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Employee Benefits Security Administration - Annual Reporting and Disclo by fsb96139


November 16, 2007

Part II:

Department of Labor
Employee Benefits Security
29 CFR Part 2520

Department of the
Internal Revenue Service

Pension Benefit
Annual Reporting and Disclosure;
Revision o Annual Lnformat3on Return/
Reports; Final Rule and Notice
64710         Federal Register / Vol. 72, No. 2 2 1 /Friday, November 16, 20CI7 /Rules and Regulations

DEPARTMENT OF LABOR                           Department of labor, (202) 693-8523             make changes to the Form 5500 Annua
                                              [not a toll-free number).                       RetumlReport required by the Pension
Employee Benefits Security                    SUPPLEMENTARY INFORMAffDN:                      Protection Act of 2006, Pub.L. 109-28(
Administration                                                                                120 Stat. 780 (20061,  enacted on Augus
                                                                                              17,2006 (PPA). 71 F'R 71562.
29 CFR Part 2520                                Under Titles I and IV of the Employee            The Department received 38 c o m e r
                                              Retirement Income Security Act of 1974,         letters on the July 2006 Proposai horn
RlN 12104B06                                                                                  representatives of employers, plans, an
                                              as amended WISA), and the Internal
Annual Reporting and Disclosure               Revenue Code, as amended [Code],                plan service providers.1 It received
                                              pension and other employee benefit              seven comments on the Supplemental
AGENCY:Employes Benefits Security             plans generally are required to file            Notice. Copies of the comments are
Administration, Labor.                        annual returns/reports concerning,              posted on the Department's Web site at
Amo#: Final rule.                             among other things, the financial               http://www,
                                              condition and operations of the plan.              The preamble to this Notice outlines
SUMMARY:    This document contains            Filing the Form 5500, "Annual Return/           the finalamendments being adopted to
amendments to Department of Labor             Report of Employee Benefit Plan,"               the Department's amual reporting
regulations relating to annual reporting      together with any required attachments          regulations to reflect the changes being
and disclosure requirements under Part        and schedules [Form 5500 Annual                 adopted to the Form 5500 Annual
1of Subtitle B of Title I of the Employee     ReiumlReport) through the ERISA
                                                                                              RetudReport, the Form 5500SF
Retirement Income Security Act of 1974,       Filing Acceptance System PIFAST)                "Short Form Annual ReturnlReport of
as amended BRISA). The amendments                                                             Small Employee Benefits Plan" (Form
                                              generally satisfies these annual                50F
                                                                                               5-       or Short Form 5500), and the
contained in this document are                reporting requirements. The Form 5500
necessarv to conform the annual               Annual RetwdReport is the primary               required attachments and schedules
reportini and disclosure regulationsto                                                        (collecfiveIy,the 5500 Forms) publishe
                                              source of information concerning the            simultaneously. A comprehensive
revisions to the Form 5500Annual              operation, funding,   assets, and
Return/Report of Employee Benefit                                                             discussion of the changes to the 5500
                                              investments of pension and other                Forms and instructions is in a separate
Plan, including a new Forrn 55004F            employ= benefit plans. In addition to
(Short Form or Short Form 55001, filed                                                        notice of adoption of final revisions to
                                              being an important disclosure document          the annual reportlreturn forms (Forms
for employee pension and welfare              for plan participants and beneficiaries,
benefit plans under ERISA and the                                                             Revision Notice] that is being pubIishe4
                                              the Form 5500 Annual RetwdTieport is            in today's Federal Register. To avoid
Internal Revenue Code of 1986, as             a compliance and research tool for the
amended (Code). The changes to the                                                            unnecessary duplication, that
                                              Department of Labor [Department),               discussion is incorporated herein by
Form 5500 forms and implementing              Internal Revenue Service (IRS),and the
regulatory amendments are intended to                                                         reference and only a general summary (
                                              Pension Benefit Guaranty Corporation            the form and instruction changes is
facilitate the transition to an elewonic      PBGC)[collectively, the Agencies) and
filing system,reduce and sbearnline                                                           included in this preamble as
                                              a source of information and data for use        background for the required costfbenef
annual reporting bumlens, especially for      by other federal agencies, Congress, and
small businesses, and update the annual                                                       and regulatory impact analyses.
                                              the private sector in assessing employee
reporting forms to reflect current issues,    benefit, tax, and economic trends and           3 Discussion of the Revisions to 29
agency priorities and new requirements        policies.                                       CFR Part 2520
under the Pension Protection Act of             On July 21,2006, the Agencies                   The public comments generally did
2006. Some of the forms revisions apply       published a notice of proposed forms            not directly address the proposed
on a transitional basis for the 2008          revisions Uuly 2006 Proposal) with              regulations themselves. Rather, the
reporting year before all of the form         changes to the Form 5500 Annual                 comments were addressed to the scope
revisions are fully implemented as part       ReturnlReport for the 2008 rtfporti~lg          and specifics of the proposed forms an<
of the switch under the ERISA Filing          year. 7 1 FR 41615. The proposed form           insimction changes. As described more
Acceptance System @FAST)to a wholly                                                  h
                                              changes were intended to: facilitate t e        fully in the Form Revision Notice, the
electronic filing system for the 2009         kansition to a wholly electronic f l n
                                                                                 iig          public comments generally approved of
reporting year. The current effective         system for the 5500 Forms, including            the Agencies' streamlining of the annua
date of the electronic filing requirement     removal of IRS-only schedules; reduce           reporting requirements through the
under 29 CFR 2520.104a-2also is being         and sbeamline annual reporting                  adoption of the new Form 5500-SF and
postponed in this document to apply to        burdens, especially for small businesses,       eliminating the ES-only scheduIes front
plan years beginning on or after January      with the establishment of a new Short           the Form 5500 Annual ReturntReport.
1, 2009. The regulatory amendments            Form 5500; and update the annual                The comments also generally supported
will affect the financial and other           reporting forms to reflect current issues       the objectives of updating the annual
information required to be reported and       and agency priorities, including                returnlreport filing requirements to
disclosed by employee benefit plans           enhanced reporting of plan fees and             reflect current issues and enhancing
filing the Form 5500 Annual Return/           expenses. The Department also                   bansparency and accountability,
Report of Employee Benefit Plan,              published a final ruIe requiring                although some commenten expressed
including the Form 5500-SF, under             electronic filing of the Form 5500              concerns about the benefits, feasibility,
Title I of ERISA.                             Annual Return/Report for plan years             and cost of complying with some of the
DATES: T h i s rule i s effective Janua~y
                                        15,   beginning January 1,2008 (Electronic            proposed changes, particularly the
2008.                                         Filing Rule). 7 1 FR 41359 Only 21,
FOR FURTHER INFORMATION CONTACT:              2006). On December 11,2006, the             'The Department also received a comment lettel
Elizabeth A. Goodman or Michael I.            Agencies published a Notice of            horn tho Unitod Statw Depariment of rarnmerw,
                                                                                        Economic and Statistics Administration. Bureau o:
Baird, Office of Regulations and              Supplemental Proposed Forms               Ec0~0mic   Analysis (BEA), indicating that the BBA
Interpretations, Employee Benefits            Revisions (Supplemental Notice]. The      relies on the infonnrtion collected i the Forrn 5 3
Security Adminisbation. U.S.                  Supplemental Notice was acccssaq to       to prepare certain statisti~x.
64712            Federal Register l Vol. i'2, No. 221 1Friday, November 16, 2007 1Rules and Regulations

 [dl Schedule SB (Single-Employer                     to fill out all of these sections. Instead, providers, the final Schedule C require
Defined Benefit Plan Actuarial                        additional information related to the       direct compensation paid by the plan t
Information] and Schedule MB                          ap Iicable funding rules for such plans     be reported on a separate line item fror
 (Multiemployer DefinedBenefit Plan                   w i t be rovided as an attachment.          indirect compensation received horn
and Certain Money Purchase Plan                          ~ c h e l u l e must be filed for all
                                                                       MB                         sources other than the plan or plan
Actuarial Information) (Formerly                      multiemployer defined benefit plans         sponsor. In addition, in light of the faci
Schedule 3)                                           and money purchase plans [including        that particular service providers may
   Actuarial schedules am required for                target ben~fit    plans) that are currentlyreceive indirect compensation of
defined benefit pension plans subject to              amortizing waivers. Schedule M!3 is        various types from various sources,t h ~
the minimum funding standards (see                    similar to the existing Schedule B. New     final forms revisions expand the codes
Code section 412 and Part 3 of Title I                items that have been added include: (1)    currently required on the Schedule C t~
of ERISA]. Schedules SB and MB will be                Accrued liability determined using the     better identify the types of services
required to be filed as a non-standard                unit credit cost method; (2) information   provided and to abo require codes for
attachment for the 2008 plan year to                  about whether the plan is in                types of fees received by the service
meet the requirements of the PPA and,                 endangered, seriously endangered, or        provider.
for the 2009 plan year and later, will be             critical staius, and,if so, whether the       As noted above, the final form
filed in the same manner as the other                 plan is complying with the applicable       revisions includes an alternative
scheduIes under the electronic filing                 requirements for its funding               reporting option for service providers
system.                                               improvement or rehabilitation plan; and    whose only compensation in relation ti
   The Schedule SB must be filed for                  (3) information required by PPA section    &e plan is limited to "eligible indirect
single-employer defined benefit pension               503.                                       compensation'' [ certain specified type:
plans [including multiple-employer                     Ie) Schedule C (Service Provider          of common investment related fees]
defined benefit pension plansl.5 Tbs                  Information)                                 rovided that written disclosure[s) are
Schedule SB and accompanying                                                                     krnished to the plan administrator,
attachments will capture identifying                     Schedule C generally must be            including in electronic form, that
information about the plan and plan                   attached to the Form 5500 Annual           disclose the existence of the indirect
sponsor, the type of plan, and prior year             Return/Report filed by lwge plan filers    compensation; the services provided fo
plan size. It includes basic information              to report persons who rendered services the indirect compensation or the
about plan assets, number of                          to the plan or in connection with          purpose for payment of the indirect
participants, funding target information,             transactions with the plan received,       compensation; the amount (or estimate
and a statement by an enrolled actuary.               directly or indirectly, $5,000 or more i of the compensation or a description o
                                                                                               n                                           f
It consists of basic actuarial worksheets             compensation during the plan year, and the formula used to caIculate or
designed to allow the Agencies to                     to report terminations of plan             determine the compensation;and the
evaluate the plan's compliance with the               accountants or enrolled actuaries.         identity of the party or parties paying
funding requirements as amended by                    Consistent with recommendations of the and receiving the compensation. Whert
sections 101,102,111, and 112 of the                  ERISA Advisory Council Working             a particular service provider received
PPA, and to ensure that the reporting                 Groups and the Government                  only "eligible indirect compensation''
requirements under ERISA,as amended                   Accountability Office (GAO), EBSA has for which the re uired disclosures wen
by section 503 of the PPA, are included                                                                           8
                                                      concluded that more information shouId provided, instea of providing
                                                      be disclosed on the Form 5500 Annual       information on the service provider, thr
on the schedule. The material is divided
into sections consisting of ''Basic                   ReturnlReport regarding plan fees and      Schedule C may report instead
information," "Beginning of year                      expenses. See ERISA Advisory Council identifying information on the person o
carryover and prefunding balances ,"                  Report of the Working Group on Plan        persons who provided the plan with thl
"Funding percentages,""Contributions                  Fees and Reporting on Form 5500            required written disclosures.
and liquidity shortfalls," "Assumptions               (November 10,2004)     [available on the      With respect to service providers
used to determine funding target and                  Internet at: h~p:// required to be listed on the Schedule G
target normal cost," "Miscellaneous                   publications);Private Pensions:            who received such eligible types of
items," "Reconciliation of unpaid                     Government Actions Could Improve the indirect compensation for which the
minimum required contributions for                    Timeliness and Content of Form 5500        written disclosures were not provided
prior years," and "Minimum required                   Pension Information, GAO-05491             or any other indirect compensation, iht
contribution for current year." Airlines              (available on the Internet at: htrp://     Schedule C requires more detailed
that have &ozen ension plans electing                 www.go0. ov).                              information on the indirect
the alternate fun& schedule and
                                                         ~chedufe reporting continuer to be compensation, including, in the case o
                                                                   C                                                                      l
plans for which the effective date of the             limited to large plan filers and the       certain key service providers,
new PPA funding mles is delayed
                                                      $5,000 reporting threshold has been        information regarding the payor if the
[PBGC settlement plans, certain defense               retained. As in the proposal, the          service provider received during the
contractors, certain rural electrical                 Schedule C consists of three parts. Part   plan year indirect compensation from E
cooperatives, etc.) will not be required              I of the Schedule C requires, subject to   single source of $1,000 or more.
                                                      a alternative reporting option
                                                        n                                           Although filers generally have the
   'Unlike multiemployor p h s within the meaning     described below, the identification of     option of reporting a formula used to
of W S A suctions 3(37) and 1001{a)(3) to which       each person who received, directly or      calculate indirect compensation
more than m e employer I required to contribute,
                           s                          indirectly, $5,000 or more in total        received instead of an actual dollar
which must be maintained pursuant to one or more      compensation (i.e.,money or anything       amount or estimate,where a formula is
mIlective bargaining apernents between one or
more employee organizationsand more than one          eIse of value) in connection with          used to describe indirect compensation
employer, and which must satisfy other                services rendered to the plan or their     received by one of the key service
requirements prescrihd in d a t i o n s issued by     position with the plan during the plan     providers, the amount of indirect
the J h p m e n t at 29 CFR 2510.3-37. multiple-
employer plans are plans that cover the employees     year. To provide more informative          compensation is presumed to meet the
of two or more employnrs but are treated as single-   disclosures about the types of fees being reporting thresholds for purposes of thc
employer plans for varinus purposes undor ERISA.      paid to or received by plan service        Schedule C reporting requirements.
              Federal Register / Vol. 72, No. 221 /Friday, November 16, 20137 1Rules and Regulations                                   64713
   As noted above, the final Schedule C       in 29 CFR 2510.101-3; (31 addition of a        25 participants will be available for bot
includes a new Part II for plan               compliance question on whether the             the 2007 and 2008 plan ear filings.
administrators to identify each service       plan failed to pay benefits when due             Thus. for the 2007 andl2008 plan
provider that failed or refused to            under the plan; [4] expansion of the use                                hn
                                                                                             years, plans with fewer t a 25
provide the information necessary to          of codes to report plan feature                 participants that meet the eligibility
complete Part 1 of the Schedule C.            information on pension and welfare             requirements for the Short Form 5500,
   The third part of the Schedule C (Part     benefit plans; (5)elimination of the           treating those conditions a if they
III) is the current Part II of the Schedule   optional enby of the form preparer's            applied for 2007 and 2008 plan year
C used for reporting termination              name and employer identification                filings, wiIl be permitted to satisfy the
information on plan accountants and           number (EM); requiring small plans
                                                              (6)                             annual reporting requirement by filing
enrolled actuaries.                           to report administrative expenses               on the appropriate year form and
 (fj Schedule R (Rstirement Plan              separately born other expenses on the           schedules: (I) The Form 5500; (2) a
Information)                                  Schedule I: (71 addition of a question on      Schedule A for any insurance contracts
                                              w h d e r any minimum funding amount           for which a Schedule A is required
   As noted above, in light of the            reported for a pension plan will be met        under current rules, completing only
removal of the Schedule E (ESOP               by the funding deadline; and [8]               lines A, B,C,D and the insurance fee
Annual Information), selected questions       adoption of a standard format for use in       and commission information in Part 1;
from the Schedule E are being                 connection with an independent                  [3] Schedule B for the 2007 plan year,
incorporated into the Schedule R in           qualified public accountant [IQPA)             and,for the 2008 plan year, Schedule
order to continue to collect certain          rendering an opinion on the                    MB for multiemployer defined pension
information regarding ESOPs as part of        supplemental schedule information on           benefit plans and certain money
the Form 5500 Annual Return/Re ort.           Line 4a of Schedule H and I relating to        purchase plans, and Schedule SB for
   As in the proposal. Schedule flgas
been modified to include additional           delinquent participant contributions.          single employer defined benefit pensio:
questions required by section 503 of                                                         plans; [4] Schedule I; (5) Schedule R,
                                              b)WA-Required Simplified Reporting             completing only lines A, B, C, D, and
PPA and to collect information the            for Plans With Fewer Than 25
PBGC needs to enable it to properly                                                          Part II;and (6) Schedule SSA.
                                              Participants                                   Additional detailed guidance regarding
monitor the plans it insures. The new
Part V collects PPA-required                     As noted in the Forms Revision              this simplified reporting option is
information on multiemployer defined          Notice, section 1103(b) of the PPA             included in the instructions to the 2007
benefit plans and additional information      requires a simplified report for plans         Form 5500 and the instructions to the
related to major contributing empIoyers.      with fewer than 25 participants to be          2008 Form 5500.
Asset allocation questions for large          available for 2007 plan year filings, i.e.,        The Department understands that
 defined benefit plans (1,000 or more         filings for plan y e m beginning after         some eligible small plan filers may wan
participants] are included in Part VI.        December 3 1, 2006. To satisfy this            to wait until the implementation of the
Such plans must provide a breakdown           requirement, the Agencies proposed             Short Form 5500 for the 2009 plan year
of plan assets by type of invssbnent          giving plans covering fewer than 25            in order to avoid having to make
 (stock, investment-grade debt, high-         participants that would meet the               changes to their annual reporting
yield debt, real estate, and other).          conditions for being eligible to file the      systems and procedures for 2007 and
Information on the average duration of        Short Form 550bkeating those                   2008 pIan year filings and then adjust
combined investment-grade and high-           conditions as if they applied for 2007         them again to start filing the Short Forn
yield debt is also required. For this         plan year filings-the option of filing an      for the 2009 plan year. The above
purpose, duration may be determined           abbreviated version of the current Form        simplified reporting alternative,
using any generally accepted                  5500 Annual RetudReport for "small             accordingly, is available for plans that
methodology. Although the ESOP-               plan" filers. The abbreviated version, to      voluntarily take advantage of its
related questions will not be on the          a large extent, i s an attempt to replicate,   availability. Plans with fewer than 25
Schedule R until the s i t to the wholly
                        hf                    within the context of the existing Form        participants can instead continue to f i l ~
electronic filing system effective for the    5500 Annual Rstm/Report structure,             in accordance with the normal small
2009 plan year, the PPA-related               the information that would be required         plan rules for the 2007 and 2008 plan
questions and the asset allocation            to be reported on the Short Form 5500          year.
questions for the PBGC will be required       by allowing certain schedules to be            [il PPA-Required Actuarial Schedules
as a non-standard attachment to the           excluded from the filing and requiring         and Multiemployer Plan Reporting
Schedule R for the 2008 plan year.            only certain line items to be completed
                                              on any required schedules. Although               The remaining PPA-required changes
($) Technical and Conforming Changes          the Deparhent received a comment               in the 5500 Forms are the new actuarial
for Forms and Inshctions                      suggesting that the Agencies satisfy the       information schedules (Schedules SB
   Various other technical and                PPA requirement by instituting the             and MB), most of the questions on Part
conforming changes are being adopted          Form 5 5 0 G F for 2007 plan year              V of the Schedule R-AdditionaI
as part of the final changes to the 5500      filings, the Deparlment concluded that         Information for Multiemployer Defined
Forms.Several of the more significant         approach would not be feasible or              Benefit Pension Plans, line 18 of the
changes include: (11 Revision of the          appropriate given the costs that would         Schedule R [certain liabilities to
inshctions for the Form 5 500 Annual          have been required to modify the
                                                                                             participants and beneficiaries under t w ~
ReturnlReport and development of              current EFAST system so that it could          or more pension plans),and line 7 of th
instructions for the Short Form 5500 to       process the Form 550O-SF. Rather, with         Form 5500 (number of employers
reflect the new structure of the returns/     the additional deferral in the
                                                                                             obligated to contribute to multiemploye
reports and electronic filing                 implementation of the electronic filing        defined benefit plans).E To comply with
requirements; (21 addition of questions       requirement, the proposed simplified             6For 2008, only multimployer defined hnefit
regarding compliance with the                 reporting option using the existing 5500       pension plans will be required to answor tho new
Department's blackout notice regulation       Forms for eligible plans with fewer than
64714           Federal Register / Voi. 72 , No. 221/Friday, November 16, 20(37/ Rules anJ Regulations

 the PPA, these reporting changes for                    reports generally are not required to be      warranted without further notice and
 defined benefit and multiempioyer                       filed until the end of the 7th month          comment.
 pension plans are being implemented                     following the end of the plan year.              First, the deferral is necessitated by
 on a transitional basis under the current               Deferring the implementation date also        delays in the conwacting process
 EFAST system for 2008 plan year                         provided service providers, software          beyond the Department's control,
 annual reports. Plans required to file an               developers, and the Department                including the timing of the fiscal year
 actuarial schedule will check the                       additional time to work through               2007 budget appropriations, which
 Schedule I box on the 5500 Forms to
              3                                          electronic processing issues.                 prevented a conixact award in time to
 indicate that they are filing Schedule SB                  A significant percentage of the            build the new system to process 2008
 or MB (for plan years beginning with the                commenters on the form revision               plan year filings as contemplated in th
 2008 plan year) as an attachment to                     proposals, including several large            original rulemaking. The Agencies nov
their filing. Similarly, as to the new Part              industry groups representing plan             have, however, received the budgetary
 V and line 18 on the Schedule R, and                    sponsors and service providers, asked         authorization necessary to complete th
 the Form 5500 question for                              for a further postponement in the             procurement process, have meived
 multiemployer pIans on the total                        effective date of the forms changes, and      bids, and are actively pursuing the
number of contributing employers, as                     as a consequence, the electronic filing       process. As noted in the Department's
well as the new financial questions                     requirement. The commenters                    F Y 2008 Detailed Budget
 needed by the PBGC, filers will be                      emphasized that the PPA, including its        Documentation, availabie on the
 directed in the instxuctions to include                new reporting and disclosure                   Intmet at, t e   h
 answers to ihose questions as an                        obligations, would require many plans         Department is on track for
 attachment to the Schedule R.7                         and service providers to update existing       implementing EFASTP system on
 2. section 2520.304a-2 Electronic
                                                        information management and                    January 1,2010, to process filings for
Filing of Annual Reports                                recordkeeping systems. They also               the 2009 lan year.
                                                        pointed out the certain of the changes in         ~econcfwhen implemented, the
   The proposed revisions to the Form                   the July 22006 proposal, especially the        elimination of paper filings in favor of
 5500 Annual Returnmeport, which                        enhanced fee disclosure requirements in        elecironic filing will result not only in
include both those set forth in the                     Schedule C and the increased reporting        significant improvements in the
Agencies' July 2006 Fropod and those                    by Code section 403b) plans (described        timeliness and accuracy of information
in the Supplemental Notice to address                   below], would also require changes in         available to workers, regulators and tht
changes required by the PPA, were part                  the way plans collect and keep plan           public about employee benefit plans
 of the Agencies' move to a fully                        information.They argued that it would         and result in operational improvement
 electronic filing and processing system                be particularly burdensome to require          and cost savings, a direct goal of the
to replace the existing largely paper-                  plans to transition to the new Form            Resident's E-government initiative. bu
based EFAST system. As part of that                      5500 annual reporting obligations,            it will also be used to fulfill informatio
 initiative, the Deparbnent published the               incIuding the move to the wholly               collection and disclosure requirements
Elecbonic Filing RuIe, establishing an                  electronic filing system, at the same          of the PPA, many of which apply forth
electronic filing requirement for the                   time as i h ~ were working to comply
                                                                       y                               2008 plan year.Thus, additional delay!
Form 5500 Annual ReturnIReport and                      with new PPA requirements. Also,              would negatively impact orderly and
the Form 5506SP for plan years                          complications with the procurement            cost-effective integration of the new
beginning on or after January 1,2008.71                 process and delays in completing the          W A requirements and the new EFAST
FR 41359. In adopting the final                         2007 fiscal year appropriations               system, in li t of the PPA's deadIines.
Electronic Filing Rule, the Department
responded to public comments seeking
                                                        impacted the timifig of the EFAST2
                                                        conbact award.
                                                                                                          Third, ishing the deferral of the
                                                                                                      effective date on an interim basis with
a postponement in the move to a wholly                     The Department continues to believe        an opportllnity for comment not only
elemonic filing system by agreeing to a                 it is important for plans, service            could potentially interfere with the
deferral of the electronic filing mandate               providers, and the Agencies to have an        contracting and budget process, but aIs
for one year from the 2007 plan year to                 orderly and cost-effective m i a t i o n to   could also harm plans by leading them
the 2008 plan year.The Department                       the EFASTP electronic filing system.          to delay preparing for the move to the
agreed to the deferral in order to ensure               The Department, in conjunction with           new system, when it is not practical to
an orderly and cost-effective migration                 the other Agencies, has decided to defer      implement the new system either earlir
to an electronic filing system by both                  for an additional on0 year the                or later.
the Department and annual report filers.                implementation of annual reporting                Accordingly, under the final
Under that deferral, the vast majoriv of                forms changes not mandated by the             regulation, the electronic filing
filers would have had until at least July               PPA. In determining to publish this           requirement and all of the forms
2009 to make any necessary adjusments                   deferral in final form,the Department         changes, except for those mandated by
to accommodate the electronic filing of                 considered section 553 of the                 the PPA discussed in this Notice and
their annual report because annual                      Adminisbativs Procedure Act (APA),            the Forms Revision Notice, wiII becom~
                                                        which requires that an agency provide         effective for all annual report filings
question 7 on the 2009 Form 5500        a               for notice and comments prior to              made under Part 1 of Title I of EHSA
nonst&d        attachment),as mandated by the PPA. promulgating substantive mles does not             for plan years (reporting years for non-
but in 2009 and forlowing yeam, ali mdtiempioyer        apply when an agency, for good cause,         plan filings) beginning on or after
plans will b required to answer the quastion as
part of the electronic filing of the F m 5500, as       unless it determines that such                January I,2009. To effectuate the
proposed i the July 2006 Proposal.
           n                                            procedures are impractical, unnecessary       deferral of the electronic filing
  7Bscause the 2007 f o m will not include the          or contrary to the public interest. 5         requirement, this final rule includes an
new PPA required questions,a caution was a d d d        U.S.C. 553(b)(A) and (B).  The                amendment to the Eleckonic Filing Rul
to the 2007 Fomi 5500 instructions to alert shon        Department has determined that in             published in the Federal Register on
plan year filers required tu wmplete tho Schedule
SB, Schedule MB or the new Schedule R qusstions         order to effectuate a n orderly rni-gation    July 21, 2006. Specifically, this final
that they will haw to wait until the 2008 Forms and to the ITASTI system, a deferral of tbe           rule amends the Department's
instructions are publicly available for uso for filing. final rule for one additional year is         regulation a t 2 9 CFR 2520.104a-2 to
               Federal Register / Vol. 7'2, No. 221 /Friday, November 16, 2007/ Rules and Regulations                             6473

provide that the electronic filing        Department has added the model notice                  administrative burdens with respect to
requirement is applicable for plan years  as an appendix to section 2520.104-46.8                the operation of the plan; and (31 the
beginning on or after January 1,2009.     5.Section 2520.104&10                                  application of the statutofy reporting
   Under this find rule, the vast majority                                                       and disclosure requirements would be
                                             Section 104(b)[3) of ERISA provides                 adveme to the interests of plan
of filers will now have until at least July
                                          in part that, each year, administrators
2010 to complete any necessary                                                                   participants in the aggregate. For
                                          must furnish to participants and                       purposes of Title I of ERISA, the filing
adjustments to accommodate the non-       beneficiaries receiving benefits under a
PPA required changes to the form and                                                             of a completed Form 5500 Annual
                                          plan SAR materials that fairly                                                     h
                                                                                                 ReturnIRepori, including t e filing by
those required for elecbonic filing of    summarize the plan's annual report.                    eligible plans of the Short Form 5500, i
their annual report because annual        Section 2520.104b-10 sets forth the                    accordance with the insb-uctions and
reports generally are not required to be  requirements for the SAR used to satisfy               related regulations, generally would
filed until the end of the 7th month      &at requirement and prescribes formats                 constitute compliance with the
following the end of the plan year.       for such reports. The regulatory                       simplified report, Iimited exemption
                                          amendments described in this Notice do                 andtor alternative method of
 3. Section 2520.1 0 4 4 4                not include any change to the SAR                      compliance in 2 9 CFR 2520.103-1. The
   Section 2520.104-44 and the current    content requirements. In order to                      findings required under ERISA section:
Form 5500 Annual ReturnlReport            facilitate compliance with the SAR                     104(a][3)and 110 relating to the use of
instructions provide for limited          requirement for Short Form 5500 filers,               the revised 5500 Forms as alternative
reporting forpension plans that           however, the Department is updating its                methods of compliance, simplified
exclusively use a tax deferred annuity    moss-referenceguide to correspond the                 report, andlor limited exemption f o rm
                                          l n items of the SAR to the relevant
                                           ie                                                   the reporting and disclosure
arrangement under Code section            h e items on the Form 5500 and Short
403m){l), custodial accounts for                                                                requirements of Part '1 of Subtitle 3 of
                                          Form 5500. The cross-reference guide,                 Title I of ERISA are set forth below. In
regulated investment company stock        as before, would continue to be an
under Code section 403 bI(71, or a                                                              revising the 5500 Forms and making th
                                          appendix to section 2520.104b-10.                     amendments in this rulemaking, the
combination of both. The exemption in
section 2520.104-4&)(3] is being          C.Findings on the Revised 5500 Forms                  Department has attempted to balance
eliminated, with the result that Code     as a m t e d Exemption and Alternative                the needs of participants and
section 403@]pension plans subject to     Method of Compliance                                  beneficiaries and the Department to
Title I will now be treated the same         Section 104(a)(2](A) of the Act                    obtain information necessary to protect
                                                                                                ERISA rights and interests with the
under the regulations as any other Title authorizes the Secretary of Labor                      needs of administrators to minimize
I pension plan for purposes of the        (Secretary)to prescribe by regulation
                                          simplified reporting for pension plans                 costs attendant with the reporting of
annual reporting requirements under                                                              information to the federal government.
Title I of ERISA.                        that cover fewer than 100 participants.
                                          Section 104(a](3)authorizes the                       The Department makes the foIlowing
4. Section 2520.104-46                    Secretary to exempt any welfare plan                  findings under sections 104(a)(3)and
                                          born all or part of the reporting and                  110 of the A d with regard to the use of
   In accordance with the Department's disclosure requirements of Title I of                    the revised 5500 Poms as a simplified
authority under section 104[a)(Z)(A) and ERISA or to provide simplified                         report, alternative method of
¶04(a)[3)of ERISA, the Deparhent has reporting and disclosure if the Secretary                  compliance, andlor limited exemption
adopted, at 2 9 CF'R 2520.104-41,        finds that such requirements am                        pursllant to 29 CFR 2520.103-lfb).
simplified annual reporting              inappropriate as applied to such plans.                   The use of the revised 5500 Forms is
requirements for pension and welfare     Section 110 permits the Secretary to                   consistent with the purposes of Title I
benefit plans with fewer than 100        prescribe for pension plans alternative                of EIUSA and provides adequate
participants. In addition, the           methods of complying with any of the                   disclosure to participants and
Department, at 29 CFR 2520.10446, has: reporting and disclosure requirements if                 beneficiaries and adequate reporting to
prescribed for such small plans a waiver the Secretary finds that: (I] The use of               the Secretary. While the information
from the requirements of ERTSA section the alternative method is consistent                     that would be required to be reported c
103(a)(3)(A]to engage an IQPA and to     with the purposes of Title I of EKISA,                 or in connection with the revised 5500
include the opinion of the IQM as part provides adequate disclosure to plan                     Forms deviates, as before, in some
of the plan's annual report. The waiver  participants and beneficiaries, and                    respects, from that delineated in sectio
of the IQPA requirements for pension     provides adequate reporting to t e         h           103 of the Act, the information needed
plans was conditioned, among other       Secretary; (2) application of the                      for adequate disdosure and reporting
requirements, on enhanced disclosure     statutory reporting and disclosure                     under Title I is required to be included
in the Summary Annual Report [SARI       requirements would increase costs to                   on or as part of the 5500 Forms.
provided to participants and             the plan or impose unreasonable                           The use of the 5500 Forms will reliei
beneficiaries. In that regard, the                                                              plans subject to the annual reporting
                                             The FPA requires defined benefit plans to          requirements f o increased costs and
Department prepared a model notice       provide an Annual Funding Notico for plan years
that plans could use to satisfy the      begiming aftm January1,2008. Under the PPA.            unreasonable administrative burdens b
enhanced SAR disclosure conditions.      plans that provide an Annual Funding Wotiw will        providing a standardized format that
                                         no longer have to provide an SAR. The Department
That model notice has been available at has a separate regulatory initiative regarding the      facilitates reporting, eliminates
                                                                                                duplicative reporting requirements, an1
the EBSA's Web site at http://           PPA-requirod Annual Funding Notice. The
                                                                                                simplifies the content of the annual
www, In order to provide    D e p m e n t anticipates that rulemaking will
                                         provide &at die e n h a n d disclwure required to ke   report in general. The 5500 Forms are
plan administrators with additional      eligible for the waiver of the rquimment for an        intended to reduce further the
access to the model notice and to        audit by an independent qualifiud public
                                                                                                administrative burdens and costs
hcilitate compliance with the audit      accountant be includsd i the Annual Funding
                                         Notice for small pension plans providing that notice   attributable to compliance with the
waiver eligibility conditions, the       instead of an SAR.                                     annual reporting requirements.
64716                  Federal Register / VoI, 72, No, 221 /Friday, November 16, 2007/ KuIes and Regulations

   Taking i t account the above, the
Department has determined that
application of the statutory annual
reporting and disclosum requirements
                                                                         effect on the economy of $100 million
                                                                         or more, or adversely and materially
                                                                         affecting a sector of the economy,
                                                                         productivity, competition, jobs, the
                                                                                                                                      Forms Revision Notice being publishe
                                                                                                                                      simultaneously with this EnaI rule, the
                                                                                                                                      Department's assessment pursuant to
                                                                                                                                      the Executive Order combines the
without the availability of the revised                                  environment, public health or safety, or                     regulatory amendments and the form
5500 Forms and the new Schedules SB                                      State, local or tribal governments or                        revisions, lreating these changes as a
and MB,would be adverse to the                                           communities (also referred to as                             coordinated regulatory action. The
interests of participants in the aggregate.                              "economically significant"); 12) creating                    Department's assessment, desaibed
The revised 5500 Forms provide for the                                   serious inconsistency or otherwise                           below, takes into account the public
reporting and disclosure of basic                                        interfering with an action taken or                          comments received in response to the
financial and other plan information                                     planned by another agency; (3)                               July 2006 Proposal and the
described in section 103 of ERISA in a                                   materially altering the budgetary                            Supplemental Notice,which are
uniform, efficient, and understandable                                   impacts of entitlement grants, user fees,                    discussed in detail in the preamble of
manner, thereby facilitating the                                         or loan programs or the rights and                           the Forms Revision Notice. That
disclosure of such information to plan                                   obligations of recipients thereof: or (4)                    discussion, to which reference is made
partici ants and beneficiaries.                                          raising novel legal or policy issues                         throughout this assessment, is hereby
   ~i&, Department has
            the                                                          arising out of legaI mandates, the                           incorporated into this assessment by
determined under section 104[a](3) of                                    President's priorities, or the principles                    reference.
ERISA that a strict application of the                                   set forth in the Executive Order.                              In accordance with OMB Circular A-
statutory reporting requirements,                                          Pursuant to the t m s of the Executive                     4 (available at http://
without taking i t account the
                  no                                                     Order, it has been determined that this                  b/circulars/
revisions to the 5500 Forms would be                                     regulatary action is Likely to have an                       a004/a-4.pdj), Table 1 below depicts ar
inappropriate in the context of welfare                                  mnual effect on the economy of                               accountirig statement showing h e
plans for the same reasons discussed                                     approximately $100 million. Therefore,                       haarhnent's assessment of the net
above [i.e., the streamlined foms reduce                                 this action is being treated as                              a n k l cost reduction associated with
filing burdens without impairing                                         "economically significant" and subject                       the provisions of the finaI rule and
enforcement, research, and policy                                        to O m review under section 3(f)(l)of                        forms revisions. Over the next ten years,
needs, while at the same time providing                                  Executive Order 12886. The Department                        the Department anticipates an average
adequate disclosure to participants and                                  accordingly has undertaken to assess ?he                     annual reduction in costs of $94 millior
beneficiaries).                                                          costs and benefits of this regulatory                        when using a 3% discount rate as
D. Regulatory Impact Analysis                                            action in satisfaction of the applicable                     suggested by OMB Circular A-4.' As
                                                                         requirements of the Executive Order and                      described more fully b l o w , the
Executive Order 12866 Statement                                          provides herein a summary discussion                         Department believes that the impact of
   Under Executive Order 22866, the                                      of its assessment.                                           these chanees will affect individual
Department must determine whether a                                        The amendments contained in this                           employee Lnetit plans disparately,
regulatory action is "significant" and                                   f n l rule conform the annual reporting
                                                                          ia                                                                      on
                                                                                                                                      de~endina their individual
therefore subject to the requirements of                                 and disclosure regulations promulgated                       ci<ccums&ces. While most employee
the becutive Order and review by the                                     under Title I of ERISA to final revisions                    benefit plans are likely to experience a
Office of Management and Budget                                          to the 5500 Forms and instructions                           decrease in costs, some plans may see
(OMB). Section 3 [fl of Executive Order                                  being issued sirnulianeousIy with this                       an increase in costs due to these rules.
12866 defines a "significant regulatory                                  f d rule. Inasmuch as the amendments                         Further information about the relative
action" as an action that is likely to                                   contained in this final rule implement                       increase or decrease in costs likely for
result in a rule's (1) having an annual                                  the forms revisions contained in the                         particular plan types is described belor

                                                                       :STIMATED COSTREDUCTION FROMTHE CIJRRENT                                 REPORTING
                                                                                                                                                        REQUIREMENTS                        T
                                                                         THE 2W19 REPORTING REQUIREMENTS
                                                                                     [In millions]

                                                                                            I PT
                                                                                               1 1



                                                                                                                                                                    I         Perid

    Annuaiizd Monetized ......................................................                                                                                          2007 and later.
    ($millions/year) .................................................................                                                                                  2007 and later.
    Annualized Quantified ......................................................
    Qualitative .........................................................................
    Annualized Monetized ......................................................                                                                                         2007 and later.
    [$millions&ear) .................................................................                                                                                   2037 and later.
    Annualized Quantified ......................................................
    Qualitative .........................................................................

  9A 7% units discount rate inaoases ihe estimate                         annualized estimates are based on aggregate cost            2008, and $97.4 million, starting in 2009   (all in
of the average m d reduction to $97 million. Both
                u                                                         savings of $25.6 million i 2007, $30.2 million in
                                                                                                   n                                  200[) BolIars).
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64718           Federal Register l Vol. i'2, No. 221 /Friday, November 16, 200

 secured, easy to value assets and (21
permitting all plans with fewer than 25
participants to file the Short Form 5500,
regardless of wh~ther plan's
 investments were so invested.
    As described more fully in tbe
                                                multiemployer plans and for plans with
                                                difficult-to-value assets.
                                                   Scope of Code section 403(b)plan
                                                reporting. The Department considered,
                                                but rejects, alternatives, suggested by
                                                cornmenters, to its proposal regarding
                                                expanded reporting requirements for
                                                                                           the need for additional disclosure in

                                                                                            likely impose.                        1
                                                                                           this area against the cost to the replat d
                                                                                            entities that additional disclosure wou d

                                                                                            Benefits and Costs
                                                                                               The Department beIieves that the
 preamble to the Forms Revision Notice,         Code section 403(b) plans that would       benefits to be derived from this final
 the benefits to be gained through the         have retained the current limited           regulatory action,incIuding the final
 ability to exercise oversight of small        reporting requirements for such plans or    amendments to the reporting regulatio
 glans that invest in other types of assets     modified the proposai to permit such       and the final adoption of forms
 justifies not diminishing the c m n t          plans their current exemption from         revisions, justify their costs. The
 burden for plans with fewer than 25            annual audit and accountant's opinion      Department further believes that thew
 participants by having them continue to        requirements. The Department rejects        revisions to the existing reporting
 file the same information currently            these alternatives because they would      requirements will both reduce aggrega
required on those assets. Permitting            significantly reduce or eliminate the      reporting costs and enhance protectior
plans with employer securities or other         benefit that will flow from expanded        of ERISA rights. The Department
assets that are difficult to value to file      reporting by Code section 403(b) plans,     conducted a thorough assessment of tE
the limited information. in the Short           which the Department believes will          costs and beneFrts of these changes as
Form 5500 would be inconsistent with           result in significant improvements in        originally proposed. The major
important policy objectives, which are         the adminisbation of Code section           proposed changes from the July 2006
underscored by the PPA's emphasis on           403(b) plans covered by Title I of          Proposal that are promulgated in this
 increasing plan kansparency, more             ]ERISA, reducing the rate of vioIations     final rule essentiaIly as proposed
 accurately measuring plan assets,             currently being found in invest' ations     include: (2) Ado tion of the Short Fon
 increasing participant control over the       of Coda section 403(b) plans an?            550D; (2) rernov8 of the IRS-only
 disposition of employer securities in         increasing benefit security for such        schedules; and (3) adoption of fuller
 defined contribution plans, and               plans' participants and beneficiaries.      reporting requirements for Code sectio
 expanding the annual reporting                   Scope of Schedule C reporting            403 @) plans.
requirements for multiemployer plans.          obligations.The Department considered          Changes proposed in the
Valuation of difficult-to-valueassets,         and rejects several alternative             Supplemental Notice that are being
such as employer securities, may                approaches to the reporting of direct      finalized herein without substantial
provide an opportunity for abuse or             and indirect compensa~on the  on           change include: (1)adoption of separai
mismanagement that is not lessened by           Schedule C prior to developing the final   Schedules MB and SB to replace
a plan's smaller size. The additional           decisions embodied in this action.         Schedule B; and (2) adoption of the
oversight possible through increased            Specifically, the Department considered    Short Form 5500 as one method of
reporting responsibilities justifies the       and rejects alternatives that would have    compliance to effectuate the PPA's
additional burden on such plans.               limited reporting of indirect               directive to establish simplified
                                               compensation, including requiring           reporting for plans with fewer than 25
    In any event, as described in the          reporting of only indirect compensation     partici ants.
Forms Revision Notice, the Department          received by providers with direct              The $iscursion below under Benefit2
estimates that 95 percent of single-           service relationships with the plan;        and Costs presents the Department's
employer non-403(b)plans will qualify          adding a "de minimis" exception for         assessment of this final action as a
to fibthe Short Form 5500, about 75            reporting cash compensation under a         whole and provides discussion of the
percent of which will be plans with            certain dollar amount; and reinstating      major aspects of the f n l action that
fewer than 25 participants. Expanding          the "top 40" provider limitation. The       conbibuted to the assessment. The
Short Form filing eligibility to the           Department assessed the potential cost      discussion also makes note of some of
remaining plans with fewer than 25             savings of these and other alternatives     the modifications to the proposed
participants would only affect about           that would have reduced the amount          changes that are incorporated into the
25,000 additional plans. Further,              and detail of information on indirect       final action and describes the extent to
restricting Short Form 5500 eligibility        compensation required to be reported        which those modifications have affecte
based on the nature of a plan's asset          against the benefits to be gained through   the Department's assessment of this
investments will not deprive those non-        increased kansparency regarding             action's costs and benefits.
eligible small plans of simplified annual      compensation paid to plan service              Benefits.As previously described in
filing methods. Those small plans will         providers by third parties. The             the July 2006 Proposal and in the
still be entitled to use the other             Department believes that the incwased       Supplemental Notice,the regulatory
simplified reporting available to them         transparency that will flow from the        amendments and revised versions of t h
under the Form 5500 Annual Return/             indirect compensation reporting             5500 Forms announced today will
Report. Taking these other simplified          required by this final rule will assist     provide a standardized, streamlined
options into account, we estimate that         plan fiduciaries in assessing the value     alternative means of compliance with
this option would only have saved filing       and appropriateness of their service        applicable statutory reporting
plans approximately $4.8 million per           provider relationships, making more         requirements and wilI also provide
year,starting in 2009.31 have
                           We                  efficient kansactions possible and          appropriate simplified annual reports
concluded that this is a reasonable cost         reventing abuses that might arise         and exemptions under section 104[a)[2
to meet the important policy goal of           %ough receipt of indirect                   and (3) of ERISA. The revised Form
ensuring proper disclosure for smaIl           compensation. The Department's              5500, the Short Form 5500, and their
                                               modification of its proposals on            schedules will ease pIan administraton
  "Due to the staggered implemmtstim of tho    Schedule C disclosures, described in        compliance with reporting requiremenl
form changes,the savings in 2007 md 2008 are   detail in the Forms Revision Notice,        and greatly enhance the utility and
estimated t o ! about $250,000 annually.
              m                                represents a compromise that balances       accessibility of information reported to
              Federal Register / VoI, i' , No. 221 1 Friday, November 16, 2001 /Rules and Regulations
                                        2                                    7                                                 64719

 the government, participants and              of harm through abuse or                       to the Schedule C an alternative
beneficiaries, and others. Together with       mismanagement and can benefit                  disclosure option. Where the plan
the Department's lanned program for            through the reduced filing costs. The          administrator has received required
 assisting filers in i e preparation and       eligibility conditions for filing the Short    disclosures of sIigible indirect
demonic submission of filings, the            Form 5500, including the requirements           compensation, the plan adminiskator
revised 5500 Forms will give plan             relating to security and valuation of the       now has the option of reporting the
administrators clear guidance and a           plan's investments, ensure both                 person providing the required
 supportive, routine mechanism for            adequate disclosure to participants and         disclosures as an alternative to having
satisfying their reporting obligations.       beneficiaries in plans using the Short          the amount of the eligible indirect
The w i s e d 5500 Forms also are             Form 5500 and adequate annual                   compensation reported on the Schedul
 designed so that the Deparbnent can          reporting to the Agencies. Small plans          C itself. These modifications reduce
efficiently capture the information           that are not eligible to file the Short        reporting burden for indirect
electronically and assemble it into an        Form 5500 remain eligible to file               compensation, especially the potential
 electronic database so that the               simplified reports under currently             burdens associated with indirect
 information can be processed and              available methods of filing, such as           compensation that is difficult to track
 analyzed in many beneficial ways.             filing Schedule 1instead of Schedule H         on a plan-by-plan basis [e.g.,"float" an
These include monitoring compliance            and eligibility for the waiver kom filing      "soft dollars"). As discussed above, th
with ElUSA's reporting and otbsr              ihe report of an independent qualified          Department has also clarified that h
requirements; targeting and carrying out      public accountant by virtue of enhanced
                                              .     .                                         and welfare plans exempt under 2 9
prompt and effective enforcement               bondin&                                        2520.10444 are not required to
actions; informing participants and                            of
                                                  Eiim~nation the special reporting           Schedule C. The Deparbnent be1
beneficiaries of the characteristics,         rules for Code section 403181 wlans. As        that the final forms revisions for
operations, and financial status of their     notedbelow, this mvision'is ixpected to         Schedule C, which will improve
benefit plans; producing statistics on the    increase reporting costs for affected           disclosure of both direct and indirect
employee benefit system,monitoring            plans. The Department believes,                compensation without overburdening
trends therein, and informing the             however, that these added costs are            the efficient delivery of necessary
public; and assembling information and        justified by the need to better protect the    services to plans, will provide
conducting research that advances             participants and beneficiaries of these        substantial benefits to plans and their
knowledge and fosters the formulation         plans. As discussed in the preamble to         participants and beneficiaries. Plan
of sound public policies toward               the Notice of Adoption of Forms                administrators, the Department, and t   h
 employee benefits.                           Revisions, increased reporting by Code         public will be better able to monitor th
   Removal of the 1RS-onlyschedules.          section 403b) plans is anticipated to          compensation arrangements of plan
As explained in the Forms Revision            provide substantial benefits through           service providers, better able to
Notice published simultaneousIy with          better administration of those plans and       understand the impact of fees on plan
this final rule, the elimination of the       increased oversight by the Agencies and        assets, and better able to evaluate the
IRS-only schedules (Schedule E and            the public. Amending the annual                value of purchased services. In a
Schedule SSA) beginning with returns/         reporting requirements to place Code           it is expected that plan administrators
reports for the 2009 plan year facilitates    section 403(b) plans on par with other
the change to mandatory electronic            ERISA-covered pension plans will               should be better able to negotiate fair
filing, which is expected to yieId                                                           prices for necessary plan services.
                                              achieve these results. The Department
substantial benefits.Title I information      anticipates that most smalI Code section          Creation of separate actuarial
that was previously collected in the          403b) plans will be eligible to use the        schedules for single-employer defined
eliminated schedules will be collected        Short Form 5 5 0 0 , and thus will only        benefit plans and multiemployer
in other parts of the 5500 Forms. The         have to meet that limited filing               definedbenefit and certain money
Department understands that the rtiS is       obligation. The result of this change is       purchase plans (Schedules SB and
currently considering whether to              therefore only a modest increase in the        to reflect PPA changes in funding and
continue to collect some of the omitted       annual reporting burden on small Code          annual reporting requirements.Certai
IRS-only information via other Treasuy        section 403&) Inn filers.                      changes to Schedule B were proposed
or IRS vehicles. The impact of the                Schedule c j e and cornpensotian           the July 2006 Proposal. After passage
removal of these schedules, therefore, is     reporting. In developing the final             the PPA, these proposals for Schedul
anticipated to reduce reporting costs, as     Schedule C fee and compensation                were revised in the Supplemental
estimated below, while preserving             reporting requirements,the Department          Notice to effectuate the additional
ERISA rotwtions.                              modified certain aspects of the proposal       reporting requirements of the PPA, w
   ~sta8ishment a Short Form 5500
                    of                        as it concerned additional reporting of        the Schedule B being divided into t   w
for certain small plans. The Short Form       indirect compensation and fees paid to         separate schedules, one for
5500 will substantially reduce reporting      plan service providers on Schedule C to        multiemployer defined benefit plans
costs (as estimated below] for eligible       reach a balance between the cost to            and certain money purchase plans (the
filers, while continuing the collection of    plans and providers of gathering the           Schedule MB) and another for single-
sufficient information to preserve ERISA      required information and the need for          employer defined benefit plans (the
protections, and satisfying the               increased emsparency regarding such            Schedule SB]. noted below, the
enforcement, research, and regulatory         fees and their potential effect on plans.      adoption of this change is expected to
needs of the Agencies, as well as the         The final form, as did the proposal,           decrease reporting costs for single-
disclosure needs of participants and          keeps the existing $5,000threshold for         employer plans and slightly increase
beneficiaries. The small single-employer      reporting direct and indirect                  reporting costs for multiemployer plans
plans targ~ted eligibility (those that
                 for                          compensation, but now has separate             The Department concludes, however,
invest solely in secure assets that are       line items for reporting direct and            that the small cost increases for
held or issued by regulated financial         indmct compensation to reduce the              multiemployer plans are justified by the
institutions and have a fair market value     possibility of duplicative reporting. In       need to better monitor plan funding.
that is easily determined) are less at risk   addition, the final forms revision adds        This information is needed by
64720              Federal Register / Val. 72, No. 221 1Friday, November 16, 2007 /Rules and Regulations

participants, beneficiaries, and the                         revisions wiIl increase reporting costs              access important information
Agencies, particularly the PBGC, to                          for affected plans. The PPA q u i r e s              instantaneously and without any
improve their ability to assess the                          rnultiemployer defined benefit plans to              additional costs involved, as plans mu:ii
financia1 condition of the plan.                             report this additiona1 information,                  be capable of electronic public
  Additional data elements reported on                       which i s needed by participants,                    disclosure beginning with the 2009
Schedule R. Consistent w t the PPA,
                           ih                                beneficiaries, and the Agencies,                     reporting year.
the new Schedule R will require                              particularly the PBGC, to assess the                    Costs. Although the costs to plans of
increased reporting by multiemployer                         fmmcial risk posed to the pian by a                  satisfying their annual reporting
defined benefit pension plans regarding                      financial collapse or withdrawal of one              obligations will be lower under these
contributing employers, multiemployer                        or more contributing ernployers.lz The               regulations than they would be under
plan mergers, withdrawing employers                          need for and benefit of these PPA                    regulations previously in force, they
and their withdrawal liabilities, and                        required disclosures are essential to                will still be substantial. As shown in
participants for whom no employer                            making accurate assessments of the                   Table 2 below, the aggregate cost of such
makes cantributians. Large single-                           potential risks to which these plans are             reporting under the regulations and
employer and multiemployer defined                           exposed.                                             forms previously in force is estimated to
benefit plans with 1,000 or more                               Electronic filing and Web site display             be $425.34 million annually, shared
participants will also have to report on                     of certain Form 5500 information. T h e              across the 780,000 filers subject to the
their plans' asset allocations, and the                      requirement to post information                      f l n requirement. The Department
duration of debt portfolios. These Latter                    electronically will give participants and            estimates that ths regulations and fom3
data elements are requested by the                           beneficiaries an additional. method of               revisions announced today will impos~
PBGC and are not part of the PPA                             monitoring the financial status of h e i r           an annual cost burden on the 780,000
requirements. As noted below, them                           pension plans. They will be able to                  filers of only $327.98 million.13
          TABLE                                     PREVIOUSLY EFFECT NEW REQUIREMENTS
                                                            IN       VS.

                                                                                                       Total m s in dollars               Total costs in hours
                                                                                                           (in mllbns)                        (in miliions)
Reporling Requirements Prior to this Action .......................................................                     $425.34                                    .2
Change in Costs due to ?hisAction (as of 2009 Plan Year Fitings) ...................                                    - 97.36                                 -1.24
Reporting Requirements in effect for Plan Year 2009 Filinqs ............................                                 327.98                                   4.28
  Note: Number of affected plans: 780,000.

   Because t h i s final action makes                        doing so, the Department took account                and $59 for plan sponsors, the
substantial changes to the requirements                      of the fact that various types of plans              Depament estimates that this revisior!
previously in effect, filers will                            would bs affected by more than one                   will lower the aggregate annual
experience some one-time transition                          revision and that the sequence of                    reporting cost by an estimated $39.34
costs. The Department examined similar                       multiple revisions would create an                   million.14
kansition cost issues in connection with                     interaction in the cumulative burden on                 Establishment of a Short Form 5500
the last major revision to the Form 5500                     those plans. For example, both large and             for certain small plans. An estimated
Annual ReturnlReport, which was for                          small Code section 403(b] plans are                  594,000 of the 629,000 total small plan
plan years beginning in 1993. See 65 FR                      affected by the elimination of the                   filers will be eligible to use the Short
5026 (Feb. 2,2000). Based on                                 limited reporting rules for section 403@)            Form 5500. Of these filers, 9,000 plans
information provided by plan service                         plans, but small Code section 403m)                  are estimated to be smalI Code section
providers and Form 5500 Annual                               plans are aIso affected by the                       403(b) plans that will also be subject to
ReturnIReport software developers at                         introduction of the Short Form 5500.                 increased filing requirements. Their
that time, the Department concluded                          The Department quantified the                        annual reporting burden is estimated tl
that such costs are generally loaded into                    individual revisions as described below.             increase, as a result, by about $1.44
the prices paid by plans for affected                          Removal of the 1AS-only schedules.                 million. For the remainder of the Short
services and products, spread both                           Elimination of the IRS-only schedules                Form 5500 eligible plans (585,000
across plans and across the expected life                    beginning with filings for the 2009 plan             plans), the annual reporting burden is
of the service and product changes. The                      year will reduce costs on the whole,                 reduced by $72.33 million. This leads i
Department's estimates provided here                         even though some of the information                  an estimated aggregate saving due to th
are therefore intended to reflect such                       previuusly collected in those schedules              Short Form 5500 of $70.90 million
spreading and loading of these                               will continue to be collected by the                 (877,000hours) annually.
transition costs. That is, the gradual                       Department elsewhere in the forms and                   Elimination of the special reporting
defrayal of the transition costs is                          schedules. The net effect of these                   rules for Code section 403(b] plans.
included in the annual cost estimates                        changes wilI be to reduce the total                  While approximately f 6,000 Code
bere.                                                        burden for 198,000 affected filers by                section 403[b] plans will be subject to
   The Department has analyzed the cost                      530,000hours. AppIying an hourly                     increased reporting requirements, abou
impact of the individual revisions. In                       labar rate of $86 for service providers              9,000 small Code section 403(b)plans

  'ZTho addition of some of tho new data elements              13   The cost and burdan hour estimates for tho    model and c m ~ t with respect to the burden
was included in the July2006 Proposal based on               baseline as well as for the new reporting            estimates. More derail about the cost astimates car
the apparent detarioration o f the financial mntlition       requirements are much lower than tha estimates       be found in the seaion "Assumptions,
ofn~ultiemployer  plms aud the PBGC's belief ill the         reportad in tho July 2006 Proposal and the                              ,
                                                                                                                  M e t b o d o l r ~and Uncertainty."
need to nionitor better companies that are major             Supplemental Notice. In the estimates reported in       "The appropriaten~ss the labor rates used in
contributors to those plans.                                 this document, tl Department is able to taka
                                                                              Is                                      calculations, as well a on other 8ssumptions.
                                                             advantage of updated data, some chnnges to the       is discussmd in tho Terhnid Appendix.
                       Federal Register / Vol. 72, No. 221 /Friday, November 16, 2007/ Kules and Regulations                                                                              647

will be eligible to use the new Short                                           that this will increase the annual                              defined benefitplans) will experience
Form 5500 and will also be eligible for                                         reporting cost by an estimated $47,000.                         an estimated increase in burden of up o
waiver of the audit requirement. The                                            On the whole, replacing Schedule B                              three hours.
impact of the changes on the small Code                                         with new Schedules SB and MB will                                 Adoption of various technical
section 403fi) plans is quantified above.                                       decrease the -%ate       totaI annual                           revisions and other miscellaneous
Seven thousand large Code section                                               burden by 51,000 hours, or by an                                revjsions to the Form 5500 Annual
403fi) plans will be required to file a                                         estimated $4.31 million.                                        Raturn/Report to improve and clarifi
Form 5500 Annual Return/Report                                                     Revision of Schedule C (Service                              existing reporting requirements. Sever 1
similar to those filed by Code section                                          Provider Information).Schedule C                                additional questions regarding insurer
4 D l ( k ) plans and will be subject to the                                    revisions are intended to clarify the                           hat to supply information, plan
audit requirement. Annual reporting                                             reporting requirements and improve the                          hilures pay benefits due, schedules
costs for large Code section 403(b) plans                                       information plan officials receive                              of delinquent participant contribution ,
will increase by an estimated $7.7                                              mggarding            be@ received                               blackout compliance, mutual fund
million (100,000hours).                                                         plan service providers- The                                     dividends, fees paid to adminiSkative
   Establishment of Schedules SB and                                            reporting requirements are expected to
MB to replace Schedule B. Schedule B                                            increase the reporting burden for                               servic~  providers, and the number of
will be replaced by two separate                                                Schedule C filers by about $2.44                                con~ibuting    employers, as well as
schedules: A Schedule SB for single                                                                                                             additional pension plan characteristic
                                                                                million. This increase is partly offset by                      codes, wsre added to the         5500 a
employer {includingmultiple-em Ioyerl                                           a reduction in burden of $475,000,                              Schedules A, H,and I. Together these
defined benefit plans and a ~ c h e c k l e                                     resulting &om the Department's
MB for multiemployer defined benefit                                                                                                            h n g e s are estimated to add $6.68
                                                                                clarification that welfare plans that meet                      million [85,000             aMual
plans and certain money purchase                                                the condiiions of 29 CFR 2520.104-44
plans. Overall costs will be reduced by                                                                                                         _p_ting cosll and affsct appmximatel
                                                                                are not required to file Schedule C.                            187,000plans.
having two separate schedules, each of                                          Jointly, these changes are anticipated to
which i s tailored more precisely to a                                          add annual repodng costs of $1.97                                  E1ecfromRIc Filing and Website Displa
separate targeted group of filers. The                                          million (25,000 hours) for 48,000                               of Form 5500 Information. These
42,000 filers of Schedule SB will                                               affected plans.                                                 requirements are not anticipated to ad
therefore see a total annual burden                                               Addifionol Data Elements on                                   any additional costs, as plans are
reduction of almost 52,000 hours.                                               Schedule R. Changes to Schedule R,                              already required to be capable of
Applying an hourly labor rate of $86 for                                        which include moving b e questions                              elemonic filing and disclosure
service providers and $59 for plan                                              an ESOPs from Schedule E to Schedule                            beginning with the 2009 reporting Year
sponsors, the Department estimates that                                         R, with an offset for deleting one                              under the electronic filing rule. See 7 1
this will lower the annual reporting cost                                       question,are expected to add $828,000                           FR413.59 U U ~ Y 2006). The costs an
by an estimated $4.36 million for                                               in costs (11,000hours) for 91,000                               benefits of eIectronic filing have
Schedule S3 filers. The 2,300 Schedule                                          affected filers.15 On average, the                              previously been assessed in connectio
MI3 filers will see a total burden                                              reporting burden of affected plans is                           with promuIgation ofthat rule.
increase of 600 hours because these                                             estimated to increase by less than 7                              Table 3 contains a summary of the
fi1er.s will be required to complete new                                        minutes per plan. While some of the                             changes in costs, expressed both in
items. Applying an hourly labor rate of                                         affected plans may experience only                              dollars and in hours, allocated to the
$86 for service providers and $59 for                                           minimal burden increases, others                                changes outlined above and the numbe
plan sponsors, the Department estimates                                         (particularly very large multiemployer                          of employee benefit plans affected.
       TABLE                    TO             REQUIREMENTS: DOLL4RS, HOURS, AND AFFECTEDPLANS

                                                                                                                                 Change in          in Change in costs in        Number of af-
                             Revisions effective for 2009 plan year filing                                                            do!tars                  hours
                                                                                                                                    (in rn~lllms)                                fecied plans

Removal of IRS-Onty Schedules ...............................................................................                             -$39.34                -530,000
Short Form (small non-Code Sect. 403(b) Plans) ...................................................                                           - 72.33             - 895,000
Short Form (small Code Section 403(b) Plans) ........................................................                                            t .44               18,000
Large Code section 403(b)Plans ..............................................................................                                   7.70               100,000
Schedule MB .............................................................................................................                       007
                                                                                                                                                 .4                     600
Schedule SB .............................................................................................................                     -4.36               -52,000
Schedule C ................................................................................................................                      1.97               25,COO
Schedule FI ..............................................................................................................                      0.828                11,000
Technical and Misceflaneous Revisions ....................................................................                                       6.68               85,000
      Total                         .
               .................... ..........................................................................................               - 97.36           - 1,237,400
   Note: Some displayed numbers do not sum up to the totals due to rounding.

  The final action does not otherwise                                           requirements (such as certain small                             pensions) will remain exempt. Also,
alter reporting costs. Plans currently                                          unfunded or fully insured welfare plans                         except for Code section 403(b) plans,
exempt from annual reporting                                                    and certain sirnplifid employee                                 plans eligible for limited reporting

   '5The introduction of the Short Form 5500                                    Schedule R). This reduction i burden was
                                                                                                             n                                  R ESOP questiuns) is counted as a reduction of
eliminated the requirement of filing the Schodule                               included in ths docreme of reporting burdon due                 bucdai in wnnection w t the removal of the IRS-
R for almost 300,OW small plans previously f i l i i                            to the introduction of Ihe Short Form 5500. The                 only schedules and as an increase in burden for
Schedule R (about 94 % of all small plans filing                                moving of questions from Schedule E to Schedule                 Schedule R filers.
64722             Federd Register IVol. 72, No. 221 /Friday, November 16, 200

options (such as certain IRA-based                    requirements for plan years 2007 and                      number of service providers. The
pension plans] will continue to be                     2008 generally will be similar data items                Department separately considered the
eligible. The revised Form 5500 Annual                as are on the Short Form 5500, the items                  cost to different types of plans in
KetumlReport will retain the shcture                  to be completed are spread over several                   afFiving at its aggregate cost estimates.
that is familiar to individual and                    schedules, requiring filers to review a11                 The Department's basis for these
corporate taxpayers-& simple main                     of t e instructions to those schedules.'8
                                                          h                                                     ~stimates described below.
form with basic identifying information                Second,use of the simplified filing                        Assumptions Underlying this
necessary, along with a checklist of the              alternative for the 2007 and 2008 plan                    Analysis. The Department's analysis
schedules being filed. The structure is               years is optional. The Depariment has                     assumes that all benefits and costs wil
designed to aid filers by alIowing t e  hm            assumed that not all small plan filers                    be realized in the first year of the
to assemble and file a return customized              will take advantage of this option, given                 reporting cycle to which the changes
to their plan.                                        that it will be available only for the 2007               apply and within each year thereafter.
Form 5500 Annual Retm/Report                          and 2008 plan years.
                                                         For the 2007 filing year no other form
Changes Effective for the 2007 and 2008               changes that impacted the burden
Plan Year Filings
                                                      analysis are being made. The
   The sections above describe reporting              Department estimates a burden
changes that will become effective for                reduction due to the simplified filings
the 2009 plan year filings. As discussed              for plans with less than 25 participants
in the preamble of the Forms Revision                 of about $38.00 million (471,000 hours).
Notice, the Agencies are making some                  Assuming an additional 30 minute
changes to the reporting requirements                 transition burden for reviewing the
for the 2007 and 2008 plan year filings               simplified filing requirements, the
as mandated by the P A , along with                   estimate for the burden reduction is
adding a few new Schedule R items for                 reduced to $25.62 million (317,000
the 2008 plan year fibngs.16Plans with                hours].
fewer than 25 participants that would                    Without taking any transition burdens
meet the conditions for being eligible to             into account. the Deiartment has
file the Short Form 5500 will have the                estimated that the rkisions for the 2008
option in their 2007 and 2008 plan year               plan year will reduce the filing burden
filing of filing an abbreviated version of            by about $41.54 million (511,000 hours).
ihe Form 5500 Annual Return/Report                    Assuming an additional 30 minute
for "small plan" filers. In addition,                 wansition burden for reviewing the
defined benefit pension plans and                     simplified filing requirements, 150
certain money purchase plans wiI1 file,               minutes for Schedule SB,90 minutes for
for the 2008 plan year,the new actuarial              Schedule M3, and 60 minutes for
information schedules (Schedules SB                   Schedule R,the Department estimates
and MB, as appropriate) instead of                    that for the 2008 plan year the reporting
Schedule B. In addition, certain filers               burden will fall by $30.23 million from
will be required to answer most of the                the $425.34 million that is estimated
new questions on Schedule it                          under prior rules and forms, to an
(Questions 13 to 19 of the 2009                       aggregate burden of $395.11 rnillion.lQ
Schedule R).17
   The Department has calculated the                  Assumptions, Methodology, and
burden for the 2008 plan year returd                   Uncertainty
reports as described generally above                     The cost and burden associated with
with respect to the 2009 plan year                    the annual reporting requirement for
filings, but appxopriately modified for               any given plan will depend upon the
the difference in filing requirements.                specific information that m s be
The Department estimates that the                     provided, given the plan's
reduction in burden resulting born the                characteristics, practices, operations,
simplified filing requirements for the                and other factors. For example,a small,
2007 and 2008 plan year filings will be               single-employer defined contribution
about half the burden reduction that                  pension plan filing the new Short Form
will result &om thc inkoduction of the                5500 should incur f r lower costs than
2009 Short Form 5500,for two reasons.                 a Iarge, muhiemployer defined benefit
First, for the 2009 plan year fhings,                 pension plan that hoIds multiple
eligible filers will fill out only the Short          insurance contracts, engages in
Form 5500 and Schedules SB or R.IB, as                numerous reportable transactions, and                     requirements were grouped together in
applicable. While the simplified filing               pays fees in excess of $5,000 to a                        various groups and subgroups. As
   "As mandated by tlie PPA, t h simplified filing
                                                                                                                shown in Table 4, calcuIations of
                                                        lBAsdescribed further i the instructions,those
option for small plans with fewer than 25             small plans rcquired to file the Schedules SSA or         aggregate cost were prepared for each o
participants will hcome effective for 2W7 plan        E will still have to file tho schedules as part oftheir
yaar returnlreports. No other chsnges to the Furms    P m 5500 Annual Returnlffeport filings in 2007              lnFurtherdotail can be found in the Technical.
and Schedules are being mads for that filing year,
except for a fw updates to the Schedule B
                                                      and 2008.
                                                        '*Hours are estimated to fall from the 5.32
                                                                                                                  . TLc Mathemarica repon can be accossed at the
instructions.                                         million estimated under prior rules and forms, to         Deparbent's Web slte at h ~ ~ / / w w w . d o l . g o ~ ~ / e b s o .
     Filers will be requimd to provide the ariswers   about 4.94 million hours, a reduction of a b u t            22The Dsparbnont did noianetsmpt to                the
to these nsw questions a9 an attachment.              374,000 hours.                                            number of filers into the future.
                        Federal Register / Vol. 72, No. 221 I Friday, November 16, 2007 / Kules and Regulations                                                                                64723

the various subgroups both under                                               plans. Each of these major plan types                                      mom participants) and other large plans
requirements in effect prior to this                                           was further subdivided i t
                                                                                                        no                                                (at least 300 participants, but fewer t h t n
action and under the forms as revised.                                         multiemployer and single-employer                                          1,000 participants). Small plans were
Table 4 also shows the number of plans                                         plans. Defined con~bution    Code                                          divided similarly, except that they we:e
within each subgroup affected by the                                           section 403B)plans were treated                                            divided into Short Form 5500 eligibIe
revisions. The Total line in Table 4                                           separately horn other defmed                                               and Short Form 5500 ineligibIe plans, as
shows that the aggregate cost under                                            contribution plans. Since the filing                                       applicable. For each of these sets of
prior and new regulations, respectively,                                       requirements differ substantially for                                      respondents, burden hours per
add up to $425.34 million and $327.98                                          small and large plans, the plan types                                      respondent were estimated for the For
million. The universe of filers was                                            were also divided by plan size. Fox large                                  550D Annual Returaepo*        itself and
divided into three basic plan types:                                           plans (100 or mom pdcipanfsl, the
defined benefit pension plans, defined                                         defmed benefit plans were further                                          for up to
conkibution pension plans, and welfare                                         divided between very Iargs (1,000or
                             ~.-NuMBEFI OF AFFECTED FLLERS COSTS
                         TABLE                           AND    UNDER PRIOR
                                                                          AND NEWREQUIREMENTS

                                                                Type of plan
                                                                                                                                                           az           prior require-
                                                                                                                                                                         [in mtlhons)
5500 Large Plans (>=f DO partkipants) .......................................................................................
   DB, ME, 10&1,000 participants ..........................................................................................
   DB, ME, > 1,000          parlicipants ............................................................................................
    DB, SE, 100-1.000 participants ...........................................................................................
    DB, SE, r 1,000 participants ..............................................................................................
    DC, ME, non-403(b) .............................................................................................................
    DC, ME, Code section 403(b) ...........................................................................................
    DC, SE, m-m(b)                                               .
                                  ......................... ..............................................................................
   DC, SE. Code section 403(b) .......................................................................................                            .
   Weifare, ME .............................             .
                                                         . ........................................................................................
   Welfare, SE ..........................................................................................................................
5500 Small Short Form Eligible .................................................................................................
    DB, SE ...............................................................................................................................
   DC,Sf, M-403(b) ............................................................................................................
   DC, SE, Code section 403(b) ....................                        .
                                                                           ..      ...................................................................
   Welfare, SE .........................................................................................................................
5500 Small Short Form IneligiMe ...................,................                         ..........................................................
    DB, ME ..............................................................................................................................
    DB, Sf ................................................................................................................................
   DC, ME, non-403(b) ...........................................................................................................
   DC, ME, Code Mction 4W@) ......................... ...............................................................
   DC, SE, non-403(b) ..............................................................................................................
   WelfareME ........................................................................................................................
   WelfareISE ............................................................................................................................
        Total ...............................................................................................................................
   Note: Some displayed numbers do not sum up to the totals due to mnding.
   DB-defined benefit plans.
   DC-defind mntributiwl plans.
   SE-sin le employer plans.
   ~ E l n u q t i h p l o ~ plans.
   Large plans--1 00 participants or more.
   Small plans-fewer than 100 participants.

   We also separately estimated the costs                                       The reparting burden for each type of                                     Annual Returnkport is reflected in th43
for the form and for each schedule.                                           plan is estimated in light of the                                           estimates of reporting burden time. By
When items on a Form 5500 Annual                                              circumstances that are known to apply                                       conIrast, a large defined benefit pensio~:
ReturnlReporI scheduIe are required by                                        or that are generally expected to apply                                     plan that is intended to be tax-qualified
more than one Agency, the estimated                                           to such pIans,including plan size,                                          and that uses a b u s t fund and invests ir
burden associated with that schedule is                                       funding method, usual investment                                            insurance contracts would be required
allmated among the Agencies. This                                             h c t u r e s , and the specific items and                                  to submit an annual report completing
alIocation is based on whether only a                                         schedules such plans ordinarily                                             almost all the line items of the Form
single item on a schedule is required by                                      complete. For example, the annual                                           5500, plus Schedule A Unsurancs
more than one agency or whether                                               report for a large fully insured welfare                                    Information), Schedule B (Actuarial
several or a11 of the items are required                                      plan typically would consist of only a                                      Information), Schedule C (Service
                                                                              few questions on the Form 5500,                                             Provider Information), Schedule D
by more than one agency. The burden                                           Schedule A (Insurance Information),                                         (DFE/Farticipating Plan Information),
associated with reading the instructions                                      and Schedule G, where applicable. The                                       possibly the Schedule G (Financial
for each item also is tallied and                                             requirement that this plan provide very                                     Transaction Schedules), Schedule H
allocated accordingly.                                                        limited information on the Form 5500                                        (Financial Information], and Schedule R
64724             Federal Register/ Vol. 72, No. 221 1 Friday, November 16, 2007/Kules and Kegulations

(Ketirement Plan Information), and                   uncertainty regarding the expected                      Department's conclusion that the
would be required to submit an IQPA's                number of filers in the future and the                  proposed form changes should reduce
report and opinion. In this way, the                 unit cost estimates. The Department                     the aggregate burden relative to the
Agencies intend meaningfuIly to                      believes that it does not have sufficient                previous forms. The analysis here for
estimate the d a t i v e burdens placed on           information that would allow making                      the final regulations and forms mvisio s
different categories of filers.                      good projections of the number of                        uses the same methodology as did the
   Burden estimates were adjusted for                pension plans in the future. Also, the                  proposal, and the Department,
the proposed revisions to each schedule,             D e p m e n t has no direct measure for                 accordingly, is relying on the Peer
including items added or deleted in                  the unit costs and uses a proxy adapted                 Review prepared for the Proposal. Th
each schedule and items moved horn                   from the existing MYR model, which                      Peer Review Report can be accessed at
one schedule to another.The burden for               was developed in the late 1990s.In                       the Department's Web site at http://
the new Short Form 5500 was derived                  addition, some uncertainty is inherent         
summing the burden estimates for the                 in any revision to the existing form, and               Regulatory Flexibility Act
comparable line items contained in the               the level of uncertainty increases with
current Form 5500 Annual Return/                     the novelty of the revision in question.                   The Regulatory Flexibility Act (5
Report.                                              For example, there is a Iesser degree of                U.S.C. 601 et seq.) (RFA) imposes
   The Department has not attributed a               uncertainty regarding the impact of                     certain requirements with respect to
recordkeeping burden to the 5500 Forms               revisions that delete existing items or                 Federal rules that are subject to the
i this analysis or in the Paperwork
 n                                                   move existing items &om one schedule                    notice and comment requirements of
Reduction Act analysis because it                    to another, while there is meater                       section 553fi] of the Administrative
believes that plan adrninisi~ators'                  uncertainty regarding wholly new items                  Procedure Act (5 U.S.C. 551 et seq.) an3
practice of keeping financial records                of information, such as those involving                 that are likely to have a significant
necessary to complete the 5500 Forms                 indirect compensation.                                  economic impact on a substantial
arises horn umal and customary                         Most of the key assumptions of the                    number of small entities. In accordanci!
management practices thatwould be                    model like the wage rates, hour burden                                        h
                                                                                                             with section 603 of t e RFA, the E'BSA
used gy any h n c i a l entity and does              estimates, and the number of filers are                 presented an initial regulatory flexibili:~
not result from ERISA or Code annual                 entering the model in a direct and                      analysis at the time of the publication of
reporting and filing requirements.                   transparent way. If, for example, the                   the notice of proposed rulemaking
   The aggregate baseline burden, as                 wage rate increases by lo%, the                         describing the impact of the rule on
calcuIated by the ARC model, is the sum              reduction in costs also increases by                    small entities and seeking public
of the burden per form and schedule as               10%.24 Therefore, the Department did                    comment on such impact. After
filed prior to this action multiplied bv             not perform additional sensitivity tests.               reviewing and considering the public
the estimated aggregate number of f o h s            The Department could not quantify                       comments submitted in response to t h e
and schedules filed.23 The model then                uncertainty because formal estimates of                 proposal and the changes that are
estimated the burden impact of changes               errors are not availabIe. However, the                  incorporated into the final regulation,
in the number of filings (particularly               Department beIieves that the actual                     the Department has prepared a final
those associated with the introduction               burden could very well be 10% higher                    regulatory flexibility anaIysis, which is
of the Short Form 5500 for most small                or lower than the estimates, based on                   presented in this document as part of
filers) and of changes made to the form              the Department's experience in this                     the broader economic analysis. The
and the various schedules. The model                 program and past trends in filings.                     objectives of these amended regulation:;
uses data from the Form 5500 Annual                                                                          and the associated foms revisions are to
                                                     Peer Review                                             sbeamline reporting and reduce
ReturnIReport for plan year 2003, which                In December 2004, OMB issued a
is the most recent year for which                                                                            aggregate reporting costs, particularly
                                                     Final Information Quality Bulletin for                  for small plans, while preserving and
complete data is available.                          Peer Review, 70 FR 2664 Uanuary 14,
   The model estimated that the                                                                              enhancing protection of ERISA rights.
                                                     2005) (Peer Review Bulletin).                           These purposes are detailed above in
proposed revisions will Iead to                      establishing that important scientific
aggregate costs of $327.98 million,                                                                          this preamble and in the Forms Revisio~
                                                     information shall be peer reviewed                      Notice published simultaneously with
which represents a cost reducfion of                 before it is disseminated by t h e Federal
$97.36 million &om the baseline. While
                                                                                                             these regulations.
                                                     government. The Peer Review Bulletin                       For purposes of analysis under the
overall costs will be reduced, some large            applies to original data and formal                     W A , EBSA continues to consider a
plans may experience cost increases,                 analytic models used by agencies in                     small entity to be an employes benefit
while small plans will likely experience             regulatory impact analyses. The                         plan with fewer than 100 participants.
cost reductions. The total burden                    Department determined that the data                     The basis of this definition is found in
estimates, as well as the burden broken              and methods employed in its regulatory                  section 104[a)(2) of ERISA, which
out by type of plan, can be found in                 analysis constituted "influential                       permits the Secretary to prescribe
Table 4, above.                                      scientific information" as defined in the               simplified annual reports for pension
   Uncertainty within Estimates. Because             Peer Review Bulletin. Accordingly, a                    plans that cover fewer than 100
the Department has access to the                     peer review was conducted under                         participants. Under ERISA section
historical Form 5500 Annual Return/                  Section J of the Bulletin. The peer
                                                              I                                              104(a)(3),the Secretary may also
Report filing information, the                       review report concluded that the                        provide for exemptions or for simplifie~
Department has good data for the                     methodology and data generally were                     reporting and di&losure for welfim
number of filers that file the various               sound and produced plausible                            benefit plans. Pursuant to the authority
schedules and the types of plans those               estimates, which supported the                          of ERISA section 104[a], the ~ e ~ a r t m i r
filers represent. However, there is some                                                                     has previously issued at 2 9 CFR
                                                       "'If the hourly labar m& for service providers        2520.104-20,2520.104-21,2520.104-
  =To the extent that plans may currentiy file       incremes from $BE to $95 and for plan sponsors
schedules that are not required, such filings were   from $59 to $65 (10% increase), then the rsduction
                                                                                                             41,2520.104-46, and 2520.104k-10
disregarded in dmlating the baseline r o p d n g     in costs i n m a s e s from about $97 million to $107   certain simplified reporting provisions
burden and the find burden.                          million (10% incream).                                  and Iimited exemptions from reporting
               Federal Register l Vol. 72I, No. 221 /Friday, November 16, 20017
                                                                              IKules and Regulations                             647;!5

and disclosure requirements for small             requirements to take into account            filing, including small welfare plans,
plans, including unfunded or insured              certain recent changes in markets,the        but is rehaining from adding similar
welfare plans, that cover fewer than 100          law (including the PPA] ,and                 clarifications to the instructions for
participants and satisfy certain other            technology, many of which are referred       individual schedules in order to avoid
requirements.                                     to above in this preambl~    andtor in the   adding unnecessary review burden for
   Further, while some large employers            Forms Revision Notice published              filers.
may have small plans, in general small            simultaneoush with these readations.            Description and estimate of number of
employers maintain most small plans.                 Agency assekmen t of sign@cant            small entities to which rule will apply.
Thus,EBSA believes that assessing the             issues mised by public comments and          This final action does not alter the
impact of these requirements on small             changes to rule iin response to such         number of small alans reuuired to
plans is an appropriate substitute for
evaluating the effect on amall entities.
The detinition of small entity
                                                  comments. Commenters were mostly
                                                  supportiva of the adoption of a Short
                                                  Form 5500. Some commenters objected
                                                                                               comply with the knual riporting
                                                                                               reauirements, althouah it implements
                                                                                               new Short Form 55001,whicg is
considered appropriate for this purpose           to excluding certain small plans from        designed specifically to further
differs, however, f o a definition of
                    rm                            eligibility for filing the Short Form        streamline the limited reporting
small business that is based on size              5500, that is, those small plans holding     requirements presently appIicabIe to
standards promulgated by the Small                employer securiGes and other difficult-      small plans. The Department estimates
Business Adminisbation (SBA) [ I 3 CFR            to-value assets. As discussed elsewhere      that almost six million srnall, private-
1 2 1.201) pursuant to the Small Business         in this preamble, excluding this small       sector employee pension and welfare
Act (15 U.S.C.632 et seq.]. Prior to the          subset of small plans is justified by the    benefit plans are covered under Title I
proposal, EBSA consulted with the SBA             nature of these assets, and it would be      of ERTSA. A large majority of these,
Office of Advocacy concerning use of              inappropriate for the Agencies to            however, are fully insured or unfundec
this participant count standard for W A           compromise important Congressional           welfare benefit plans, which currently
purposes, see 13 CFR 121.902(b)(4),and            and regulatory policies, leaving             are exempt h m annual reporting
EBSA received no comments suggesting              participants covered by these small          requirements and will continue to be
use of a different size standard. The               lans with insufficient protection of       exempt under this final action.
following subsections address specific            P, eir retirement savings. The Agencies      Approximateiy 629,000 small plans,
requirements of the RFA.                          have taken other steps to reduce the         including small pension plans and
   Need for the rule and its objectives.          burden on the excluded small plans as        small funded welfare plans, currently
The Department is amending the                    much as possible, however, including         are required to file annual reports and
regulations relating to the annuaI                continuing to allow these plans to           will continue to be so required under
reporting and disclosure requirements             qualify for other simplified repofiing       this action. Of these, an estimated
of section 103 of ERISA and revising the          options. I addition, because the Short
                                                              n                                584,000 will be eligible to use the new
5500 Forms that are included in the               Form 5500 will not be available until        Short Form 5500. Use of the Short Form
Forms Revision Notice being published             the 2009 plan year, the Agencies are         5500 is expected to reduce these plans'
simultaneously with these regulations.            planning to issue separate guidance for      reporting costs, while preserving or
The Department continually skives to              plans with fewer than 25 participants        enhancing the protection of their
tailor reporting requirements to                  that would permit filin of an                participants' ERISA rights.
minimize reporting costs, while                   abbreviated version of &e Form 5500 for         Among small plans, perhaps the mos:
ensuring that the information necessary           the 2007 and 2008 plan years.                affected by this action will be the
to secure ERISA rights i s adequately                While expanding reporting                 approximately 9,000 small Code sectior.
available. The optimal design for                 obligations for Code section 403b)           403&1]plans. As explained above, such
reporting requirements to satisfy these           plans, the Agencies have attempted to        plans are currently subject only to
objectives changes over time. Benefit             minimize the burden on small Code            limited annual reporting requirements.
plan designs and practices evolve over            section 403fi) plans by not excluding        This action will increase these plans'
time in response to market trends,                small Code section 403(b) plans f o rm       reporting costs, although the cost to
including trends in labor markets,                any simplified reporting option for          these plans will be comparable to that
financial markets, health care and                which such plans are otherwise eligible.     currently borne by similar small plans
insurance markets, and markets for                In other words, small Code section           that are not operated under Code sectio-I
various services used by plans. Partly as         403b) plans will be eIigible to avail        403b). As discussed above, the
a result, the nature and mix of                   themselves of simplified reporting           Department believes the added cost to
compliance issues and risks to ERISA              options to the same extent as any other      Code section 403fi)   plans is justified by
rig& change over time. Changes to                 similarly situated plan.                     the need to strengthen protections under
ERISA, the Code, and to associated                   As discussed elsewhere in this            ERISA for those plans' affected
regulations also change the parameters            preamble, the Agencies are rejecting         participants and beneficiaries. The
of ERISA rights and the methods needed            commenters' suggestion to subject small      numbers and types of small plans
to protect those rights; in particular, t h i s   plans to Schedule C disclosure               affected by these regulations and the
amendment and the forms revisions are             requirements that do not currently           magnitude and nature of the regulations'
necessary, in part, to implement                  apply to small plans.The Agencies            effects are further elaborated below.
provisions of the PPA. In addition, the           conclude that the comment record in             Description of projected reporting,
technologies available to manage and              support of the suggestion was                recordkeeping and other compliance
Bansmit information continually                   insuficient to outweigh the added            requirements of f h e rule, induding an
advance. It is incumbent on ths                   burden that would be placed on small         estimate of the classes of small entities
Department to revise its reporiing                plans.                                       that wiY1 be subject to the requirements
requirements from time to time to keep               The Agencies also are making              and the types of professional skills
pace with such changes. The                       clarifying changes to inshctions for the     necessmy for preparation of the report
Deparbnent is adopting these                      Short F o m 5500, in response to             or record.The reporting requirements
regulations and associated forms                  comments,to provide a clearer                appIicable to small plans are detailed
revisions to readjust its reporting               description of the plans exempt from         above and in the associated Forms
64726                  Federal Register 1Vol. 72, No. 221 /Friday, November 16, 2007 1Rules and Regulations

Revision Notice. For a large majority of                                 plans that will be eligible to use the                                                   Satisfaction of annual reporting
the 629,000 small plans subject to                                       streamlined Short Form 5500,                                                           requirements under these regulations i ;
annual reporting requirements, or an                                     satisfaction of the reporting                                                          not expected to require any additional
estimated 563,000 plans, submission of                                   requirements will require additional                                                   recordkeeping that would not otherwise
the Short Form 5500 alone will fully                                     services of an actuary and submission of                                               be part of normal business practices.
satisfy their annual reporting                                           the Schedule SB or Schedule MB, as                                                       Table 5 below compares the
requirements. A 1 of these plans are
                 1                                                       applicable. The remaining 35,000 small                                                 Deparbnent's estimates of small plans'
eligible for the waiver of audit                                         plans will not be eligible to use the                                                  reporting costs under the requirements
requirements, and none are defined                                       Short Form 5500 and will continue to be                                                in effect prior to this action with those
benefit pension plans. For such plans,                                   required to file the Form 5500 Annual                                                  under the new requirements for variou;
therefore, satiskction of the applicable                                 Return/Report. Of these, fewer than                                                    classes of affected plans. As shown,
annual reporting requirements is not                                     2,000 are defined benefit plans that                                                   costs under the new requirements will
expected to require the services of an                                                                                                                          be lower on aggrqate and for most
IQPA or auditor, but will require the use                                must use an actuary and file Schedule
                                                                         MB or Schedule SB. All wiII require a                                                  classes of plans. These estimates take
of a mix of clerical and professional                                                                                                                           account of the quantity and m x of
administrative skills. For an additional                                 mix of clerical and professional                                                       clerical and professional skills requirec.
30,000 small defined benefit pension                                     administrative skills to satisfy their                                                 to satisfy the reporting requirements fo:
plans and about 500 money purchase                                       reporting requirements.                                                                various classes of plans.
                                 TABLE . - & W                    PLANREPORTING
                                                                              COSTSUNDERPRIOR AND NEW REQUIREMENTS

                                                                                                                                                                                I   Aggregate        I   Aggregate
                                       CIass of small plan                                                                                     Number
                                                                                                                                                                                    (in rniliions)       (in miltions)

Defined Benefrt Pension, Short Form eligible ...........................................                       34,000 ...........................................                          $35.71               $24.25
Defined Benefit Pension, Short Form ineligible ......................................                         2,000 ................................................                           .7
Code. Section 403(b) .................... . .
   . ..............                              .
                                                 .                                                            9,000..........................................                                  .8
Other Defined Contribution, Short Form eligible .......................................                       544,000 .........................                 .
                                                                                                                                                                .............              195.65
Other Defined Contribution Pension. Short Form ineligible                              ...................... 3 2 , W ..............................................                         11.54               10.70
Funded Weifare .........................................................................................      7,000.............................................          2.83                        1.58
Other Welfare ............................      .
                                                .. .......................................................    Alone of approximatev 6 million ......................................................
    Total for All Affected SmaH Plans .............................................                           629,000 ...........................................     248.17                        151.99
    not^ Some displayed numbers do not sum up to the totals due to rounding.

   The Department notes that the                                         requirement that smaIl funded welfare       adequate to the protection of small pl
estimated reporting costs amount to                                      plans submit annual reports and the         participants' EIUSA rights.
about $240 on average for each of the
629,000 small plans subject to annual
                                                                         exception &om annual reporting
                                                                         requirements for other small welfare        Popenvork Reduction Act Statement                                                               1
reporting requirements, or just $27 if                                   plans. Annual reporting by the                 In accordance with the requirements
averaged across all of the approximately                                 relatively small number of small funded of the Paperwork Reduction Act of 199
5.7 million small plans covered by Title                                 welfare plans is necessary, in the          (PRA)(44 U.S.C.         3506(c)[2)),the July
I of ERISA. This compares with roughly                                   Department's view, to protect ERISA         2006 Proposal solicited comments on
$1,200 on average for each of the                                        rights in connection with the assets that the information coIlections included in
152,000 affected 1 q e filers.                                           such plans hold. A requirement that the the proposed amendments to the
   The Department is unaware of any                                      remaining approximately six million         Department's regulations relating to
relevant federal rules for small plans                                   small welfare plans report annually is      annual reporting and disclosure
that duplicate, overlap, or conflict with                                not justified insofar as these plans have requirements under Part 1 of Subtitle B
these regulations.                                                       no assets that need prot~ction        and   of Title I of ERISA and in the proposed
   Rescription of steps the agency has                                   insofar as the vast majority of the plans revision of the Form 5500 Annual
taken to minimize impact on small                                        are fully insured and therefore             Return/Report pursuant to Part 1of
entities.I developing and finalizing
           n                                                             separately protected by state oversight     Subtitle B of Title I and Title I of     V
these regulations and the associated                                     of the insurance contracts they hoId and ElUSA and the Internal Revenue Code.
forms revisions, the Department                                          the insurers that issue them. The           The Department also submitted an
considered a number of alternative                                       Department also considered both             information collection request [ICR) to
provisions directed at small plans, many                                 narrower and broader eligibility criteria OMB in accordance with 44 U.S.C.
of which are discussed elsewhere in this                                 for use of the Short Form 5500, settling    3507(d), contemporaneously with
preambIe and in the Foms Revision                                        on criteria that limit eligibility to plans publication of the July 2006 Proposal,
Notice. For example, as discussed in the                                 holding relatively safe and protected       for OMB's review of the Department's
Forms Revision Notice, the ERlSA                                         assets, which nonetheless includes a        information collections previously
Advisory Council suggested that the                                      large majority of small plans. The          approved under OM3 Control No. 1210
Department consider exempting welfare                                    Department also considered the              0110.=5   Public comment on the
plans from reporting requirements, or,                                   inclusion of more or fewer of the items
alternatively, subjecting all welfare                                    of information formerly collected from        2'011 August 29,2006, OMB issued a notice

p1an.s to new,separately designed                                        small plans in the Form 5500 Annual         indicating that it wollld continue its approval of thc
                                                                                                                     information collectionsapprovod under Conbol No.
reporting requirements. The Department                                   R e t d R e p o r t , retaining only those  1210-0110 as currently i effect, but would not
opted instead to retain both the                                         items it believes to be necessary and       approve the Department's request for approval of
                  Federal Register / Vol. 72:, No. 221 /Friday, November 16, 2007 1Rules and Regulations                        6472 7

information collections contained in the              process of their formulation and
                                                    th~                                        method of compliance is prescribed for
Supplemental Notice was also solicited              implementation of policies that have       employee welfare and pension benefit
in connection with the publication of               substantial direct effects on the States,  plans, as applicable. A plan filing a
that Notice in December, 2006.                      the relationship between the national      simplified report or electing the limited
   In connection with publication of this           government and the States, or on the       exemption or alternative method of
finaI rule, the Department has submitted            distribution of power and                  compliance shall file an annual report
an information collection request [ICR)             responsibiIiiies among the various         containing the information prescribed in
to OM3 for its review of the changes in             levels of government. These rules do not   paragraph (b) or paragraph (c)of this
burden estimates for the information                have federalism implications because       section,as applicable, and shall furnisl.
collections currently approved under                they would have no substantial direct      a summary annual report as prescribed
OMB Control No. 1210-0110 that are                  effect on the States, on the relationship  in 5 2520.104b-10.
the result of t h i s final regulatory action       between the national government and           Ibl* * *
and the Forms Revision Notice                       the States, or on the distribution of         [I) A Form 5500 "Annual Return/
published simultaneously with this                  power and responsibilities among the       Report of Employee Benefit Plan" and
rule. I order to avoid unnecessary
       n                                            various levels of government. Section      any statements or schedules required tc
dupIication of public comments, the                 514 of ERISA provides, with ceriain        be attached to the form, cornpIeted in
PRA information published in the                    exceptions specifically enumerated, that   accordance with the instructions for the
associated Forms Revision Notice is                 the provisions of Titles I and IV of       form, including Schedule A (Insurance
incorporated herein by this reference in            F,KISA supersede any and aII laws of the   Information), Schedule SB (Single-
its entirety. The public is advised that            States as they relate to any employee      Employer Defined Benefit Plan
an agency may not conduct or sponsor,               benefit plan covered under ERISA. The      Actuarial Information), Schedule MB
and a person is not required to respond             requirements implemented in these          [Multiemployer Defined Benefit Plan
to, a collection of information unless it           rules do not alter the fundamental         and Certain Money Purchase Plan
displays a currently valid OMB control              provisions of the statute with respect to  Actuarial Information], Schedule C
number. The Department intends to                   employee benefit plans, and as such        (Service Provider Information),
publish a notice announcing O m ' s                 would have no implications for the         Schedule D [DFE/Participating PIan
decision upon review of the                         States or the relationship or distribution Information), Schedule G (Financial
Department's ICR.                                   of power between the national              Transaction Schedules), Schedule H
   A copy of the ICR can be obtained by             government and the States.                 [Financial Information], Schedule R
contacting the Office of Policy and                                                            (Retirement Plan Information),and
Research, Employee Benefits Security                     of SubjectS in CFR Pa* 2520           other financial schedules described in
Administration, U.S. Department of                    Accountants, Disclosure                  Sec. 2520.103-10. See the instructions
Labor,Room N-5718, 200 Constitution                 requirements, Employes benefit plans,      for this form.
Avenue, NW., Washington,DC 20210,                   EmployeeRetirement Income Security         *      *     *     *     *
Telephone: (202) 693-8410; Fax: (202)               Act, Pension plans, Pension and welfare
21-745      or at                                                         (,I contents om urrlreport for
                                                    plans*ReI'orthg and recordIceeping         plans with fewer thm 100 podjciponts.
These are not toll-free numbers.                    requirements, and Welfare benefit plans.   (11 E~~~~~as provided in pxagraph
Congressional Review Act                              In view of the foregoing, the            (c](2) of this section and in paragraph
   The final mles being issued here are             Department amends 29 CFR Pad 2520 as       (dl of this section, and in $5 2520.104-
subject to t e Congressional Review Act
             h                                      set forth below:                           43 and 2520.104a-6, the annual report
provisions of the Small Business                                                               of an employee benefit plan that covers
                                                    PART 2 5 M U L E S AND                     fewer than 100 participants at the
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and will be             REGULAT'ONS                            AND beginning of the plan year shall include
transmitted to the Congress and the                 DISCLOSURE                                 a Form 5500 "Annual RetwnlReport of
Comptroller General for review.                        I. The authority citation for part 2520 Employee Benefit Plan" and a n y
                                                    is revised to read as follows:             statements or schedules required to be
 Unfunded Mandates Reform Act                                                                  attached to the form, completed in
   For purposes of the Unfunded                        Authority:29 U.S.C.1021-1025,1027,
                                                    1029-31,1059,1134,and 1135; and            accordance with the instructions for tht
Mandates Reform Act of 1995 (Pub. L.                Secretary of Labor's Order I-2003,68 FR    form, including Schedule A (Insurance
104-4). as well as Executive Order                  5374 [Feb.3,2003). Soc. 2520.101-2 also    Information), Schedule SB (Single
12875, these rules do not include any               issued under 29 U S C 1132,1181-1183,
                                                                       ...                     Employer Defined Benefit Plan
Federal mandate that may result in                  1181 note,1185, f185a-b, 1191,and 1191a-   Actuarial Information), Schedule MB
expenditures by state, local, or tribal             c. Secs. 2520.102-3,2520.104b-1, and       [Multiemployer Defined Benefit Plan
governments in the aggregate of more                2520.104b-3 also issued under 29 U.S.C.    and Certain Money Purchase Plan
than $100 million, adjusted for                     1003,1181-1183.1181 note,1185,1185&,       Actuarial Information), Schedule D
inflation, or increased expenditures by             1191,and 1191a-c. Secs. 2520.104b-1 and
                                                    2520.107 also issued under 26 U S C 401
                                                                                   ...         @FE/Participating Pian Information],
the private sector of more than $300                note, 111 Stat. 788.                       Schedule I (Financial Information-
million, adjusted for inflation.                                                               Small Plan), and Schedule R
                                                    8 2. In 5 2520.103-1, revise paragraphs
Federalism Statement                                (a)@],[b)[l) and [c] to read as follows:   [RetirementPlan Information]. See the
                                                                                               instructions for this form.
   Executive h d e r 13132 [August 4,               9 2520.10%1 Contents of the annual            (2]{i)The annual report of an
1999) outlines fundamental principles               repo~.                                     employee benefit plan that covers fewa
of federalism and requires adherence to                (a) * * *                               than 100 participants at the beginning c
specific criteria by federal agenci~s     in           (21 Under the authority of subsections the plan year and that meets the
                                                    104(a)(2),104[a)(3) and 110 of the Act,    conditions in paragraph (c)(21Iii)of this
revisions to the IT2 until after consideration of
public comment on the JulyPmposal and               and section 1103@] of the Pension          section with respect to a plan year may
promulgation of a E d rule,describing any
                    n                               Protection Act of 2006, a simplified       as an alternative to the requirements of
changes.                                            report, limited exemption or alternative paragraph (c][l] of this section, meet its
64728         Federal Register / VoI. 7'2,No. 221 I Friday, November 16, 2007 /Rules and Regulations

 annual reporting requirements by filing     §2520.104-44 Umlted exemption and              supplemented, will be deemed to satid
 the Form 5500-SF "Short Form Annual         alternative method of mrnpllance for annual    the notice content requirements of
ReturnIReport of Small Employee              reporting by unfunded plans and by certaln     paragraph l$)(ll[i)[B) of this section.
 Benefit Plan" and any statements or         insured plans.
 schedules required to be attached to the    *      *     *    *     *                      Appendix to 5 2520.10P46-Model
 form, including Schedule SB (Single             (b)*  * *                                  Summary Annual Report Notice (Plan
Employer Defined Benefit Plan                    (1) * * "                                  Adminisirators Will Need to Modify th
 Actuarial Information) and Schedule            (iii) Partly in the manner specified in     Model to Omit Information That I Nm  s
 MB (MultiemployerDefined Benefit                                [i)
                                             paragraph @)(I] of this section and            Applicable to the Plan)
 Plan and Certain Money Purchase Plan        partly in the manner specified in                The U.S. e p h e n t of hbor's regulatior
Actuarial Information), completed in         paragraph b)(l)(ii)of this section; and         require that an independent qualified pubh
                                                ( 2 ) A pension benefit plan the benefits    accountant audit the plan's financial
 accordance with the insinctions for the     of which are provided exclusively
 form. See the instructions for this form.                                                   statements unless certain conditims are me
                                             through allocated insurance conkacts or         for the audit requirement to be waived. T ihs
    (ii) A plan meets the conditions in      policies which are issued by, and               plan met the audit waiver conditions for the
this paragraph (c)[2)(ii)with respect to     pursuant to the specific terms of such          plan year beginning [insert year) and
the year if the plan:                        contracts or policies benefit payments          therefore has not had an audit performed.
    [A] Does not hold any employer                                                          Instead, the folluwing information is
                                             ars fully guaranteed by an insurance           provided to assist you in verifying that the
 securities at any time during ihe year;     company or similar organization which           assets reported on the (Form 5500 or Form
    [B] Satisfies the audit waiver           is qualified to do business in any State,       S500-SF+18ct as applicablc) were actual11
 conditions in $5 2520.104-                  and the premiums for which are paid            held by the plan.
461bI(lI[il(A1(11, Ibl(ll(il(B)and           dirsctly by the employer or employee               At the end of the (insert year) plan ye=,
 b)~ll(iI[Cl;                                organization from its general assets or        tho plan had (include separate eniies for
    (C) at all times during the plan
         Had                                 partly horn its general assets and partly      each regdated h c i d institution holding
                                                                                             or issuing q d i f y q plan assets):
year 100 percent of the plan's assets        from conhibutions by its employees or              [Set forth amounts and names of
held for investment purposes invested        members: Provided, That conhibutions           institutions as applicable where indicated],
in assets that have a readily                by participants a e forwarded by the
                                                                 r                           [[insert $ amount) in assets held by (insert
 determinable fair market value. For         employer or employee organization to           name o bank)],[[insert$ amount) in
purposes of this section, the following      the insurance company or organization          securities held by [insert m e of registaed
shall be treated as assets that have a       within three mon&s of receipt and, in          broker-dealer)], [(insert$ amount) in shares
readily determinable fair market value:      the case of a pIan that provides for the       issued by [insertname of registerad
                                             return of refunds to contributing              investment company)], [(insert $ amount] in
Shms issued by an investment                                                                investment or annuity conixact issued by
company registered under the                 participants, such refunds are returned        (insert name of insurance company)].
Investment Company Act of 1940;              to them within three months of receipt            The plan receives year-end statmonts fro:
investment and annuity conbacts issued       by the employer or empIoyee                    these regulated financial institutions that
by any insurance company,qualified to        organization.                                  c o n h the above information. [Insert as
do business under the laws of a State,       *      *    *     *     *                      av~licab1~Tha      remainder of the nlan's
that provides valuation information at                                                      &Jets were (1)qualifying ernploy&
                                                 4. Fn § 2520.10446, add a new              securities,(2) loans to participants, I31 held
least annually to the plan administrator;    paragraph (e)and a new appendix to the         in individual participant accounts with
bank investment conkacts issued by a         section to read as follows:                    investments directed by participants and
bank or similar financial institution, as                                                   beneficiaries and with account statements
d e f - e d in 3 2550.408h[c) of this        52520.104-46 Walvw of examlnatlon and            rm
                                                                                            f o regulated financial institutions
chapter, that provides valuation             repon of an Indapmefent qualified public       furnished to the participant or beneficiary a  1
information at least annually to the plan    accountant for employee hnetlts plan whh       least annually, or (4) other assets covered by
administrator; securities (except            fewer than 100 partidpants.                    a fidelity bond at least equal to the value of
employer securities) waded on a public
                                             *       *   *      *    *                      the assets and issued by an approved suroty
exchange; government securities issued           [el Model notice. The appendix to this     company.]
                                           section contains model language for                 Plan pmticipants and beneficiaries have a
by the United States or by a State; cash                                                    right, on request and free of charge, to get
or cash equivalents held by a bank or      inclusion in the summary annual report           copies of the financial institution yoar-end
similar financial institution, as defined  to assist plan administrators in                 statements and evidenm of tho fidelity bond
in S 2550.408b4(c) of this chapter, by     complying with the requirements of               If you want to examine or get copies of the
an insurance company, qualified to do      paragraph (b)(I)[i)(B)of this section to         financial institution year-end statements or
business under the law of a State, by an   avail themselves of the waiver of                evidence of the fidelity bond, please contact
organization registered as a broker-       examination and report of the                    [insertmailing address and any other
                                           independent quaIified public                     available way to request copies such as e-
dealer under the Securities Exchange                                                        mail and phone number].
Act of 1934, or by any other               accountant for employee benctfrt plans
                                           with fewer than 100 participants. Use of            If you are unable to obtain or examine
organization authorized to act as a                                                         copies of the regulated financial institution
trustee for individual retirement          the model language i s not mandatory. In         statements or evidence of the fidelity bond,
accounts under section 408 of the          order to use the model language in the           you may contwt the regional office of the
Internal Revenue Code; and any loan        plan's summary annual report,                    U.S. Department of Labor's Employee
meeting the requirements of section        administmtors must, in addition to any           Benefits Security Administration [EBSA] for
408(b)(1) of the Act and the regulations   other information required io be in the          assistanceby calling toll-bee f .866.444.EBS.
                                           summary annual report, select among              (3272). A listing of EBSA regional offices car
issued thereundsr; and                                                                      be found at
   (D) Is not a multiemployer plan.        alternative language and add relevant
                                           information where appropriate in the                General, information regarding the audit
*       X      *    *    *                                                                  waiver conditions applicahIe to the plan can
                                           model language, Items of information             be found on the U.S. Department of Labor
r 3. Amend 52520.10444 by revising         that are not applicable to a particular          Web site at
(b)(l)[iii)and (b)[2), and removing (b)(3) plan may be deleted. Use of the model   under the heading
to read as follows:                        language, appropriateIy modified and             "Frequently Asked Questions."
64730              Federal R ~ i s t e /rVol. 72, No. 221 /Friday, November 16, 2007 1Rules and Regulations

  Signed at Washington, DC,this 30th day of
October. 2007.
E r a d m P. Campbell,
Assistant Secretary, Employee Benefifs
S e c u ' i y Admimkimtion, U.S. Department of
[FXDoc. B7-21765 Filed 11-1547; 8:45 am]
Bllltm: CODE 4 1

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