Proposed Revision of Annual Information Return/Reports
| Published date | 15 September 2021 |
| Citation | 86 FR 51488 |
| Record Number | 2021-19714 |
| Section | Proposed rules |
| Court | Pension Benefit Guaranty Corporation |
Federal Register, Volume 86 Issue 176 (Wednesday, September 15, 2021)
[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Proposed Rules]
[Pages 51488-51575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19714]
[[Page 51487]]
Vol. 86
Wednesday,
No. 176
September 15, 2021
Part IIIDepartment of Labor-----------------------------------------------------------------------Employee Benefits Security AdministrationDepartment of the Treasury-----------------------------------------------------------------------Internal Revenue ServicePension Benefit Guaranty Corporation-----------------------------------------------------------------------26 CFR Part 301
29 CFR Parts 2520 and 4065Proposed Revision of Annual Information Return/Reports; Proposed Rule
Federal Register / Vol. 86 , No. 176 / Wednesday, September 15, 2021
/ Proposed Rules
[[Page 51488]]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2520
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4065
RIN 1210-AB97
Proposed Revision of Annual Information Return/Reports
AGENCY: Employee Benefits Security Administration, Labor; Internal
Revenue Service, Treasury; Pension Benefit Guaranty Corporation.
ACTION: Notice of proposed forms revisions.
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SUMMARY: This document contains proposed changes to the Form 5500
Annual Return/Report forms filed for employee pension and welfare
benefit plans under the Employee Retirement Income Security Act of 1974
(ERISA) and the Internal Revenue Code (Code). The proposed form
revisions primarily relate to statutory amendments to ERISA and the
Code enacted as part of the Setting Every Community Up for Retirement
Enhancement Act of 2019 (SECURE Act). The Department of Labor (DOL),
the Internal Revenue Service (IRS), and the Pension Benefit Guaranty
Corporation (PBGC) (collectively ``Agencies'') are also proposing
certain additional changes intended to improve reporting on
multiemployer defined benefit pension plan funding, update Form 5500
financial reporting to make the financial information collected on the
Form 5500 more useful and usable, enhance the reporting of certain tax
qualification and other compliance information by retirement plans,
and, transfer to the DOL Form M-1 (Report for Multiple Employer Welfare
Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs))
(Form M-1) participating employer information for multiple employer
welfare arrangements that are required to file the Form M-1. The
proposed revisions would affect employee pension and welfare benefit
plans, plan sponsors, administrators, and service providers to plans
subject to annual reporting requirements under ERISA and the Code.
DATES: Written comments must be received by the Department of Labor on
or before November 1, 2021.
ADDRESSES: You may submit written comments, identified by RIN 1210-
AB97, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments. To facilitate receipt and
processing of comments, the Agencies encourage interested parties to
submit their comments electronically.
Mail: Office of Regulations and Interpretations, Employee Benefits
Security Administration, Room N-5655, U.S. Department of Labor, 200
Constitution Ave. NW, Washington, DC 20210, Attention: Proposed Form
5500 Revisions RIN 1210-AB97.
Instructions: All submissions must include the agency name and
Regulatory Identifier Number (RIN) for this rulemaking. The Agencies
will share any comment submitted to one of the Agencies individually
with the other Agencies. To avoid unnecessary duplication of effort,
the DOL also will treat public comments submitted in response to this
Notice of Proposed Forms Revisions as public comments on the Notice of
Proposed Rulemaking to the extent they include information relevant to
the proposed regulatory amendments. If you submit comments
electronically, do not submit paper copies. Comments will be available
to the public, without charge, online at: http://www.regulations.gov
and http://www.dol.gov/agencies/ebsa and at the Public Disclosure Room,
Employee Benefits Security Administration, Suite N-1513, 200
Constitution Ave. NW, Washington, DC 20210.
Warning: Do not include any personally identifiable or confidential
business information that you do not want publicly disclosed. Comments
are public records posted on the internet as received and can be
retrieved by most internet search engines.
FOR FURTHER INFORMATION CONTACT: Janet Song or Colleen Brisport
Sequeda, Office of Regulations and Interpretations, Employee Benefits
Security Administration, U.S. Department of Labor, (202) 693-8500 for
questions related to reporting requirements under Title I of ERISA. For
information related to the IRS changes and questions under the Internal
Revenue Code, contact Cathy Greenwood, Employee Plans Program
Management Office, Tax Exempt and Government Entities, (470) 639-2503.
For information related to PBGC changes, including proposed changes to
the actuarial schedules, contact Karen B. Levin, Regulatory Affairs
Division, Office of the General Counsel, Pension Benefit Guaranty
Corporation, (202) 229-3559.
Customer service information: Individuals interested in obtaining
general information from the DOL concerning Title I of ERISA may call
the EBSA Toll-Free Hotline at 1-866-444-EBSA (3272) or visit the DOL's
website (www.dol.gov/agencies/ebsa).
SUPPLEMENTARY INFORMATION:
I. Overview of the Proposal
A. Background of Form 5500 Annual Return/Report of Employee Benefit
Plan
Sections 101 and 104 of Title I and section 4065 of Title IV of the
Employee Retirement Income Security Act of 1974 (ERISA) and sections
6057(b), 6058(a), and 6059(a) of the Internal Revenue Code of 1986
(Code), and related regulations, impose annual reporting and filing
obligations on pension and welfare benefit plans, as well as on certain
other entities. Plan administrators, employers, and others generally
satisfy these annual reporting obligations by filing the Form 5500,
Annual Return/Report of Employee Benefit Plan (Form 5500), or Form
5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan
(Form 5500-SF) (together ``Form 5500 Annual Return/Report'').\1\
Specifically, filing of the Form 5500 or the Form 5500-SF, as
applicable, with any required schedules and attachments in accordance
with the instructions and related regulations, constitutes compliance
with the applicable annual reporting requirements under Title I of
ERISA and the Department's implementing regulations.\2\ Filing of a
[[Page 51489]]
Form 5500 or Form 5500-SF, together with the required attachments and
schedules in accordance with the instructions, by plan administrators,
employers, and certain other entities also satisfies the annual filing
and reporting requirements under Code sections 6057(b), 6058(a), and
6059(a). Filing the Form 5500 Annual Return/Report will also satisfy an
applicable plan administrator's annual reporting obligation under
section 4065 of Title IV of ERISA.
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\1\ Certain one-participant plans and foreign plans that are not
subject to the requirements of section 104(a) of ERISA are required
to file Form 5500-EZ, Annual Return of One Participant (Owners/
Partners and Their Spouses) Retirement Plan or a Foreign Plan.
Beginning with 2020 forms filed on or after January 1, 2021, the
Form 5500-EZ is required to be filed electronically through the same
system as the Form 5500--the Form 5500 Electronic Filing Acceptance
System (EFAST2). From 2009 to 2019, such plans had been permitted to
file the Form 5500-SF electronically in lieu of filing the Form
5500-EZ on paper with the IRS. See instructions for 2020 Form 5500-
EZ and Form 5500-SF.
\2\ ERISA section 103 broadly sets out annual reporting
requirements for employee benefit plans. The Form 5500 Annual
Return/Report and the DOL's implementing regulations generally are
promulgated under the ERISA provisions authorizing limited
exemptions to these requirements and simplified reporting and
disclosure for welfare plans under ERISA section 104(a)(3),
simplified annual reports under ERISA section 104(a)(2)(A) for
pension plans that cover fewer than 100 participants, and
alternative methods of compliance for all pension plans under ERISA
section 110. The forms, instructions, and related regulations are
also promulgated under the DOL's general regulatory authority in
ERISA sections 109 and 505.
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The Form 5500 Annual Return/Report serves as the principal source
of information and data available to the Agencies concerning the
operations, funding, and investments of approximately 843,000 pension
and welfare benefit plans that file.\3\ ERISA plans cover roughly 154
million workers, retirees, and dependents of private sector pension and
welfare plans \4\ with estimated assets of $12.2 trillion.\5\
Accordingly, the Form 5500 Annual Return/Report is essential to each
Agency's enforcement, research, and policy formulation programs, as
well for the regulated community, which makes increasing use of the
information as more capabilities develop to interact with the data
electronically. The data is also an important 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 Form 5500 Annual Return/Report also serves as a primary
means by which the operations of plans can be monitored by
participating employers in multiple employer plans and other group
arrangements, plan participants and beneficiaries, and by the general
public.
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\3\ Estimates are based on 2019 Form 5500 filings. DOL notes
that single employer welfare plans with under 100 participants that
are unfunded or insured (generally don't hold assets in trust) are
exempt from filing a Form 5500 under 29 CFR 2520.104-29. Therefore
while DOL estimates there are 2.5 million health plans and 885,000
non-health welfare plans, respectively, only 69,000 and 91,000 of
these plans filed a 2019 Form 5500.
\4\ Source: U.S. Department of Labor, EBSA calculations using
the Auxiliary Data for the March 2019 Annual Social and Economic
Supplement to the Current Population Survey.
\5\ EBSA based these estimates on the 2018 Form 5500 filings
with the U.S. Department of Labor (DOL), reported SIMPLE assets from
the Investment Company Institute (ICI) Report: The U.S. Retirement
Market, First Quarter 2021, and the Federal Reserve Board's
Financial Accounts of the United States Z1 June 10, 2021.
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The last time the Agencies implemented significant changes to the
forms and schedules was for the 2009 form year, in conjunction with the
move to mandatory electronic filing and a related update to the ERISA
Filing Acceptance System (EFAST2).\6\ Those changes were proposed in
2006, 71 FR 41615 (Jul. 21, 2006), and finalized in 2007, effective for
the 2009 form series. 72 FR 64731 (Nov. 16, 2007). Other discrete
changes that have been made to the Form 5500 Annual Return/Report over
those years were generally set forth annually in the ``Changes to
Note'' section in the instructions, some of which have involved
targeted rulemaking activity to implement reporting changes required by
law.\7\ The Agencies most recent significant initiative with respect to
the Form 5500 was the publication of a proposal to modernize the forms
and instructions in July 2016. 81 FR 47534 (July 16, 2016) (Tri-Agency
Notice of Proposed Forms Revisions) and 81 FR 47496 (July 16, 2016)
(DOL Notice of Proposed Rulemaking) (together the 2016 Modernization
Proposal). The 2016 Modernization Proposal ultimately was not adopted
as final changes to the forms, instructions, and regulations, although
a small number of changes that were included in the 2016 proposal have
been finalized, as set forth in the ``Changes to Note'' Section in the
instructions to the Form 5500 Annual Return/Report for the years in
which the changes were made.
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\6\ EFAST2 is an all-electronic system that receives and
displays Forms 5500 Series Annual Returns/Reports and Form PR Pooled
Plan Provider Registrations. EFAST2 is operated by a private-sector
government contractor on behalf of DOL, IRS, and PBGC.
\7\ See, e.g., Revisions to Annual Return/Report-Multiple-
Employer Plans, Interim Final Rule, 79 FR 66617 (Nov. 10, 2014)
(updating the Form 5500 instructions to require all multiple
employer plans, including MEWAs, to provide a list of participating
employers and certain financial information, as required by ERISA
section 103(g)); Filings Required of Multiple Employer Welfare
Arrangements and Certain Other Related Entities, Final Rule, 78 FR
13781 (Mar. 1, 2013) (among other things, added new questions to
Form 5500 for MEWAs that are required to complete the Form 5500 to
provide information on their most recent Form M-1 (Report for
Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities
Claiming Exception (ECEs) filing) (Form M-1).
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B. Recent Legislative Changes Supporting Proposed Annual Reporting
Improvements
The SECURE Act,\8\ which overall was designed to expand and
preserve workers' retirement savings, is the most significant
legislation impacting ERISA and Code provisions pertaining to
retirement plans since the Pension Protection Act of 2006. Among other
things, the SECURE Act directed the Secretary of Labor and the
Secretary of Treasury (together ``Secretaries'') to develop a new
aggregate annual reporting option for certain groups of retirement
plans and included other statutory amendments that directly impact
annual reporting requirements for multiple-employer pension plans
(MEPs). In relevant part, the SECURE Act's expansion of MEPs and
direction for the Secretaries to establish a consolidated reporting
option for defined contribution pension plans that share certain key
characteristics should help expand retirement coverage by making it
easier for record keepers and other financial services providers to
offer attractive retirement plan alternatives and for employers,
especially small ones, to pick from among a broader array of
alternatives what works best for them and their employees.
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\8\ The SECURE Act was enacted December 20, 2019, as Division O
of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-
94).
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Section 202 of the SECURE Act provides that the Secretaries, shall,
in cooperation, modify the Form 5500 Annual Return/Report so that all
members of a group of defined contribution individual account plans
described in section 202 may file a single aggregated annual return/
report satisfying the requirements of both section 6058 of the Code and
section 104 of ERISA. The SECURE Act further provides that, in
developing the consolidated return/report, the Secretaries may require
any information regarding each plan in the group as such Secretaries
determine is necessary or appropriate for the enforcement and
administration of the Code and ERISA. The SECURE Act also mandates that
the consolidated reporting by such a group must include such
information as will enable participants in each of the plans to
identify any aggregated return/report filed with respect to their plan.
Section 202 provides that to constitute an eligible group of plans, all
of the plans in the group must be either individual account plans or
defined contribution plans as defined in section 3(34) of ERISA or in
section 414(i) of the Code; must have the same trustee as described in
section 403(a) of ERISA; the same one or more named fiduciaries as
described in section 402(a) of ERISA; the same administrator as defined
in section 3(16)(A) of ERISA and plan administrator as defined in
section 414(g) of the Code; must have plan years beginning on the same
date; and must provide the same investments or investment options to
participants and beneficiaries. Section 202 further provides that a
plan not subject to Title I of ERISA shall be treated as meeting these
requirements for being eligible to be part of a consolidated reporting
[[Page 51490]]
group of plans, if the same person that performs each of the functions
described in the above requirements, as applicable, for all other plans
in such group performs each of such functions for such plan.\9\
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\9\ SECURE Act Section 202(c).
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Section 101 of the SECURE Act amended ERISA section 3(2) and added
ERISA sections 3(43) and 3(44) to allow for a new type of ERISA-covered
MEP--a defined contribution pension plan called a ``pooled employer
plan'' operated by a ``pooled plan provider.'' Pooled employer plans
allow multiple unrelated employers to participate without the need for
any common interest among the participating employers (other than
having adopted the plan).\10\ Under section 3(2) of ERISA, a pooled
employer plan is treated for purposes of ERISA as a single plan that is
a multiple employer plan. A pooled employer plan is defined in section
3(43) as a plan that is an individual account plan established or
maintained for the purpose of providing benefits to the employees of
two or more employers; that is a qualified retirement plan or a plan
funded entirely with individual retirement accounts (IRA plan); and the
terms of which must meet certain requirements set forth in the
statute.\11\ The term pooled employer plan does not include a
multiemployer plan as defined in ERISA section 3(37) or a plan
maintained by employers that have a common interest other than having
adopted the plan.\12\ The term also does not include a plan established
before the date the SECURE Act was enacted unless the plan
administrator elects to have the plan treated as a pooled employer plan
and the plan meets the ERISA requirements applicable to a pooled
employer plan established on or after such date. The existence of this
new type of multiple employer plan requires some adjustments to the
Form 5500 to provide for annual reporting by such plans.\13\
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\10\ DOL sought comments through a Request for Information
published on July 31, 2019, on ``open'' MEP structures (those
without the need for any commonality among the participating
employers or other genuine organization relationship unrelated to
participation in the plan) being treated as one multiple employer
plan for purposes of compliance with ERISA. The DOL does not have
any current plan to take further action regarding defined
contribution open MEPs due to the SECURE Act provisions permitting
pooled employer plans as a type of open MEP.
\11\ 29 U.S.C 1002(43).
\12\ In establishing a pooled employer plan as a new type of
multiple employer plan, the SECURE Act in section 101(c)
specifically referred to plans maintained by employers that have a
common interest other than having adopted the plan. For example, the
DOL's recent final association retirement plan regulation, at 29 CFR
2510.3-55, published July 31, 2019, clarified and expanded the types
of arrangements that could be treated as MEPs under Title I of ERISA
to include plans established and maintained by a bona fide group or
association of employers or by a professional employer organization
(PEO). The SECURE Act provision excluding a ``plan maintained by
employers that have a common interest'' from the definition of a
pooled employer plan does not preclude employers with a common
interest other than participating in the plan from establishing or
participating in a pooled employer plan. Rather, it means that if a
group of employers with a common interest other than participating
in the plan establish a MEP, e.g., an association retirement plan
under the DOL's regulation, the association retirement plan will not
be subject to the SECURE Act requirements for a plan to be a pooled
employer plan.
\13\ New section 3(44) of ERISA establishes requirements for
pooled plan providers, including a requirement to register with the
DOL before beginning operations as a pooled plan provider. A
parallel requirement to file a registration statement with the
Secretary of Treasury is in section 413(e)(3)(A)(ii) of the Code. On
November 16, 2020, the DOL published a notice of final rulemaking
establishing the registration requirement for pooled plan providers.
85 FR 72934 (Nov. 16, 2020). The Treasury Department and the IRS
have advised that filing the Form PR with the DOL will satisfy the
requirement to register with the Secretary of the Treasury. The
instructions to the Form PR (Pooled Plan Provider Registration)
(Form PR) advised registrants to use the same identifying
information on the Forms 5500 Annual Return/Report filed by the
pooled employer plans, particularly name; EIN for the pooled plan
provider; any identified affiliates providing services; trustees;
and plan name and number for each pooled employer plan. The Form PR
and its instructions, as well as any Form PR that have been filed
with the DOL by pooled plan providers, are available on the DOL
website at www.efast.dol.gov.
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Section 101 of the SECURE Act also amended ERISA section 103(g) for
MEPs. Section 103(g) of ERISA requires that the annual return/report of
a MEP generally must include a list of participating employers and a
good faith estimate of the percentage of total contributions made by
each participating employer during the plan year. The SECURE Act
amended section 103(g) to expand the participating employer information
that must be reported on the Form 5500 Annual Return/Report \14\ also
to require the aggregate account balances attributable to each employer
in the plan (determined as the sum of the account balances of the
employees of each employer and the beneficiaries of such employees),
and applied section 103(g) to retirement plans that currently meet the
definition of a MEP under ERISA section 210(a), including any pooled
employer plans, for plan years beginning on or after January 1,
2021.\15\ With respect to a pooled employer plan, section 103(g)
further requires that the annual return/report must include the
identifying information for the person designated under the terms of
the plan as the pooled plan provider.
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\14\ SECURE Act Section 101(d).
\15\ SECURE Act Section 101(e)(1).
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In addition to various changes to the forms and instructions to
address these statutory changes and reflect the existence of pooled
employer plans and defined contribution plan reporting arrangements,
some of the annual reporting changes being proposed are intended to
ensure appropriate transparency and financial accountability for pooled
employer plans, other MEPs, and defined contribution plan reporting
arrangements. The rationales for some of those changes apply more
broadly to retirement plans as a class (for example, improvements to
the content and format for the financial schedules that retirement
plans use to report information regarding their assets, investments,
income, and expenses), and, accordingly, some of the changes are being
proposed for retirement plans in general.
C. Overview of Proposed Changes to Forms, Schedules, and Instructions
1. General Proposed Changes
The proposed revisions involve the following major categories of
changes, along with other technical revisions and updates, to the
current structure and content of the Form 5500 Annual Return/Report.
Update the Form 5500 and its instructions to establish
requirements pursuant to section 202 of the SECURE Act for consolidated
returns/reports for eligible defined contribution group (DCG) reporting
arrangements as an alternative method of compliance for certain
individual account or defined contribution retirement plans relying on
the consolidated report to satisfy the generally applicable requirement
that employee benefit plans file a Form 5500. This would include adding
a new Schedule DCG (Individual Plan Information) to provide individual
plan-level information for defined contribution pension plans covered
by a DCG consolidated Form 5500 filing. It would also include adding a
new checkbox on the Form 5500 (Part II, line 10a(4)) to indicate that
Schedule DCG is attached to the Form 5500, with a space for the filer
to enter the number of Schedules DCG (one per plan) attached to the
Form 5500 filing.
Update the Form 5500 and its instructions to add a new
Schedule MEP (Multiple Employer Pension Plan). MEPs would report
information specific to MEPs, including the ERISA section 103(g)
participating employer information, updated to add the new aggregate
account information that is
[[Page 51491]]
relevant only for pension plans, on the Schedule MEP. Questions
intended to satisfy the SECURE Act's reporting requirements for pooled
employer plans and questions to link the Form PR (Pooled Employer
Registration) and the Form 5500 for each plan operated by a pooled plan
provider would also be on the Schedule MEP. A new checkbox would be
added to the Form 5500 (Part II, line 10a(5) to indicate that Schedule
MEP is attached to the Form 5500.
Transfer the participating employer information from the
Form 5500 Annual Return/Report to the Form M-1 for all multiple
employer welfare arrangements (MEWAs)) (plan and non-plan MEWAs)) that
offer or provide coverage for medical benefits, and continue to require
reporting of participating employer information on the Form 5500 Annual
Return/Report for plan MEWAs that provide other benefits.\16\
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\16\ The Agencies may choose as part of a final rule to have
those plan MEWAs that are not required to file the Form M-1 complete
the relevant participating employer information on the Schedule MEP
rather than continuing to complete as an attachment to the Form
5500. The agencies invite comment on any preference from a
disclosure, forms preparation, or data usage perspective as to how
the information is collected.
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Update Schedule H and instructions to standardize the
schedules of investment assets required to be included in the annual
return/report (Schedule H, line 4i Schedules), so that the information
can be entered or imported for improved electronic use and
transparency.
Update the Form 5500 and 5500-SF and their instructions on
counting participants to change the current threshold for determining
when a defined contribution plan may file as a small plan, including
eligibility for the waiver of the requirement for small plans to have
an audit and include the report of an independent qualified public
accountant (IQPA) with their annual report. Specifically, instead of
using all those eligible to participate, filers generally would look at
the number of participants/beneficiaries with account balances as of
the beginning of the plan year (the first plan year would use an end of
year measure). This proposed change would be reflected in a new line
item on the Form 5500 and Form 5500-SF.\17\
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\17\ This change was proposed partly in light of section 112 of
the SECURE Act, which provides that long-term, part-time workers
that have reached specified minimum age requirements and worked at
least 500 hours in each of three consecutive 12-month periods must
be permitted to make elective contributions to a Code section 401(k)
qualified cash or deferred arrangement for plan years beginning on
or after January 1, 2024. This could add to the number of
participants who are eligible to, but who elect not to participate
in a plan, which could impact whether a plan needs to file as a
large plan. The DOL expects that excluding from the participant
count those participants who are eligible to participate but did not
have an account balance will reduce expenses for small employers to
establish and maintain a small retirement plan, and as a
consequence, encourage more employers to offer workplace-based
retirement savings plans to their employees.
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Add trust questions to the Form 5500, the Form 5500-SF,
and the IRS Form 5500-EZ, regarding the name of the plan's trust, the
trust's EIN, the name of the trustee or custodian, and the trustee's or
custodian's telephone number. This information will enable the Agencies
to more efficiently focus on compliance concerns for retirement plan
trusts, including those for pooled employer plans and DCG reporting
arrangements.
Revise the 2021 5500 Annual Return/Report instructions to
provide an interim method of reporting participating employer
information for MEPs and pooled plan provider identification
information for pooled employer plans pending the Schedule MEP
implementation for 2022 plan year filings.
Section 101 of the SECURE Act also amended ERISA section
104(a)(2)(A) to permit the Secretary of Labor to prescribe by
regulation simplified reporting for MEPs subject to ERISA section
210(a) with fewer than 1,000 participants in total, as long as each
participating employer has fewer than 100 participants. The DOL is not,
however, currently proposing to amend the current reporting rules to
establish a ``simplified report'' for such plans. The DOL is interested
in stakeholder comments on why MEPs subject to ERISA section 210(a)
should be subject to different reporting requirements than single
employer plans that cover fewer than 1,000 participants, and on
appropriate conditions and limitations for such a simplified report
that would ensure transparency and financial accountability comparable
to that for other large retirement plans.
2. Internal Revenue Code-Based Questions for the 2022 Form 5500s
To better identify non-compliant plans, the IRS is proposing the
following changes to the 2022 forms, schedules, and instructions,
including adding the proposed Schedule DCG, so that certain questions
are answered at the individual plan level (not the DCG level) in order
for a plan's annual reporting obligation to be satisfied by a DCG Form
5500 filing:
Add a nondiscrimination and coverage test question to Form
5500, Form 5500-SF, and proposed Schedule DCG that was on the Schedule
T before it was eliminated. The question asks if the employer
aggregated plans in testing whether the plan satisfied the
nondiscrimination and coverage tests of Code sections 401(a)(4) and
410(b).
Add a question to Form 5500, Form 5500-SF, and proposed
Schedule DCG, for section 401(k) plans, asking whether, if applicable,
the plan sponsor used the design-based safe harbor rules or the ``prior
year'' or ``current year'' ADP test.
Add a question to Form 5500, Form 5500-SF,\18\ and
proposed Schedule DCG asking whether the employer is an adopter of a
pre-approved plan that received a favorable IRS Opinion Letter, the
date of the favorable Opinion Letter, and the Opinion Letter serial
number.
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\18\ IRS will separately make a parallel update to the Form
5500-EZ, which is solely in the jurisdiction of the IRS.
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3. Defined Benefit Plan/Title IV Questions for the 2022 Form 5500s
The proposal includes certain changes designed to improve reporting
by defined benefit plans subject to Title IV of ERISA. The proposed
changes would:
Modify Schedule MB, line 3 instructions to require an
attachment that breaks down the total withdrawal liability amounts by
date, separately specifying the periodic withdrawal liability amounts
and lump sum withdrawal liability amounts.
Modify Schedule MB by adding a new requirement for plans
that assess withdrawal liability to an employer during the plan year,
to report the interest rate used to determine the present value of
vested benefits for withdrawal liability determinations. This
information would be reported in a renumbered new line, 6f.
Modify Schedule MB for the questions related to the line 6
``expense load'' to better align with the various ways multiemployer
plans incorporate expense loads into their calculations.
Modify Schedule MB, line 8 by requiring additional
information about demographics, benefits and contributions for plans
with 500 or more total participants on the valuation date. Certain
PBGC-insured single-employer plans would be required to report the some
additional information as well.
Modify Schedule MB by changing the ``age/service'' scatter
attachment which is currently required for PBGC-insured multiemployer
plans with active participants, regardless of the number of
participants.
Modify Schedule MB by clarifying the line 4f instructions
and Schedule language concerning when or if plans in critical status or
critical and declining
[[Page 51492]]
status are projected to emerge or become insolvent.
Make the Schedule SB, line 26 reporting requirements about
demographics and benefits similar to the requirements for PBGC-insured
multiemployer plans.
Modify Schedule SB's Part IX, line 41 because the
previously required information related to elective funding relief
under the Pension Relief Act of 2010 is no longer relevant, and in its
place, require information about the elective funding relief under the
American Rescue Plan Act of 2021.
Modify Schedule R's Part V, line 13 requirement that
multiemployer defined benefit pension plans subject to minimum funding
standards report identifying information about any participating
employer whose contributions to the plan account for more than five (5)
percent of the total contributions for the year to require that the ten
employers who contributed the largest amounts be reported, even if that
employer's contribution accounted for less than five (5) percent of the
total.
Modify the instructions to permit (but not require)
certain attachments to Schedule MB and SB to be provided in a tabular
format (spreadsheet) rather than PDF or TXT formats.
D. Appendices
The Agencies have included the following appendices to provide more
detailed illustrations and explanations of the proposed changes: (1)
Appendix A--a facsimile of proposed Schedule MEP (Multiple Employer
Pension Plan) and its instructions; (2) Appendix B--a facsimile of
proposed Schedule DCG (Individual Plan Information) and its
instructions; (3) Appendix C--a detailed description of proposed
changes to the 2021 Form 5500, the Form 5500-SF, and their
instructions; (4) Appendix D--a detailed description of proposed
changes to the 2022 Form M-1 and its instructions; (5) Appendix E--a
detailed description of proposed changes to the 2022 Form 5500, Form
5500-SF, applicable schedules, and their instructions.\19\
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\19\ The appendices include mock-ups of certain forms or parts
of forms that are intended to be illustrative and facilitate
stakeholders' ability to comment on the proposed changes. This
approach of showing proposed changes will reduce costs associated
with publication of the proposed form changes in the Federal
Register and provide greater flexibility for the related EFAST2
development processes. The Agencies intend to publish mock-ups of
the forms on the DOL's website as part of the EFAST third party
software developer certification process and in furtherance of
public education efforts about the changes to be implemented.
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Certain amendments to the annual reporting regulations are
necessary to accommodate some of the proposed revisions to the forms.
The DOL is publishing separately today in the Federal Register proposed
amendments to the DOL's annual reporting regulations. That document
includes a discussion of the findings required under sections 104 and
110 of ERISA that are necessary for the DOL to adopt the Form 5500
Annual Return/Report, including the Form 5500-SF, if revised as
proposed herein, as an alternative method of compliance, limited
exemption, and/or simplified report under the reporting and disclosure
requirements of Part 1 of Subtitle B of Title I of ERISA.
II. Request for Comments
The Agencies invite comments from interested persons on all facets
of the proposed forms and instruction changes. Comments should be
submitted in accordance with the instructions at the beginning of this
document. Commenters are asked to take into account the costs and
burdens to plans, participants and beneficiaries, plan fiduciaries,
plan service providers, and other affected parties, in commenting on
the proposed annual reporting changes, including any suggested
alternatives.
As noted above, the DOL also is publishing elsewhere in today's
Federal Register a Notice of Proposed Rulemaking with proposed
amendments to the reporting and disclosure regulations at Part 2520 of
Chapter XXV of Title 29 of the Code of Federal Regulations to implement
certain proposed Form 5500 Annual Return/Report changes under Title I
of ERISA. To avoid unnecessary duplication of effort, public comments
submitted in response to this Notice of Proposed Forms Revisions will
be treated as public comments on the Notice of Proposed Rulemaking to
the extent they include information relevant to the proposed regulatory
amendments.
The DOL components of this proposal are generally focused on
implementing annual reporting changes related to the SECURE Act and
MEPs and a limited number of other supporting proposed changes intended
to ensure the Form 5500 serves as an appropriate transparency and
financial accountability tool for retirement plans, including pooled
employer plans and MEPs. The DOL has added a separate project to its
semi-annual regulatory agenda that would focus on a broader range of
improvements to the Form 5500 annual reporting requirements. The
regulatory action is part of a strategic project with the IRS and PBGC
to improve the Form 5500 Annual Return/Report. Modernizing the
financial and other annual reporting requirements on the Form 5500,
continuing to make the investment and other information on the Form
5500 more data mineable, and potential changes to group health plan
annual reporting requirements are part of that evaluation. The project
is also focused on enhancing the agencies' ability to collect employee
benefit plan data that best meets the needs of changing compliance
projects, programs, and activities. See www.reginfo.gov for more
information. Public comments on such broader improvements to the Title
I components of the Form 5500 are beyond the intended scope of this
rulemaking.
III. Discussion of Proposed Changes
A. SECURE Act Section 202 Defined Contribution Group (DCG) Reporting
Arrangements
Section 202 of the SECURE Act directs the Secretaries to modify the
Form 5500 to allow certain groups of defined contribution pension plans
to file a single consolidated annual return/report. For a group of
plans to be able to file a consolidated return/report, the SECURE Act
provides that all of the plans must be either individual account plans
or defined contribution pension plans that have the same trustee; the
same one or more named fiduciaries; the same plan administrator under
ERISA and the Code; the same plan year; and provide the same
investments or investment options for participants and beneficiaries.
The SECURE Act also provides that in developing the consolidated
return or report for such arrangements, the Secretaries shall require
such information as will enable a participant in a plan to identify any
consolidated return or report filed with respect to the plan, and may
require such return or report to include any information regarding each
plan in the group as each Secretary determines is necessary or
appropriate for the enforcement and administration of the provisions of
ERISA and the Code.
Pursuant to Section 202 of the SECURE Act directing the Secretaries
to modify the Form 5500 to allow certain groups of defined contribution
pension plans to file a single consolidated annual return/report, the
DOL and the IRS (the ``Departments'') have determined that an efficient
and effective approach to establishing such a consolidated return/
report option would be to amend the Form 5500 and its related
instructions to provide that the filing requirements for large pension
plans and direct filing entities (DFEs)
[[Page 51493]]
would generally apply to this new type of DFE--a defined contribution
group (DCG) reporting arrangement, except that an additional schedule
to report individual plan level information--the proposed Schedule DCG,
would have to be attached for each plan included in the DCG filing.\20\
Consistent with section 202(b) of the SECURE Act, as discussed in more
detail below, the Departments are proposing to obtain for each plan in
the DCG the additional information requested on a new proposed Schedule
DCG, and are proposing certain other key conditions for DCG reporting
arrangements that are intended to ensure appropriate transparency and
financial accountability. Specifically, under the proposal: (1) The DCG
would file a Form 5500 under rules and conditions that apply generally
to large defined contribution pension plans; (2) each of the plans
participating in the DCG would need to meet certain conditions as
discussed in more detail below, including that the participating plan
must not hold any employer securities, be 100% invested in certain
secure, easy to value assets that meet the definition of ``eligible
plan assets'' and be audited by an IQPA or be eligible for the waiver
of the annual examination and report of an IQPA under 29 CFR 2520.104-
46, but not by reason of enhanced bonding; (3) the DCG's Form 5500
would have to provide the plan level information reported on the
proposed Schedule DCG regarding the covered plans, including an IQPA
audit report for each participating large plan; and (4) the investment
assets of the plans participating in the DCG would have to be held in a
single trust of the DCG reporting arrangement and the consolidated Form
5500 filed by the DCG would include an audit of the DCG's trust
financial statements.
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\20\ The proposed new regulation that would be at 29 CFR
2520.104a-9 published in the parallel NPRM provides that, as would
be the case for all of the participating plans in the DCG reporting
arrangement if they were filing individually, the aggregated Form
5500 for the DCG is due no later than the end of the 7th month after
the end of the common plan year that all the plans must have in
order to participate in a DCG reporting arrangement pursuant to the
requirement in section 202 of the SECURE Act and the proposed
regulation that would be at 29 CFR 2520.104-51. Because the DCG
filing is an alternative to each participating plan filing its own
Form 5500, that would mean that each plan would have to submit its
own IRS Form 5558 to extend the plan's due date, and, as a
consequence, extend the due date for the DCG filing. A plan that did
not submit a timely Form 5558 and that participated in a DCG filing
that was submitted after the 7th month normal due date would be
treated as having filed late. Public comments are specifically
solicited on how the filing extension process should be structured
for DCGs, including whether DCG reporting arrangements should be
able to file a single Form 5558 to obtain an extension for filing
the DCG consolidated report on behalf of the participating plans as
an alternative to having each individual plan file a Form 5558 for
there to be an extension for the reporting group as a whole. The
Departments note that under the somewhat similar consolidated
reporting provisions applicable to GIAs, the GIA is permitted to use
the Form 5558 to apply for an extension of time the GIA consolidated
report on behalf of the plans participating in the GIA.
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An important aspect of the audit of the DCG trust would be that, in
the DOL's view, the versions of the separate schedules referenced in
ERISA section 103(a)(3)(A) and 29 CFR 2520.103-10(b) and proposed
2520.103-14(b) that would be filed as part of the DCG consolidated Form
5500 would be treated as ERISA section 103(b)(3) supplemental schedules
for purposes of the required IQPA's opinion on whether those schedules
are presented in conformity with DOL rules and regulations, including
the delinquent participant contributions schedule filed by the DCG in
connection with line 4a of its Form 5500, Schedule H. The DOL views
these conditions as providing important financial accountability and
oversight protections while also allowing DCGs to offer annual
reporting cost-efficiencies, particularly for the small plans that we
believe SECURE Act section 202 was intended to benefit, that are
comparable to those that can be offered by MEPs, including pooled
employer plans.
The DOL is also publishing a separate Notice of Proposed Rulemaking
that includes a proposal to add new regulations at 29 CFR 2520.103-14
and 2520.104-51 pursuant to section 110 of ERISA that would set forth
this DCG option as an alternative method of compliance for eligible
plans with the generally applicable requirement to file their own
separate Form 5500.
1. General Section 202 Conditions Applicable to Covered Plans
The Departments' review of the conditions in section 202 of the
SECURE Act suggests that it was primarily aimed at plans of unrelated
small businesses that adopt a plan that has received approval from the
IRS as to its form through the IRS Pre-Approved Program (pre-approved
plan) offered by the same provider, and that section 202 was intended
to provide this type of business structure with annual reporting cost
efficiencies similar to those that MEPs and pooled employer plans can
offer to their participating employers. Accordingly the conditions and
reporting requirements in this proposal focus on such arrangements. The
Departments solicit public comments on whether the final rule should
include other or different conditions for DCG reporting arrangements.
Under the proposed Form 5500 form changes and the DOL's related
proposed regulation, and pursuant to the terms of section 202 of the
SECURE Act, all of the plans relying on the DCG consolidated return/
report must be individual account plans or defined contribution pension
plans that have the same trustee and trust(s); the same one or more
named fiduciaries; the same plan administrator under ERISA and the
Code; the same plan year; and provide the same investments or
investment options for participants and beneficiaries. The Departments
are providing the following explanations of some aspects of and
limitations related to those conditions that are part of the proposal.
With respect to the same trustee requirement, section 403(a) of
ERISA provides that, except as provided in ERISA section 403(b), all
assets of an employee benefit plan shall be held in trust by one or
more trustees. The criteria set forth in ERISA section 403(b) apply to
the DCG trustee under the proposal, except, pursuant to the SECURE Act
provision there must be only one trustee for all the plans
participating in a DCG reporting arrangement. The common trustee must
be either named in the trust instrument or in the plan instrument or
appointed by a person who is a named fiduciary of the participating
plan, and upon acceptance of being named or appointed, the trustee
shall have exclusive authority and discretion to manage and control the
assets of the plan, except to the extent that the plan expressly
provides that the trustee is subject to the direction of a named
fiduciary who is not a trustee (in which case the trustees shall be
subject to proper directions of such fiduciary which are made in
accordance with the terms of the plan and which are not contrary to
ERISA), or authority to manage, acquire, or dispose of assets of the
plan is delegated to one or more investment managers pursuant to
section 402(c)(3) of ERISA.
The Departments note that, historically, the IRS conditions
applicable to many pre-approved plans required that employers who used
what was known as a ``master'' plan were required to use the same trust
or custodial account, whereas each employer had a separate trust or
custodial account in a ``prototype plan.'' \21\ Under the proposal, the
``same trust'' requirement for the consolidated report would be
satisfied by the same trust structure historically used by
[[Page 51494]]
employers using ``master'' plans. Use of sub-trusts of the DCG trust
would be permitted, but the proposal would not cover arrangements that
allow separate plans to have a separate trust for investments. As
discussed in more detail below, part of the reason for this provision
stems from considerations related to the establishment of audit
requirements for DCG reporting arrangements and the otherwise generally
applicable requirement under Title I of ERISA for plans that cover 100
or more participants file with their Form 5500 an audit report of an
independent qualified public accountant (IQPA) and the application of
Generally Accepted Auditing Standards or GAAS (which ERISA section 103
applies to employee benefit plan audits).
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\21\ See www.irs.gov/retirement-plans/types-of-pre-approved-retirement-plans.
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Although, as described above, section 202 of the SECURE Act
includes a requirement that the eligible plans must have the same
``trustee'' as described in section 403(a) of ERISA, the Departments
note that it is commonplace for ERISA covered plans to use insurance
(e.g., individual account plans using variable annuity structures and
Code section 403(b)(1) plans) and custodial accounts (e.g., Code
section 403(b)(7) plans) as funding vehicles. ERISA section 403(b)
includes explicit exceptions to the trust requirement for such plan
designs. There is no legislative history for SECURE Act section 202
discussing why the provision was limited to plans with ``trustees,''
and the Departments do not believe that the SECURE Act section 202
requirement for a ``trustee'' can be read to include plans without
trustees funded by insurance or custodial accounts pursuant to the
trust exceptions in ERISA section 403(b). Nonetheless, the Departments
specifically solicit comments on whether they should, pursuant to their
general regulatory authority, provide a consolidated reporting option
for plans that use the same custodial account or insurance policy as
the funding vehicle for their plans, and if so, whether special
conditions should apply in light of the absence of a trustee or
trustees.
With respect to the ``same one or more named fiduciaries
requirement,'' ERISA section 402 provides that every employee benefit
plan shall be established and maintained pursuant to a written
instrument. Such instrument shall provide for one or more named
fiduciaries who jointly or severally have authority to control and
manage the operation and administration of the plan. Section 402 of
ERISA further provides that the term ``named fiduciary'' means a
fiduciary who is named in the plan instrument, or who, pursuant to a
procedure specified in the plan, is identified as a fiduciary (A) by a
person who is an employer or employee organization with respect to the
plan or (B) by such an employer and such an employee organization
acting jointly. The Departments understand that it is customary for the
employer/plan sponsor to be a named fiduciary of the employer's plan.
The Departments do not believe the SECURE Act intended that each
employer in a group of plans be a named fiduciary of every plan in the
group. Accordingly, the proposal would allow for the employer/plan
sponsor to be a named fiduciary of each employer's own plan, provided
that the other named fiduciaries under the plans are the same and
common to all plans.
The SECURE Act further requires that all the plans have the same
administrator as defined in section 3(16)(A) of ERISA and plan
administrator as defined in section 414(g) of the Code. Under the
proposal, the plans must designate the same person (which could be an
entity or organization) as the administrator. In general, under ERISA
and the Code the ``plan administrator'' or ``administrator'' is the
person specifically so designated by the terms of the instrument under
which the plan is operated. If an administrator is not so designated,
the plan administrator is the plan sponsor, as defined in section
3(16)(B) of ERISA. The Departments do not believe that the default
``plan sponsor'' provision is workable in this context, and,
accordingly, the proposal requires that there be a designated common
plan administrator and that the administrator be the same for all the
plans relying on the DCG consolidated Form 5500.
The proposal also requires that all the plans provide the same
investments or investment options to participants and beneficiaries to
be able to rely on the DCG consolidated Form 5500 as satisfying their
annual reporting obligation. In the Departments' view, this requirement
in part was intended to allow for appropriate transparency in the
consolidated financial information that would be filed by the DCG. To
the extent the covered plans had different investments or investment
options, much more detailed financial reporting would be needed to
provide appropriate oversight and accountability. The Departments also
believe that, even absent the proposed ``eligible plan assets condition
for DCGs,'' the SECURE Act's ``same investments or investment options''
requirement effectively precludes plans that hold employer securities
from participating in a DCG reporting arrangement as well as precluding
treatment of brokerage windows as an ``investment option'' because such
investments and investment alternatives would conflict with the
investment uniformity objectives of the SECURE Act requirement. The
Departments, however, specifically solicit comments on whether the
final rule should allow employer securities as an exception to the
``same investments or investment options'' requirement. The Departments
also solicit comments on whether the final rule should allow brokerage
windows, self-directed brokerage accounts, and similar features in
plans participating in DCG arrangements, and, if so, what reporting
requirements should be applied, e.g., what information should be
collected regarding the brokerage windows/accounts, the participants
using the brokerage windows/accounts, and the individual assets held by
the plans as a result of investments made through brokerage windows/
accounts.
Section 202 further provides that a plan not subject to Title I of
ERISA can be part of a DCG reporting arrangement if the non-Title I
plan and all other plans in the reporting group have the same persons
acting as the trustee as defined in ERISA section 403(a), the named
fiduciaries as described in ERISA section 402(a), the administrator as
defined in ERISA section 3(16)(A), and the plan administrator as
defined in Code section 414(g), as applicable. In the Departments'
view, this provision was directed at so-called ``one-participant''
plans required to file the IRS Form 5500-EZ. IRS views the current Form
5500-EZ as providing plan sponsors with a simple and streamlined means
to satisfy the annual reporting requirement under section 6058 of the
Code. The information being requested on the Schedule DCG for a DCG is
almost identical to the information already provided on the Form 5500-
EZ, so that the group filing arrangement would not effectively reduce
the information a Form 5500-EZ filer would need to provide to IRS in a
separate filing. Additionally, the plan administrator will need to file
a consolidated Form 5500 (with any required schedules) for the DCG that
provides aggregate information for all Form 5500-EZ filers. Presumably,
the DCG will require a Form 5500-EZ filer to provide at least as much
information as would be required to file an individual Form 5500-EZ.
Finally, IRS might incur significant costs and use significant
resources if it were to develop a separate group filing arrangement for
Form 5500-EZ filers.
[[Page 51495]]
Before incurring these costs and using these resources, IRS requests
comments from interested parties on whether Form 5500-EZ filers are
expected to be interested in participating in a DCG structure,
including a separate DCG structure only for Form 5500-EZ filers, in
light of the lack of burden reduction that a Form 5500-EZ filer would
experience by participating in a DCG structure. With respect to the
latter, the Departments request comments on the feasibility of
including both ERISA and non-ERISA filers in a single DCG filing,
including with respect to the application of the audit requirements
under Title I.
2. Conditions for Plans To Participate in a DCG Reporting Arrangement
To be eligible to rely on the proposed alternative method of
compliance, the employee benefit plan (1) must have all of its
investment assets held in a single trust of the DCG reporting
arrangement; (2) the plan must not hold any employer securities at any
time during the plan year; (3) at all times during the plan year, the
plan must be 100% invested in certain secure, easy to value assets that
meet the definition of ``eligible plan assets'' (see the instructions
for line 6a of the Form 5500-SF), such as mutual fund shares,
investment contracts with insurance companies and banks valued at least
annually, publicly traded securities held by a registered broker
dealer, cash and cash equivalents, and plan loans to participants; (4)
the plan must be audited by an IQPA or be eligible for the waiver of
the annual examination and report of an IQPA under 29 CFR 2520.104-46,
but not by reason of enhanced bonding (see instructions for line 6b of
the Form 5500-SF); and (5) multiemployer plans and MEPs (including
pooled employer plans and professional employer organizations (PEOs))
cannot participate in DCG reporting arrangements.
An important aspect of the audit of the DCG trust would be that, in
the DOL's view, the versions of the separate schedules referenced in
ERISA section 103(a)(3)(A) and 29 CFR 2520.103-10(b) and 2520.103-2(b)
that would be filed as part of the DCG consolidated Form 5500 would be
treated as ERISA section 103(b)(3) supplemental schedules for purposes
of the required IQPA's opinion on whether those schedules are presented
in conformity with DOL rules and regulations, including the delinquent
participant contributions schedule filed by the DCG in connection with
line 4a of its Form 5500, Schedule H. The DOL views these conditions as
providing important financial accountability and oversight protections
while also allowing DCGs to offer annual reporting cost-efficiencies,
particularly for the small plans that we believe SECURE Act section 202
was intended to benefit, that are comparable to those that can be
offered by MEPs, including pooled employer plans.
With respect to the audit requirement for large plans participating
in a DCG, the DOL understands that under GAAS, it would not be possible
to have a consolidated audit of all the participating plans in the DCG
reporting arrangement. Rather, under GAAS, each large plan in the DCG
reporting arrangement would have to be subject to its own separate
audit. By comparison it would be possible, under GAAS, for a DCG
reporting arrangement to be subjected to a single audit if it used a
single trust for all of the plans covered by the DCG report. Such a
``single trust'' audit, however, would cover only the trust's financial
statements and would not cover aspects of plan operations and finances
that would be covered by a GAAS audit at the plan level. The DOL views
an IQPA audit as an important financial transparency and accountability
condition for DCG reporting arrangements. Generally, pension plans and
funded welfare plans with 100 or more participants are required to have
an audit of the plan's financial statements performed by an IQPA. Under
Statement on Auditing Standards No. 136 (SAS 136), Forming an Opinion
and Reporting on Financial Statements of Employee Benefit Plans Subject
to ERISA, independent qualified public accountants are required to
consider relevant plan provisions that affect the risk of material
misstatement for various transactions, account balances, and related
disclosures. Areas such as participant eligibility, plan contributions,
benefit payments and participant loans are all covered as part of a
plan level audit. Additionally, auditors are required to communicate
reportable findings to the plan that are identified during the audit of
the plan. For example, it has been the DOL's experience that plan
audits lead to increased reporting of prohibited transactions, such as
identifying and disclosing delinquent participant contributions.
An audit of a trust, such as a DCG trust, does not have similar
requirements. In a trust audit, the line items on the trust's financial
statement are audited, but because the underlying participating plans
themselves are not audited, compliance with the provisions of the plans
that are invested in and funded by the trust are not audited.
Therefore, in a trust audit, the amount of contributions received by
the trust might be tested against the contributions remitted by
participating plans, but, whether those contributions amounts remitted
are in accordance with the individual plan provisions would not be
tested, as they would be tested in an audit of the plan. There could be
undisclosed, material errors in the amount of contributions remitted to
the trust versus what should have been remitted. Similarly, in a trust
audit, the benefit payments to participants might be tested in terms of
amounts paid and whether they were authorized, but whether those were
in compliance with plan provisions, such as vesting provisions, would
not be tested as they would be tested in a plan's audit. In a plan
audit, participant data is tested. Participant data testing involves
determining whether employees are properly included or excluded from
participating and whether the census data upon which eligibility for
certain contributions and distributions are made is accurate. The audit
of a trust would not test this at all. Finally, the materiality
threshold for a trust audit could be significantly higher than that
which would apply in the case of an individual participating plan
because the trust threshold would be based on total assets in the trust
rather than assets in each individual plan. After carefully considering
these issues, the Departments decided to propose that a large plan that
elects to participate in a DCG must continue to be subject to an IQPA
audit and that the audit report for the plan would have to be filed
with the consolidated Form 5500 of the DCG reporting arrangement.
The DOL acknowledges that at least some of these considerations
could be applied to small plans participating in the DGC arrangement.
While the DOL did not believe it would be appropriate to relieve from
the IQPA audit requirement those large plans currently subject to the
audit, it also did not believe that it would be appropriate to require
small plans that are not currently required to have an IQPA audit to
have such an audit as a condition of participating in a DCG reporting
arrangement. Rather, in light of the fact that DCG reporting
arrangements would be consolidating the assets of many unaffiliated
small plans under the control of a single trustee in a single trust,
and the DOL's understanding that such a trust could be subject to a
single GAAS audit, the DOL is proposing that the DCG trust be audited
by an IQPA as a way of adding protections for funds aggregated in the
DCG trust. The DOL notes that this structure has some parallels to the
[[Page 51496]]
current reporting alternative for group insurance arrangements (GIAs)
under 29 CFR 2520.103-2, another type of DFE that files the Form 5500
Annual Return/Report on behalf of participating welfare benefit plans.
The need for more information for DCGs than for GIAs is due to the
difference between retirement and welfare plans, including the
respective requirements under the Code, and also due to the fact that
GIAs must provide welfare benefits fully through insurance.
DOL further acknowledges that, under the proposal, for plans to be
able to satisfy their annual reporting obligation by relying on the
Form 5500 filing by a DCG reporting arrangement, the plans would have
to be 100% invested in eligible plan assets as defined in the Form
5500-SF instructions.
Accordingly, plan assets in the DCG trust would, by definition, be
held by regulated financial institutions, including banks or similar
financial institutions and insurance companies, and may qualify for
limited scope audit treatment in accordance with ERISA section
103(a)(3)(C). Thus, even for large plans, the investment assets
certified by those financial institutions/insurance companies would not
be audited, and the auditor would not be performing valuation work on
the assets covered by the bank or insurance company certifications.
Although that may diminish some aspects of the IQPA requirement for
large plans in DCG reporting arrangements, the DOL did not believe that
it would be appropriate to propose that large plans be precluded from
participating in a DCG unless the plan disclaimed reliance on the
limited scope audit provisions in ERISA section 103(a)(3)(C) and had a
full scope audit performed.
The DOL further expects that, because all of the investments held
in the DCG's single trust would be the subject of the DCG audit, it is
likely that to reduce expenses the DCG reporting arrangement and the
participating large plans would engage the same auditor to perform the
audits of the DCG trust and any individual large plans participating in
the DCG reporting arrangement. Alternatively, to the extent the
individual plans engage different auditors, the DOL expects that the
use of reports issued under Statement on Standards for Attestation
Engagements No. 16 (SSAE 16) may permit the individual plan auditors to
use those reports for the DCG trust to reduce their own audit work on
the trust as part of the individual plan audit. The same rules for
determining whether an individual plan is required to file as a large
plan would apply to the plans within a DCG, including the ``80 to 120''
transition rule at 29 CFR 2520.103-1(d). Similarly, if finalized, the
proposed change on using participants with account balances, rather
than all eligible participants, to determine small plan status for
general annual reporting purposes also would apply.
With respect to the condition prohibiting multiemployer plans and
MEPs from being part of DCG reporting arrangements, the Departments do
not believe that section 202 of the SECURE Act was focused on allowing
groups of multiemployer plans or MEPs, which already file a single Form
5500 that covers all of the employers that participate in the plan, to
file a single consolidated Form 5500 covering the group of
multiemployer plans or MEPs. The Departments are also concerned that
allowing a single consolidated Form 5500 in the case of such plans, for
example, a group of multiemployer section 401(k) plans, could result in
an undesirable reduction in transparency and financial accountability.
Further, creating a consolidated report for such groups of plans would
likely be much more complicated and costly than what is being proposed
in this document. Nonetheless, the Departments acknowledge that such a
limitation is not expressly set forth in section 202 of the SECURE Act,
and, accordingly, solicits public comments on whether the final rule
should include multiemployer plans and MEPs, and if so, what conditions
should apply to DCG reporting arrangements that would include such
plans.
3. Content Requirements for DCG Form 5500
The proposal also sets forth the content requirements for the
consolidated Form 5500 return/report filed by the DCG reporting
arrangement. Under the proposal, DCGs would not be permitted to file a
Form 5500-SF. Rather, DCG reporting arrangements would be required to
file a Form 5500 Annual Return/Report that includes largely the same
information that large pension plans and other DFEs are generally
required to file, except that a DCG reporting arrangement would also be
required to include in its annual report a proposed Schedule DCG
(described below) to report individual participating plan information
for each plan that is a part of the DCG reporting arrangement.
Specifically, the content of the DCG annual return/report would include
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), Schedule R (Retirement Plan Information), Schedule DCG
(Individual Plan Information), schedules described in Sec. 2520.103-
10(b)(1) and (b)(2), an IQPA audit report and the related financial
statements covering the DCG trust, and, for DCG consolidated Form 5500
filings that are intended to cover large plans (generally those with
100 or more participants), an IQPA audit report and the related
financial statements attached to the Schedule DCG for each such
individual large plan. Financial statements include the financial
statements of the trust, the notes to the financial statements and the
schedules described in paragraph (b)(1) of Sec. 2520.103-10.
Information reported on the various schedules to the Form 5500,
other than the proposed Schedule DCG, would be reported in the
aggregate. Thus, a Schedule A would be required for all insurance
contracts that constitute one of the investments or investment
alternatives available to all of the participants in a plan, regardless
of whether certificates were to be issued to individual plans or
participants upon selection of that option by a participant. The fees
and commissions paid with respect to any insurance contracts available
for investment by any of the plans/participants would be reported on
the Schedule A. Similarly, a service provider to the trust and to each
of the plans would be reported on Schedule C, even if the service
provider did not actually provide services or charge fees to a
particular plan because, for example, the service provider provided
investment management services with respect to a particular investment
option that was not selected by any of the participants in a particular
plan. The $5,000 threshold would be based on the total amount received
by the service provider. Reporting on Schedule C would still be
required if the total amount was $5,000 or more, even if the amount
paid by or charged against the assets of each the participating plans
was less than $5,000 per plan. Reportable transactions on Schedule G
would include any involving the assets of the trust and any parties in
interest with respect to the trust. For reporting delinquent
participant contributions on Schedule H, Line 4a, the Agencies would
expect the DCG filing the annual report to identify the delinquent
[[Page 51497]]
participating employer in the attachment already required in the
instructions.
The Departments expect that cost savings for plans relying on a DCG
filing compared to plans filing separately would generally only begin
to emerge when the DCG collectively exceeds an aggregate participant
count of 100 participants. In other words, the Departments do not
expect a DCG filing to provide meaningful cost savings for plans, as
compared to filing their own annual report, in the case of DCG
arrangements with an aggregate participant count of under 100
participants. Rather, the Departments expect in such cases that the
individual plans would likely qualify for filing the Form 5500-SF and
that they would likely find it more cost effective to file their own
separate Form 5500-SF.\22\ Accordingly, this proposal does not include
an option under which such a ``small'' DCG could file as a small plan
filer. The Departments solicit comments on whether stakeholders expect
there to be ``small'' DGCs, whether a ``small'' DCG alternative should
be made available, and what the content requirements for such an
alternative should be, e.g., whether the content of the ``small'' DCG
annual return/report should include Schedule I instead of Schedule H,
whether it should include the IQPA audit report and/or the schedules of
assets, and whether it should include the Schedule C.\23\
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\22\ Section III.A.1 of this preamble discusses the Departments'
view that creating a consolidated group filing for employers
required to file a Form 5500-EZ is similarly unlikely to generate
administrative efficiencies for those employers, as compared to
continuing to file separately.
\23\ Since the aggregate participant count of the entire DCG
would be less than 100, there could be no ``large plans''
participating in such a ``small'' DCG so the issue of an individual
audit for a participating large plan would not arise.
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4. Proposed Schedule DCG (Individual Plan Information)
Section 202(b) of the SECURE Act specifically provides that IRS and
DOL may require the consolidated Form 5500 return/report filed by the
DCG reporting arrangement to include any information regarding each
plan in the group as IRS and DOL may determine necessary or appropriate
for the enforcement and administration of the Code and ERISA. The
proposed Schedule DCG would contain the plan level information needed
by the IRS for administrating and enforcing tax laws passed by Congress
and by the DOL for important Title I oversight functions, particularly
with respect to large plans. A separate Schedule DCG would be required
to be completed for each individual plan, similar to the requirement to
complete a separate Schedule A for each insurance contract held by a
plan or DFE filing the Form 5500. IRS examines individual plans, not
groups of plans, to ensure that plan sponsors and/or employers comply
with the tax laws governing retirement plans, and to help protect the
retirement benefits of participants and beneficiaries. Thus, IRS
requires information with respect to a plan's qualification, financial
condition, and operation on a separate basis for each plan filing as
part of a DCG. Individual plan financial information already reported
on the Form 5500-SF is important for the DOL to continue to ensure that
participants and beneficiaries of the individual plans participating in
a DCG receive their promised benefits. The proposed Schedule DCG
includes:
Part I--DCG name and EIN/PN modeled on the similar plan-
level information on other schedules to the Form 5500. Information in
Part I must match the DCG information reported on Part II of the
consolidated Form 5500.
Part II--confirmation that the plan for which the Schedule
DCG is being filed is a single employer plan (as noted above, MEPs and
multiemployer plans may not participate in a DCG under the proposal)
and, if applicable, identification of the plan as a collectively
bargained plan.
Part III--basic individual plan information, including the
plan name, plan number, plan effective date, plan sponsor's name and
address, plan sponsor's EIN, plan sponsor's telephone number, plan
sponsor's business code, total number of participants, total number of
active participants, number of participants with account balances, and
number of participants who terminated employment during the plan year
with accrued benefits that were less than 100% vested.
Part IV--plan financial information, including total plan
assets (including participant loans), total plan liabilities, net plan
assets, contributions received or receivable in cash from the employer,
participants, and others; noncash contributions and, total
contributions; benefit payments, corrective distributions, and certain
deemed distributions of participant loans, direct expense information,
net income, and assets transferred to (from) plans.
Part V--two-digit boxes for entry of all applicable codes
in the List of Plan Characteristics Codes in the instructions to the
Form 5500.
Part VI--compliance questions relating to delinquent
participant contributions, plan assets/liabilities transferred from the
plan, indication of whether the plan is a defined contribution plan
subject to section 412 of the Code, plan coverage and nondiscrimination
information, and whether a plan is a pre-approved plan that received a
favorable IRS Opinion Letter.
Part VII--questions for large plans (generally plans
covering 100 or more participants as of the beginning of the plan year)
regarding the required individual IQPA report and financial statements
that must be filed with the Schedule DCG filed for the participating
large plan.
B. SECURE Act Section 101 Amendment to ERISA Section 103(g)
Participating Employer Information
1. Participating Employer Reporting Under ERISA Section 103(g)
As discussed above, section 103(g) of ERISA, which was added to
ERISA by the Cooperative and Small Employer Charity Pension Flexibility
Act (CSEC Act) in 2014,\24\ requires multiple employer plans to include
with their annual reports ``a list of participating employers'' and,
with respect to each participating employer, ``a good faith estimate of
the percentage of total contributions made by such participating
employers during the plan year.'' The DOL issued an interim final rule
on November 10, 2014, which implemented the section 103(g) reporting
requirements by requiring filers that check the ``multiple employer
plan'' box on the face of the Form 5500 or the Form 5500-SF, and to
attach a list of participating employers and a good faith estimate of
the percentage of total contributions made by each participating
employer during the plan year. \25\ The 2014 interim final rule and the
corresponding instructions further provided that unfunded or insured
multiple employer welfare plans that are exempt under 29 CFR 2520.104-
44 from filing financial statements with their annual report must
attach a list of participating employers, but do not have to include an
estimated amount of contributions from each employer.\26\ Pursuant to
the interim final rule, the section 103(g) reporting change became
effective with the 2014 Form 5500 Annual Return/Report forms. The 2016
proposal on modernization of the Form 5500 included a proposal to
finalize these changes.\27\
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\24\ Public Law 113-97 (Apr. 7, 2014).
\25\ 79 FR 66617 (Nov. 10, 2014).
\26\ See, e.g., 2020 Form 5500 instructions at 14; see also 2020
Form 5500-SF instructions at 8-9.
\27\ 81 FR 47534, 47564-47565.
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The DOL received four comments on the interim final rule and six
additional
[[Page 51498]]
comments in connection with the Paperwork Reduction Act (PRA) notice
associated with the publication of the interim final rule.\28\ In
addition, two comments on the 2016 proposal related to the proposal to
finalize the 2014 interim final rule.\29\ The central concerns of most
of the commenters was that filing the participating employer list
imposes material costs and burdens on multiple employer plans and that
making the employer list public was not in the best interests of plan
participants and beneficiaries. One commenter suggested that the DOL
should not apply the section 103(g) reporting changes to defined
contribution or welfare plans because ERISA section 103(g) was added as
part of the CSEC Act, which generally focused on ERISA minimum funding
requirements that are not applicable for the majority of defined
contribution pension plans or to any group health and welfare plans. In
the 2016 proposed rule as well as in the Field Assistance Bulletin No.
2019-01,\30\ DOL stated its position that it believes the section
103(g) reporting requirements adopted by the 2014 interim final rule,
which apply the new requirements to all multiple employer plans
(defined benefit pension plans, defined contribution plans, and welfare
plans), are a reasonable and appropriate way to implement Congress'
directive in the CSEC Act. The information has proven useful to the DOL
for its oversight functions for both MEPs and those MEWAs that file the
Form 5500, regardless of the types of benefits provided by the MEWA.
Before the DOL finalized the section 103(g) reporting requirements, the
SECURE Act was enacted, which amended the original language in ERISA
section 103(g), reaffirming that MEPs, including association retirement
plans, PEOs, and the newly created pooled employer plans would have to
report not just the existing identifying information, but also new
financial information.
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\28\ See Proposed Extension of Information Collection Request
Submitted for Public Comment; Revisions to Annual Return/Report--
Multiple Employer Plans, 79 FR 66741 (Nov. 10, 2014).
\29\ Comments are available on the DOL's website.
\30\ In 2019, the DOL issued Field Assistance Bulletin No. 2019-
01, which provided transition relief for MEPs that failed to file a
complete and accurate participating employer information with their
Form 5500 Annual Return/Report for the 2017 and prior plan years.
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Specifically, section 101 of the SECURE Act amended ERISA section
103(g) by providing that annual reports for ``any plan to which [ERISA]
section 210(a) applies (including a pooled employer plan)'' must
include (1) a list of participating employers in the plan, a good faith
estimate of the percentage of total contributions made by such
participating employers during the plan year, and the aggregate account
balances attributable to each employer in the plan (determined as the
sum of the account balances of the employees of such employer (and the
beneficiaries of such employees)); and (2) with respect to a pooled
employer plan, identifying information for the person designated under
the terms of the plan as the pooled plan provider. Although the SECURE
Act added a specific reference to ERISA section 210(a), DOL believes
that this reference was meant to emphasize that defined contribution
multiple employer pension plans and different types of MEPs that became
more accessible in recent years, such as association retirement plans,
professional employer organization plans (PEOs), and the newly created
pooled employer plan are required to comply with the participating
employers reporting requirements, and not just defined benefit pension
plans.
The SECURE Act reporting changes are effective for plan years
beginning on or after January 1, 2021. In order to implement the SECURE
Act reporting requirements on a timely basis, the Agencies are
proposing that, for the 2021 plan year, MEPs (including pooled employer
plans, association retirement plans, and PEOs) would be required to
provide the participating employer information as a nonstandard
attachment to the 2021 Form 5500 Annual Return/Report in a similar
manner as currently required, and the content of the attachment would
be updated to add the aggregate account balances attributable to each
participating employer in the plan to the current requirement to
provide identifying information and the percent of contributions by
each participating employer. In addition, a MEP that is a pooled
employer plan would be required to indicate on the nonstandard
attachment for 2021 that it is a pooled employer plan and provide
information similar to information required to be reported on a
proposed Schedule MEP, as discussed below, for the 2022 and following
plan years, including confirming that the entity identified as the plan
sponsor and administrator in Part I of the Form 5500 is the pooled plan
provider, and providing the ACK ID for the pooled plan provider's most
recent Form PR. For the 2022 and following plan years, MEPs would be
required to report the participating employer information in a standard
format on a proposed new Schedule MEP, as discussed below.
2. Participating Employer Reporting for MEWAs
As discussed above, the SECURE Act amended ERISA section 103(g) by
directing the reporting requirements specifically to multiple employer
plans subject to ERISA section 210(a). The DOL continues to believe
that receiving participating employer information from multiple
employer welfare plans is important for oversight of such arrangements
and should be continued. Even though the DOL originally relied on ERISA
section 103(g) when it added the requirement for all multiple employer
plans to provide the participating employer information, there are
other rulemaking and reporting authorities that support continuing the
reporting requirement for multiple employer welfare plans and extending
it to non-plan MEWAs that file the Form M-1 (Report for Multiple
Employer Welfare Arrangements (MEWAs) and Certain Other Entities
Claiming Exception (ECEs) (Form M-1).
Based on the authority in ERISA sections 101(g), 505, and 734, the
DOL in 2003 promulgated a regulation at 29 CFR 2520.101-2 that required
the administrators of both multiple employer welfare plans and non-plan
MEWAs that offer or provide coverage for medical benefits to file the
Form M-1 on an annual basis (Form M-1 annual report) as well as upon
occurrence of certain registration events (Form M-1 registration
filing). Effective for plan years beginning on or after January 1,
2022, DOL is proposing to require MEWAs (plan and non-plan MEWAs) that
offer or provide coverage for medical benefits to provide the
participating employer information on the Form M-1 and not as an
attachment to the Form 5500 Annual Return/Report. Specifically, new
questions would be added to Form M-1 requiring MEWAs (plan and non-plan
MEWAs) that offer or provide coverage for medical benefits to identify
each participating employer in the MEWA by name and EIN and provide a
good faith estimate of each participating employer's percentage of the
total contributions made by all participating employer during the plan
year. However, similar to the 2014 interim final rule issued under
ERISA section 103(g), the Form M-1 proposal does not require
contribution information from unfunded or insured MEWAs. Furthermore,
the Form M-1 proposal would require contribution information on the
Form M-1 annual report filing but not the Form M-1 registration filing.
The DOL specifically solicits comments on whether the final rule should
require participating
[[Page 51499]]
employer information on only the annual Form M-1 filing, and not on
other M-1 required filings, in light of the fact that only annual
information is required for plans reporting participating employer
information on the Form 5500.
With respect to multiple employer welfare plans that do not offer
or provide coverage for medical benefits, and thus are not required to
file a Form M-1 (for example, life or disability benefits), section 103
of ERISA provides the DOL with the authority to require the plan
administrator to furnish, as part of the Form 5500 annual report, the
``name and address of each fiduciary.'' See ERISA section 103(c)(2). In
the DOL's view, the employer is acting as a fiduciary with respect to
its decision to provide ERISA-covered benefits through a MEWA rather
than through a single employer plan and also is a fiduciary for
purposes of continuing to monitor the plan that it adopted.\31\
Accordingly, the DOL is relying on ERISA section 103(c)(2) as its
authority for requiring multiple employer welfare plans (other than
those that file the Form M-1) to continue reporting the participating
employer identifying information, and unless unfunded or insured, a
good faith estimate of each participating employer's percentage of the
total contributions made by all participating employer during the plan
year.\32\ As is currently required for such plans, the information
would continue to be filed as an attachment to the Form 5500 Annual
Return/Report. MEWAs, however, whether those reporting on the Form
5500/Form 5500-SF or the Form M-1, would not be required to provide the
new aggregate account balances information that was added by the SECURE
Act to section 103(g).
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\31\ See Advisory Opinion Letter 2007-06A (Aug. 16, 2007)
(``decisions regarding the method through which benefits are to be
paid under an employee welfare benefit plan, including the selection
of an insurer and the negotiation of the terms of any contractual
arrangement obligating the plan, are matters that generally are
subject to the fiduciary responsibility provisions of Title I of
ERISA''.); Information Letter to Diana Ceresi (Feb. 2, 1998) (``when
the selection of a health care provider involves the disposition of
employee benefit plan assets, such selection is an exercise of
authority or control with respect to the management and disposition
of the plan's assets within the meaning of section 3(21) of ERISA,
and thus constitutes a fiduciary act . . .''); See also Advisory
Opinion Letter 2018-01A (Nov. 5, 2018) (In the context of a pension
plan rollover service provider, not covered by Title 1 of ERISA,
``When plan sponsors or other responsible fiduciaries choose to have
a plan participate in the RCH Program, they are acting in a
fiduciary capacity, and would be subject to the general fiduciary
standards and prohibited transaction provisions of ERISA in
selecting and monitoring the RCH Program.'')
\32\ Similar to the 2014 interim final rule issued under ERISA
section 103(g), such multiple employer welfare plans that are
unfunded or insured and exempt under 29 CFR 2520.104-44 from filing
financial statements with their annual report will continue to be
required to attach a list of participating employers, but do not
have to include the contribution information. See, e.g., 2020 Form
5500 instructions at 14; see also 2020 Form 5500-SF instructions at
8-9.
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For the 2021 plan year, pending the implementation of the Form M-1
changes, all plan MEWAs would continue to provide participating
employer information as a nonstandard attachment to the 2021 Form 5500
Annual Return/Report in a similar manner as currently required.
The proposal, by transferring the participating employer
information from the Form 5500 Annual Return/Report to the Form M-1 for
MEWAs that offer or provide coverage for medical benefits and
continuing to require reporting of participating employer information
on the Form 5500 Annual Return/Report for plan MEWAs that provide other
benefits, would enable the DOL to receive such information from both
plan and non-plan MEWAs, regardless of how they are funded or
structured. The DOL and other users of the Form M-1 data (e.g., state
insurance regulators) would have access to updated and current lists of
participating employers because the Form M-1 must be filed annually as
well as upon the occurrence of certain registration events (30 days
prior to MEWAs operating in any state or expanding their operations
into an additional state; and within 30 days of a merger, material
change, or a participant increase of 50% or more).
C. Proposed Form 5500-Schedule MEP (Multiple Employer Pension Plan
Information) and Requirement That MEPs (Including Pooled Employer
Plans) File the Form 5500 and not the Form 5500-SF
The proposal would add a new Schedule MEP (Multiple Employer
Pension Plan Information) to the Form 5500 Annual Return/Report that
would be completed by MEPs. The proposal also would add a limited
number of additional data items elsewhere on the Form 5500 relevant to
MEPs. The proposed Schedule MEP would provide a unified vehicle to
report information related to new SECURE Act provisions, including
information unique to MEPs. The first section, Part I, like the other
schedules to the Form 5500, would require filers to enter identifying
information (which must match the information entered on the Form 5500)
and to indicate the plan type by checkbox. The instructions would
provide general definitions for purposes of annual reporting for the
various categories of pension plans that must complete the Schedule
MEP. This would include different types of MEPs (group or association
retirement plans within the meaning of 29 CFR 2510.3-55(b) (association
retirement plans), professional employer organization plans within the
meaning of 29 CFR 2510.3-55(c) (PEO plans), pooled employer plans
within the meaning of ERISA section 3(43), and other MEPs covering the
employees of two or more employers that are not single or multiemployer
plans for annual reporting purposes). Multiemployer plans, as defined
under section 3(37) of ERISA, would not be required to complete the
Schedule MEP.\33\
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\33\ Multiemployer defined pension benefit plans are required to
provide, on Form 5500, Schedule R (Retirement Plan Information),
identifying information and the percentage of contributions for
those plans that are five percent or more contributors for the plan
year being reported.
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Part II of the proposed Schedule MEP would be a repeating line item
on which all MEPs would report information under ERISA section 103(g)
regarding participating employers, including employer/plan sponsor
name, EIN, and the percentage of total contributions to the plan or
arrangement by each participating employer, and the aggregate account
balances information the SECURE Act added to ERISA section 103(g).\34\
That information is currently collected for MEPs as a non-standard
attachment to the Form 5500 and Form 5500-SF.\35\ Pursuant to the
SECURE Act, a new data element would be added to require reporting of
the aggregate account balances for each participating employer in the
MEP.
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\34\ As discussed above, MEWAs would report the participating
employer information either as an attachment to the Form 5500 or on
the Form M-1.
\35\ The total contributions are the amount reported on Form
5500, Schedule H, line 2(a)(3) or the total of lines 8a(1), 8a(2),
and 8a(3) on the Form 5500-SF.
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Part III would be completed by pooled employer plans. A pooled
employer plan would be required to indicate whether the pooled plan
provider operating the plan (identified on the Form 5500 for each of
the pooled employer plans it operates as both the plan sponsor and the
plan administrator) has complied with the registration requirements for
pooled plan providers under section 3(43) and 3(44) of ERISA by filing
a Form PR, in accordance with that form's instructions.\36\ The pooled
employer plan would be required to provide the ``ACK ID''--the
acknowledgement code generated by the system in response to a completed
filing--for the most recent
[[Page 51500]]
Form PR submitted.\37\ Pooled employer plans would also be required to
indicate whether certain services were provided by an affiliate, and,
if relying on a prohibited transaction exemption for the use of an
affiliate, to identify the prohibited transaction (whether a class or
individual) exemption.
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\36\ See Form PR and its instructions, available at
www.efast.dol.gov.
\37\ The instructions to the Form PR advise the pooled plan
provider that it must keep, under section 107, the electronic
receipt for the Form PR filing as part of the records of the pooled
employer plans operated by the pooled plan provider.
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The DOL, through rules and other initiatives, has pursued and
required improvements in fee transparency to ensure that ERISA plan
fiduciaries and plan participants are effectively informed about
service provider fees and expenses, including cost and performance
information of designated investment alternatives under the plan. These
considerations are particularly important in the case of pooled
employer plans and MEPs given their structure and the roles that
traditional service providers end up playing as plan sponsors and plan
administrators. Accordingly, comments are specifically solicited on
whether more specifically tailored questions should be added, in
addition to those already on the Schedules C and H, to report fee and
expense information on pooled employer plans and other MEPs, including
information on how fees and expenses are allocated among participating
employers and among covered participants and beneficiaries.
Further, the proposal would require all MEPs, similar to the
current rule for multiemployer plans and the proposed rule for DCGs, to
file the Form 5500 regardless of whether they would otherwise be
eligible to file the Form 5500-SF. Making the filings across plan types
more uniform would enable more consistent and informed oversight of
collective retirement arrangements. Small MEPs would have the same
simplified Form 5500 reporting as small pension plans, including MEPs,
that currently file the Form 5500. They would be able to file the
Schedule I instead of the Schedule H and its financial attachments,
would not be required to complete the Schedule C or Schedule G, and
would be able to file without having an IQPA audit and attaching an
IQPA report.
D. Improving Usability of Data Collection for Schedule H, Line 4i
Schedules of Assets
By their nature, MEPs have the potential to build up a substantial
amount of assets quickly and the effect of any abusive schemes on
future retirement distributions may be hidden or difficult to detect
for a long period. The DOL is aware that MEPs could be the target of
fraud or abuse for this reason. Although DOL is not aware of direct
information indicating that the risk for fraud and abuse is greater for
MEPs than for other defined contribution pension plans, a key component
of the proposal is to make the financial information reported on the
Form 5500 Annual Return/Report more data mineable and accessible for
enforcement and analysis purposes. The DOL does not believe it would be
sensible to limit this aspect of the proposal to just pooled employer
plans and other MEPs because, although an important data improvement
for MEPs, the need for more relevant and comparable financial
information extends to defined contribution and defined benefit pension
plans generally. Reports from GAO, the DOL--Office of Inspector
General, the ERISA Advisory Council, and the Treasury Inspector General
for Tax Administration (``TIGTA'') have focused on the need for
increased transparency and accountability generally in connection with
employee benefit plan investments in hard-to-value and alternative
assets and those held through pooled investment vehicles. It also would
be confusing and inefficient to try to adopt these kinds of financial
reporting improvement just for MEPs or for certain types of MEPs.
Mandatory e-filing, which was implemented for the 2009 form filing
year, changed both the regulated community's and the government's
ability to use the Form 5500 Annual Return/Report data. The data sets
developed from e-filing information have been helping researchers,
businesses, and other plan professionals.\38\ The Form 5500 Annual
Return/Report data sets can be one of the major building blocks for a
private organization to use in developing information for employees and
employers on plan administration. Currently, however, the line 4i
attachments to Schedule H (Schedule of Assets Held at End of Year,
Schedule of Assets Acquired and Disposed of Within Year and the
Schedule of Reportable Transactions) are difficult to search, filter,
aggregate, and analyze because they are not filed in a standardized
electronic format. As a result, the Agencies, policymakers, employers,
labor organizations, participants and beneficiaries, and the public
have difficulty accessing key information about plan investments. This
proposal to establish a standardized electronic filing format for the
Schedule H, line 4i Schedules of Investments is also intended to be
responsive to the OIG's recommendation that the Agencies create a
searchable reporting format for the Schedule H, line 4i Schedules of
Assets and otherwise increase the accessibility of Form 5500 Annual
Return/Report information, particularly information on hard-to-value
assets and multiple-employer plans. See DOL-OIG EBSA Needs to Provide
Additional Guidance and Oversight to ERISA Plans Holding Hard-To-Value
Alternative Investments, at 17. See also Private Pensions: Targeted
Revisions Could Improve Usefulness of Form 5500 Information, at 37; see
also U.S. Gov't Accountability Office, GAO-12-665, Federal Agencies
Should Collect Data and Coordinate Oversight of Multiple Employer Plans
(2012), at 30.
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\38\ EBSA is responsible for collecting the Form 5500 Annual
Return/Report, in part, to fulfill the statutory requirements under
Sections 104 and 106 of ERISA, which require that DOL make annual
reports filed under Title I of ERISA available to the public. EBSA
also makes the Form 5500 filings and data available to the public
under the Freedom of Information Act (FOIA), 5 U.S.C. 552. EBSA
fulfills its responsibilities by making the Form 5500 Annual Return/
Report data available for downloading in bulk. See http://www.dol.gov/ebsa/foia/foia.html. These bulk data files, which EBSA
updates at the end of each month with the Form 5500 Annual Return/
Report data collected during that month, are downloaded by private-
sector organizations that, in some cases, also make the data
available on the internet. Thus, most returns/reports are currently
open to public inspection, and the contents are public information
subject to publication on the internet.
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Schedule H, line 4i would be separated into two elements--line
4i(1) would ask whether the plan held assets for investment at the end
of the year; line 4i(2) would ask about assets acquired and disposed of
during the plan year. The information to be collected as part of the
schedules would be largely unchanged, but some adjustments are being
proposed to improve the consistency and quality of the data. The
proposal clarifies conventions for identifying filers by name and
identifying number(s).\39\ The proposal would require plans to use
legal entity and other industry and regulatory identifiers for
investment assets whenever possible. Check boxes are also being added
for participant directed individual account plans to identify
investments that are designated investment alternatives and qualified
default investment alternatives and to require entry of the total
annual
[[Page 51501]]
operating expenses for the investments expressed as a percentage of
assets that was furnished to participants and beneficiaries in their
most recent ``404a-5 statement.'' \40\ With the expected increase in
employers choosing to offer retirement benefits through MEPs and DCGs,
instead of stand-alone plans that file their own annual return/report,
and the requirement for DCGs to provide the same investments and
investment alternatives, these changes are intended to help the
Agencies, employers, and other interested stakeholders compare plan
participation, investment options, and investment performance from
year-to-year.
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\39\ These changes are also intended to address concerns raised
by the GAO in recommending that ``the Agencies develop a central
repository for EIN and Plan Numbers (PNs) for filers and service
providers to improve the comparability of form data across
filings.'' GAO Private Pensions: Targeted Revisions Could Improve
Usefulness of Form 5500 Information, at 37.
\40\ See 29 CFR 2550.404a-5. The DOL published a final rule in
2012 that was designed to help America's workers manage and invest
the money they contribute to their 401(k)-type pension plans. The
rule requires that workers in this type of plan are given, or have
access to, the information they need to make informed decisions,
including information about fees and expenses; the delivery of
investment-related information in a format that enables workers to
meaningfully compare the investment options under their pension
plans; that plan fiduciaries use standard methodologies when
calculating and disclosing expense and return information so as to
achieve uniformity across the spectrum of investments that exist
among and within plans, thus facilitating ``apples-to-apples''
comparisons among their plan's investment options; and a new level
of fee and expense transparency. Requiring the total annual
operating expenses from those statements to be included on the
plan's Form 5500 is intended to help further that objective by
allowing third-party data aggregators to build tools that will help
employers, participants and beneficiaries, the Agencies, and other
interested members of the public evaluate and monitor investment
alternatives being made available for America's workers to save to
their retirement.
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E. Schedules MB, SB and R--Proposed Modifications and Additions to
Information Reported
As described more fully below, the Agencies propose adding new
questions to the Form 5500 Schedule MB (Multiemployer Defined Benefit
Plan and Certain Money Purchase Plan Actuarial Information), Schedule
SB (Single-Employer Defined Benefit Plan Actuarial Information), and
Schedule R (Retirement Plan Information), and modifying the demographic
and benefit attachment requirements to enable the Agencies to project
more precisely defined benefit pension plans' and insurance programs'
liabilities. Also for multiemployer defined benefit pension plans,
among other changes, the Agencies propose identifying a larger number
of contributing employers. For both single-employer and multiemployer
defined benefit pension plans, the Agencies propose the option to
provide certain required attachments in a spreadsheet file to make it
easier for the Agencies to access the information.
1. Schedule MB Modifications
Currently, Schedule MB requires that if any of the employer
contributions reported in line 3 include amounts owed for withdrawal
liability, an attachment must be provided listing the total withdrawal
liability amounts and the dates such amounts were contributed. The
Agencies propose modifying the line 3 instructions to require an
attachment that breaks down the total withdrawal liability amounts by
date, separately specifying the periodic withdrawal liability amounts
and lump sum withdrawal liability amounts.
Currently, line 6 of Schedule MB requires filers to provide
information about the actuarial assumptions used to determine plan
liabilities. The Agencies propose adding a new requirement for plans
that assess withdrawal liability to an employer during the plan year to
report the interest rate used to determine the present value of vested
benefits for withdrawal liability determinations. This information
would be reported in a new line, which would become line 6f. In
addition, the Agencies propose modifying the questions related to the
line 6 ``expense load'' to better align with the various ways
multiemployer plans incorporate expense loads into their calculations.
Filers would be required to indicate if an expense load is included in
normal cost and, if so, whether it is determined as a percentage of
normal cost, a dollar amount that varies from year to year, or
something else. As part of the modification, the Agencies propose
moving the expense load from line 6e to a new line 6i and to revise the
instructions accordingly.
In addition, the Agencies propose modifying line 8 of Schedule MB
by requiring additional information about demographics, benefits, and
contributions as described below. As is the case currently with respect
to line 8, these requirements would apply only to PBGC-insured
multiemployer plans with 500 or more total participants as of the
beginning of the plan year.
Benefit Projections--Currently, such plans are required to
attach a projection of benefits expected to be paid in each of the next
ten years (see line 8b(1)).\41\ The Agencies propose modifying the
format of the attachment to show the benefit projection broken down
into three categories based on the participant's or beneficiary's
status on the valuation date (i.e., active, terminated vested, in pay
status). In addition, the projection period would be extended from 10
to 50 years. It is the Agencies' understanding that almost all
valuation software automatically generates these numbers and that it
takes the same amount of effort to project 50 years as it does to
project 10 years.
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\41\ The current instructions provide that the line 8b(1)
attachment is required for plans with 500 or more participants as of
the valuation date, not as of the beginning of the plan year. The
Agencies are proposing to change that to ``the beginning of the plan
year'' because the only participant count reported on Schedule MB is
the count at the beginning of the plan year (i.e., line 2b(3)(c),
column 1) and because doing so is consistent with another Schedule
MB requirement, See instructions for line 8b(2).
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Contribution Projections--The Agencies propose adding a
new requirement that such plans provide, as an attachment, a 10-year
projection of employer contributions and withdrawal liability payments.
A new line, line 8b(3), would be added to Schedule MB where the filer
would report whether the projection is required. As is the case with
the benefit projection attachments, the instructions would provide the
required format for the attachment.
Average age/benefit--The Agencies propose requiring such
plans to report the average age and average monthly benefit separately
for terminated vested participants and retired participants and
beneficiaries receiving payments. This information would be provided
directly on Schedule MB, in new line 8b(4).
The Agencies also propose a change to the ``age/service'' scatter
attachment which is currently required for PBGC-insured multiemployer
plans with active participants, regardless of the number of
participants. Currently, the scatter shows, for each ``attained age''
and ``years of credited service'' grouping of active participants, the
number of active participants, and if the total number of active
participants at the beginning of the plan year is 1,000 or more, (1)
for plans that use compensation to determine benefits, the average
compensation, and (2) for cash balance plans, the average cash balance
account (see line 8b(2)). The Agencies propose modifying the age/
service scatter by deleting the required information related to cash
balance plans and adding a requirement to report average accrued
monthly benefits as of the valuation date for each grouping (for plans
with 1,000 or more active participants at the beginning of the year).
As is the case with respect to average compensation, the accrued
benefit information would not be required for any age/service
combination that contains fewer than 20 participants.
The Agencies also propose clarifying the line 4f instructions and
Schedule language concerning when (or if) plans in critical status or
critical and
[[Page 51502]]
declining status are projected to emerge or become insolvent, as
filers' previous responses indicate they may have been confused as to
how to fill out line 4f correctly.
2. Modifications to Schedule SB
The Agencies propose making the Schedule SB (actuarial schedule),
line 26 reporting requirements about demographics and benefits similar
to the requirements for PBGC-insured multiemployer plans. Consistent
with the requirements for PBGC-insured multiemployer plans, the new
single-employer plan requirements would apply only to plans with 500 or
more total participants. However, because the only participant count
information reported on Schedule SB is as of the valuation date, for
single-employer plans, participants are counted as of the valuation
date for this purpose instead of as of the beginning of the plan year.
Such plans would be required to attach a projection of benefits
expected to be paid in each of the next 50 years broken down into three
categories based on the participant's or beneficiary's status on the
valuation date (i.e., active, terminated vested, in pay status). The
instructions would provide the requirements for the attachment's
format. The Agencies are also proposing that these plans report the
average age and average monthly benefit separately for terminated
vested participants and retired participants and beneficiaries
receiving payments. As discussed above, the Agencies do not believe the
benefit projection requirement would be burdensome for such single-
employer plans, as almost all valuation software automatically
generates these numbers.
To facilitate these changes, the Agencies propose rearranging
Schedule SB line 26. Currently, line 26 relates only to the ``age/
service'' scatter of active participant data required to be attached to
Schedule SB for PBGC-insured single-employer plans with active
participants. The Agencies propose changing line 26 into a three-part
question (26a, 26b, and 26c). Line 26a would be the current line 26.
New line 26b would require PBGC-insured single-employer plans with 500
or more total participants as of the valuation date to attach a
projection of expected benefit payments. New line 26c would be the line
for plans to report average age and average monthly benefit
information.
The Agencies propose modifying Part IX of the Schedule SB, and its
instructions, so that it relates to elective funding relief provided
under the American Rescue Plan (ARP) Act of 2021 instead of elective
funding relief provided under the Pension Relief Act of 2010 (PRA
2010). The PRA 2010 information is no longer needed because the ARP Act
reduces to zero all shortfall amortization bases, including
amortization bases established pursuant to the PRA 2010 elective
funding relief. As modified, plan sponsors of single-employer defined
benefit plans that elect to have the ARP Act extended amortization rule
apply before the 2022 plan year would be required to report the first
plan year to which the extended amortization rule applies.
3. Modification to Schedule R Reporting Requirement
The Agencies propose modifying Schedule R's Part V, line 13
requirement that multiemployer defined benefit pension plans subject to
minimum funding standards report identifying information about any
participating employer whose contributions to the plan account for more
than five (5) percent of the total contributions for the year. The
proposed change would require that plans report identifying information
about any participating employer who either (1) contributed more than
five percent of the plan's total contributions or (2) was one of the
top ten highest contributors. This will ensure that reported data
represents a reasonable sampling of contributors.
4. Change in Format for Certain Schedule MB and SB Attachments
EFAST filers currently file Form 5500 attachments as PDF and plain
text (TXT) files. A PDF file is required only if the attachment is
supposed to be signed. TXT attachments are rarely provided. Many
attachments include a lot of numbers (e.g., benefit projections, age/
service scatters) that are reported in tables. These numbers have to be
extracted out of PDF tables and entered into databases or spreadsheets
before the Agencies can use the information for various projects,
studies, etc. This is costly and inefficient. It would be more
efficient for the Agencies if this information was instead provided by
filers in a tabular format (spreadsheet). Therefore, the Agencies
propose modifying the instructions to allow and suggest (but not
require) that certain attachments be provided in a tabular format
(spreadsheet) such as CSV or XLS rather than PDF or TXT formats. The
attachments affected by this change are:
------------------------------------------------------------------------
Attachment Schedule MB Schedule SB
------------------------------------------------------------------------
Schedule of Projection of Line 8b(1)..... Line 26b.
Expected Benefit Payments.
Schedule of Active Line 8b(2)..... Line 26a.
Participant Data (i.e., Age/
service scatter).
Withdrawal Liability Amounts Line 3......... N/A.
Schedule of Projection of Line 8b(3)..... N/A.
Employer Contributions and
Withdrawal Liability.
------------------------------------------------------------------------
Because much of this information is automatically generated by
valuation software, the Agencies expect that this option may simplify
the process for preparing attachments as well.
F. Internal Revenue Code-Based Questions for the 2022 Form 5500s
Prior to 2009, Schedule E, ESOP Annual Information, Schedule P,
Annual Return of Fiduciary of Employee Benefit Trust, and Schedule T,
Qualified Pension Plan Coverage Information, were required as part of
the annual return under section 6058(a) of the Code and associated
regulations, but they were not information collections of the DOL or
the PBGC. Beginning in 2009, DOL mandated electronic filing of Form
5500, Annual Return/Report of Employee Benefit Plan, and Form 5500-SF,
Short Form Annual Return/Report of Small Employee Benefit Plan.
Limitations on the IRS' authority to require electronic filing of
annual returns resulted in the removal of the ``IRS-only'' schedules
from the Form 5500 filing requirements. See Code section 6011(e).
The 2011 report from the TIGTA entitled ``The Employee Plans
Function Should Continue Its Efforts to Obtain Needed Retirement Plan
Information'' notes that the lack of information contained on Schedules
E, P, and T can negatively impact the IRS's ability to effectively
focus on specific factors of noncompliance when selecting retirement
plans for examination. This lack of information may result in the IRS
selecting relatively compliant plans, which increases the burden on
these plans and affects the IRS's ability to identify and focus on
potentially noncompliant plans. Additionally, the Employee Plans (EP)
function has
[[Page 51503]]
focused its examination strategy on identifying plans with non-
compliance by using compliance strategies and data analysis. Compliance
strategies use agents' experience to identify certain types of plans
where EP sees numerous qualification failures. EP uses data analysis by
identifying certain responses to questions on the Form 5500 that
indicate that a plan may be non-compliant.
Rather than reinstating the Schedules E, P, and T, the IRS is
proposing to add new questions to the 2022 Form 5500 that are designed
to assist the IRS in identifying plans that are non-compliant relating
to Code section 410(b) coverage, Code section 401(a)(4) non-
discrimination, and Code section 401(k) non-discrimination testing.
Additionally, the IRS is proposing to add a question that will help it
identify whether adopters of pre-approved plans have been updated
timely for changes in the law. DCGs would report this information at
the plan level as part of the Schedule DCG.
Specifically, the proposal would add a nondiscrimination and
coverage test question to Form 5500 and Form 5500-SF that was on the
Schedule T before it was eliminated. The question asks if the employer
aggregated plans in testing whether the plan satisfied the
nondiscrimination and coverage tests of Code sections 401(a)(4) and
410(b). A plan that is aggregated with another plan to pass either
nondiscrimination or coverage testing generally has more issues that
are technically complicated and raise the possibility of non-
compliance. Adding this question will allow EP to identify these plans
for examination over plans that are likely more compliant with the law.
This question is also helpful when performing pre-examination analysis
and allows the IRS to narrow any inquiries for information that is
requested from the plan sponsor. The restoration of this question also
reflects the elimination of optional coverage and nondiscrimination
demonstrations in the IRS determination letter process. See Rev. Proc.
2012-6, 2012-1 I.R.B. 235, and Announcement 2011-82, 2011-52 I.R.B.
1052.
The proposal would add a question to Form 5500 and Form 5500-SF,
for section 401(k) plans, asking whether the plan sponsor used the
design-based safe harbor rules or, if applicable, the ``prior year'' or
``current year'' ADP test. ADP testing and nondiscrimination are
significant compliance issues for section 401(k) plans. For example, a
plan that performs prior year or current year ADP testing is more
likely to have compliance issues than a plan with a designed-based safe
harbor. Adding this question will allow EP to identify for examination
section 401(k) plans that use ADP testing over plans that have
designed-based safe harbors. This question will also help the IRS
perform pre-examination analysis and, for design-based safe harbor
plans, verify whether (1) allocations of required safe harbor
contributions comply with the terms of the plan, and (2) proper notice
requirements are satisfied on an annual basis.
The proposal would add a question to Form 5500 and Form 5500-
SF,\42\ asking whether the employer is an adopter of a pre-approved
plan that received a favorable IRS Opinion Letter, the date of the
favorable Opinion Letter, and the Opinion Letter serial number. This
question will help the IRS identify whether a plan sponsor has adopted
a pre-approved plan and to determine whether the plan was adopted
timely in accordance with the Code section 401(b) remedial amendment
period. This question will also assist the IRS in determining whether
to select a plan for examination as a late amender for changes in the
law.
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\42\ IRS will separately make a parallel update to the Form
5500-EZ, which is solely in the jurisdiction of the IRS.
---------------------------------------------------------------------------
Finally, the proposal would add a new checkbox F to Form 5500-EZ,
Part I, asking whether a filer is required to file Form 5500-EZ
electronically pursuant to Treas. Reg Sec. 301.6058-2. A filer who has
to file at least the applicable number of returns with the IRS during a
calendar year generally must file Form 5500-EZ electronically under
EFAST2. The applicable number is 10 for returns required to be filed
during calendar years after 2022. If a filer is required to file Form
5500-EZ electronically, but fails to do so, the filer is deemed to have
failed to file Form 5500-EZ. This question will assist IRS in
determining if a filer is in compliance with IRS mandatory electronic
filing rules, in the event a paper Form 5500-EZ is filed.
G. Change to Participant-Count Methodology for Determining Independent
Qualified Public Accountant Audit Requirement for Individual Account
Plans
The Agencies are proposing to change the rules for determining when
a defined contribution pension plan is exempt from the requirement to
include an IQPA report with its annual return/report filing. Currently,
the plan size measure for the IQPA audit requirement is based on the
total number of participants at the beginning of the plan year,
including those eligible to elect to have contributions made under a
section 401(k) qualified cash or deferred arrangement even if they have
not elected to participate and do not have an account balance in a
section 401(k) or 403(b) plan. Some stakeholders have pointed out that
the use of this definition for the audit threshold may result in two
plans with the same number of active participants, e.g., 85 account
holders, with one subject to an audit and the other not based on the
number of non-participating but eligible employees of the plan sponsor.
They questioned the policy basis for such a difference in application
of the audit requirement. Further, under this definition, some
stakeholders have suggested that section 112 of the SECURE Act could
make it even more likely that a plan with a small number of active
participants may be required to bear the cost of an audit based on
eligible but not participating employees being counted toward the audit
threshold. Specifically, because section 112 provides that long-term,
part time workers that have reached the plan's minimum age requirement
and worked at least 500 hours in each of three consecutive 12-months
period must be permitted to make elective contributions to a section
401(k) qualified cash or deferred arrangement for plan years beginning
on or after January 1, 2024, there could be more employees eligible to
participate that elect not to do so. These eligible employees who are
not active participants would still be impacting the threshold for
determining whether the plan would have to file as a large plan.\43\
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\43\ The Agencies proposed a similar change in 2016 and received
few comments on that aspect of the proposal. 81 FR 47534 (Jul. 16,
2016).
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To address these issues, the Agencies are proposing to add to the
Form 5500 and Form 5500-SF a new question for defined contribution
pension plans only, asking for the number of participants with account
balances at the ``beginning of the year,'' in addition to the current
end-of-year count for defined contribution pension plan participants
with account balances. Defined contribution pension plans would
determine whether they have to file as a large plan and whether they
have to attach an IQPA report and audited financial statements based on
the number of participants with account balances as of the beginning of
the plan year, as reported on the face of the Form 5500 or Form 5500-
SF. To avoid circumstances in which a beginning-of-year count would
result in an inappropriate exclusion of large plans
[[Page 51504]]
from the audit requirement, for first plan year filings, the
participant count for this purpose would exclude only plans that have
fewer than 100 participants with account balances both at the beginning
of the first plan year and the end of the first plan year.\44\ Thus,
under the proposal, the determination would be based on the number of
participants with account balances as of the beginning of the plan year
(as reported on proposed line 6g(1) of the Form 5500 or line 5c(1) of
the Form 5500-SF), except that the determination for first plan year
filings would be based on the number of participants with account
balances both at the beginning of the plan year and at the end of the
plan year (as reported on proposed line 6g(2) of the Form 5500 and line
5c(2) of the Form 5500-SF).
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\44\ This would not otherwise change how participants are
counted for Form 5500 reporting purposes.
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H. Miscellaneous and Conforming Changes for Forms and Instructions
Various other technical, formatting, and conforming changes to the
forms, schedules, and instructions are being proposed as part of the
substantial restructuring of the Form 5500 Annual Return/Report
described in this notice. For example, to implement the proposed
Schedule MEP and Schedule DCG, the proposal includes conforming changes
to other parts of the forms, schedules, and instructions. The
instructions for what constitutes a multiple employer plan for purposes
of the Form 5500 would generally be left unchanged, but conforming
changes would be made throughout the instructions as necessary to
reference the Schedule MEP and pooled employer plans for pension plans.
The instructions would also be amended to reflect the transferring of
the participating employer information from the Form 5500 Annual
Return/Report to the Form M-1 for MEWAs that offer or provide coverage
for medical benefits, and continued reporting of participating employer
information on the Form 5500 Annual Return/Report as an attachment for
plan MEWAs that provide other benefits. The instructions for Part I,
DFE box, would be updated to add a code for DCGs, which would be
instructed to check the DFE box, enter the correct code, and attach the
proposed Schedule DCG. The proposed Schedule MEP and Schedule DCG would
be added to the list of pension schedules. DCG filers would have to
check that they are adding the Schedule DCG and enter the number of
Schedules DCG attached. Other conforming changes would also be made
throughout the instructions as necessary to reference DCGs and Schedule
DCG. The DOL's reporting regulation at 29 CFR 2520.103-1(c)(2)(ii) and
the Form 5500-SF instructions would be amended to add MEPs and DCGs to
those types of filers that are not permitted to file a Form 5500-SF,
but must instead file the Form 5500, with all required schedules and
attachments. The instructions would be revised to state that pooled
employer plans and DCGs would not report investment assets aggregated
into master trust investment accounts (MTIAs) because the purpose of
the MTIA reporting structure is to provide a financial reporting
structure for groups of affiliated plans (e.g., separate plans of
controlled group members) that utilize master trusts for the collective
investment of the assets of the affiliated plans. The Departments do
not believe that separate pooled employer plans and DCGs are
``affiliated'' in the way that was envisioned for master trust
reporting by plans and may in fact create an overly complex and
undesirable lack of transparency if used in the case of pooled employer
plans and DCGs.
The proposal would also add new breakout categories to the
``Administrative Expenses'' category of the Income and Expenses section
of the Schedule H balance sheet. The Agencies have determined that to
get a better picture of plan expenses, particularly those related to
service providers, more detail in this category is warranted.
Accordingly, data elements would be added for ``Salaries and
allowances,'' ``Independent Qualified Public Accountant (IQPA) Audit
fees,'' ``Recordkeeping and Other Accounting Fees,'' ``Bank or Trust
Company Trustee/Custodial Fees,'' ``Actuarial fees,'' ``Legal fees,''
``Valuation/appraisal fees,'' and ``Trustee fees/expenses (including
travel, seminars, meetings.'' Other than IQPA Audit Fees and Bank or
Trust Company Trustee/Custodial Fees, these questions were on the Form
5500 prior to 1999.\45\ As noted above in connection with pooled
employer plans and MEPs, transparency and improved reporting of fees
and expenses is an ongoing objective for the DOL and an important goal
for continuing to improve the Form 5500 as a tool for financial
transparency and accountability among employee benefit plans.
Accordingly, the agencies specifically request comments on whether the
final rule should require more detailed reporting regarding fee and
expense information on the Form 5500. Useful comments would include,
for example, suggestions on how to improve reporting of direct and
indirect service provider compensation, generally and in particular
with respect to pooled employer plans, other MEPs, and DCG reporting
arrangements (including information about how the fees and expenses are
allocated among participating plans, employers, and plan participants
and beneficiaries, as applicable). Another example of an area of
interest on fee information is whether the Form 5500 would be an
appropriate vehicle for collecting information on fees charged to
participants or alternate payees by a retirement plan--including plan
service provider fees the plan passes on to participants--for review
and qualification of domestic relations orders.\46\
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\45\ See 1998 Form 5500, line 32(g).
\46\ See Government Accountability Office (GAO) Report GAO 20-
541, ``Retirement Security: DOL Could Better Inform Divorcing
Parties About Dividing Savings,'' which recommended that ``EBSA
should explore ways to collect information on fees charged to
participants or alternate payees by a retirement plan--including
plan service provider fees the plan passes on to participants--for
review and qualification of domestic relations orders and evaluate
the burden of doing so. For example, DOL could consider collecting
fee information as part of existing reporting requirements in the
Form 5500.''
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The proposal would also amend the Form 5500 instructions to make
explicit that the pooled plan provider operating the pooled employer
plan must report the same identifying information--i.e., name and EIN
for itself, identified affiliates and other service providers, and
trustees--on the Form PR for the pooled plan provider and on the Forms
5500 for every pooled employer plan the pooled plan provider operates.
The instructions to the new Form PR have parallel instructions. The
proposal would also amend the Form 5500 and Form 5500-SF instructions
and make conforming changes to the other parts of the forms, schedules,
and instructions to implement the proposed changes described above to
the participant count methodology for individual account plans for
determining whether such plans have to file as a large plan and whether
they have to attach an IQPA report.
IV. Paperwork Reduction Act Statement
As part of continuing efforts to reduce paperwork and respondent
burden, the general public and Federal agencies are invited to comment
on proposed and/or continuing collections of information in accordance
with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C.
3506(c)(2)(A)). This helps to ensure that requested data will be
provided in the
[[Page 51505]]
desired format, reporting burden (time and financial resources) will be
minimized, collection instruments will be clearly understood, and the
impact of collection requirements on respondents is properly assessed.
Currently, the DOL is soliciting comments concerning the proposed
revisions of the Form 5500 Annual Return/Report, Form M-1 and Summary
Annual Report, which are information collection requests subject to the
PRA. A copy of the ICRs may be obtained by contacting the person listed
in the PRA Addressee section below. The DOL has submitted a copy of the
proposed revisions to the Office of Management and Budget (OMB) in
accordance with 44 U.S.C. 3507(d) for its review of the DOL's
information collection. The IRS and the PBGC intend to submit separate
requests for OMB review and approval based upon the final forms
revisions. The DOL and OMB are particularly interested in comments
that:
Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the Agencies,
including whether the information will have practical utility;
Evaluate the accuracy of the estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
Comments should be sent to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Room 10235, New Executive
Office Building, Washington, DC 20503 and marked ``Attention: Desk
Officer for the Employee Benefits Security Administration.'' Comments
can also be submitted by Fax: 202-395-5806 (this is not a toll-free
number), or by email: [email protected]. OMB requests that
comments be received by October 15, 2021, which is 30 days from
publication of the proposed rule to ensure their consideration.
PRA Addressee: Address requests for copies of the ICR to James
Butikofer, Office of Regulations and Interpretations, U.S. Department
of Labor, Employee Benefits Security Administration, 200 Constitution
Avenue NW, Room N-5655, Washington, DC 20210. Email: [email protected].
ICRs submitted to OMB also are available at http://www.RegInfo.gov.
Form 5500 ICR: As described below, DOL is requesting a new OMB
Control Number for this collection. The request for a new control
number is for administrative reasons only. The DOL is currently in the
process of requesting an extension for OMB Control Number 1210-0110,
Annual Information Return/Report of Employee Benefit Plan. Once all of
the outstanding actions are complete, the DOL intends to submit a
nonmaterial change request to transfer the burden from the new ICR to
the existing OMB control number for the Annual Information Return/
Report of Employee Benefit Plan (1210-0110) and proceed to discontinue
the use of the new control number.
The Agencies' burden estimation methodology excludes certain
activities from the calculation of ``burden.'' If the activity is
performed for any reason other than compliance with the applicable
federal tax administration system or the Title I annual reporting
requirements, it was not counted as part of the paperwork burden. For
example, most businesses or financial entities maintain, in the
ordinary course of business, detailed accounts of assets and
liabilities, and income and expenses for the purposes of operating the
business or entity. These recordkeeping activities were not included in
the calculation of burden because prudent business or financial
entities normally have that information available for reasons other
than federal tax or Title I annual reporting. Only time for gathering
and processing information associated with the tax return/annual
reporting systems, and learning about the law, was included. In
addition, an activity is counted as a burden only once if performed for
both tax and Title I purposes. The Agencies also have designed the
instruction package for the Form 5500 Annual Return/Report so that
filers generally will be able to complete the Form 5500 Annual Return/
Report by reading the instructions without needing to refer to the
statutes or regulations. The Agencies, therefore, have included in
their PRA calculations a burden for reading the instructions and find
there is no recordkeeping burden attributable to the Form 5500 Annual
Return/Report. The DOL solicits comments regarding whether or not any
recordkeeping beyond that which is usual and customary is necessary to
complete the Form 5500 Annual Return/Report. Comments are also
solicited on whether the Form 5500 Annual Return/Report instructions
are generally sufficient to enable filers to complete the Form 5500
Annual Return/Report without needing to refer to the statutes or
regulations.
Summary Annual Report ICR: Section 2520.104b-10 sets forth the
requirements for the Summary Annual Report (SAR) appendix and
prescribes formats for such reports. The DOL is proposing to revise the
currently approved information collection (1210-0040) to include
required additions to the SAR formats that reflect the addition of the
new Schedule MEP and Schedule DCG to the 5500 Annual Report/Return.
Form M-1 ICR: Effective for plan years beginning on or after
January 1, 2022, DOL is proposing to amend the Form M-1 information
collection (1210-0116) by adding new questions requiring MEWAs (plan
and non-plan MEWAs) that offer or provide coverage for medical care to
identify each participating employer in the MEWA by name and EIN. MEWAs
that are not unfunded or insured must also provide participating
employer's percentage of the total contributions (employer and
employee) made by all employer participating in a MEP. This information
is currently reported as a non-standard attachment as part of the Form
5500 filing. The reporting of this burden is being moved from OMB
control number 1210-0110. For the 2021 plan year, pending the
implementation of the Form M-1 changes, plan MEWAs that offer or
provide coverage for medical care would be required provide
participating employer information as a nonstandard attachment to the
2021 Form 5500 Annual Return/Report in a similar manner as currently
required. A summary of paperwork burden estimates follows:
Agency: DOL-EBSA.
Type of Review: New information collection.
Title: Annual Information Return/Report of Employee Benefit Plan.
Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
Forms: Form 5500 and Schedules.
Total Respondents: 804,000.
Total Responses: 804,000.
Frequency of Response: Annually.
Estimated Total Burden Hours: 588,000.
Total Annualized Costs: $275 million.
Agency: Department of Treasury--IRS.
Type of Revision: Revision of existing collection.
Title of Collection: Annual Return/Report of Employee Benefit Plan.
[[Page 51506]]
OMB Control Number: 1545-1610.
Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
Forms: Form 5500 and Schedules.
Total Respondents: 804,000.
Total Responses: 804,000.
Frequency of Response: Annually.
Estimated Total Burden Hours: 354,000.
Total Annualized Costs: $142 million.
Agency: PBGC.
Type of Revision: Revision of existing collection.
Title of Collection: Annual Information Return/Report.
OMB Control Number: 1212-0057.
Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
Forms: Form 5500 and Schedules.
Total Respondents: 24,744.
Total Responses: 24,744.
Frequency of Response: Annually.
Estimated Total Burden Hours: 1,242.
Total Annualized Costs: $2 million.
Agency: DOL-EBSA.
Type of Revision: Revision of existing collection.
Title of Collection: Annual Report for Multiple Employer Welfare
Arrangements.
OMB Control Number: 1210-0116.
Affected Public: Not-for-profit institutions, Businesses or other
for-profits.
Forms: Form M-1.
Total Respondents: 687.
Total Responses: 687.
Frequency of Response: Annually.
Estimated Total Burden Hours: 141.
Total Annualized Costs: $126,556.
Agency: DOL-EBSA.
Type of Revision: Revision of existing collection.
Title of Collection: Summary Annual Report Requirement.
OMB Control Number: 1210-0040.
Affected Public: Not-for-profit institutions, Businesses or other
for-profits.
Total Respondents: 761,170.
Total Responses: 177,793,034.
Frequency of Response: Annually.
Estimated Total Burden Hours: 1,110,692.
Total Annualized Costs: $20,320,505.
The DOL solicits comments regarding whether or not any
recordkeeping beyond that which is usual and customary is necessary to
complete the Form 5500 Annual Return/Report. Comments are also
solicited on whether the Form 5500 Annual Return/Report instructions
are generally sufficient to enable filers to complete the Form 5500
Annual Return/Report without needing to refer to the statutes or
regulations.
Paperwork and Respondent Burden: Estimated time needed to complete
the forms listed below reflects the combined requirements of the IRS,
the DOL, and the PBGC. The times will vary depending on individual
circumstances. The estimated average times are:
----------------------------------------------------------------------------------------------------------------
Pension plans
--------------------------------------------------------------------------
Large Small, filing Form 5500 Small, filing 5500-SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................ 1 hr, 51 min........... 1 hr, 19 min...........
Sch A................................ 2 hr, 52 min........... 2 hr, 52 min...........
Sch MB............................... 8 hr, 49 min........... 8 hr, 6 min............ 8 hr, 6 min.
Sch SB............................... 6 hr, 38 min........... 6 hr, 49 min........... 6 hr, 49 min.
Sch C................................ 2 hr, 52 min...........
Sch D................................ 1 hr, 39 min........... 20 min.................
Sch G................................ 14 hr, 22 min..........
Sch H................................ 11 hr, 51 min..........
Sch I................................ 2 hr, 6 min............ 2 hr, 6 min............
Sch R................................ 1 hr, 45 min........... 1 hr, 7 min............
Form 5500-SF......................... ....................... ....................... 2 hr, 35 min.
Sch MEP.............................. 10 min.................
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Welfare plans that include health
benefits
---------------------------------------
Small, unfunded,
combination
unfunded/fully
Large insured, or funded
with a trust 5500-
SF
------------------------------------------------------------------------
Form 5500....................... 1 hr, 45 min...... 1 hr, 14 min.
Sch A........................... 3 hr, 40 min...... 2 hr, 43 min.
Sch C........................... 3 hr, 38 min......
Sch D........................... 1 hr, 52 min...... 20 min.
Sch G........................... 11 hr, 0 min......
Sch H........................... 12 hr, 46 min.....
Sch I........................... .................. 1 hr, 56 min.
Form 5500-SF.................... .................. 2 hr, 35 min.
------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Welfare plans that do not include health benefits
--------------------------------------------------------------------------
Small, filing Form 5500-
Large Small, filing Form 5500 SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................ 1 hr, 45 min........... 1 hr, 14 min...........
Sch A................................ 3 hr, 40 min........... 2 hr, 43 min...........
Sch C................................ 3 hr, 38 min...........
Sch D................................ 1 hr, 52 min........... 20 min.................
Sch G................................ 11 hr, 0 min...........
Sch H................................ 12 hr, 46 min..........
Sch I................................ ....................... 1 hr, 56 min...........
Form 5500-SF......................... ....................... ....................... 2 hr, 35 min.
Sch M1............................... 15 min.................
----------------------------------------------------------------------------------------------------------------
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Direct filing entities
-----------------------------------------------------------------------------------------------------------------------
Master trusts CCTs PSAs 103-12 IEs GIAs DCGs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 5500....................... 1 hr, 50 min...... 1 hr, 30 min...... 1 hr, 23 min...... 1 hr, 38 min...... 1 hr, 26 min...... 1 hr, 50 min.
Sch A........................... 2 hr, 54 min...... 2 hr, 48 min...... 2 hr, 46 min...... 2 hr, 51 min...... 3 hr, 1 min....... 2 hr, 52 min.
Sch C........................... 3 hr, 2 min....... 1 hr, 2 min....... 29 min............ 1 hr, 56 min...... 1 hr, 22 min...... 2 hr, 42 min.
Sch D........................... 1 hr, 30 min...... 48 min............ 34 min............ 1 hr, 1 min....... 54 min............ 1 hr, 39 min.
Sch G........................... 12 hr, 34 min..... .................. .................. 8 hr, 3 min....... .................. 11 hr, 6 min.
Sch H........................... 12 hr, 19 min..... 11 hr, 47 min..... 11 hr, 43 min..... 12 hr, 16 min..... 12 hr, 1 min...... 8 hr, 36 min.
Sch DCG......................... .................. .................. .................. .................. .................. 1 hr, 33 min.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The aggregate hour burden for the Form 5500 Annual Return/Report
(including schedules and short form) is estimated to be 0.9 million
hours annually. The hour burden reflects filing activities carried out
directly by filers. The cost burden is estimated to be $419 million
annually. The cost burden reflects filing services purchased by filers.
Presented below is a chart showing the total hour and cost burden of
the revised Form 5500 Annual Return/Report separately allocated across
the DOL and the IRS. There is no separate PBGC entry on the chart
because, as explained below, its share of the paperwork burden is very
small relative to that of the IRS and the DOL.
----------------------------------------------------------------------------------------------------------------
DOL IRS
---------------------------------------------------------------------
Hours Costs Hours Costs
----------------------------------------------------------------------------------------------------------------
Pension:
Large Plans........................... 261,464 $62,431,639.11 142,897 $31,568,313.36
Small Plans........................... 174,999 87,694,622.39 176,481 103,113,327.32
Welfare:
Large Plans........................... 108,142 111,593,190.83 9,953 1,811,627.38
Small Plans........................... 6,137 5,407,649.86 2,507 1,252,295.71
Total:
Large Plans........................... 369,607 174,024,829.94 152,850 33,379,940.74
Small Plans........................... 181,136 93,102,272.24 178,988 104,365,623.03
DFEs.................................. 37,642 8,014,192.20 21,908 4,543,173.65
---------------------------------------------------------------------
Total Plans....................... 588,385 275,141,294.38 353,746 142,288,737.43
----------------------------------------------------------------------------------------------------------------
The paperwork burden allocated to the PBGC includes a portion of
the general instructions, basic plan identification information, a
portion of Schedule MB, a portion of Schedule SB, a portion of Schedule
H, and a portion of Schedule R. The PBGC's Estimated Share of Total
Form 5500 Annual Return/Report Burden is: 1,242 Hours and $1.6 million
per year.
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Statutory Authority
Accordingly, pursuant to the authority in sections 101, 103, 104,
109, 110 and 4065 of ERISA and sections 6058 and 6059 of the Code, the
Form 5500 Annual Return/Report and the instructions thereto are
proposed to be amended as set forth herein.
Signed at Washington, DC,
Ali Khawar,
Acting Assistant Secretary, Employee Benefits Security Administration,
U.S. Department of Labor.
Eric Slack,
Director, Employee Plans, Tax Exempt and Government Entities Division,
Internal Revenue Service.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2021-19714 Filed 9-14-21; 8:45 am]
BILLING CODE 4510-29-C
