July Notice of Proposed Forms Revision

Friday,
July 21, 2006

Part III

Department of Labor
Employee Benefits Security
Administration

Department of the
Treasury
Internal Revenue Service

Pension Benefit
Guaranty
Corporation

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Proposed Revision of Annual Information
Return/Reports; Notice

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Federal Register / Vol. 71, No. 140 / Friday, July 21, 2006 / Notices

Employee Benefits Security
Administration
DEPARTMENT OF THE TREASURY
Internal Revenue Service
PENSION BENEFIT GUARANTY
CORPORATION
RIN 1210–AB06

Proposed Revision of Annual
Information Return/Reports
Employee Benefits Security
Administration, Labor, Internal Revenue
Service, Treasury, Pension Benefit
Guaranty Corporation.
ACTION: Notice of proposed forms
revisions.

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AGENCIES:

SUMMARY: This document contains
proposed revisions to the Form 5500
Annual Return/Report forms, including
a proposed new Short Form 5500, 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 Form 5500 Annual Return/
Report, including its schedules and
attachments (Form 5500 Annual Return/
Report), is an important source of
financial, funding, and other
information about employee benefit
plans for the Department of Labor, the
Pension Benefit Guaranty Corporation,
and the Internal Revenue Service (the
Agencies), as well as for plan sponsors,
participants and beneficiaries, and the
general public. The proposed revisions
to the Form 5500 Annual Return/Report,
contained in this document, including a
new Form 5500–SF short form annual
return/report for certain types of small
pension plans, are intended to reduce
and streamline annual reporting
burdens, especially for small businesses,
update the annual reporting forms to
reflect current issues and agency
priorities, and facilitate the
establishment of a wholly electronic
filing system for receipt of the Form
5500 Annual Returns/Reports. The form
revisions thus would, upon adoption,
apply for the reporting year for which
the electronic filing requirement is
implemented. 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 September 19, 2006.

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Comments should be
addressed to the Office of Regulations
and Interpretations, Employee Benefits
Security Administration (EBSA), Room
N–5669, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington,
DC 20210. Attn: Revision of Form 5500
(RIN 1210–AB06). Comments also may
be submitted electronically to eori@dol.gov or by using the Federal
eRulingmaking Portal:
www.regulations.gov (follow
instructions provided for submission of
comments). EBSA will make all
comments available to the public on its
Web site at http://www.dol.gov/ebsa.
The comments also will be available for
public inspection at the Public
Disclosure Room, N–1513, EBSA, U.S.
Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210.

ADDRESSES:

DEPARTMENT OF LABOR

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FOR FURTHER INFORMATION CONTACT:

Elizabeth A. Goodman or Michael Baird,
Employee Benefits Security
Administration (EBSA), U.S.
Department of Labor, (202) 693–8523,
for questions relating to the Form 5500,
and its Schedules A, C, D, G, H, and I,
and lines 1 through 11 of the proposed
Form 5500–SF (Short Form 5500), as
well as the general reporting
requirements under Title I of ERISA;
Ann Junkins, Internal Revenue Service
(IRS), (202) 283–0722, for questions
relating to Schedules B and R of the
Form 5500, lines 12 and 13 of the
proposed Short Form 5500, and the
filing of Short Form 5500 instead of the
Form 5500–EZ for plans that are not
subject to Title I of ERISA, as well as
questions relating to the general
reporting requirements under the
Internal Revenue Code; and Michael
Packard, Pension Benefit Guaranty
Corporation (PBGC), (202) 326–4080 for
questions relating to Schedule B of the
Form 5500, and line 13 of Schedule R,
as well as questions relating to the
general reporting requirements under
Title IV of ERISA. For further
information on an item not mentioned
above, contact Mr. Baird. The telephone
numbers referenced above are not tollfree numbers.
Sections
101 and 104 of Title I and section 4065
of Title IV of the Employee Retirement
Income Security Act of 1974 (ERISA), as
amended, sections 6058(a) and 6059(a)
of the Internal Revenue Code of 1986
(Code), as amended, and the regulations
issued under those sections, impose
certain annual reporting and filing
obligations on pension and welfare
benefit plans, as well as on certain other

SUPPLEMENTARY INFORMATION:

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entities.1 Plan administrators,
employers, and others generally satisfy
these annual reporting obligations by
the filing of the Form 5500 Annual
Return/Report, in accordance with the
instructions and related regulations.
The Form 5500 Annual Return/Report
is the principal source of information
and data available to the Department of
Labor (Department), the IRS, and the
PBGC concerning the operations,
funding, and investments of more than
800,000 pension and welfare benefit
plans. These plans cover an estimated
150 million participants and hold an
estimated $4.3 trillion in assets.
Accordingly, the Form 5500 Annual
Return/Report necessarily constitutes an
integral part of each Agency’s
enforcement, research, and policy
formulation programs, and is a source of
information and data for use by other
federal agencies, Congress, and the
private sector in assessing employee
benefit, tax, and economic trends and
policies. The Form 5500 Annual Return/
Report also serves as the primary means
by which plan operations can be
monitored by participants and
beneficiaries and by the general public.
I. EFAST and Electronic Filing
The Agencies currently use an
automated processing system, the
ERISA Filing Acceptance System
(EFAST) to process the Form 5500
Annual Return/Report. As part of the
Department’s efforts to update and
streamline EFAST’s current paper-based
processing system, the Department
published in the Federal Register today,
a notice of final rulemaking establishing
an electronic filing requirement for the
Form 5500 Annual Return/Report for
plan years or, for direct filing entities’
reporting years, beginning on or after
January 1, 2008 (Electronic Filing
Rule).2 The rule establishes an
electronic filing requirement for the
Form 5500 Annual Return/Report and
the proposed Form 5500–SF (Short
Form 5500) under Title I of ERISA. The
Electronic Filing Rule provides that any
Form 5500 Annual Return/Report
(including any Short Form 5500) to be
filed with the Secretary of Labor
1 Other filing requirements may apply to certain
employee benefit plans and to multiple employer
welfare arrangements under ERISA or to other
benefit arrangements under the Code, and such
other filing requirements are not within the scope
of this proposal. For example, Code sec. 6033(a)
imposes an additional reporting and filing
obligation on organizations exempt from tax under
Code sec. 501(a), which may be related to
retirement trusts that are qualified under sec. 401(a)
of the Code.
2 The notice of proposed rulemaking to mandate
electronic filing was published in the Federal
Register on August 30, 2005 (70 FR 51542).

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(Secretary) for any plan year or
reporting year beginning on or after
January 1, 2008, must be filed
electronically in accordance with
instructions and such other guidance as
the Secretary may provide, applicable to
such annual report. The Electronic
Filing Rule explains that such electronic
filing by the administrator of a pension
or welfare benefit plan would constitute
compliance with the applicable limited
exemption, alternative method of
compliance, and/or simplified reporting
requirements, as applicable, prescribed
in 29 CFR 2520.103–1 et seq. and
promulgated in accordance with the
authority granted by the Secretary under
sections 104(a) and 110 of Title I of
ERISA. For purposes of the PBGC’s
annual filing and reporting
requirements under section 4065 of
Title IV of ERISA, a plan administrator’s
electronic filing of a Form 5500 Annual
Return/Report or the proposed Short
Form 5500, in accordance with the
instructions, will be treated as satisfying
the administrator’s annual reporting
obligation under section 4065 of Title IV
of ERISA.3 Similarly, for purposes of the
annual filing and reporting
requirements of the Code, the IRS has
advised the Department that, although
there are no mandatory electronic filing
requirements for a Form 5500 Annual
Return/Report or the proposed Short
Form 5500 under the Code or the
regulations issued thereunder, the
electronic filing of a Form 5500 Annual
Return/Report or the proposed Short
Form 5500 (described below), in
accordance with the instructions and
such other guidance as the Secretary of
Treasury may provide, will be treated as
satisfying the annual filing and
reporting requirements under Code
sections 6058(a) and 6059(a).4
The Form 5500–EZ is used by certain
plans that are not subject to the
requirements of section 104(a) of ERISA
to satisfy the annual reporting and filing
obligations imposed by the Code. To
ease the burdens on these filers, the IRS
has also advised the Department that
certain Form 5500–EZ filers will be
permitted to satisfy the requirement to
file the Form 5500–EZ with the IRS by
filing the proposed Short Form 5500
electronically through the EFAST
3 Administrators of plans required to file reports
under ERISA section 4065 also are required to file
annual reports for purposes of section 104(a) of
ERISA.
4 The IRS intends that plan administrators,
employers, and certain other entities that are
subject to various other filing and reporting
requirements under Code sections 6033(a), 6047(e),
6057 and 6058(a) must continue to satisfy these
requirements in accordance with IRS revenue
procedures, regulations, publications, forms, and
instructions.

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processing system. Information
regarding the Form 5500–EZ filers who
would be eligible for this proposed
electronic filing option is included in
the proposed instruction for the Short
Form 5500 attached as Appendix B.
Therefore, under the IRS’ proposal,
certain Form 5500–EZ filers will be
provided both electronic and paper
filing options. The electronic option
will allow Form 5500–EZ filers to
complete and electronically file selected
information on the Short Form 5500.
Form 5500–EZ filers will also have the
option to file a paper Form 5500–EZ.5
At the same time as the Electronic
Filing Rule was being developed, the
Agencies undertook a comprehensive
review of the current forms and
instructions in an effort to improve the
data collected and to determine what, if
any, design or data changes should be
made in anticipation of the new
processing system. This proposed
revision of the forms and instructions,
in conjunction with the Electronic
Filing Rule, is intended to streamline
the return/report, facilitate the
electronic filing requirement, and
reduce the burden on plans that file the
Form 5500 Annual Return/Report.
Public comments submitted in
response to the notice of proposed
rulemaking on the electronic filing
requirement (Electronic Filing Proposal)
generally recognized the value of
electronic filing over paper filing and
expressed support for increasing the use
of electronic filing. In response to the
concerns of some commenters about
whether the proposed 2007 reporting
year implementation date would give
plans, plan administrators, plan
sponsors, and service providers enough
time to make adjustments necessary to
migrate to an e-filing environment,
especially in the absence of specific
information on the characteristics and
technical specifications of the new efiling system, the Electronic Filing Rule
is now effective for plan years, or for
direct filing entities reporting years,
beginning on or after January 1, 2008.
Further, in response to commenters’
concerns, the preamble to the final rule
states the Department, in deciding
whether to assess annual reporting civil
penalties, will take into account
technical and logistical obstacles
experienced by plan administrators who
acted prudently and in good faith in
5 Under the voluntary electronic filing option,
5500–EZ filers filing an amended return for a plan
year must file the amended return electronically
using the Form 5500–SF if they initially filed
electronically for the plan year and must file with
the IRS using the paper Form 5500–EZ if they filed
for plan year with the IRS on a paper Form 5500–
EZ.

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attempting to timely file a complete
annual report in the first year of the
wholly electronic filing system. The
revised and streamlined data
requirements for the Form 5500 Annual
Return/Report being proposed in this
document are intended to be applicable
for the reporting year for which the new
e-filing system is implemented.
II. Overview of Form Revisions
The proposed revisions to the annual
return/report forms 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:
• Establishment of the Form 5500–SF
Annual Return/Report (Short Form or
Short Form 5500) as a new simplified
report for certain small plans;
• Removal of the IRS-only schedules
from the Form 5500 Annual Return/
Report as part of the move to a wholly
electronic filing system;
• Elimination of the special limited
financial reporting rules for Code
section 403(b) plans;
• Revision of the Schedule C (Service
Provider Information) to clarify the
reporting requirements and improve the
information plan officials receive
regarding amounts being received by
plan service providers; and
• Addition of new questions to
improve information on pension plan
funding and compliance with minimum
funding requirements.
In addition to the description of the
proposed form changes contained in
this Notice, the Agencies have included
the following appendices: (1) Appendix
A—a facsimile of the proposed Form
5500–SF; (2) Appendix B—a facsimile
of the proposed Instructions to the Form
5500–SF; (3) Appendix C—detailed
description of the proposed changes to
the Form 5500 and Schedules; and (4)
Appendix D—detailed description of
the proposed changes to the instructions
for the Form 5500 and Schedules. The
Agencies are also making available on
the Department’s Web site mark-ups of
the Form 5500, Schedules, and related
instructions showing the proposed form
and instruction changes. The facsimiles
and mark-ups are provided to show the
data proposed to be collected
electronically beginning with the first
reporting year for which the new e-filing
system is implemented. Because of the
electronic filing requirement for the
revised Form 5500 Annual Return/
Report, including the proposed Short
Form 5500, copies of facsimile forms
and schedules, will not be acceptable
for filing under ERISA. Rather, the
facsimile forms and schedules the

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Agencies anticipate publishing in
conjunction with the final regulation
will show the required format for
satisfying disclosure obligations under
ERISA, including the plan
administrator’s obligation to furnish
copies of the annual report to
participants and beneficiaries on request
pursuant to section 104(b) of ERISA, but
paper versions will not be able to be
used for filing.

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A. Short Form 5500 as New Simplified
Report for Certain Small Plans
As part of continuing efforts to
streamline and simplify the annual
reporting process, the Agencies are
proposing a new two page form—the
Short Form 5500—to be filed by certain
small plans (generally, plans with fewer
than 100 participants) with secure and
easy to value investment portfolios. The
Agencies have previously issued
simplified reporting provisions and
limited exemptions for small plans to
ease the burdens and costs attributable
to annual reporting. After careful
review, the Agencies determined that
certain small plans, by virtue of their
assets being held by regulated financial
institutions and having a readily
determinable fair market value, present
reduced risks for their participants and
beneficiaries. In such cases, therefore,
an abbreviated annual report filing (i.e.,
the Short Form 5500) could be
established without compromising the
enforcement and research needs of the
Agencies or the disclosure needs of
participants and beneficiaries in such
plans. In establishing the criteria for
such Short Form filers, the Agencies
relied in part on the conditions for a
waiver of the audit requirements for
small plans under 29 CFR 2520.104–
46.6
6 In additional to meeting the small plan size
requirement applicable to both pension and welfare
plans, for pension plans the eligibility requirements
for the audit waiver under 29 CFR 2520.104–46 are:
(1) as of the last day of the preceding plan year at
least 95% of a small pension plan’s assets were
‘‘qualifying plan assets;’’ (2) the plan must include
certain information in the Summary Annual Report
(SAR) furnished to participants and beneficiaries
regarding its compliance with the audit waiver
conditions in addition to the information ordinarily
required (see 29 CFR 2520.104b–10(d)(3) for a
model SAR and the Notice of Proposed Rulemaking
published today for model language for the
enhanced notice requirement); and (3) in response
to a request from any participant or beneficiary, the
plan administrator must furnish without change
copies of statements from the regulated financial
institutions holding or issuing the plan’s
‘‘qualifying plan assets’’ describing the assets and
the amount of the assets as of the end of the plan
year. ‘‘Qualifying plan assets, ’’ for this purpose
include: shares issued by an investment company
registered under the Investment Company Act of
1940 (e.g., mutual fund shares); investment and
annuity contracts issued by any insurance company
qualified to do business under the laws of a state;

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As proposed, a pension or welfare
plan would be eligible to file the Short
Form if the plan: (1) Covers fewer than
100 participants or would be eligible to
file as a small plan under the 80 to 120
rule in 29 CFR 2520.103–1(d); (2) is
eligible for the small plan audit waiver
under 29 CFR 2520.104–46 (but not by
virtue of enhanced bonding); (3) holds
no employer securities; and (4) has
100% of its assets in investments that
have a readily ascertainable fair market
value. For this purpose, participant
loans meeting the requirements of
ERISA section 408(b)(1), whether or not
they have been deemed distributed, and
investment products issued by banks
and licensed insurance companies that
provide valuation information at least
annually to the plan administrator, will
be treated as having a readily
ascertainable fair market value. Plans
with assets that are employer securities
will not be eligible to file the Short
Form. The Agencies believe that the
separate financial information about
employer securities on the Schedule I is
important for regulatory, enforcement,
and disclosure purposes. The Agencies
also believe that due to the importance
of obtaining financial information
concerning employer securities,
allowing plans that hold employer
securities to file the Short Form would
conflict with the need to obtain such
information. Similarly, because the
Agencies believe that all multiemployer
plans should be required to answer
newly proposed questions on the Form
5500 Annual Return/Report and the
Schedule R regarding contributing
employers, multiemployer plans would
not be eligible to file the Short Form.
In brief, Short Form filers would be
required to provide: (1) Basic plan and
plan sponsor identifying information;
(2) abbreviated participant count data,
with defined contribution plan filers
participant loans meeting the requirements of
ERISA section 408(b)(1), whether or not they have
been deemed distributed; and any asset held by
banks or similar financial institutions, including
trust companies, savings and loan associations,
domestic building and loan associations, and credit
unions, insurance companies qualified to do
business under the laws of a state, organizations
registered as broker-dealers under the Securities
Exchange Act of 1934, investment companies
registered under the Investment Company Act of
1940, or any other organization authorized to act as
a trustee for individual retirement accounts under
Code section 408. In the case of an individual
account plan, qualifying plan assets also include
any assets in the individual account of a participant
or beneficiary over which the participant or
beneficiary had the opportunity to exercise control
and with respect to which the participant or
beneficiary has been furnished, at least annually, a
statement from one of the above regulated financial
institutions describing the plan assets held or
issued by the institution and the amount of such
assets.

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providing the number of participants
with account balances at the end of the
plan year; (3) information on features of
the plan (e.g., plan type, manner of
providing benefits) using delineated
codes; (4) an abbreviated statement of
assets and liabilities and income and
expenses; and (5) responses to a series
of ‘‘yes/no/amount’’ compliance
questions, such as identification of any
delinquent participant contributions,
non-exempt party-in-interest
transactions, fidelity bonding coverage,
losses caused by fraud or dishonesty,
and total participant loan balances at
the end of the plan year. Like other
filers, Short Form filers would be
required to answer new questions on
whether during the plan year the plan
reduced or failed to provide any benefit
under the plan, whether there was a
blackout period during the plan year,
and whether the blackout notice
requirements were met. Short Form
pension plan filers also would be
required to provide certain basic
pension coverage and pension funding
compliance information. Short Form
defined benefit pension plan filers still
would have to file a Schedule B and its
attachments. Plans filing the Short Form
on an extension of time or in connection
with the Department’s Delinquent Filer
Voluntary Compliance Program would
have to include attachments relevant to
the extension or participation in the
program.
Because eligible plans can only hold
certain types of investments, several
compliance questions have been
eliminated for Short Form filers (e.g.,
Schedule I questions relating to leases
in default or uncollectible, non-cash
contributions, and assets whose current
value was not readily determinable).
Instead of filing Schedule A, Short
Form 5500 filers would be required to
provide a total of all fees or
commissions paid to any brokers,
agents, or other persons by an insurance
carrier, insurance service, or other
organization that provides some or all of
the benefits under the plan. Short Form
filers will still need to receive, and
insurers will still be required to provide,
Schedule A fee and commission
information with respect to each
contract necessary to complete the Short
Form 5500. Plan administrators will be
required to retain this information to
meet the recordkeeping requirements of
section 107 of ERISA.
Under this proposal, most Short Form
filers would not be required to file any
schedules, although defined benefit
pension plans would continue to be

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required to file Schedule B, where
applicable.7
The Agencies believe that the
eligibility conditions for Short Form
filers, especially the requirements
relating to security and valuation of the
plan’s investments, ensure that the
Short Form 5500 will provide adequate
disclosure to the participants and
beneficiaries in the plan and adequate
annual reporting to the Agencies.
Small plans that are not eligible to file
the Short Form would continue to be
able to file simplified reports as under
the current system. Specifically, small
plan Form 5500 filers would file the
Form 5500, Schedules A, B, D, I, and R,
where applicable. This proposal also
would not change the conditions for the
small pension plan audit waiver in 29
CFR 2520.104–46. Small pension plans
will still be able to claim the audit
waiver even if they are not eligible to
file the Short Form. Conversely, small
pension plans filing the Short Form
would continue to be required to meet
all applicable requirements for the audit
waiver, including the enhanced
Summary Annual Report (SAR) and
other disclosure requirements of that
regulation. Similarly, all welfare plans
that file the Form 5500 Annual Return/
Report and have fewer than 100
participants are currently exempt from
the audit requirement without regard to
how their assets are invested. See 29
CFR 2520.104–46(b)(2). The proposed
Short Form would not change the
welfare plan audit waiver conditions.
For a funded welfare plan to be eligible
to file the Short Form, however, the
plan would have to meet the Short Form
requirements regarding investment
assets.
B. Removal of IRS-Only Components
From the Form 5500 Annual Return/
Report
The second category of changes
involves the removal of schedules and
information that were filed as part of the
Form 5500 Annual Return/Report to
meet various annual reporting
requirements under the Code. The IRS
has advised that there are currently no
mandatory electronic filing
requirements for a Form 5500 Annual
Return/Report under the Code or the
regulations issued thereunder. As
described more fully in the Electronic
Filing Rule, the Department has
concluded that, taking into account the
costs and inefficiencies inherent in the
maintenance of any form of a paper
7 Short Form 5500 filers would not be required to
file Schedule D, but Direct Filing Entities (DFEs) in
which such plans invest would still be required to
list the plan name and Employer Identification
Number (EIN) on Part II of the DFE’s Schedule D.

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filing system, it is not in the overall
interest of plan participants and
beneficiaries, the Department, and
taxpayers generally to continue to
accept and process paper Form 5500
Annual Returns/Reports filings as part
of a new processing system. To
effectuate the electronic filing
requirement, the portions of the Form
5500 Annual Return/Report required to
satisfy filing obligations imposed by the
Code, but not required under ERISA,
had to be removed. Accordingly, under
this proposal, the following schedules
will no longer be required to be filed as
part of the Form 5500 Annual Return/
Report: Schedule E (ESOP Annual
Information), Schedule P (Annual
Return of Fiduciary of Employee Benefit
Trust), and Schedule SSA (Annual
Registration Statement Identifying
Separated Participants With Deferred
Vested Benefits). In that regard, the IRS
has independently eliminated the
Schedule P (which served as the Trust’s
information return that is filed under
Code section 6033(a)) from the 2006
Form 5500 in anticipation of the
transition to a wholly electronic filing
environment. Further, as described
elsewhere in this document, the
Department is proposing to move to the
Schedule R three questions on ESOP
information formerly on the Schedule E,
and the IRS has advised the Department
that it does not anticipate requiring
separate filings by ESOPs on the
remaining questions from the Schedule
E. The IRS is evaluating the information
collected on Schedule SSA, and
considering whether other existing
information collections could be used in
place of the Form 5500 Annual Return/
Report.
The IRS, however, also advised the
Department that it intends that plan
administrators, employers, and certain
other entities that are subject to filing
and reporting requirements under the
Code will have to continue to satisfy
any applicable requirements in
accordance with IRS revenue
procedures, regulations, publications,
forms, and instructions.
The Form 5500 Annual Return/Report
would thus be comprised of the Form
5500, and Schedule A (Insurance
Information), Schedule B (Actuarial
Information), Schedule C (Service
Provider Information), Schedule D
(DFE/Participating Plan Information),
Schedule G (Financial Transaction
Schedules), Schedule H (Financial
Information), Schedule I (Financial
Information Small Plan), and Schedule
R (Retirement Plan Information).

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C. Elimination of Limited Reporting
Option for Code Section 403(b) Pension
Plans
Code section 403(b) pension plans
that are subject to Title I of ERISA
generally have had limited reporting
obligations under the Form 5500
Annual Return/Report. A pension plan
or arrangement using an annuity
contract under Code section 403(b)(1)
and/or a custodial account for regulated
investment company stock under Code
section 403(b)(7) as the sole funding
vehicle for providing pension benefits
currently files only a Form 5500,
containing basic plan identification
information. The administrator
currently is not required to engage an
independent qualified public
accountant (IQPA) to conduct an annual
audit of the plan, attach an accountant’s
opinion to the Form 5500, or attach any
schedules to the Form 5500. Over the
years, the Code has been amended to
give favorable tax treatment to Code
section 403(b) plans similar to that for
Code section 401(k) plans, and these
arrangements have grown both in size
and number during this time. In this
regard, the IRS promulgated regulations
to update the current regulations under
section 403(b) generally to reflect the
numerous legal changes that have been
made in section 403(b) since 1964 when
the IRS originally promulgated its
section 403(b) regulations. 69 FR 67075,
67076 (Nov. 16, 2004). The IRS’s
proposed regulations note the increasing
similarity among arrangements that
include salary reduction contributions,
i.e., section 401(k), section 403(b), and
governmental section 457(b) plans.
The Department understands that the
IRS has found a number of Code
compliance issues with section 403(b)
plans. The Department, in its own
reviews, has detected violations of Title
I in a high percentage of its Code section
403(b) plan investigations. The
predominant issue has been the
improper handling of employee
contributions.
The Department concluded that these
developments warrant a reexamination
of the continued reporting exemptions
for Code section 403(b) plans.
Amending the annual reporting
requirements to put Code section 403(b)
plans on par with other pension plans
covered by Title I of ERISA would
enhance the Department’s oversight
capabilities and improve compliance in
this area without substantial additional
burden. For example, the reporting in
the proposed Short Form, or on
Schedules H and I, for delinquent
participant contributions may help to
ensure that participant contributions are

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transferred to individual investment
accounts on a timely basis.
Under the proposal, Code section
403(b) plans that are subject to Title I of
ERISA would be subject to the same
annual reporting rules that apply to
other ERISA-covered pension plans,
including eligibility for the proposed
Short Form 5500. In this regard, the
Department notes that because Code
section 403(b) plans are generally
required to be invested exclusively in
annuity contracts or mutual funds, they
generally would be eligible to file the
proposed Short Form 5500. Moreover,
under section 107 of ERISA, every
person who is required to file a report
under Title I of ERISA, but for an
exemption or simplified reporting
requirement under section 104(a)(2) or
(3), already is required to maintain
records on which disclosure would be
required but for the simplified reporting
requirement.

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D. Addition of New Questions to
Schedules on Title I Compliance,
Service Provider Compensation, and
Pension Plan Funding
Schedule A: Identify Insurers That Fail
To Supply Information
It is the view of the Department that
compliance with annual reporting
requirements consists both of filing
complete, accurate, and timely annual
returns/reports, including disclosing the
information required to be reported on
the Schedule A, and maintaining
records regarding the information
required to be provided under section
103 of ERISA. Plan administrators, thus,
are required to take reasonable and
prudent steps to secure the necessary
Schedule A information. In this regard,
section 103(a)(2) of ERISA provides that,
if some or all of the information
necessary to enable the administrator to
comply with the requirements of Title I
of ERISA is maintained by an insurance
carrier or other organization that
provides some or all of the benefits
under a plan or holds assets of the plan
in a separate account, such carrier or
other organization is required to
transmit and certify the accuracy of
such information to the administrator
within 120 days after the end of the plan
year. The current instructions for the
Schedule A state that, if necessary
information is missing because of an
insurer’s refusal to provide the
information, administrators should, to
the extent possible, complete the
Schedule A and file a timely return/
report noting the refusal and any
deficiencies in the Schedule A.
The 2004 ERISA Advisory Council
Working Group on Health and Welfare

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Plan Reporting concluded that many
employers have difficulty obtaining
timely Schedule A information from
insurers. See 2004 ERISA Advisory
Council Working Group Reports at
http://www.dol.gov/ebsa. When the
Form 5500 Annual Return/Report was
revised in 1988 and 1999, public
commenters had complained about the
difficulties administrators confronted in
obtaining timely and complete Schedule
A information from their insurers. See
65 FR 5026 (Feb. 2, 2000) and 54 FR
8631 (Mar. 1, 1989). In light of these
continuing difficulties for plan
administrators, the Department
proposes to add a check box to the
Schedule A to permit plans to identify
situations in which the insurance
company or other organization that
provides some or all of the benefits
under a plan has failed to provide
Schedule A information. Space would
also be provided for the administrator to
indicate the type of information that
was not provided. As a separate
Schedule A is required for each
insurance contract, the identity of the
insurance company or organization will
be self-evident. This would give the
Department more usable data on
insurers that fail to satisfy their
disclosure obligations under section
103(a)(2) of ERISA and the Department’s
regulations.
Schedule B: Asset Allocations in Very
Large Defined Benefit Pension Plans
The PBGC believes that it is important
to obtain more detailed information
regarding the asset allocations of very
large defined benefit plans in order to
help the PBGC assess the financial
viability of those plans. Although the
Schedule H collects certain investment
information, the PBGC has found that it
needs additional information on the
breakdown of assets held by defined
benefit plans. The funding status of
these plans is highly dependent on the
level and types of assets in the plan and
the sensitivity of these assets to changes
in market conditions. Readily
ascertainable information on asset
distribution information would improve
the PBGC’s ability to estimate the
impact of economic changes on the
financial status of the plans it insures,
and, by extension, on the future
financial status of the PBGC.
Under this proposal, new questions
would be added to the Schedule B that
are designed to obtain a ’’look-through’’
allocation of plan investments in certain
pooled investment funds for defined
benefit plans with 1,000 or more
participants. The new questions would
obtain the percentage of assets held in
each of four categories—Stocks, Debt

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Instruments (Bonds), Real Estate, and
Other. The debt instrument data would
be further disaggregated into three
categories—governmental debt,
investment-grade corporate debt, and
high-yield corporate debt. The new
Schedule B questions would also
require plans to provide a measure of
the duration of the aggregate debt
instruments (‘‘Macaulay duration’’) in
order to provide the PBGC with a more
accurate basis for reflecting bond
duration for modeling purposes. For this
purpose, the Macaulay duration is a
weighted average of the number of years
until each interest payment and the
principal are received. The weights are
the amounts of the payments discounted
by the yield-to-maturity of the bond.
When calculating the distribution of
debt securities, any corporate debt that
has not been rated will have to be
included in the High-Yield Corporate
Debt category. Foreign debt will be
expected to be allocated to the
appropriate category as if it were debt
issued by United States corporations or
governmental entities.
The asset distribution information,
other than the Macaulay duration,
should be readily available to singleemployer plans because the Financial
Accounting Standards Board (FASB)
requires that the aggregate asset
distribution for all employer plans be
included as a part of the sponsor’s
10–k filings with the Securities and
Exchange Commission. Multiemployer
plans are not currently required to
calculate these distributions, but the
data should be readily available from
the plan’s investment committee. In
addition, data from Section C of EBSA’s
Private Pension Plan Bulletin 8 indicates
that multiemployer plans tend to have
a much smaller percentage of assets
invested in assets whose type is difficult
to ascertain. Obtaining the overall
distribution of assets should not be
overly burdensome for the
administrators of multiemployer plans.
The Macaulay duration should be a
simple computation for managers of
bond portfolios. Only in rare instances
would this computation be time
consuming. For instance, combining
these durations into an aggregate
duration could be time consuming if the
plan has several bond portfolio
managers.
Schedule C: Compensation Received by
Plan Service Providers
The Department has been examining
issues regarding service provider
8 The Private Pension Bulletin is available on-line
at http://www.dol.gov/ebsa/PDF/
2000pensionplanbulletin.PDF.

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compensation from a number of
perspectives.9 Questions and issues
relating to the appropriate manner and
scope of the reporting of service
provider compensation on the Schedule
C have been raised by the ERISA
Advisory Council. See ERISA Advisory
Council Report of the Working Group on
Plan Fees and Reporting on Form 5500
(Nov. 10, 2004) and the Government
Accountability Office (See Private
Pensions: Government Actions Could
Improve the Timeliness and Content of
Form 5500 Pension Information, GAO–
05–491) (discussing fee disclosure
generally), as well as by Form 5500
Annual Return/Report filers and service
providers. The Department has
determined it is appropriate to modify
the Schedule C reporting requirements
in an effort both to clarify the reporting
requirements and to ensure that plan
officials obtain the information they
need to assess the reasonableness of the
compensation paid for services rendered
to the plan, taking into account revenue
sharing and other financial relationships
or arrangements and potential conflicts
of interest that might affect the quality
of those services.10
As proposed, the Schedule C would
consist of three parts. Part I of the
Schedule C would require the
identification of each person who
received, directly or indirectly, $5,000
or more in total compensation (i.e.,
money or anything else of value) in
connection with services rendered to
the plan or their position with the plan
during the plan year. This requirement
would no longer be limited to the 40
highest paid service providers. Filers
also would have to indicate for all
service providers whether the service
provider received any compensation
attributable to the person’s relationship
with or services provided to the plan
9 In its Spring 2006 Semi-Annual Regulatory
Agenda, the Department indicated that it is
considering proposed rulemaking which would
amend the regulation setting forth the standards
applicable to the exemption under ERISA section
408(b)(2) for contracting or making reasonable
arrangements with a party in interest for office
spaces for services (29 CFR 2550.408b–2). The
amendment would ensure that plan fiduciaries are
provided or have access to that information
necessary to a determination whether an
arrangement for services is ‘‘reasonable’’ within the
meaning of the statutory exemption, as well as the
prudence requirements of ERISA section
404(a)(1)(B). This regulation is needed to eliminate
the current uncertainty as to what information
relating to services and fees plan fiduciaries must
obtain and service providers must furnish for
purposes of determining whether a contract for
services to be rendered to a plan is reasonable.
10 See Staff Report Concerning Examinations of
Select Pension Consultants, issued on May 16,
2005, by the Office of Compliance Inspections and
Examinations, U.S. Securities and Exchange
Commission.

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from a party other than the plan or plan
sponsor. If a fiduciary to the plan or any
of an enumerated list of service
providers received, directly or
indirectly, $5,000 or more in total
compensation and also received more
than $1,000 in compensation from a
person other than the plan or plan
sponsor, then the Schedule C would
have to provide information identifying
the payor of the compensation, the
relationship or services provided to the
plan by the payor, the amount paid, and
the nature of the compensation. The
enumerated service providers are
contract administrator, securities
brokerage (stock, bonds, commodities),
insurance brokerage or agent, custodial,
consulting, investment advisory (plan or
participants), investment or money
management, recordkeeping, trustee,
appraisal, or investment evaluation.
A new Part II for Schedule C would
provide a place for plan administrators
to identify each fiduciary or service
provider that failed or refused to
provide the information necessary to
complete Part I of the Schedule C.
The proposed Schedule C
requirements would raise the threshold
for reporting on non-fiduciary
employees of the plan from the current
$1,000 per month to $25,000 per year.
It would also revise the current
instructions to make clear that the
exception for reporting employees of the
plan sponsor or institutional service
providers does not apply if those
employees receive compensation in
connection with the plan or services
provided to the plan other than salary
from the plan sponsor or institutional
service provider.
The Department is also proposing to
update the ‘‘codes’’ for identifying
services. It is expanding certain codes
and modifying others to reflect changes
in the plan services industry and to
provide greater clarity. It is also
eliminating the codes for medical and
legal benefit providers to make clear
that self-insured plans need not report
payments to persons who provide
medical services or legal services to
participants and beneficiaries. Unlike
payments to other service providers
required to be reported on the Schedule
C, such payments by self-insured plans
to medical and legal service providers
constitute benefit payments under the
plan. The Department notes that insured
plans are not required to report on the
Schedule C individual providers who
are paid by the insurance company for
medical and legal services provided to
participants and beneficiaries. In the
Department’s view, the Schedule C was
intended to capture information
regarding payment of plan assets to

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41621

persons rendering services to plans, and
not information on benefit payments by
the plan to participants and
beneficiaries.
The proposal would change the
Schedule C instructions to make explicit
that, except to the extent not otherwise
excluded (e.g., non-employee
compensation of less than $5,000 and
plan employee compensation of less
than $25,000 a year), compensation in
connection with services rendered to
the plan or their position with the plan
includes ‘‘float’’ or similar earnings on
plan assets or plan deposits that are
retained by a service provider as part of
its compensation package.
Under the proposal, reportable
compensation would include brokerage
commissions and fees charged to the
plan on purchase, sale, and exchange
transactions regardless of whether the
broker is granted discretion. As
brokerage fees and commissions may
constitute a significant part of a plan’s
annual expenses, the Department does
not believe that continuing the current
exemption from the Schedule C
reporting for such expenses is
appropriate. The Department believes
that an annual review of such expenses
is part of a plan fiduciary’s on-going
obligation to monitor service provider
arrangements with the plan. Requiring
the reporting of such information
should emphasize that monitoring
obligation.
When a plan acquires a unified
package or bundle of services from a
provider, and the amount paid for the
package or bundle reflects the amount
paid for all services included within the
package or bundle, direct compensation
would include only the aggregate
amount paid by the plan to the provider
of the package or bundle of services. In
such cases, it would not be necessary to
break out or report amounts on a
service-by-service basis. Similarly,
amounts paid by the provider of the
bundled services to other service
providers to the plan would not be
reported on Schedule C unless (1) the
plan is also paying the provider directly
for services in addition to those
included in the package or bundle, or
(2) the recipient of such compensation
is a fiduciary to the plan or one of the
other listed service providers from
whom additional information is
required to be reported where the
provider receives compensation in
excess of $1,000 from a person other
than the plan or plan sponsor.
To address possible burdens
associated with allocating such revenuesharing income and third-party
payments to individual plans, the
Schedule C would provide that

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‘‘indirect’’ compensation (i.e., amounts
paid by a party other than the plan or
plan sponsor) could be reported as an
actual amount or an estimate of the
compensation received during the
reporting period. If any part of the
compensation is an estimate, the
Schedule C will also require an
explanation of the formula used for
calculating the payments.
The third part of the Schedule C (Part
III) would be the current Part II of the
Schedule C, used for reporting
termination information on accountants
and enrolled actuaries. The proposal
would not alter these current
requirements.

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Schedule H and I: Compliance With
Blackout Notice Requirements
On January 24, 2003, the Department
of Labor published final rules on the
disclosure of blackout periods to
participants and beneficiaries. 68 FR
3716. EBSA proposes adding questions
to Schedules H and I regarding whether
a plan has had a blackout period during
the plan year, and if so, whether it has
provided the notice required by statute
and regulation. The proposal would
require plan administrators to report on
Schedule H or I, or the Short Form 5500,
as appropriate, whether there has been
a temporary suspension, limitation, or
restriction lasting more than three
consecutive business days of the rights
of participants or beneficiaries to direct
or diversify assets credited to their
accounts, to obtain loans from the plan,
or to obtain plan distributions. If so,
plan administrators will have to state
whether participants have been
provided the required notice of this
suspension period. There are an
estimated 655,000 defined contribution
plans, approximately 400,000 of which
are wholly or partially participantdirected. EBSA believes that
incorporating a line item in the
fiduciary compliance sections of the
Form 5500 financial schedules
regarding blackout periods and
compliance with the blackout notice
regulation will promote awareness
among the regulated community of the
blackout notice requirements, and will
give EBSA an objective tool to measure
its enforcement activities in the area.
Schedules H and I: Failure To Pay
Benefits When Due
The proposal would add to the
Schedule H and Schedule I, also
included on the new Short Form 5500,
a compliance question that would
require plan administrators to answer
whether the plan has failed to pay any
benefits when due during the plan year.
A similar question on the Form 5500–

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C/R had not been carried forward to the
Form 5500 Annual Return/Report as
part of the restructuring of the form for
the 1999 plan year. The Department has
now determined that requiring filers to
respond to a modified version of this
question would provide the Department
with important information about plans
with potentially serious management or
funding problems. The information
would also provide participants and
beneficiaries with information that
could alert them to potentially serious
problems with their plan.
Schedule I: Separate Disclosure of Fees
Paid to Administrative Service
Providers
The Department is proposing to
enhance the disclosure requirements for
direct compensation paid by small plans
for administrative expenses, i.e.,
professional and administrative salary,
fee, and commission payments. Small
plans currently file simplified financial
information on Schedule I without
having to file the more detailed
Schedule C information on plan service
providers. As described above, the
Agencies developed an even more
streamlined Short Form 5500 that small
plans with secure and easily valued
investment portfolios may use as their
annual return/report. The proposed
Short Form 5500 requires filers to report
administrative service fees separately
from other expenses of operating the
plan. The Agencies are making a
parallel change to the Schedule I for
those small plans that are not eligible to
file the Short Form 5500. This fee
information is currently required to be
reported on the Schedule I as part of an
aggregate plan expense line item. The
Agencies believe that having a separate
line item for payments to professional
and administrative service providers
will promote better awareness among
plan fiduciaries regarding these fee
payments and will provide participants,
beneficiaries, and government
regulatory agencies with improved
disclosure of these plan expenses.
Schedule R: Contributors to
Multiemployer Pension Plans
The PBGC seeks to have plan
administrators identify major
contributing employers to
multiemployer defined benefit pension
plans. The Form 5500 Annual Return/
Report lacks information describing the
basis for employer contributions to
multiemployer plans. This information
is needed by the PBGC to assess the
financial risk posed to multiemployer
pension plans by the financial collapse
or withdrawal of one or more
contributing employers. For a number of

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plans, one or two employers are
responsible for a large portion of the
funding. If these sponsors go out of
business or run into severe financial
difficulties, the plan’s funding can
deteriorate rapidly, increasing the
PBGC’s exposure. As a part of its singleemployer monitoring activities (the
Early Warning Program), the PBGC
follows the business transactions and
financial conditions of many
companies. When certain conditions are
met, the PBGC contacts the company to
negotiate protections for plan
participants and the PBGC. Because the
PBGC is unable to identify the major
contributors to multiemployer plans, it
cannot establish a similar monitoring
program for its multiemployer insurance
program. Over the past several years, the
financial condition of many
multiemployer plans has been
deteriorating. The PBGC believes it is
prudent to monitor those companies
that are major contributors to the
multiemployer plans. To accomplish
this, the PBGC must be able to identify
these companies.
The PBGC recognizes that the
multiemployer plans most at risk when
a major contributing employer
encounters financial difficulties are
those plans that depend upon a few
employers for a large portion of the
plan’s funding. Accordingly, the new
requirement strikes a balance between
the burden that would be imposed on
the plan by this information collection
and the benefit to the PBGC by requiring
the new information on contributions by
an employer only if that employer’s
contributions constitute at least five
percent of the total contributions for the
plan year. For these employers, the plan
would be required to report on Schedule
R: (1) The name of the contributing
employer; (2) the employer’s EIN; (3) the
dollar amount contributed; (4) the
contribution rate; (5) the type of base
units for the contribution; and (6) the
expiration date for the collective
bargaining agreement pursuant to which
contributions are required to be made to
the plan.
E. Other Improvements and
Clarifications of Existing Form 5500
Reporting Requirements
The last category of revisions involves
proposed amendments to the Form
5500, individual schedules, and
instructions to clarify and improve
existing reporting requirements.
Form 5500: Addition of Question
Seeking Total Number of Contributing
Employers to Multiemployer Plans
Currently, the Form 5500 Annual
Return/Report does not collect any

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information that identifies the
employers participating in the
approximately 10,000 multiemployer
plans currently in existence. The
Agencies do not have any information
as to the number of individual
employers who provide benefits to their
employees through such plans.
Multiemployer plans are currently
required by the Department’s
regulations to keep information on
participating employers on file and to
make such information available to
participants on request. See 29 CFR
2520.102–3(b)(4). Accordingly, adding a
question to the Form 5500 asking the
number of participating employers in a
multiemployer plan would not create
new record-keeping requirements. The
Agencies believe this information would
be useful to other governmental entities
and private firms that use the Form
5500 data for policy and research
purposes.

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Form 5500: Improved Schedule
Checklist
The Form 5500 includes a checklist of
the various schedules that may be
required to be attached. In addition to
revising the checklist to eliminate the
IRS-only Schedules, the Agencies have
also made other cosmetic changes to the
presentation of the schedule checklist to
improve it as a disclosure document for
participants, beneficiaries, and others.
The Agencies solicit comment on
whether and how the clarity and
readability of the schedule checklist or
other presentation on the face of the
Form 5500 could be improved.
Form 5500: New Plan Characteristics
Code for Pension Plans
Under the current filing requirements,
plans must include on the Form 5500 all
of the plan characteristics that apply to
the plan from a list of codes included in
the instructions. These ‘‘feature’’ codes
allow the Agencies to identify and
classify the universe of filers by their
major characteristics. The Agencies do
not currently collect any information as
to the number of plans that provide for
automatic enrollment or the number of
plans that provide default investments
in the event participants with the ability
to direct investments in their individual
accounts fail to provide directions. The
Department has decided to add new
plan feature codes for defined
contribution pension plans with
automatic enrollment features and
default investment provisions. The
Department believes this information
would be useful both to the Department
and to other governmental and nongovernmental organizations for policy
and research purposes. The Department

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added these new feature codes partly in
response to the Reports of the ERISA
Advisory Council and the GAO,
discussed previously, that noted that the
Form 5500 Annual Return/Report could
be updated to better reflect the current
plan and financial universe. The
Department seeks comments as to
whether any additional feature codes
should be added to better describe the
types of benefit and funding
arrangements used for defined benefit
pension plans, defined contribution
pension plans, and welfare benefit
plans. The Agencies also have
eliminated the feature codes for certain
types of plans that are not subject to
Title I of ERISA because they will not
be filing the Form 5500 with EFAST
under the proposed electronic filing
system.
Schedules H and I: New Supplemental
Schedule for Line 4a of the Schedule H
for Reporting Delinquent Participant
Contributions
Beginning with the 2003 Form 5500
Annual Return/Report, information on
delinquent participant contributions
must be reported only on Schedule H,
Line 4a, or on Schedule I, Line 4a, and
should not be reported on Schedule H,
Line 4d, on Schedule G, Part III,
Nonexempt Transactions, or on
Schedule I, Line 4d. This change was
made to avoid double reporting of
information on delinquent participant
contributions and otherwise to simplify
the reporting requirements. In the case
of employee benefit plans subject to an
ERISA audit requirement, the
supplemental schedules referenced in
ERISA section 103(a)(3)(A) and 29 CFR
2520.103–1(b) and 2520.103–2(b),
including information on nonexempt
prohibited transactions, are subject to
the IQPA audit. The IQPA must express
an opinion on whether the scheduled
information is presented fairly in all
material respects in relation to the basic
financial statements taken as a whole. In
that regard, the instructions state that
delinquent participant contributions
reported on Schedule H, Line 4a, should
be treated as part of the supplemental
schedules for purposes of the required
IQPA audit and opinion. The
instructions also provide that, if the
information contained on Schedule H,
Line 4a is not presented in accordance
with the Department’s regulatory
requirements, the IQPA report must
make the appropriate disclosures in
accordance with Generally Accepted
Auditing Standards (GAAS). In response
to requests for guidance from some in
the accounting profession, the
Department posted on its Web site FAQs
about reporting delinquent participant

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contributions, including examples of
formats for supplemental schedules that
plan administrators and IQPAs could
use to meet those reporting and
disclosure obligations.
The Department proposes modifying
the Instructions to Schedule H, Line 4a
to require delinquent participant
contributions to be presented on a
standardized supplemental schedule.
The proposed Schedule H, Line 4a—
Schedule of Delinquent Participant
Contributions would identify the total
participant contributions transferred
late to the plan, the total that are
nonexempt prohibited transactions, and
the total contributions fully corrected
under the Voluntary Fiduciary
Correction Program (VFCP) 71 FR 20261
and 20135 (Apr. 19, 2006). Those that
constitute nonexempt prohibited
transactions would be broken down into
contributions not corrected,
contributions corrected outside of the
VFCP, and contributions pending
correction in the VFCP. This
supplemental schedule is one of those
already published on the Department’s
Web site at http://www.dol.gov/ebsa/
faqs/faq_compliance_5500.html and can
be viewed as part of the proposed forms
mark-ups displayed on the Department’s
Web site.11 The Department specifically
seeks comments from the accounting
profession as to whether this
supplemental schedule should in fact be
made mandatory, whether the
Department should continue to allow
filers to choose the format in which to
present the required information, or
whether a different version of the
supplemental schedule should be made
mandatory.
The Schedule H and I instructions for
Line 4a would also be revised to
incorporate guidance included in FAQs
on the Department’s website on
including delinquent forwarding of
participant loan repayments on line 4a.
In Advisory Opinion 2002–02A (May
17, 2002), the Department stated that
participant loan repayments paid to or
withheld by an employer for purposes
of transmittal to an employee benefit
plan are sufficiently similar to
participant contributions to justify, in
the absence of regulations providing
otherwise, the application of principles
similar to those underlying the
participant contribution regulation for
purposes of determining when such
repayments become assets of the plan.
Delinquent forwarding of participant
loan repayments is eligible for
11 A similar addition would be made to the
instructions for Line 4a of the Schedule I applicable
to small plans filers who are not eligible for the
audit waiver.

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correction under the VFCP and PTE
2002–51 on terms similar to those that
apply to delinquent participant
contributions. The Department advised
filers in its FAQs that the Department
would not reject a Form 5500 Annual
Return/Report based solely on the fact
that delinquent forwarding of
participant loan repayments are
included on Line 4a of the Schedule H
or Schedule I, provided that filers that
choose to include such participant loan
repayments on Line 4a use the same
supplemental schedule and IQPA
disclosure requirements for the loan
repayments as for delinquent
transmittals of participant contributions.

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Schedule R: ESOP Questions Moved
From Schedule E
In evaluating the consequences of
removing the IRS-only schedules from
the Form 5500 Return/Report, the
Department determined that ESOP-filers
should continue to be asked the
following questions regarding the
operations and investments of the
ESOP: (1) Whether any unallocated
employer securities or proceeds from
the sale of unallocated securities were
used to repay any exempt loan; (2)
whether the ESOP holds any preferred
stock, and if so, whether the ESOP has
an exempt loan with the employer as
lender that is part of a ‘‘back-to-back’’
loan—the repayment terms of the
employer loan to the ESOP are
substantially similar to the repayment
terms of a loan to the employer from a
commercial lender; and (3) whether the
ESOP holds any stock that is not readily
tradable on an established securities
market. The Department believes these
questions provide important
information for investigators in
reviewing the operations and activities
of ESOPs and identifying potential
violations of the statute and regulations.
Public disclosure of this information
would also serve as a deterrent to noncompliance with ESOP statutory duties.
Technical and Conforming Changes for
Forms and Instructions
Various technical and conforming
changes are being proposed to the forms
and instructions. For example, the
proposal would delete the optional line
for identifying the principal preparer of
the Form 5500. The Agencies added this
line item in 1999. Only a very small
number of filers have provided this
optional information, and the Agencies
have not been able to make systematic
use of the data. Similarly, Schedule R
currently contains questions regarding
minimum required contributions for the
plan year, and the proposal would add
a question on whether the minimum

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funding amount reported will be met by
the funding deadline. The Agencies
generally seek input from the public as
to whether other technical or
conforming changes would further
clarify or improve required reporting
obligations for the Form 5500 Annual
Return/Report.
F. Other Welfare Plan Issues
In developing these proposed
revisions, the Department also
considered the ERISA Advisory
Council’s, Report of the Working Group
on Health and Welfare Form 5500
Requirements (Nov. 10, 2004). The
Department already has addressed
several of this Report’s
recommendations through
improvements in the instructions for the
2005 Form 5500 Annual/Return Report.
Others are addressed by the proposed
form and instruction changes discussed
above.
While the Department recognizes that
the current reporting framework does
not capture information on the entire
universe of welfare plans, the
Department believes that generally
retaining the current reporting
requirements is important for disclosure
purposes for both the Department and
for participants and beneficiaries in the
welfare plans that currently report. One
suggestion of this Working Group was
for the Department to consider
developing a separate Form 5500
Annual Return/Report just for welfare
plans. The Department, through its
restructuring of the Form 5500 Annual
Return/Report in 1999, and by
providing separate instructions for
pension and welfare plans, already has
limited the need to examine the form
and schedules to determine which
questions and instructions are required
for the type of plan filing. The
Department also believes that
considerations for having a separate
form for welfare plans will be less
significant in a system where all filing
is electronic. What will be significant in
that type of system is the instructions as
they relate to the data appropriate to
each type of plan. In this regard, it
should be noted, as discussed above,
that the Department has published the
Electronic Filing Rule requiring that all
Form 5500 Annual Return/Reports be
filed electronically. Under any type of
electronic system, we anticipate that
filers would need to access the
instructions relevant only to their type
of plan, eliminating any potential
confusion from determining in a unified
form package which instructions are
relevant to the filer.
The Working Group also suggested
that the Department consider limiting

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certain reporting currently required of
welfare plans. The Department believes
that retaining the current requirements
as they relate to funded welfare plans
(i.e., those with assets held in trust) and
large fully insured plans, without
imposing new reporting burdens on all
welfare plans, best serves to balance the
needs of the Department and
participants and beneficiaries and the
burden associated with the reporting
requirements. Similarly, the Department
believes that continuing the audit
requirement for large funded welfare
plans provides important protections to
participants and beneficiaries of those
plans, even when the trust principally
serves as a conduit for the payment of
benefits. Accordingly, the Department is
not proposing to change the application
of the audit requirement to such plans.
As noted above, the Department
already has taken steps to address some
of the issues raised by the Working
Groups. It modified the 2005 Form 5500
Annual Return/Report instructions by
adding language regarding how to count
participants in a welfare plan, by
providing guidance on how to
determine the number of welfare plans
a sponsor has for annual reporting
purposes, and by including new
language reflecting a recent advisory
opinion on fee and commission
reporting by insurance companies for
purposes of Schedule A. The
Department invites comments and
suggestions on what, if any, additional
steps the Department could take to
clarify reporting rules for welfare plans.
III. Regulations Relating to the
Proposed Form
As noted above, certain amendments
to the annual reporting regulations are
necessary to accommodate some of the
proposed revisions to the forms. The
Department is publishing separately
today in the Federal Register proposed
amendments to the Department’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
Department to adopt the Form 5500
Annual Return/Report, if revised as
proposed herein, and the proposed
Short Form 5500, 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.
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

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continuing collections of information in
accordance with the Paperwork
Reduction Act of 1995 (PRA 95) (44
U.S.C. 3506(c)(2)(A)). This helps to
ensure that requested data will be
provided in the 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, comments
concerning the proposed revision of the
Form 5500 Annual Return/Report,
pursuant to Part 1 of Subtitle B of Title
I and Title IV of ERISA and the Internal
Revenue Code are being solicited. A
copy of the Information Collection
Request (ICR) may be obtained by
contacting the person listed in the PRA
Addressee section below.
The Department has submitted a copy
of the proposed forms revisions to the
Office of Management and Budget
(OMB) in accordance with 44 U.S.C.
3507(d) for its review of the
Department’s information collection.
The IRS and the PBGC intend to submit
separate requests for OMB review and
approval based upon the final forms
revisions. Of particular interest are
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, OMB, Room 10235, New
Executive Office Building, Washington,
DC 20503; Attention: Desk Officer for
the Employee Benefits Security
Administration, Department of Labor.
Although comments may be submitted
through September 19, 2006, OMB
requests that comments be received
within 30 days of publication of the
Notice of Proposed Forms Revision to
ensure their consideration.
PRA Addressee: Address requests for
copies of the ICR to Gerald B. Lindrew,
Office of Policy and Research, U.S.
Department of Labor, Employee Benefits
Security Administration, 200
Constitution Avenue, NW., Room N–
5718, Washington, DC 20210.
Telephone: (202) 693–8410; Fax: (202)
219–4745. These are not toll-free
numbers.
Type of Review: Revision of a
currently approved collection.
Agencies: Employee Benefits Security
Administration (OMB Control No.
1210–0110); Internal Revenue Service
(OMB Control No. 1545–0710); Pension
Benefit Guaranty Corporation (OMB
Control No. 1212–0057).
Title: Form 5500 Series.
Affected Public: Individuals or
households; Business or other for-profit;
Not-for-profit institutions.
Form Number: DOL/IRS/PBGC Form
5500 and Schedules.
Total Respondents: The total number
of annual Form 5500 filers will be
approximately 833,000.
Total Responses: See ‘‘Total
Respondents’’ Above.
Frequency of Response: Annually.
Estimated Total Burden Hours: 2.3
million.
Estimated Time per Response,
Estimated Burden Hours, Total Annual
Burden: See below for each Agency.
Total Annualized Capital/Startup
Costs: $0.
Total Burden Cost (Operating and
Maintenance): $754 million.
Total Annualized Costs: $754 million.
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 Series 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 comments are solicited on
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
Department, and the PBGC. The times
will vary depending on individual
circumstances. The estimated average
times are:

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Pension

Form 5500 ........................................................
Sch A ...............................................................
Sch B ...............................................................
Sch C ...............................................................
Sch D ...............................................................
Sch G ...............................................................
Sch H ...............................................................
Sch I .................................................................

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Welfare

Large

Small

Large

1 hr., 55 min ..............
1 hr., 48 min ..............
6 hr., 51 min ..............
1 hr., 35 min ..............
10 hr ..........................
11 hr., 58 min ............
8 hr., 26 min ..............
....................................

1 hr., 7 min ................
55 min .......................
31 min.
....................................
10 hr.
....................................
....................................
1 hr., 33 min ..............

1 hr., 38 min ..............
8 hr., 31 min ..............

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Small
1 hr., 5 min.
2 hr., 17 min.

56 min.
6 hr., 28 min.
3 hr., 35 min.
....................................

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Pension

Welfare

Large

Small

Large

Sch R ...............................................................
Short Form .......................................................

1 hr., 4 min ................
....................................

31 min.
2 hr., 5 min ................

....................................

The aggregate hour burden for the
Form 5500 Annual Return/Report
(including schedules and short form) is
estimated to be 2.3 million hours
annually. The hour burden reflects
filing activities carried out directly by
filers. The cost burden is estimated to be

$754 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 Department and the IRS.
Pension plans

Small
2 hr., 5 min.

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
Department.

Welfare plans

Total

Agency

Total
Large

DOL ...................................................................
IRS ....................................................................

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The paperwork burden allocated to
the PBGC includes a portion of the
general instructions, basic plan
identification information, a portion of

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Hours 000s .........
$MM ....................
Hours 000s .........
$MM ....................

1,437
$428
226
$72

Small

Large

158
$59
152
$63

Schedule B, and a portion of Schedule
R. The PBGC’s Estimated Share of Total
Form 5500 Annual Return/Report

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266
$121
29
$4

Small
2
$1
1
>$.5

Large
1,703
$549
255
$76

Small
159
$60
154
$64

1,862
$608
409
$140

Burden is: 4,000 hours and $5 million
dollars per year.
BILLING CODE 4510–29–P

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Specific Changes

Appendix C—Description of Changes to
Existing Form 5500

Form 5500

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General Changes to Form 5500 and
Schedules
Appearance of check boxes and line items
may be changed in order to reflect electronic
input format. Dates and line numbering will
be changed to reflect plan year and insertions
and deletions throughout. Line titles may be
changed to provide for fewer or additional
entries to reflect changed appearance and
electronic data entry on the Form 5500 and
all Schedules. Instructions for schedules and
line items being eliminated will also be
eliminated. Conforming changes to titles and
line items changed in the forms will be made
in the instructions.
To enable filers to better evaluate the
proposed changes, the Department is making
available on its Web site at http://
www.dol.gov/ebsa, handwritten mark-ups of
the existing Form 5500 and Schedules to
show the changes proposed. Copies of the
mark-ups may also be obtained by calling the
EBSA’s Public Disclosure Room at
1.866.444.EBSA (3272).

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• Signature lines will be changed to reflect
shift to electronic filing; plan administrators
still will be required to maintain a manually
signed copy with the plan’s records.
• Separate signature line will be added for
DFEs.
• Line 5 (Preparer information) will be
eliminated.
• New Line 7 will be added to request total
number of contributing employers to
multiemployer plan.
• List of Schedules will be modified to
eliminate references to schedules being
eliminated.
Schedule A
• Minor non-substantive changes will be
made to language of lines to make questions
clearer.
• Line 2(b) entry will be changed to
‘‘Amount of sales and base commissions
paid’’
• Line 2 (c) entry will be changed to ‘‘Fees
and other commissions paid’’
• New Part IV will be added to enable plan
administrator to identify any insurance

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company that failed to provide the
information necessary to complete Schedule
A and the information that was not provided
by the insurance company.
Schedule B
New Line 12 will be added that provides
as follows:
12 If the total participant count on
Schedule B, line 2(b)(1)(4) is 1,000 or more,
then answer questions 12a and 12b.
a Enter percentage of plan assets held as:
Stock ll% Debt ll% Real Estate ll%
Other ll%
b For the debt securities, provide the
Macaulay duration for all debt securities and
the percentage held as (see instructions):
Macaulay Duration ....................
ll.ll
Government Debt ...................
ll.ll
Investment Grade Corporate
Debt .....................................
ll.ll
High-Yield Corporate Debt ....
ll.ll
Schedule C
Existing Part I will be deleted; new Part II
will be added; existing Part II will be
renumbered Part III.
New Part I and II will be as follows:

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Part I—Service Provider Compensation
Information (See Instructions)
Line 1. The information required by this Part
must be completed, in accordance with the
instructions, for each person receiving,
directly or indirectly, $5,000 or more in total
compensation (i.e., money or anything else of
value) in connection with services rendered
to the plan or their position with the plan
during the plan year.
(a) Name llllllllllllllll
(b) Enter EIN or, if reported person does not
have an EIN, address and telephone number
1. EIN – –
2. Address and Phone Number llllll
( ) – Ext.
(c) Enter Code(s) for relationship or services
provided to the plan (see instructions)
(d) Relationship to employer, employee
organization, or person known to be a partyin-interest. llllll
(e) Total amount received (see instructions)
1. $ lllllllllllllllllll
2. Is the amount entered in element (d)(l) an
estimate? Yes No
3. If applicable, describe formula for
calculating payment(s) llll
(f) Did the person identified in element (a)
(above) receive during the plan year
compensation (money or anything else of
value) from a source other than the plan or
plan sponsor in connection with the person’s
position with the plan or services provided
to the plan? Yes No
(g) If the answer to (f) is ‘‘Yes,’’ enter the
following information for each source from
whom the person identified in element (a)
received $1,000 or more in compensation if
the person is a fiduciary to the plan or
provides one or more of the following
services to the plan— contract administrator,
securities brokerage (stock, bonds,
commodities), insurance brokerage or agent,
custodial, consulting, investment advisory
(plan or participants), investment or money
management, recordkeeping, trustee,
appraisal, or investment evaluation.
(1) Name and EIN of source from whom
compensation was received
(payor)llllll –
(2) Enter Code(s) for relationship or services
provided by the payor to the plan (see
instructions)
(3) Amount paid by the payor (see
instructions)
(A) $llll
(B) Is the amount entered in element (3)(A)
an estimate? Yes No
(C) If applicable, describe formula for
calculating payment(s)
lllllllllllllllllllll
(4) Describe nature of compensation reported
in (g)(3) (see instructions)
lllllllllllllllllllll
Part II. Service Providers Who Fail or Refuse
to Provide Information
Line 2. Provide, to the extent possible, the
following information for each fiduciary or
service provider who failed or refused to
provide the information necessary to
complete Part I of this Schedule.
(a) Name llllllllllllllll
(b) Enter EIN or, if reported person does not
have an EIN, address and telephone number

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1. EIN – –
2. Address and Phone Numberllllll
( ) – Ext.
Schedule H
Part IV will be changed as follows:
• Title will be changed to ‘‘Compliance
Questions.’’ General instructions will be
modified to note that MTIAs, 103–12IEs, and
GIAs will not complete new lines 4m and 4n
and that 103–12IEs and MTIAs also will not
complete new Line 4l.
• Line 4a will be modified to read as
follows: ‘‘Was there a failure to transmit to
the plan any participant contributions within
the time period described in 29 CFR 2510.3–
102? (See Instructions and DOL’s Voluntary
Fiduciary Correction Program).’’ This will
conform the text in Line 4a to the same
question on the new proposed Short Form
5500.
• New Lines 4l–4m will be added as
follows:
Æ 4l Has the plan failed to provide any
benefit when due under the plan? Yesl
Nol Amount l.l
Æ 4m If this is an individual account plan,
was there a blackout period? (see
instructions and 29 CFR 2520.101–3)
YeslNo l
Æ 4n If 4m was answered ‘‘Yes,’’ did the plan
administrator comply with the blackout
period notice requirements in 29 CFR
2520.101–3? Yesl Nol
Schedule I
• New Line 2h will be added to conform
Schedule I to new Short Form, and ‘‘total
expenses’’ description will be modified to
reflect addition of new entry:
Æ 2h Administrative service providers
(salaries, fees, and commissions).
• Part II will be changed as follows:
Æ Title changed to ‘‘Compliance Questions.’’
Æ New Lines 4l-ndash;4m are added as
follows:
• 4l Has the plan failed to provide any
benefit when due under the plan? Yesl
NolAmount l.l
• 4m If this is an individual account plan,
was there a blackout period? (see
instructions and 29 CFR 2520.101–3)
YeslNo l
• 4n If 4m was answered ‘‘Yes,’’ did the plan
administrator comply with the blackout
period notice requirements in 29 CFR
2520.101–3? Yesl Nol
Schedule R
• New Line 7 will added:
• Will the minimum funding amount
reported on line 6c be met by the funding
deadline? Yes l No l N/A l
• Current Part IV Coverage will be deleted.
• New Part IV will be added as follows:
Part IV ESOPs (See Instructions) If this is not
a plan described under Section 409(a) or
4975(e)(7) of the Internal Revenue Code,
skip this part.
10 Were unallocated employer securities or
proceeds from the sale of unallocated
securities used to repay any exempt loan?
b Yes b No
11 a Does the ESOP hold any preferred
stock? b Yes b No
b If the ESOP has an outstanding exempt
loan with the employer as lender, is such

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loan part of a ‘‘back-to-back’’ loan? (See
instructions for definition of ‘‘back-toback’’ loan.) b Yes b No
12 Does the ESOP hold any stock that is not
readily tradable on an established
securities market? b Yes b No
• New Part V will be added as follows:
Part V Contributing Employer Information for
Multiemployer Defined Benefit Pension
Plans
List each employer required to contribute an
annual amount equal to or greater than 5%
of all annual contributions to the plan
(measured in dollars). (See instructions).
Complete as many entries as needed to
report all employers required to be listed.
a Name of contributing employer llll
b EIN lllllllllllllllll
c Dollar Amount Contributed llllll
d Contribution Rate
llllllllll
e Contribution Base Unit Measure (Check
Applicable Measure):
Hourly l Weekly l Unit of Product l
Other (Specify): l
f CBA Expiration Date (mm/dd/yyyy) ll

Appendix D—Description of Proposed
Changes to Existing Form 5500
Instructions
General Changes
All instructions regarding ‘‘hand print’’
and ‘‘machine print’’ and paper filings will
be eliminated, as will be instructions as to
how to file using the original EFAST system.
Instructions will be updated to describe the
mechanics of electronic filing and the
EFAST2 processing system. Appropriate date
changes, table of contents changes, and other
non-substantive changes will be made. Crossreferences to the Short Form instructions will
be included as appropriate. Instructions
regarding plans that only filed the Form 5500
for Title II purposes, and not Title I purposes
will be eliminated.
To enable filers to better evaluate the
proposed changes, the Department is making
available on its Web site at
http://www.dol.gov/ebsa, handwritten markups of the existing Instructions to the Form
5500 and Schedules to show the changes
proposed.
Specific Changes Using Format of Existing
Instructions
A new general section describing
electronic filing will be inserted:
Electronic Filing Requirement
Under the computerized ERISA Filing
Acceptance System (EFAST), you must file
your 2008 Form 5500 electronically. You
may file your 2008 Form 5500 on-line, using
EFAST’s web-based filing system, or you may
file through an EFAST-approved vendor.
Detailed information on electronic filing is
available at (insert web address). For
telephone assistance, call the EFAST Help
Line at 1–866–463–3278. The EFAST Help
Line is available Monday through Friday
from 8 a.m. to 8 p.m., Eastern Time.
[CAUTION] Annual reports filed under
Title I of ERISA must be made available by
plan administrators to plan participants and
by the Department to the public pursuant to
ERISA sections 104 and 106. Even though the

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Form 5500 must be filed electronically, the
administrator must keep a copy of the Form
5500, including schedules and attachments,
with all required manual signatures on file as
part of the plan’s records and must make a
paper copy available on request to
participants, beneficiaries, and the
Department of Labor as required by section
104 of ERISA and 29 CFR 2520.103–1.
Answer all questions with respect to the
plan year unless otherwise explicitly stated
in the instructions or on the form itself.
Therefore, responses usually apply to the
year entered at the top of the first page of the
form.
Your entries will be initially screened.
Your entries must satisfy this screening in
order to be initially accepted as a filing. Once
initially accepted, your form may be subject
to further detailed review, and your filing
may be rejected based upon this further
review. To reduce the possibility of
correspondence and penalties:
• Complete all lines on the Form 5500
unless otherwise specified. Also
electronically attach any applicable
schedules and attachments.
• Do not enter ‘‘N/A’’ or ‘‘Not Applicable’’
on the Form 5500 or Schedules unless
specifically permitted. ‘‘Yes’’ or ‘‘No’’
questions on the forms and schedules cannot
be left blank, but must be marked either
‘‘Yes’’ or ‘‘No,’’ and not both.
The Form 5500, Schedules, and
attachments are open to public inspection,
and the contents are public information
subject to publication on the Internet. Do not
enter social security numbers in response to
questions asking for an EIN. Because of
privacy concerns, the inclusion of a social
security number on the Form 5500 or on a
schedule or attachment that is open to public
inspection may result in the rejection of the
filing. EINs may be obtained by applying for
one on Form SS–4, Application for Employer
Identification Number. You can obtain Form
SS–4 by calling 1–800–TAX–FORM (1–800–
829–3676) or at the IRS Web Site at
www.irs.gov. The EBSA does not issue EINs.
• Who Must File
Æ This section will be modified to
eliminate paragraph 6, requiring certain
foreign plans to file the Form 5500 based
solely on whether the contributions are
deducted on a U.S. tax return.
• Do Not File A Form 5500 For A Pension
Benefit Plan That Is Any Of The Following
Æ This section will be modified to
eliminate paragraph 6, referring to ‘‘qualified
foreign plans’’ under Code section 404A, and
replacing it with the following: ‘‘A pension
benefit plan that is maintained outside the
United States primarily for the benefit of
persons substantially all of whom are
nonresident aliens.’’
Changes to Line by Line Instructions will
be made as follows:
Form 5500
Instructions for the new line 7 will be
added:
Line 7. For multiemployer plans, enter the
total number of employers that made
contributions to the plan for any part of the
2007 plan year. Any two or more
contributing entities (e.g., places of business

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with separate collective bargaining
agreements) that have the same nine-digit
employer identification number (EIN) must
be aggregated and counted as a single
employer for this purpose.
List of plan characteristic codes will be
modified as follows:
Codes 2L and 2M—reference to Limited
Pension Plan reporting is eliminated. Codes
3A and 3G are eliminated.
New Codes 2S and 2T are added:
2S Plan provides for automatic enrollment
in plan that has employee contributions
deducted from payroll.
2T Total or partial participant-directed
account plan—plan uses default investment
account for participants who fail to direct
assets in their account.
The Schedule A Instructions will be
changed as follows:
The ‘‘Important Reminder’’ regarding the
insurance company obligation to provide
information will be deleted.
Instructions for the new proposed Part IV
will be added:
Part IV—Provision of Information
The insurer (or similar organization) is
required to provide the plan administrator
with the information needed to complete the
return/report, pursuant to ERISA section
103(a)(2). If you do not receive this
information in a timely manner, contact the
insurer (or similar organization). If
information is missing on Schedule A (Form
5500) due to a refusal to provide information,
check ‘‘Yes’’ on line 10 and enter a
description of the information not provided
on line 11.
The Schedule B Instructions will be
changed as follows:
The instructions for Line 1d(2)(a) will be
modified to eliminate discussion of the
special rule under Code section
412(l)(7)(C)(i).
Instructions for the new line 12 will be
added as follows:
Line 12. Line 12 must be filed by all
defined benefit pension plans (except DFEs)
with 1,000 or more participants at the
beginning of the plan year as shown in line
2(b)(1)(4) of the Schedule B.
Line 12a. Show the beginning of year
distribution of assets for the categories
shown. These percentages should reflect the
total assets held in stocks, debt instruments
(bonds), real estate, or other asset classes,
regardless of how they are listed on the
Schedule H. For example, assets held in
master trusts should be disaggregated into the
four asset components and properly
distributed. They should not be listed under
‘‘Other’’ unless the trust contains no stocks,
bonds, or real estate holdings. The same
methodology should be used in
disaggregating trust assets as are used when
disclosing the allocation of plan assets on the
sponsor’s 10-K filings to the Securities and
Exchange Commission. REITs should be
listed with stocks, while real estate limited
partnerships should be included in the Real
Estate category.
Line 12b. Report the Macaulay duration for
the entire Debt portfolio. The Macaulay
duration is a weighted average of the number
of years until each interest payment and the

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principal are received. The weights are the
amounts of the payments discounted by the
yield-to-maturity of the bond.
When calculating the distribution of debt
securities, any corporate debt that has not
been rated should be included in the HighYield Corporate Debt category. Foreign debt
should be allocated to the appropriate
category as if it were debt issued by U.S.
corporations or government entity.
The Instructions for Schedule C will be
modified as follows:
The existing general instructions and
instructions for Part I will be eliminated. The
proposed new general instructions and
instructions for the revised Part I and new
Part II of Schedule C will be as follows:
Who Must File
Schedule C (Form 5500) must be attached
to a Form 5500 filed for a large pension or
welfare benefit plan, a MTIA, 103–12IE, or
GIA, to report information concerning service
providers. For more information on MTIAs,
103–12IEs, and GIAs see the instructions for
Direct Filing Entities on pages xx of the Form
5500 Instructions.
Check the Schedule C box on the form
5500 (Part II, line 10b(4)) if a Schedule C is
attached to the Form 5500. Multiple
Schedule C entries must be used (if
necessary) to report the required information.
Lines A, B, C, and D. This information
should be the same as reported in Part II of
the Form 5500 to which this Schedule C is
attached. You may abbreviate the plan name
(if necessary) to fit in the space provided.
Do not use a social security number in line
D in lieu of an EIN. The Schedule C and its
attachments are open to public inspection,
and the contents are public information and
are subject to publication on the Internet.
Because of privacy concerns, the inclusion of
a social security number on this Schedule C
or any of its attachments may result in the
rejection of the filing.
EINs may be obtained by applying for one
on Form SS–4, Application for Employer
Identification Number. You can obtain Form
SS–4 by calling 1–800–TAX–FORM (1–800–
829–3676) or at the IRS Web Site at
www.irs.gov. The EBSA does not issue EINs.
Instructions for Part I
Part I must be completed to report all
service providers receiving, directly or
indirectly, $5,000 or more in compensation
for all services rendered to the plan, MTIA,
103–12IE, or GIA during the plan or DFE year
except:
1. Employees of the plan whose only
compensation in relation to the plan was less
than $25,000 for the plan year;
2. Employees of the plan sponsor or other
business entity where the plan sponsor or
business entity was reported on the Schedule
C as a service provider, provided the
employee did not separately receive
compensation in relation to the plan; and
3. Persons whose only compensation in
relation to the plan consists of insurance fees
and commissions listed in a Schedule A filed
for the plan.
For purposes of this Schedule, reportable
compensation includes money or any other
thing of value (for example, gifts, awards,

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trips) received by a person who is a service
provider in connection with that person’s
position with the plan or services rendered
to the plan. Examples of indirect
compensation include: finders’ fees,
placement fees, commissions on investment
products, transaction-based commissions,
sub-transfer agency fees, shareholder serving
fees, 12b–1 fees, soft-dollar payments, and
float income. Also, brokerage commissions or
fees (regardless of whether the broker is
granted discretion) are reportable whether or
not they are capitalized as investment costs.
In the case of service provider
arrangements where one person offers a
bundle of services priced to the plan as a
package rather than on a service-by-service
basis, generally only the person offering the
bundled service package should be identified
in Part I, except that investment service
providers must be separately identified if
their compensation in the bundled fee
arrangement is set on a per transaction basis,
e.g., brokerage fees. If, however, the person
providing services is a fiduciary to the plan
or provides one or more of the following
services to the plan—contract administrator,
securities brokerage (stock, bonds,
commodities), insurance brokerage or agent,
custodial, consulting, investment advisory
(plan or participants), investment or money
management, recordkeeping, trustee,
appraisal, or investment evaluation, such
person must be separately identified
regardless of whether the payment received
by such service provider is only as part of a
bundle of services priced to the plan as a
package. Also, if a person is providing
services directly to the plan, as well as part
of a bundle of services, that person must be
separately identified on Schedule C.
Include in the compensation reported the
amount of consideration received by the
service provider attributable to the plan or
DFE filing the Form 5500, not the aggregate
amount received in connection with several
plans or DFEs. If, however, reportable
compensation is due to a person’s position
with or services rendered to more than one
plan or DFE, the total amount of the
consideration received generally should be
reported on the Schedule C of each plan or
DFE unless the consideration can reasonably
be allocated to services performed for the
separate plans or DFEs. For example, if an
investment advisor working for multiple
pension plans and other non-plan clients
receives a gift valued in excess of $1,000
from a securities broker in whole or in part
because of the investment advisor’s
relationship with plans as potential
brokerage clients, the full dollar value of the
gift would be reported on the Schedule C of
all plans for which the investment advisor
performed services. On the other hand, if a
securities broker received incentive
compensation from an investment provider
based on amount or volume of business with
the broker’s clients, the Schedule C of each
plan could report a proportionate allocation
of the incentive compensation attributable to
the plan. In such cases, any reasonable
method of allocation may be used provided
that the allocation method is disclosed to the
plan administrator.
The term ‘‘persons’’ on the Schedule C
instructions includes individuals, trades and

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businesses (whether incorporated or
unincorporated). See ERISA section 3(9).
Either the cash or accrual basis may be
used for the recognition of transactions
reported on the Schedule C as long as you
use one method consistently.
Specific Instructions
Line 1—Service Provider Compensation
Information—List each person receiving,
directly or indirectly, $5,000 or more in total
compensation (i.e., money or any other thing
of value) in connection with services
rendered to the plan or their position with
the plan during the plan year. Start with the
most highly compensated and end with the
lowest compensated. Enter in element (a) the
person’s name and complete elements (b)
through (g) as specified below. Use as many
entries as necessary to list all service
providers.
Element (b). Enter the EIN for the person.
If the name of an individual is entered in
element (a), the EIN to be entered in element
(b) should be the EIN of the individual’s
employer. If the person does not have an EIN,
you may enter the person’s address and
telephone number. Do not use a social
security number in lieu of an EIN. The
Schedule C and its attachments are open to
public inspection and are subject to
publication on the Internet. Because of
privacy concerns, the inclusion of a social
security number on this Schedule C or any
of its attachments may result in the rejection
of the filing.
Element (c). Select from the list below and
enter all codes that describe the nature of
services provided to the plan or the position
with the plan. If more than one code applies,
enter the primary codes first. Complete as
many entries as necessary to list all
applicable codes. Do not list PBGC or IRS as
a service provider on Part I of Schedule C.
Service Provider Codes
10 Accounting (including auditing)
11 Actuarial
12 Contract Administrator
13 Administration
14 Brokerage (real estate)
15 Brokerage (stocks, bonds, commodities)
16 Computing, tabulating, data processing,
etc.
17 Consulting (general)
18 Consulting (pension)
19 Custodial (other than securities)
20 Custodial (securities)
21 Insurance agents and brokers
22 Investment advisory and evaluations
(participants)
23 Investment advisory and evaluations
(plan)
24 Investment management
25 Money management
26 Legal
27 Named fiduciary
28 Printing and duplicating
29 Recordkeeper
30 Trustee (individual)
31 Trustee (business)
32 Trustee (discretionary)
33 Trustee (directed)
34 Pension insurance advisor
35 Valuation services (appraisals, asset
valuations, etc.)
36 Employee (plan)

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37 Employee (plan sponsor)
99 (Other)
Element (d). Enter relationship to
employer, employee organization, or person
known to be a party-in-interest, for example,
employee of employer, vice-president of
employer, union officer, affiliate of plan
recordkeeper, etc.
Element (e). Enter the total amount of
direct and indirect compensation received.
Indicate in the boxes provided whether the
amount entered includes an estimate. If the
amount or part of the amount entered
includes an estimate, describe the formula
used for calculating the estimated payments.
Caution: Do not report the same
compensation twice on the Schedule C filed
for the plan and again on the Schedule C
filed for an MTIA or 103–12IE in which the
plan participates. Plan filers must include in
Element (e) the plan’s share of compensation
paid during the year to an MTIA trustee or
other persons providing services to the MTIA
or 103–12IE, if such compensation is not
subtracted from the total income of the MTIA
or 103–12IE in determining the net income
(loss) reported on the MTIA’s or 103–12IE’s
Schedule H, line 2k. MTIA and 103–12IE
Schedule C filers must include compensation
for services paid by the MTIA or 103–12IE
during its fiscal year to the MTIA trustee and
persons providing services to the MTIA or
103–12IE if such compensation is subtracted
from the total income in determining the net
income (loss) reported by the MTIA or 103–
12IE on Schedule H, line 2k.
Element (f). You must indicate, by
checking ‘‘Yes’’ or ‘‘No,’’ whether the person
identified in element (a) received during the
plan year consideration (money or anything
else of value) from a source other than the
plan or plan sponsor in connection with the
person’s position with the plan or services
provided to the plan. Do not leave element
(f) blank.
Element (g). If the answer to (f) is ‘‘Yes,’’
and the person identified in element (a) is a
fiduciary to the plan or provides one or more
of the following services to the plan—
contract administrator, securities brokerage
(stock, bonds, commodities), insurance
brokerage or agent, custodial, consulting,
investment advisory (plan or participants),
investment or money management,
recordkeeping, trustee, appraisal, or
investment evaluation—enter the requested
information for each source other than the
plan or plan sponsor from whom the person
received $1,000 or more in consideration.
Part II. Service Providers Who Fail or Refuse
To Provide Information
Line 2. Provide, to the extent possible, the
requested identifying information for each
fiduciary or service provider who failed or
refused to provide any of the information
necessary to complete Part I of this Schedule.
The Schedule D Instructions will be
changed as follows:
A statement will be added to advise that
DFEs must complete Part II to identify
participating plans even if those plans are
filing the Form 5500–SF and not the Form
5500 with Schedule D.
The Schedule H Instructions will be
changed as follows:

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• Line 2i(1) and 2i(4) instructions changed
to have reporting for fees and expenses for
corporate trustees and individual trustees,
including reimbursement of expenses
associated with trustees, such as lost time,
seminars, travel, meetings, etc., on line 2i(1)
instead of 2i(4).
• General instructions for lines 4a through
new line 4n are modified to indicate that
MTIAs, 103–12IEs, and GIAs do not complete
new lines 4m or 4n and MTIAs and 103–
12IEs also do not complete new line 4l.

• The Line 4a Instructions are changed to
add the following language permitting
reporting delinquent participant loans on
line 4a and requiring filers to use the
following supplemental Schedule if they
respond ‘‘yes’’ to line 4a:
Participant loan repayments paid to and/or
withheld by an employer for purposes of
transmittal to the plan that were not
transmitted to the plan in a timely fashion
may be reported on Line 4a in accordance
with the reporting requirements that apply to
delinquent participant contributions or they

can be reported on Line 4d. See Advisory
Opinion 2002–02A, available at http://
www.dol.gov/ebsa.
Line 4a Schedule. Attach a Schedule of
Delinquent Participant Contributions using
the format below if you entered ‘‘Yes.’’ If you
choose to include participant loan
repayments on Line 4a, you must apply the
same supplemental schedule and IQPA
disclosure requirements to the loan
repayments as apply to delinquent
transmittals of participant contributions.

2008 FORM 5500 LINE 4a.—SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
Total that constitute nonexempt prohibited transactions
Participant contributions
transferred late to plan

Contributions not corrected

• Instructions will be added for the new
lines 4l, 4m, and 4n as follows:
Line 4l. You must check ‘‘Yes’’ if any
benefits due under the plan were not timely
paid or not paid in full. Include in this
amount the total of any outstanding amounts
that were not paid when due in previous
years that have continued to remain unpaid.
Line 4m. Check ‘‘Yes’’ if there was a
‘‘blackout period.’’ A blackout period is a
temporary suspension of more than three
consecutive business days during which
participants or beneficiaries of a 401(k) or
other individual account pension plan were
unable to, or were limited or restricted in
their ability to, direct or diversify assets
credited to their accounts, obtain loans from
the plan, or obtain distributions from the
plan. A ‘‘blackout period’’ generally does not
include a temporary suspension of the right
of participants and beneficiaries to direct or
diversify assets credited to their accounts,
obtain loans from the plan, or obtain
distributions from the plan if the temporary
suspension is: (1) Part of the regularly
scheduled operations of the plan that has
been disclosed to participants and
beneficiaries; (2) due to a qualified domestic
relations order (QDRO) or because of a
pending determination as to whether a
domestic relations order is a QDRO; (3) due
to an action or a failure to take action by an
individual participant or because of an action
or claim by someone other than the plan
regarding a participant’s individual account;
or (4) by application of federal securities
laws. For more information, see the
Department of Labor’s regulation at 29 CFR
2520.101–3 (available at www.dol.gov/ebsa).

Contributions corrected
outside VFCP

Contributions pending correction in VFCP

Line 4n. If there was a blackout period, did
you provide the required notice not less than
30 days nor more than 60 days in advance
of restricting the rights of participants and
beneficiaries to change their plan
investments, obtain loans from the plan, or
obtain distributions from the plan? See 29
CFR 2520.101–3 for specific notice
requirements and for exceptions from the
notice requirement. Answer ‘‘no’’ if notice
was not provided even if the plan met one
of the exceptions to the notice requirement.
The Schedule I Instructions will be
changed as follows:
• The line 2h and 2i Instructions will be
changed to conform to the Instructions for
the proposed Form 5500–SF:
Line 2h. Administrative service providers
(salaries, fees, and commissions) include the
total fees paid (or in the case of accrual basis
plans, costs incurred during the plan year but
not paid as of the end of the plan year) by
the plan for, among others:
1. Salaries to employees of the plan;
2. Fees and expenses for accounting,
actuarial, legal and investment management,
investment advice, and securities brokerage
services;
3. Contract administrator fees;
4. Fees and expenses for corporate trustees
and individual trustees, including
reimbursement for travel, seminars, and
meeting expenses;
5. Fees and expenses paid for valuations
and appraisals of real estate and closely held
securities;
6. Fees for legal services provided to the
plan (do not include legal services as a
benefit to plan participants).

Total fully corrected under
VFCP and PTE 2002–51

Do not include in this line amounts paid
to plan employees to perform administrative
services.
Line 2i. Other expenses (paid and/or
payable) include other administrative and
miscellaneous expenses paid by or charged to
the plan, including among others, office
supplies and equipment, telephone, postage,
rent and expenses associated with the
ownership of a building used in operation of
the plan.
• The Line 4a Instructions will be changed
to add the following language permitting
filers to report delinquent participant loan
repayments on line 4a and to require filers
to use the following supplemental Schedule
if they respond ‘‘yes’’ to line 4a:
Participant loan repayments paid to and/or
withheld by an employer for purposes of
transmittal to the plan that were not
transmitted to the plan in a timely fashion
may be reported on Line 4a in accordance
with the reporting requirements that apply to
delinquent participant contributions or they
can be reported on Line 4d. See Advisory
Opinion 2002–02A, available at
www.dol.gov.ebsa.
Line 4a Schedule. Attach a Schedule of
Delinquent Participant Contributions using
the format below if you entered ‘‘Yes’’ on
Line 4a and you are checking ‘‘No’’ on Line
4k because you are not claiming the audit
waiver for the plan. If you choose to include
participant loan repayments on Line 4a, you
must apply the same supplemental schedule
and IQPA disclosure requirements to the loan
repayments as apply to delinquent
transmittals of participant contributions.

2008 FORM 5500 LINE 4a.—SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
Total that Constitute Nonexempt Prohibited Transactions

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Participant Contributions
Transferred Late to Plan

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Contributions Not Corrected

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Outside VFCP

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Total Fully Corrected
Under VFCP and PTE
2002–51

Federal Register / Vol. 71, No. 140 / Friday, July 21, 2006 / Notices

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• The Instructions for line 4k will be
updated to indicate that a model notice that
plans can use to satisfy the enhanced SAR
requirements to be eligible for the audit
waiver is made available as an appendix to
29 CFR 2520.104–46 under the proposed
regulations published simultaneously with
this Notice.
• Instructions will be added for the new
lines 4l, 4m, and 4n as follows:
Line 4l. You must check ‘‘Yes’’ if any
benefits due under the plan were not timely
paid or not paid in full. Include in this
amount the total of any outstanding amounts
that were not paid when due in previous
years that have continued to remain unpaid.
Line 4m. Check ‘‘Yes’’ if there was a
‘‘blackout period.’’ A blackout period is a
temporary suspension of more than three
consecutive business days during which
participants or beneficiaries of a 401(k) or
other individual account pension plan were
unable to, or were limited or restricted in
their ability to, direct or diversify assets
credited to their accounts, obtain loans from
the plan, or obtain distributions from the
plan. A ‘‘blackout period’’ generally does not
include a temporary suspension of the right
of participants and beneficiaries to direct or
diversify assets credited to their accounts,
obtain loans from the plan, or obtain
distributions from the plan if the temporary
suspension is: (1) Part of the regularly
scheduled operations of the plan that has
been disclosed to participants and
beneficiaries; (2) due to a qualified domestic
relations order (QDRO) or because of a
pending determination as to whether a
domestic relations order is a QDRO; (3) due
to an action or a failure to take action by an
individual participant or because of an action
or claim by someone other than the plan
regarding a participant’s individual account;
or (4) by application of federal securities
laws. For more information, see the
Department of Labor’s regulation at 29 CFR
2520.101–3 (available at www.dol.gov/ebsa).
Line 4n. If there was a blackout period, did
you provide the required notice not less than
30 days nor more than 60 days in advance
of restricting the rights of participants and
beneficiaries to change their plan
investments, obtain loans from the plan, or
obtain distributions from the plan? See 29
CFR 2520.101–3 for specific notice
requirements and for exceptions from the
notice requirement. Answer ‘‘no’’ if notice
was not provided even if the plan met one
of the exceptions to the notice requirement.
The Schedule R Instructions will be
modified as follows:

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• The general instructions will be updated
to explain how Schedule R now also applies
to ESOPs.
• Instructions will be deleted for old Part
IV, Coverage, and instructions will be added
for new Part IV, line 11b as follows:
Line 11b. A loan is a ’’back-to-back loan’’
if the following requirements are satisfied:
1. The loan from the employer corporation
to the ESOP qualifies as an exempt loan
under Department regulations at 29 CFR
2550.408b–3 and under Treasury Regulation
sections 54.4975–7 and 54.4975–11; and
2. The repayment terms of the loan from
the sponsoring corporation to the ESOP are
substantially similar to the repayment terms
of the loan from the commercial lender to the
sponsoring employer.
Instructions will be added for new Part V,
line 13 as follows:
Part V Contributing Employer Information
for Multiemployer Defined Benefit Pension
Plans
Line 13 should be completed only by
multiemployer defined benefit pension plans
that are subject to the minimum funding
standards (see Code section 412 and Part 3
of Title I of ERISA). Enter the information on
Lines 13a through 13f for any employer that
contributed five (5) percent or more of the
plan’s total contributions for the 2008 plan
year. The employers should be listed in
descending order according to the dollar
amount of their contributions to the plan.
Complete as many entries as are necessary to
list all employers that contributed five (5)
percent or more of the plan’s contributions.
Line 13a. Enter the name of the
contributing employer to the plan.
Line 13b. Enter the EIN number of the
contributing employer to the plan. Do not
enter a social security number in lieu of an
EIN. The Form 5500 is open to public
inspection, and the contents are public
information and are subject to publication on
the Internet. Because of privacy concerns, the
inclusion of a social security number on this
line may result in the rejection of the filing.
EINs may be obtained by applying for one
on Form SS–4, Application for Employer
Identification Number. You can obtain Form
SS–4 by calling 1–800–TAX–FORM (1–800–
829–3676) or at the IRS Web Site at http://
www.irs.gov. The EBSA does not issue EINs.
Line 13c. Dollar Amounts Contributed.
Enter the total dollar amount contributed to
the plan by the employer for all covered
workers in all locations for the plan year. Do
not include the portion of an aggregated
contribution that is for another plan, such as

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41651

a welfare benefit plan, a defined contribution
pension plan or another defined benefit
pension plan.
Line 13d. Contribution Rate. Enter the
employer’s contribution rate per contribution
base unit (e.g., if the contribution rate is
$xx.xx per covered hour worked, enter
$xx.xx). If the employer’s contribution rate
changed during the plan year, enter the last
contribution rate in effect for the plan year.
If the employer uses different contribution
rates for different classifications of
employees or different places of business,
complete separate entries for each
contribution rate.
Line 13e. Contribution Base Units. Check
the contribution base unit on which the
contribution rate is based. If the contribution
rate is not measured on an hourly, weekly,
or unit-of-production basis, check ‘‘other’’
and indicate the basis of measurement. If you
entered more than one contribution rate for
an employer in line 13d, show the applicable
contribution base unit for each contribution
rate.
Line 13f. Collective Bargaining Agreement
Expiration Date. Enter the date on which the
employer’s collective bargaining agreement
expires. If the employer has more than one
collective bargaining agreement requiring
contributions to the plan, enter the expiration
date of the agreement that provided for the
largest dollar amount contributed by the
employer for the plan year.
Statutory Authority
Accordingly, pursuant to the authority in
sections 101, 103, 104, 109, 110 and 4065 of
ERISA and section 6058 of the Code, the
Form 5500 Annual Return/Report and the
instructions thereto are proposed to be
amended as set forth herein, including the
addition of the proposed Short Form 5500.
Signed at Washington, DC, this 13th day of
July, 2006.
Ann C. Combs,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.
Carol D. Gold,
Director, Employee Plans, Tax Exempt and
Government Entities Division, Internal
Revenue Service.
Vincent K. Snowbarger,
Acting Executive Director, Pension Benefit
Guaranty Corporation.
[FR Doc. 06–6329 Filed 7–20–06; 8:45 am]
BILLING CODE 4510–29–P

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