system  called the ERISA Filing Acceptance System (EFAST) to improve the  processing of the forms. Because it is important that pension information  be both timely and useful, we are reporting on (1) the information  reported on the Form 5500 and how it is used, (2) the factors that affect  the timeliness of Form 5500 information, and (3) issues affecting the  content of the Form 5500.
To complete this work, we reviewed the Form 5500 and its filing  requirements and the laws that require the filing of regulatory reports on  pensions. We also interviewed officials from Labor, IRS, PBGC, and other  federal agencies as well as pension experts that use this information. In  addition, we analyzed documents regarding the Form 5500 information  federal agencies collect and their reasons for obtaining it. As a basis for  our analysis of the factors that affect the timeliness of Form 5500  information, we examined the Form 5500 statutory reporting requirements  as well as the preparation and processing procedures for the Form 5500.  We interviewed representatives of the contractor that operates EFAST to  determine the amount of time needed to process Form 5500 Reports.  Further, we reviewed EFAST operating procedures, contracts, and  performance reports, and conducted a site visit to the EFAST processing  center to examine how Form 5500 Reports are processed. We also  conducted interviews with parties involved in preparing and filing Form  5500 Reports, including plan sponsor representatives, actuaries,  accountants, service providers, insurance companies, and financial  institutions to determine the time and effort that is needed to prepare and  file the forms.
To determine the factors affecting the release of usable Form 5500  information to the public, we interviewed Labor officials responsible for  releasing Form 5500 information products to the public and to government  users. We also interviewed the government contractors that participate in  the preparation of these Form 5500 products. To determine the issues  affecting the content of the Form 5500, we reviewed current initiatives  aimed at improving its content and conducted interviews with federal  agency officials, industry association representatives, service providers,  and pension experts that either use or prepare Form 5500 Reports. We  conducted our work between June 2004 and June 2005 in accordance with  generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: ERISA and the IRC require administrators of pension and welfare benefit  plans (collectively referred to as employee benefit plans) to file annual  reports concerning, among other things, the financial condition and  operation of plans. Labor, IRS, and PBGC jointly developed the Form 5500  so that plan administrators can satisfy this annual reporting requirement.  The requirements for completing the form vary according to the type of  plan. If a company sponsors more than one plan, it must file a Form 5500  for each plan. Additionally, ERISA and the IRC provide for the assessment  or imposition of penalties by Labor and IRS for plan sponsors not  submitting the required information when due.
Form 5500 Reports are shared among Labor’s Employee Benefits Security  Administration (EBSA), IRS, PBGC, and the Social Security Administration  (SSA), and each agency uses the Form 5500 to meet its statutory  obligations. EBSA is responsible for the administration and enforcement  of ERISA, and its primary purpose is to protect the pension, health, and  other benefits of participants in private sector employee benefit plans. IRS  oversees the tax code provisions of the law. PBGC is a federal government  corporation that guarantees the payments of pension plan benefits to  participants in the event that covered defined benefit pension plans  terminate while underfunded. SSA is responsible for notifying each new  Social Security or Medicare claimant for whom it has pension benefit  information. Form 5500 Reports are also made available to other federal  agencies and researchers through Labor. Once the forms for a given plan  year are processed by EFAST they are available for enforcement and  public disclosure purposes. In addition, after the forms are edited by  Labor, the information is compiled into a database of usable computerized  Form 5500 information, known as the research file, which includes  information from all plans with over 100 participants and a 5 percent  sample of all of the smaller plans. The research file is used by various  federal agencies and pension researchers for conducting policy research  and developing government statistics.
Beginning with plan year 1999, EBSA assumed the administrative  responsibility for accepting all Form 5500 filings, electronic and otherwise,  which had previously been filed with IRS. As part of the switch, Labor, IRS  and PBGC adopted EFAST, which was designed to expedite the receipt  and processing of Form 5500 filings by relying on paper forms and  electronic filing technologies. Collectively, all three agencies have  authority to mandate the electronic filing of the Form 5500.
There are various types of Form 5500 filers. Filers are classified as either  single-employer plans, multiemployer plans, multiple-employer plans, or  direct filing entities (DFEs). In general, a separate Form 5500 must be filed  for each plan or DFE. Single-employer plans are plans that are maintained  by one employer or employee organization. Multiemployer plans are  established pursuant to collectively bargained pension agreements  negotiated between labor unions representing employees and two or more  employers, and are generally jointly administered by trustees from both  labor and management. Multiple-employer plans are plans maintained by  more than one employer and are typically established without collective  bargaining agreements. DFEs are trusts, accounts, and other investment or  insurance arrangements that plans participate in and that are required to  or allowed to file the Form 5500.
Filers have a normal deadline of 210 days after the end of the plan year to  submit their Form 5500 Reports. For example, under the filing deadlines  for plan year 2001, a calendar year filer must file its Form 5500 by July 31,  2002. However, a non-calendar year plan, for example, that has a plan year  that runs from October 1, 2001 to September 30, 2002 would have until  April 30, 2003 to file its Form 5500.
When the Form 5500 was first developed, nearly 30 years ago, more  participants were covered by defined benefit plans than by defined  contribution plans. As shown in figure 1, in 2000, defined contribution  plans had about 62 million participants, while defined benefit plans had  about 41 million participants.
As shown in figure 2, as of 1997, assets held by defined contribution plans  exceed those held by defined benefit plans.
As shown in figure 3, as of 2000, employers sponsored over 687,000  defined contribution plans compared with about 49,000 defined benefit  plans.
Unlike defined contribution plans, where benefits are based on investment  returns on individual accounts, benefits provided by defined benefit  pension plans are partially insured by PBGC. In the case of a single- employer defined benefit plan, PBGC guarantees benefits when an  underfunded plan terminates. For multiemployer defined benefit pension  plans, the agency guarantees benefits when a plan becomes insolvent,  which is when a plan’s available resources are not sufficient to pay the  level of benefits at PBGC’s guaranteed level. PBGC’s insurance programs  and its operations are financed through premiums paid annually by plan  sponsors, investment returns on PBGC assets, assets acquired from  terminated single-employer plans, and recoveries from employers  responsible for underfunded terminated single-employer plans. Premium  revenue totaled about $1.485 billion in 2004, of which $1.458 billion was  paid into the single-employer insurance program and $27 million paid to  the multiemployer insurance program. This is the highest premium  revenue PBGC has ever received. In contrast, in 2004 PBGC paid $3.007  billion in benefit payments and provided over $10 million in financial  assistance to insolvent multiemployer pension plans.
The termination of several large, underfunded defined benefit pension  plans of bankrupt firms in troubled industries has worsened the single- employer program’s net financial position. After fluctuating over the last  decade, the single-employer insurance program now has a large and  growing accumulated deficit and has moved from a $9.7 billion  accumulated surplus in 2000 to a $23.3 billion accumulated deficit in 2004.  Additionally, the agency’s multiemployer insurance program has a current  deficit of $236 million. Because of the decline in the financial condition of  the single-employer program, GAO placed it on its high-risk list of  programs with significant vulnerabilities to the federal government.
section_title: Form 5500 Reports Provide Detailed Private Pension Plan Information, Which Is Primarily Used to Determine Compliance with Federal Laws
paragraphs: Detailed information on private pension plans is reported on the Form  5500 and is used by Labor, IRS, and PBGC for compliance, research, and  public disclosure purposes. Each agency uses data from Form 5500  Reports primarily as a means to identify actual and potential violations of  ERISA and the IRC, as well as for research and policy formulation. Other  federal agencies, private sector entities, and researchers also use Form  5500 data in assessing employee benefit, tax, and economic trends and  policies. The Form 5500 is also made widely available to the general  public.
subsections: section_title: Form 5500 Reports Provide Detailed Information about the Financial Condition and Operation of Private Pension Plans
paragraphs: The Form 5500 is used to collect important information about the financial  health and operation of private pension plans. Similar to the structure of  an income tax form, the Form 5500 has multiple parts. As shown in table 1,  there is the Form 5500 and its 12 schedules. The main part of the form  provides basic information to identify the plan and type of plan. The form’s  schedules provide more specific information about the plan, such as  financial information, actuarial information, and insurance information.
Form 5500 schedules are used to collect more in-depth information,  including data on assets, liabilities, insurance, and financial transactions.  These schedules can be separated into two distinct groups: those that  contain financial information on the plan and those that contain  information on the benefits that the plan expects to pay out. For example,  the Schedule H is a key financial schedule and includes an accountant’s  report along with an audited financial statement of the plan’s operations.  Information from the financial schedules helps to provide a picture of a  plan’s financial condition, while the benefit schedules collect information  on the contributions to and distributions made from the plan in the current  and future years. Information collected on the benefit schedules helps to  provide a picture of the pension plan’s benefits and benefit promises.
Different sizes and types of plans must meet different requirements. (See  table 2.) For example, small defined benefit and defined contribution plans  must file a Schedule I rather than the more detailed Schedule H required  for a large pension plan. Additionally, unlike defined contribution plans,  defined benefit plans are required to file Schedule B, including the  signature of an Enrolled Actuary attesting to the completeness, accuracy,  and reasonableness of the actuarial calculations, along with an attachment  of any clarifying material not reported on the schedule itself.
section_title: Form 5500 Reports Are Used for Monitoring Compliance and Enforcement
paragraphs: Labor, IRS, and PBGC use Form 5500 Reports as a compliance tool to  identify actual and potential violations of ERISA and the IRC. Each agency  has a unique statutory responsibility and uses the information on the form  for monitoring and enforcement purposes. Agency officials said that each  agency has developed computerized systems that analyze the reported  information to help them ensure that plans are in compliance with  applicable laws.
Although Labor officials said that the most effective source of leads on  violations of ERISA, such as delinquent participant contributions, were  complaints from plan participants, computer searches and targeting of  Form 5500 information on specific types of plans account for  approximately 25 percent of case openings. Labor is currently using plan  year 2002 and 2003 Form 5500 information for computer targeting. Labor  officials told us that they open about 4,000 investigations into actual and  potential ERISA violations annually. Labor officials said an early step  when opening an investigation is to review the available Form 5500  Reports to identify names and contact information for the plan, its  corporate sponsor, and its plan administrator. Labor officials said they use  Form 5500 data to enforce ERISA reporting and disclosure provisions and  fiduciary standards.
IRS officials told us that they use Form 5500 data to examine plan financial  transactions and to target plans for examination. Pension law provides  significant tax benefits for sponsors of certain retirement plans and the  employees that participate in them. IRS enforces certain minimum funding  requirements of ERISA and the IRC. IRS officials said the purpose of IRS  examinations is to ensure plan sponsors are making contributions to the  plan as required, the assets truly exist to satisfy the liabilities and are  classified properly, and that plans are operating in accordance with plan  design. IRS can levy penalties, taxes, and interest charges as well as  completely disqualify a tax-exempt plan from tax-exempt status if major  violations are found.
In fiscal year 2004, IRS examined more than 10,700 plans and 91 percent of  these examinations were based solely on Form 5500 information, and an  additional 5 percent were based in part on Form 5500 information. IRS  uses its Returns and Inventory Classification System (RICS) to select plans  for review based on Form 5500 Reports. For example, after IRS had  determined that a pension practitioner was involved with tax-abusive  schemes, it used available contact information listed on the Form 5500 to  create a list of over 400 sponsors who had filed their Form 5500 Reports  using the address of the practitioner who allegedly designed these  schemes.
PBGC uses Form 5500 information to monitor both single-employer and  multiemployer defined benefit pension plan activities, focusing on assets,  liabilities, number of participants, and funding levels. Form 5500  information is also used to forecast PBGC’s potential liabilities. PBGC’s  data on multiemployer plans currently come only from Form 5500 Reports,  while single-employer plan data are supplemented with information  obtained from other filings and submissions with the government and  from corporate annual returns. PBGC officials said the agency is  particularly interested in single-employer and multiemployer plans with  financial problems. For both types of plans, PBGC officials said they  maintain a database of financial information about such plans drawn from  Form 5500 Reports, premium filings, and other data in order to determine  which plans may be at risk of requiring PBGC financial assistance.
PBGC officials also said they use the Form 5500 for participant notice and  PBGC insurance premium compliance. For example, PBGC reviews Form  5500 filings to ensure that plan sponsors of underfunded plans report  sending required participant notices to plan participants notifying them of  the plan’s funding status and the limits of PBGC’s guarantee benefits. If a  participant notice is not issued as required, agency officials said they may  assess penalties. PBGC officials also said they use Form 5500 information  on plan type and level of underfunding to help ensure that plans are  making the appropriate premium payments (which vary by type of plan  and the extent of underfunding). They also said the agency has an  “intercept program” arrangement with the EFAST processor. Through this  program, PBGC has identified over 2,000 plans it is most interested in and  has made arrangements for copies of these Form 5500 filings to be mailed  to PBGC before being processed.
section_title: Federal Agencies and Others Use Form 5500 Information for Research and Statistical Purposes
paragraphs: Form 5500 information is also used for research and statistical purposes.  Labor and PBGC officials told us that Form 5500 information is an integral  part of their policy research. Labor officials said that EBSA’s Office of  Policy and Research (OPR) uses Form 5500 information to assist in  developing regulations and to prepare its Private Pension Plan Bulletin.  OPR also uses Form 5500 information to develop aggregate pension  statistics and conduct economic research on relevant topics. OPR officials  said they plan and administer an employee benefits research and  economic analysis program to support EBSA policy and program  priorities, respond to requests for data and findings, and provide technical  assistance to EBSA offices, other Labor agencies, and external groups.  Officials from PBGC’s Policy, Research, and Analysis Department said  they use Form 5500 data to develop policies for PBGC’s insurance  programs and conduct related research and modeling.
SSA is also a direct recipient of Form 5500 Reports. SSA officials said they  receive information on name and address changes for plan administrators  and information on mergers from pension plans. Plans file the Schedule  SSA if they have vested participants who separated from the plan during  the prior reporting period. SSA officials said they use the data to notify  those participants or their survivors who apply for Social Security that  they may have benefits from one or more private pension plans.
The Form 5500 is also a source of information that is used by other federal  agencies. In our discussions with federal agency officials, we found they  use Form 5500 information for government research and preparing  government statistics. For example, some federal agencies use the  information in assessing employee benefits and taxes, determining  economic trends, and evaluating policies. As shown in table 3, different  federal agencies use Form 5500 information for different purposes.
Finally, others outside of the federal government use Form 5500  information. Pension researchers told us they use Form 5500 information  to determine employer contributions to defined benefit plans, employer  pension costs for defined contribution plans, and data on the relationship  between collective bargaining and pensions. Additionally, researchers said  they have used information from the Form 5500 to determine the extent of  cash balance defined benefit plans. Benefit consulting firms also use Form  5500 information. Consultants from one firm told us they use Form 5500  information for a variety of client-sponsored projects such as studying the  time it takes an active participant to become vested and comparing single- employer with multiemployer pension plans. Others said that they  repackage and sell information from Labor’s Form 5500 data after editing  it and verifying contact information for large plans.
section_title: Form 5500 Reports Are Made Available to the Public
paragraphs: The Form 5500 is also an important public disclosure document. The  public disclosure of the form is a Labor function required by ERISA.  According to Labor officials, the form is the only source of detailed  financial information available to plan participants and beneficiaries, who  upon written request must be furnished a copy of the plan’s latest Form  5500 by the plan administrator. Moreover, the form serves as a basis for  the Summary Annual Report (SAR), which plan administrators are  generally required to furnish to each participant and beneficiary annually.
Labor also maintains a public disclosure room so that Form 5500 Reports  and related plan information are available to public agencies, private  organizations and individuals for review. Labor officials said in fiscal year  2004, EBSA’s Public Disclosure Office received about 1,800 requests for  Form 5500 Reports and provided about 5,200 documents in response to  these requests. Labor officials said making the form publicly available is  intended to serve as a deterrent to non-compliance with the statutory  duties imposed on plan fiduciaries. EBSA also makes its Form 5500  research file available in electronic format to individuals and groups for  research purposes. In addition, separate from the research file, an  electronic database of all available publicly disclosable filings is made  available in response to Freedom of Information Act requests. Information  from Form 5500 Reports is also made available through private parties.  For example, electronic facsimiles of publicly available Form 5500 filings  can be obtained free of charge at FreeErisa.com.
section_title: Statutory Reporting Requirements, Current Processing Methods, and Labor Practices Delay the Release of Form 5500 Information
paragraphs: Statutory reporting requirements, EFAST processing issues, and current  Labor practices delay the release of Form 5500 information for up to 3  years in some cases. Current statutory requirements allow plan sponsors  up to 285 days following the end of their plan year to file their Form 5500  Reports. Once the reports are filed, processing of the reports is slowed by  some of EFAST’s procedures. Labor’s practice of not releasing the  research file–Form 5500 information in its most practical form–until it has  processed all forms from a plan year results in further delays. Agency  officials told us that the timeliness of Form 5500 Reports affects their use  of the information.
subsections: section_title: Current Statutory Reporting Requirements Limit the Timeliness of Form 5500 Information
paragraphs: The length of time plan sponsors have to file their Form 5500 Reports is  determined by the statutory reporting requirements. Under ERISA, plan  sponsors have a normal deadline of 210 days after the end of the plan year  to file and may then apply to IRS for an annual automatic one-time 2 ½  month extension. Thus, plan sponsors can take up to 285 days from the  end of the plan year to file their Form 5500 reports. For example, as shown  in figure 4, for a calendar year plan that ends on December 31, a plan  sponsor has until July 31 to file the Form 5500. If the plan sponsor requests  an extension, the new deadline would be October 15.
An additional 45-day extension from the normal statutory deadline is also  automatically given to corporations receiving an extension on their federal  income taxes. However, an extension granted by using this automatic  extension procedure cannot be extended further by using the one-time 2 ½  month extension. Labor, IRS, and PBGC may also grant special extensions  of time, beyond the 285 day extended deadline, for events such as  presidentially declared disasters or for service in, or in support of, the  armed forces of the United States in a combat zone.
The current statutory filing requirements are also intertwined with other  statutory deadlines relating to private pension plans (See fig. 5). For  example, under ERISA, certain providers, such as insurance companies  and financial institutions, have 120 days after the plan year to provide  information to the plan administrator. Then, under IRC and ERISA,  defined benefit plans have up to 8 ½ months after the plan year end to  make contributions for minimum funding purposes. Finally, under  Treasury regulations, a plan has up to 9 ½ months after the end of the plan  year to correct any coverage or nondiscrimination violations, which  enables any corrections to be made and timely reflected on Schedule T of  Form 5500.
Service providers and plan sponsor representatives said that the 210 day  time frame with extensions is necessary, given the amount of coordination  with other parties that is needed to prepare the form and the obstacles  that exist. Plan sponsors are ultimately responsible for filing the Form  5500. However, industry association representatives told us that many plan  sponsors are relying heavily on service providers to help them prepare the  form. In addition, there are numerous parties that must provide  information to the plan sponsor or service provider in order to complete  the Form 5500. For example:    Financial institutions provide information on plan assets held in their  custody.  Insurance companies provide information about any benefits provided  through or investments made with them, including commissions and  fees paid by the plan sponsor for the year.
Actuaries are responsible for preparing the Schedule B and attesting  that the information and any assumptions being presented are both  reasonable and represent the best estimates of anticipated experience  under the plan.
Auditors are required to review plan financial statements as well as any  books or records of the plan that they deem necessary. This review  enables them to form an opinion as to whether the financial statements  and the schedules provided as part of the Form 5500 are presented  fairly according to generally accepted accounting principles. They also  provide an opinion as to whether the schedules present the information  about the plan fairly when examined in conjunction with the financial  statements as a whole.
Figure 6 shows an example of the coordination and information flow that  must occur for service providers or plan sponsors to obtain information  necessary to complete the Form 5500.
Parties involved in filling out the Form 5500 told us they face obstacles  that limit the timeliness of form preparation. For example, some officials  said that plan sponsors are busy preparing their corporate taxes, closing  their books for the year end, and preparing appropriate SEC filings during  the first quarter of the year and that these things cause them to be unable  to provide information for Form 5500 preparation until March or April at  the earliest.
Service providers, who often prepare the Form 5500 on behalf of plan  sponsors, told us that gathering information from many different parties  creates numerous obstacles that can delay preparation. Service providers  said that it can be difficult to receive timely information from insurance  companies, which is needed to complete the Schedule A. Service providers  also said that receiving complete census data from plan sponsors can be  difficult and often leads to delays in form preparation because of such  problems as merging information from different databases, dealing with  non-computerized retiree data, and identifying vested participants who  have left the company. The data collection and the analysis of census data  are further complicated when companies go through mergers,  acquisitions, or divestitures, which can result in further delays. In addition,  service providers said that many plan sponsors have outsourced their  payroll function, which means that they have to get data from another  party, which adds additional time.
Actuaries said they face certain obstacles that can affect the timeliness of  Schedule B preparation for defined benefit plans. These officials said the  biggest delay is due to funding rules that allow plan sponsors to make  contributions up to 8 ½ months following the close of a plan year.  Actuaries said they need to know all of the contributions that have been  made in order to certify Schedule B of the form. In addition, actuaries said  they must wait for plan sponsors to give them information such as asset  valuations, which can take a long time to prepare; as a result, they are  generally unable to begin preparing the Schedule B until May or June at  the earliest for calendar year plans. In general, actuaries said that once  they have all the information they need, it typically takes them up to 2  months to complete the Schedule B.
Audits are typically the last step in the preparation of the Form 5500 and  can hold up submission of the form in many cases. Auditors said that  scheduling a pension plan audit is often delayed because auditors are busy  performing corporate year-end audit work and preparing corporate tax  filings, and therefore they lack the time and resources to begin auditing  pension plans until after April at the earliest. Officials from the larger  auditing firms said that once they start working on pension plan audits,  corporate work still takes precedence and if issues relating to a corporate  audit arise, the pension plan audit will be put on hold. In addition,  depending on any issues uncovered during the pension plan audit, auditors  said they may need to go back to the plan sponsors, service providers,  actuaries, or even the insurance companies and financial institutions to  seek clarification or additional information. Auditors also said that this  back and forth can be very time consuming, and sometimes small issues  can hold up an entire audit. Once the audit is completed, it is typically sent  back to the service provider, and then the completed Form 5500 Report is  signed by the plan sponsor and submitted to EFAST for processing.
Figure 7 shows an example of the preparation timeline for all the parties  involved in providing information to the service providers in order to  prepare Form 5500 Reports, as well as the other requirements that the  various parties must meet during this time frame.
All of the service providers, actuaries, and auditors we talked to said that  given all the various commitments of the parties involved in preparing the  Form 5500, it would be very difficult to shorten the Form 5500 filing  deadline. Even given the current time frame, filings can get held up past  the deadline and sponsors may be forced to file late. For example, if the  actuarial report is not prepared in time to finish the plan audit by the  October 15 deadline, a plan will have no choice but to file late or file an  incomplete filing. According to statistics provided by Labor, 11 percent of  all filers in 2001 filed late.
section_title: Paper Filings and EFAST Processes Further Affect the Timeliness of Form 5500 Information
paragraphs: The submission of numerous paper filings and certain EFAST processes  limit the timeliness of Form 5500 report processing. Labor officials  reported that the EFAST system processes approximately 25 million paper  pages annually and that 98 percent of filers used paper forms in 2001, the  most recent year for which data are available; this figure is consistent with  prior years. EFAST officials said that under the current system, all filings  are sent by the filers to a central processing facility in Lawrence, Kansas,  operated by an outside contractor. Paper filings, once received and  properly sorted, are scanned using advanced data capture software, and  in some cases must be entered manually if the software is unable to  process the form. After the forms are processed and scanned, they are run  through edit checks and any errors are corrected. When the processing of  the form is considered final, meaning any necessary corrections have been  made, the information from the form is posted to the EFAST database.  From there the information is then distributed to Labor, IRS, and PBGC on  digital media. According to Labor officials, paper filings take more than  three times as long as electronic filings to process and have nearly twice  as many errors. As shown in figure 8, the abundance of paper filings  results in long processing times, which delay the availability of the forms  to the agencies.
According to Labor officials and the ERISA Advisory Council’s working  paper on electronic reporting, the electronic filing option of the current  EFAST system has been underutilized by plan sponsors largely because of  the fact that electronic filing is entirely voluntary. In addition, service  providers told us there are some obstacles to electronic filing. First, they  said the current process of obtaining an electronic signature and personal  identification number (PIN) is burdensome and time consuming. For  example, in order to receive a PIN, a plan sponsor must file a paper  application with Labor, a process that takes from 3 to 4 weeks. Second,  plan sponsors also reported that currently there is little economic benefit  to filing electronically because purchasing the software needed for  electronic filing can be more costly than generating paper filings, with no  corresponding benefit. Third parties such as actuaries and accountants  must sign certain portions of the Form 5500 filings, which complicates the  electronic filing process. These officials said they want to ensure that any  information developed by them and attributed to them is not changed or  altered after it leaves their control. Labor and others have made attempts  to address these issues. In 2002, the ERISA Advisory Council issued a  report recommending the use of Web-based technologies and requiring  that Form 5500 Reports be filed electronically.
Resolving errors on Form 5500 filings, another paper-based process, can  add up to 120 days to the processing of a form. EFAST officials said that  whether a form is submitted in a paper format or electronically, the  process for resolving errors or problems is paper based. We found that the  EFAST system locates errors only after a form has been processed and  seeks to resolve the error by mailing letters to plan sponsors. Labor will  send up to two letters to receive clarification, providing plan sponsors up  to 30 days to respond to each letter. In addition, Labor officials estimate  that it takes roughly 30 days for mailing and processing, thereby adding up  to 60 days in total for each letter to the overall processing time of Form  5500 Reports. Once two letters are sent, a filing is marked complete  whether a resolution was achieved or not. As shown in figure 9, a Form  5500 Report can be initially processed by January 15, but if there are  errors it may not be completed until May 14.
Labor officials said they initiated EFAST with the hope of achieving  certain advantages provided by an electronic system, including better  dissemination of information to the public, better access to data for  regulatory agencies, and availability of more current data for participants  and beneficiaries. Currently, Labor is looking into a new system to replace  EFAST when its contract ends. The new system would build on the gains  achieved through EFAST, utilizing Web-based technologies and mandatory  electronic filing, as recommended by the 2002 ERISA Advisory Council  Working Group report on electronic filing.
section_title: Labor’s Need for Complete and Accurate Filing Records for a Plan Year Also Delays the Release of Certain Form 5500 Information
paragraphs: We found that currently Labor waits until EFAST has processed all filings  for a plan year before finalizing work on the Form 5500 research file— Form 5500 information in its most practical form for producing aggregate  statistics and conducting policy research. Labor officials said that waiting  for all processing to be completed allows Labor to be more accurate and  not be forced to use estimates for information in the research file. Under  EFAST, the processing cycle for a plan year lasts 2 years to account for all  types of filings, including non-calendar year plan filings. Since non- calendar year plan filings can be due up to a year later than calendar year  plan filings, the research file is often not available to end users until  about 3 years after the end of the plan year. For example, in plan year  2001, 74 percent of all filings were calendar year plans, and for those plans  that were filed on time, processing under the EFAST contract standards  was to be completed by May 13, 2003. Labor began work on the 2001  research file in mid-2004. The long delay in releasing the research file  results in a lack of timely information on the current state of pension plans  for policy makers and researchers.
The need for adjustments to the EFAST system and the switch to an  outside contractor, Actuarial Research Corporation (ARC), to prepare the  research file have also delayed the release of the research file. Officials  from ARC told us that part of the recent delays in releasing the 1999 Form  5500 research file is that the switch to EFAST in 1998 resulted in changes  to the way that the data are collected and therefore new processes were  required to develop the research file. In addition, Labor has included new  variables that are not in the raw dataset, adding more time. Plan year 2000  marks the first year that the research file will be produced by ARC;  previously the file was produced within Labor. Because of the long delay  in releasing the 1999 research file, ARC has gotten off to a delayed start on  subsequent years. ARC officials said that they are currently working on the  2000, 2001, and 2002 research files. ARC officials also said that there is a  significant learning curve associated with preparing the research file, and  therefore they expect the time frame needed to prepare the research file to  be shorter in the future. They estimated that once the processes for  developing the file are in place, it should take roughly 4 months to produce  a preliminary version. As shown in figure 10, they began work on the 2000  research file in early 2004 and expect to release it in the summer of 2005.
section_title: The Timeliness of Form 5500 Reports Affects Federal Agencies’ Use of the Information
paragraphs: Although Labor, IRS and, PBGC have access to the Form 5500 information  sooner than other federal agencies and the general public, the agencies are  affected by the long processing times for paper filings and EFAST’s paper- based correction process. Each agency receives processed Form 5500  information on individual filings on a regular basis once a form is  completely processed, which means that any necessary corrections have  been made. As stipulated in the EFAST contract, IRS and PBGC receive  weekly updates of processed Form 5500 information, while Labor and SSA  receive updated information on a monthly basis. These agencies are also  able to view images of the forms immediately after being scanned by  EFAST. However, agency officials told us that as with the release of the  Form 5500 research file, they still have to wait for a sufficiently complete  universe of plan filings from any given plan year to be processed in order  to begin their compliance targeting programs.
Federal agency officials said that old Form 5500 information may paint a  distorted picture of the current financial condition of defined benefit  pension plans. The value of plan assets can change significantly over a  period of time, and the value of plan liabilities can also change because of  changes in interest rates, plan amendments, layoffs, early retirements, and  other factors. For plans that experience a rapid deterioration in their  financial condition, the funding measures may not reveal the true extent of  a plan’s financial distress to relevant federal agencies and plan  participants.
Federal agency officials also said that it would be useful to have certain  Form 5500 information reported prior to the lengthy Form 5500 filing  deadline. For example, Labor, IRS and PBGC officials told us that Form  5500 Schedule B information, including information about a defined  benefit pension plan’s funding status, is outdated by the time it is filed. As  a result, these agencies are not notified of a plan’s funding status until  almost 2 years after the actual valuation date. These officials said this  makes the Form 5500 an unreliable tool for determining a plan’s current  funding financial condition. They also told us other information could be  reported earlier than the filing deadline, including Schedule H and I  information, which would provide them with more timely plan financial  information, including plan assets and liabilities.
Labor, IRS, and PBGC officials told us that because of the timeliness of the  information received, their ability to carry out various statutory  responsibilities is hampered. Labor officials said that, in some cases,  untimely Form 5500 Reports affects their ability to identify financially  troubled plans whose sponsors may be on the verge of going out of  business and abandoning their pension plans, because these plans may no  longer exist by the time that Labor receives the processed filing or is able  to determine that no Form 5500 was filed by those sponsors. IRS officials  said the timeliness of Form 5500 Reports also affects their enforcement  efforts, because the IRS has a 3 year statute of limitations. These officials  said that working with older Form 5500 information raises the time and  cost required to complete an investigation because retrieving the required  information becomes more difficult with each passing year. Finally, the  timeliness of Form 5500 reporting affects PBGC’s ability to monitor  multiemployer plans. PBGC officials said that it is a challenge to get  current information on the stability of defined benefit pension plans,  especially multiemployer plans, because of the unavailability of current  Form 5500 data. Multiemployer plan data come only from Form 5500  Reports and are much less current and complete than single-employer  plan data–such data are generally 2 to 3 years older. According to PBGC  officials, a major reason for this is that PBGC can identify the corporate  sponsor of a single-employer plan from the Form 5500 and is often able to  obtain financial information from the sponsor’s corporate 10-K filing. They  said obtaining such data is not possible for multiemployer plans because  participating corporate employers cannot be identified from Form 5500  information.
Officials from other federal agencies that use Form 5500 information also  told us that the information is not current, a fact that affects their ability to  use the information to conduct program activities, inform policy makers,  and evaluate the condition of the private pension plan universe. Some  federal agency officials told us that they would develop modeling  programs to explore more uses of Form 5500 information if it were  available in a timelier manner.
section_title: Despite Efforts to Improve Its Content, the Form 5500 Lacks Key Information
paragraphs: Labor, IRS, and PBGC have taken steps to improve the content of the  Form 5500, including reviewing the form annually and revising the content  as needed to ensure that the form is collecting all required information  while not overburdening plan sponsors. Despite the content changes that  have been made, the Form 5500, in its current form, lacks key information  that could better assist Labor, IRS, and PBGC in tracking and identifying  plans from year to year and monitoring multiemployer plans. In addition,  federal agency officials and researchers that use Form 5500 information  said the form has not kept pace with changes in the private pension  universe. Although federal agency officials and others said the form lacks  certain information, pension practitioners and service providers told us  that it could be further streamlined by removing certain items and  consolidating schedules.
subsections: section_title: Federal Agencies Have Taken Steps to Improve the Content of Form 5500 Information
paragraphs: Labor, IRS, and PBGC annually review and revise Form 5500 content as  needed to ensure that the form is collecting all information required under  ERISA. These agencies conduct a review of the Form 5500 as part of the  process by which they publish updated versions of the form and its  instructions on an annual basis. The agencies receive public input  throughout the course of the year from interested parties, such as plan  sponsors and service providers, either asking questions about the form or  suggesting areas where the instructions can be improved. Federal agency  officials told us that these questions and comments are taken into account  as part of the annual process of reviewing the Form 5500.
Agency officials said the process of revising the form, which can include  adding or removing items, can be triggered by a number of events, such as  a statutory requirement to change the form or a requirement for agencies  to collect certain information. Revisions to the form can also result from  recommendations from entities such as the ERISA Advisory Council. After  the triggering event, if the respective agency deems that a change is  appropriate, it starts the process of developing the proposed change. The  proposed change then goes through an approval, public comment, and  clearance process at the agency level and the Office of Management and  Budget (OMB). The process provides the general public and federal  agencies an opportunity to comment on the proposed changes as well as  helping to ensure, among other things, that any additional information can  be reported in a way that minimizes respondent reporting burden (time  and financial resources). The process to change the Form 5500 can take  anywhere from 1 to 2 years, depending on the nature of the revisions.
Efforts to minimize plan sponsors’ reporting burden may limit the  collection of Form 5500 information. Legislation requires OMB to review  forms before they are used to collect data. The Paperwork Reduction Act  of 1995 (Pub. L. No. 104-13) and similar previous legislation are designed  to minimize the paperwork burden on the public while at the same time  recognizing the importance of information to the successful completion of  agency missions. The act requires OMB to approve all existing and new  collections of information by federal agencies. In approving agency  collection efforts, OMB must weigh the burden to the public against the  practical utility of the information to the agency. Revisions to the Form  5500 can also include eliminating duplicate or obsolete items. Agency  officials said that they were reluctant to propose additional Form 5500  data collection unless they could clearly establish that the benefit  outweighed the perceived burden. They also said that efforts to reduce  existing data collection requirements sometimes result in a loss of  information.
Over the years Labor, IRS, and PBGC have made revisions to the Form  5500. The last major revision occurred in 1999, as part of a multiyear  project, and followed Labor, IRS, and PBGC’s evaluation of public  comments on their 1997 proposal from employer groups, employee  representatives, financial institutions, service providers, and others. This  resulted in these three agencies, in an effort to streamline the form,  replacing the Form 5500, Form 5500-C, and Form 5500-R with one Form  5500 (the current form) to be used by all filers as well as more detailed  schedules customized to each filer’s type of plan. In addition, the revisions  eliminated duplicate or obsolete items. Since 1999, other annual revisions  have included clarifying the Form 5500, its schedules, and instructions;  adding items on Employee Stock Ownership Plans, frozen plans, and floor  offset plans; removing items concerning delinquent participant  contributions and fringe benefit plans; and changing the small plan audit  requirements.
Other changes have been proposed that relate to information associated  with the Form 5500. In January 2005, the Secretary of Labor announced  the Administration’s proposal to improve retirement security. The  proposal presented three areas of change, one of them to increase the  disclosure of information about private, single-employer defined benefit  pension plans to workers, investors, and regulators. The proposal would  increase disclosure in four ways: (1) reporting ongoing and at-risk liability  on the Form 5500, (2) shortening the deadline for the Schedule B report of  the actuarial statement, (3) publicly disclosing Section 4010 information,  and (4) expanding the information reported on the SAR.
section_title: The Form 5500 Still Lacks Key Information
paragraphs: The Form 5500 lacks key information that could better assist Labor, IRS,  and PBGC in monitoring plans and ensuring that they are in compliance  with the law. Federal agency officials and pension researchers  acknowledge that the form does not collect certain information, such as  information that could help them to better track plans from year to year,  and certain information on multiemployer plans and defined contribution  plans.
Labor, IRS, and PBGC officials said that they have experienced difficulties  when relying on Form 5500 information to identify and track all plans  across years. Although these agencies have a process in place to identify  and track plans filing a Form 5500 from year to year, problems still arise  when plans change employer identification numbers (EIN) and/or plan  numbers. Currently, Labor, IRS, and PBGC use the EINs and plan numbers  listed on the form to identify and track individual plans from one year to  the next. However, officials from these agencies reported they are having  problems using EINs and plan numbers to consistently and accurately  track all plans because many employers have numerous plans and each  plan files Form 5500 Reports using the same EIN. As a result, only the  three-digit plan number assigned by the plan administrator uniquely  identifies plan filings that have identical EINs. However, when plan  administrators do not file their Form 5500 with the same plan number each  year, absent a unique EIN, it is difficult for federal agencies to track the  same plan from year to year. Identifying plans is further complicated when  plan sponsors are acquired, sold, or merged. In these cases, agency  officials said that there is an increased possibility of mismatching of EINs,  plans, and their identifying information.
Agency officials also told us that without a reliable way to identify and  track plans a number of problems occur. For example, Labor officials said  they are unable to (1) verify if all required employers are meeting the  statutory requirement to file a Form 5500 annually, (2) identity all late  filers, and (3) assess and collect penalties from all plans that fail to file or  are late. IRS officials said that EINs reported on the Form 5500 do not  always match EINs listed on a corporate tax return of a business; this  makes it difficult for IRS to individually match businesses’ Form 5500  Reports with their corporate tax returns. PBGC officials said they must  spend additional time each year trying to identify and track certain defined  benefit pension plans so that they can conduct their compliance and  research activities. Furthermore, other federal agencies and researchers  said that the inability to identify and track plans limits their ability to  effectively identify all of the pension plans associated with a particular  company, track changes over time in certain types of pension plans, and  match Form 5500 information with other data sources. Labor, IRS, and  PBGC officials said they are considering measures to better track and  identify plans but have not reached any conclusions.
We were also told that the Form 5500 lacks certain information on  multiemployer plans that would enable PBGC, other federal regulators,  and pension researchers to (1) identify all of the participating employers in  a particular multiemployer plan; (2) determine a multiemployer plan’s  basis for making contributions; and (3) determine the amount of unfunded  liabilities attributable to each participating employer. Currently, the form  does not collect information that identifies the employers participating in  a particular multiemployer plan. Thus, PBGC and other regulators are  unable to identify all the employers upon whose financial health  multiemployer plans depend or link the financial health of these  employers to the condition of the particular multiemployer plans that  these employers are participating in. PBGC officials said they are unable to  gauge the full impact that events such as employer bankruptcies,  withdrawals, and labor strikes would have on multiemployer plans, their  participants, and the agency’s multiemployer insurance program, which  they emphasized as important, given that with multiemployer plans, an  employer’s pension liabilities can be affected by the financial health of  other employers in the plan. The form also lacks information that shows a  multiemployer plan’s basis for employer contributions, which means that  PBGC cannot determine the impact that events, such as labor strikes,  would have on an employer’s ability to make plan contributions and its  effect on the financial condition of that particular plan. Finally, the Form  5500 does not capture information on each participating employer’s  responsibility for unfunded liabilities. Thus, PBGC is unable to assess the  financial risk to an insured multiemployer plan posed by the financial  collapse or withdrawal of one or more contributing employers, which  PBGC officials said is an important piece of information because of its role  in monitoring multiemployer plans for financial problems, providing  financial and technical assistance to troubled plans and guaranteeing a  minimum level of benefits to participants in insolvent multiemployer  plans. PBGC officials said that the agency needs relevant information on  multiemployer plans to fully assess the financial health of and potential  risks faced by multiemployer plans, and they said that this information is  currently lacking on the Form 5500. PBGC officials also said they are  exploring ways to obtain more useful information on multiemployer plans.
However, their plans are still in the developmental stages. In addition,  officials from Labor, IRS, and other federal agencies and pension  researchers said it would be useful if the Form 5500 captured more  information on multiemployer plans.
section_title: Federal and Private Sector Researchers Said the Form 5500 has Not Kept Pace with Changes in the Private Pension Universe
paragraphs: Federal and private sector researchers said the Form 5500 has not kept  pace with changes in the private pension universe, where defined  contribution plans have become the more prevalent type of private  pension plan offered by employers and more employees are increasingly  being covered by defined contribution plans. They said the Form 5500 is  geared more toward defined benefit plans rather than toward defined  contribution plans and suggested that the form could collect detailed  information on the range of investment options that are available to  participants (employer securities and mutual funds), 401(k) plan matching  contributions, employee contribution limits, as well as more detailed  information on the asset allocations of pooled accounts. They also said  that the form could collect better information to determine the true cost of  administering a defined contribution plan and 401(k) plan fees. For  example, the ERISA Advisory Council Working Group recently reported  that the Form 5500, as currently structured, does not reflect the way that  the defined contribution plan fee structure works. The Advisory Council  concluded that Form 5500s filed by defined contribution plans are of little  use to policy makers, government enforcement personnel, plan sponsors,  and participants in terms of understanding the cost of a plan. The Advisory  Council also recommended that Labor modify the Form 5500 and the  accompanying schedules so that total fees incurred either directly or  indirectly by these plans can be reported or estimated. This information  could be used for research or regulatory purposes.
In addition to having more information on defined contribution plans,  federal and private sector researchers also said that it would be useful if  information reported on Section 4010 filings, such as information about  the ability of a defined benefit plan to meet its obligations to participants if  the plan were to be terminated, were captured on the Form 5500. Section  4010 filings (named after the ERISA section that requires companies to  submit such reports) also include proprietary information about the plan  sponsor and its pension assets. However, this information is available only  to PBGC and by law may not be publicly disclosed. Some officials told us  that participants should be provided with the necessary information,  including Section 4010 data, to inform them when their plan is  underfunded and when the sponsor’s financial condition may impair the  ability of the company to fund or maintain the plans.
section_title: Pension Practitioners and Others Said the Form Can Be Further Streamlined
paragraphs: Despite federal agencies’ attempts to streamline the form, pension  practitioners and service providers said that the Form 5500 can be further  streamlined by removing duplicate items and consolidating certain  schedules. Pension practitioners and service providers told us that  opportunities exist to modify and consolidate certain financial schedules  and provided us with recommendations that in their opinion would better  capture relevant information about pension plans for the federal  government, participants, plan sponsors, and pension practitioners, as  shown in table 4. However, Labor, IRS, and PBGC officials told us that, to  some extent, they use all of the information reported on the Form 5500. In  addition, pension researchers told us that removing certain information  from the form, such as plan financial information, may limit their ability to  use the form for research and statistical purposes.
section_title: Conclusions
paragraphs: The Form 5500 is the primary source of information available concerning  the operation, funding, assets, liabilities, and investments of private  pension plans. Because these data are important to enforcement of federal  pension laws and to pension policy development, it is important that Form  5500 information be timely and useful. Changes in the private pension  world illustrate why improvements to the Form 5500 and its processing  are so important. For example, the private pension environment has been  changing fundamentally in the types of plans offered today’s workers, yet  little has been done to reflect these changes in the types of data collected.
In addition, the sudden deterioration in funding levels for some large  defined benefit plans has brought financial pressures to PBGC and led to  calls for comprehensive reforms, but Form 5500 data are not timely  enough to help policy makers in developing effective responses. Untimely  pension plan information forces policy makers to make key pension policy  decisions based on data that are about 3 years old. It also hampers  regulators’ ability to enforce ERISA and other laws and results in users  getting an outdated picture of the financial condition of the private  pension plan environment.
Although Labor has made significant progress in implementing EFAST,  more should be done to reduce the time it takes to process and release  usable computerized Form 5500 information. Changes to the current  system, such as utilizing its electronic filing capabilities and improving its  paper-based correspondence process, could speed up the processing of  Form 5500 Reports and provide more timely data for all users.  Alternatively, certain types of information could be reported earlier than  the current filing deadline, such as information on a plan’s funding status,  which could also provide regulators with more timely information.
Content issues also remain a problem, despite Labor’s, IRS’s, and PBGC’s  periodic revisions to the form. Information currently collected on the  form, while useful to some extent, does not permit these agencies to be in  the best position to ensure compliance with federal laws and accurately  assess the financial condition of private pension plans. Given the increase  in the number of defined contribution pension plans and the need for  relevant information on multiemployer plans, providing better information  on these plans would help policy makers and others make informed  decisions about the financial risks posed by private pension plans.  However, any improvement to the content of the Form 5500 must be done  in such a way that does not pose an undue burden on plan sponsors.
section_title: Recommendations
paragraphs: Given the improved timeliness and reduced errors associated with  electronic filing, Labor, IRS, and PBGC should require the electronic filing  of the Form 5500. In doing so, Labor should also make improvements to  the current electronic filing process to make it less burdensome, such as  revising the procedure for signing and authenticating an electronic filing.
To improve timeliness, reduce errors, and maximize efficiency, Labor  should modify its current EFAST processing methods. In doing so, the  following steps should be considered:    Labor should streamline its data correction processes by ensuring that  filings are checked for errors before they are accepted for processing  by the EFAST system.
It should develop an electronic-based correspondence process,  whereby the agencies can notify filers of errors electronically, thereby  eliminating the 30 days that officials at Labor estimate it takes to mail  the paper-based correspondence back and forth. Also this will allow for  filers to be notified of errors on a more timely basis.
Considering the need for federal agencies, Congress, and the public to  have access to timely and usable Form 5500 information as soon as  possible, we recommend that Labor evaluate ways to speed up the release  of its research file, including considering making information available  from the file on an interim basis prior to its completion and final release to  the public.
To more effectively identify and track individual plans across years,  especially when plans change EINs and plan numbers, and to take into  account Labor’s need to be able to verify if all required employers are  meeting the statutory requirement to file a Form 5500 annually, we  recommend that Labor, IRS, and PBGC work collectively to better identify  and track the same plan from one year to the next.
To improve the federal government’s ability to regulate multiemployer  defined benefit pension plans and improve participant information, we  recommend that Labor, IRS, and PBGC modify the Form 5500 to collect  additional information on multiemployer pension plans that would enable  Labor, IRS, and PBGC to monitor and manage potential risks associated  with events such as employer bankruptcies, withdrawals, and labor strikes  and the attendant consequences for these plans, plan participants, and  PBGC’s multiemployer insurance program. In doing so, Labor, IRS, and  PBGC should consider requiring multiemployer plans to report the  following information on the Form 5500:  information sufficient to identify all of the employers associated with a  particular plan and their annual contributions to the plan,    plan specifics on determining employer contributions (per hour, per  unit of output, etc.), and  the distribution by employer of responsibility for unfunded or  underfunded plan liabilities.
section_title: Agency Comments
paragraphs: We provided a draft of this report to Labor, PBGC, IRS, and SSA. Labor,  PBGC, and IRS provided written comments, which appear in appendix I,  appendix II, and appendix III. Labor’s, PBGC’s and IRS’s comments  generally agree with the findings and conclusions of our report. Labor,  PBGC, IRS, and SSA also provided technical comments on the draft. We  incorporated each agency’s comments as appropriate.
Labor suggested that we clarify our assertion that the Form 5500 could  collect information that could help agencies better identify and track plans  across years. Labor stated that the Agencies currently apply computerized  “entity control” tests to Form 5500 filings as part of the EFAST processing  system that are designed to track individual plans and determine if  consistent identifying data are reported each year for a particular filer in  order to maintain accurate year-to-year records for each filer. We have  clarified that section of our report by noting that the agencies’ have a  system in place to identify and track plans and the shortcomings of this  method. However, although a system is in place to track plans from year to  year, officials from all the principal agencies said that it is very difficult to  track plans from year to year if plans change EINs and plan numbers.
Labor and PBGC suggested that the section of our report on the timeliness  of available Form 5500 information further clarify that generally individual  Form 5500 filings are made available for enforcement and for public  disclosure as soon as they are processed by EFAST. We agree and did note  that in the appropriate section of the report. We have also revised our  report in various sections to state that Form 5500 information is available  for enforcement and public disclosure purposes prior to the release of the  Form 5500 research file.
PBGC proposed an additional recommendation regarding the timeliness of  defined benefit pension plan funding information reported on Form 5500  Schedule B. The Administration’s pension reform proposal includes a  provision that would advance the reporting date for the Schedule B to  February 15 for certain large defined benefit plans. We agree with PBGC  that advancing the reporting date for the Schedule B to provide more  timely information on such plans to Labor, IRS, and PBGC could be an  important piece of comprehensive pension reform.
IRS specifically stated that, with electronic filing, EFAST can validate  filings as received, reject filings with errors or incomplete responses, and  minimize or eliminate error correction using electronic correspondence.  IRS also stated its support for our recommendations to require the  electronic filing of Form 5500 Reports, evaluate ways to better identify and  track plans from year to year, and to modify the Form 5500 to collect  additional information on multiemployer pension plans.
We are sending copies of this report to the Secretary of Labor, the  Commissioner of Internal Revenue, the Executive Director of the Pension  Benefit Guaranty Corporation, the Commissioner of Social Security,  appropriate congressional committees, and other interested parties. We  will also make copies available to others on request. In addition, the report  will be available at no charge on GAO’s Web site at http://www.gao.gov.
If you have any questions concerning this report please contact me at  (202) 512-7215 or Tamara Cross at (202) 512-4890. Other contacts and  acknowledgments are listed in appendix IV.
section_title: Appendix I: Comments from the Department of Labor
section_title: Appendix II: Comments from the Pension Benefit Guaranty Corporation
section_title: Appendix III: Comments from the Internal Revenue Service
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to those named above, Joseph Applebaum, Richard Burkard,  Scott Heacock, Gene Kuehneman, Michael Maslowski, Robert Parker,  Roger J. Thomas, and Gail Vallierers made important contributions to this  report.