Rule2023-02653
Annual Information Return/Reports
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 24, 2023
Effective
January 1, 2023
Issuing agencies
Treasury DepartmentInternal Revenue ServiceLabor DepartmentEmployee Benefits Security AdministrationPension Benefit Guaranty Corporation
Abstract
This document contains final forms and instructions revisions for the Form 5500 Annual Return/Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan effective for plan years beginning on or after January 1, 2023. The forms and instructions revisions relate to statutory amendments to the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) enacted as part of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) for multiple-employer plans and groups of plans, as well as changes intended to improve reporting of certain plan financial information regarding audits and plan expenses and enhance the reporting of certain tax qualification and other compliance information by retirement plans. There are also some minor changes that further improve defined benefit plan reporting by building on changes made to the forms for plan years beginning on or after January 1, 2022. The remaining changes are technical changes that are part of the annual rollover of the Form 5500 and Form 5500-SF forms and instructions. The revisions being finalized in this document affect employee pension and welfare benefit plans, plan sponsors, administrators, and service providers to plans subject to annual reporting requirements under ERISA and the Code.
Full Text
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<title>Federal Register, Volume 88 Issue 37 (Friday, February 24, 2023)</title>
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[Federal Register Volume 88, Number 37 (Friday, February 24, 2023)]
[Rules and Regulations]
[Pages 11984-12105]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-02653]
[[Page 11983]]
Vol. 88
Friday,
No. 37
February 24, 2023
Part II
Department of the Treasury
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Internal Revenue Service
Department of Labor
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Employee Benefits Security Administration
Pension Benefit Guaranty Corporation
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26 CFR Part 301
29 CFR Parts 2520 and 4065
Annual Information Return/Reports; Final Rule
Federal Register / Vol. 88 , No. 37 / Friday, February 24, 2023 /
Rules and Regulations
[[Page 11984]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2520
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4065
RIN 1210-AB97
Annual Information Return/Reports
AGENCY: Employee Benefits Security Administration, Labor; Internal
Revenue Service, Treasury; Pension Benefit Guaranty Corporation.
ACTION: Final forms revisions.
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SUMMARY: This document contains final forms and instructions revisions
for the Form 5500 Annual Return/Report of Employee Benefit Plan and
Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit
Plan effective for plan years beginning on or after January 1, 2023.
The forms and instructions revisions relate to statutory amendments to
the Employee Retirement Income Security Act of 1974 (ERISA) and the
Internal Revenue Code (Code) enacted as part of the Setting Every
Community Up for Retirement Enhancement Act of 2019 (SECURE Act) for
multiple-employer plans and groups of plans, as well as changes
intended to improve reporting of certain plan financial information
regarding audits and plan expenses and enhance the reporting of certain
tax qualification and other compliance information by retirement plans.
There are also some minor changes that further improve defined benefit
plan reporting by building on changes made to the forms for plan years
beginning on or after January 1, 2022. The remaining changes are
technical changes that are part of the annual rollover of the Form 5500
and Form 5500-SF forms and instructions. The revisions being finalized
in this document affect employee pension and welfare benefit plans,
plan sponsors, administrators, and service providers to plans subject
to annual reporting requirements under ERISA and the Code.
DATES: The final forms and instructions revisions in this document are
effective for plan years beginning on or after January 1, 2023.
FOR FURTHER INFORMATION CONTACT: Janet Song, Florence Novellino, or
Colleen Brisport Sequeda, Office of Regulations and Interpretations,
Employee Benefits Security Administration, U.S. Department of Labor
(DOL), (202) 693-8500 for questions related to reporting requirements
under Title I of ERISA. For information related to the IRS reporting
requirements under the Code, contact Cathy Greenwood, Employee Plans
Program Management Office, Tax Exempt and Government Entities, (470)
639-2503. For information related to Pension Benefit Guaranty
Corporation (PBGC) reporting and changes in this document, including
proposed changes to the actuarial schedules, contact Karen Levin,
Regulatory Affairs Division, Office of the General Counsel, PBGC, (202)
229-3559.
Customer service information: Individuals interested in obtaining
general information from the DOL concerning Title I of ERISA may call
the EBSA Toll-Free Hotline at 1-866-444-EBSA (3272) or visit the DOL's
website (<a href="http://www.dol.gov/agencies/ebsa">www.dol.gov/agencies/ebsa</a>).
SUPPLEMENTARY INFORMATION:
A. ERISA Reporting Framework
Titles I and IV of the Employer Retirement Income Security Act of
1974 (ERISA) and the Internal Revenue Code (Code) generally require
pension and other employee benefit plans to file annual returns/reports
concerning, among other things, the financial condition and operations
of the plan. Filing a Form 5500 Annual Return/Report of Employee
Benefit Plan (Form 5500) or, if eligible, a Form 5500-SF Short Form
Annual Return/Report of Small Employee Benefit Plan (Form 5500-SF),
together with any required schedules and attachments (together ``Form
5500 Annual Return/Report''), in accordance with related instructions,
generally satisfies these annual reporting requirements. ERISA sections
103 and 104 broadly set out annual financial reporting requirements for
employee benefit plans under Title I of ERISA. The Form 5500 Annual
Return/Report, and related instructions and regulations, are also
promulgated under the DOL's general regulatory authority in ERISA
sections 109 and 505.\1\
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\1\ ERISA sections 103 and 104 broadly set out the content and
filing requirements for the annual report under Title I of ERISA.
The Form 5500 Annual Return/Report and the DOL's implementing
regulations are promulgated through notice and comment rulemaking
under general ERISA regulatory authority and specific ERISA
provisions authorizing limited exemptions to these requirements and
simplified reporting and disclosure for welfare plans under ERISA
section 104(a)(3), simplified annual reports under ERISA section
104(a)(2)(A) for pension plans that cover fewer than 100
participants, and alternative methods of compliance for all pension
plans under ERISA section 110. The Form 5500 Annual Return/Report
filings are also information collections for the Agencies, subject
to a separate clearance process under the Paperwork Reduction Act
(PRA).
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In the United States, there are an estimated 2.5 million health
plans,\2\ an estimated 673,000 other welfare plans,\3\ and
approximately 747,000 private pension plans.\4\ These plans cover
roughly 152 million private sector workers, retirees, and
dependents,\5\ and have estimated assets of $12 trillion.\6\ The Form
5500 Annual Return/Report serves as the principal source of information
and data available to the DOL, the Internal Revenue Service (IRS), and
the Pension Benefit Guaranty Corporation (PBGC) (together ``Agencies'')
concerning the operations, funding, and investments of approximately
864,000 pension and welfare benefit plans that file.\7\ Accordingly,
the Form 5500 Annual Return/Report is essential to each Agency's
enforcement, research, and policy formulation programs, as well as for
the regulated community, which makes increasing use of the information
as more capabilities develop to interact with the data electronically.
The data is also an important source of information for use by other
Federal agencies, Congress, and the private sector in assessing
employee benefits, tax, and economic trends and policies. The Form 5500
Annual Return/Report also serves as a primary means by which the
operations of plans can be monitored by participating employers in
multiple-
[[Page 11985]]
employer plans and other group arrangements, by plan participants and
beneficiaries, and by the general public.
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\2\ Source: U.S. Department of Labor, EBSA calculations using
the 2021 Medical Expenditure Panel Survey, Insurance Component
(MEPS-IC), the Form 5500 and 2019 Census County Business Patterns.
\3\ Source: U.S. Department of Labor, EBSA calculations using
non-health welfare plan Form 5500 filings and projecting non-filers
using estimates based on the non-filing health universe.
\4\ Source: U.S. Department of Labor, EBSA. Private Pension Plan
Bulletin: Abstract of 2020 Form 5500 Annual Reports.
\5\ Source: U.S. Department of Labor, EBSA calculations using
the Auxiliary Data for the March 2021 Annual Social and Economic
Supplement to the Current Population.
\6\ EBSA projected ERISA covered pension, welfare, and total
assets based on the 2020 Form 5500 filings with the U.S. Department
of Labor (DOL), reported SIMPLE assets from the Investment Company
Institute (ICI) Report: The U.S. Retirement Market, Second Quarter
2022, and the Federal Reserve Board's Financial Accounts of the
United States Z1 September 9, 2022.
\7\ Estimates are based on 2020 Form 5500 filings. Welfare plans
with fewer than 100 participants that are unfunded or insured (do
not hold assets in trust) are generally exempt from filing a Form
5500. Therefore, while DOL estimates there are 2.5 million health
plans and 673,000 non-health welfare plans, respectively only 63,000
and 21,000 of these plans filed a 2020 Form 5500.
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B. September 2021 Proposed Rule and Final Rule Phases I, II and III
On September 15, 2021, the Agencies published a notice of proposed
forms revisions (NPFR) to amend the Form 5500 Annual Return/Report
primarily to implement annual reporting changes related to legislative
provisions in the Setting Every Community Up for Retirement Enhancement
Act of 2019 (SECURE Act) focused on multiple-employer pension plans
(MEPs) and defined contribution group reporting arrangements (DCGs or
DCG reporting arrangements).\8\ 86 FR 51488 (Sep. 15, 2021). The NPFR
also set forth additional proposed changes intended to improve
reporting on multiemployer and single-employer defined benefit pension
plans, update reporting on Form 5500 Annual Return/Report to make the
financial information collected on the Form 5500 Annual Return/Report
more useful and usable, enhance the reporting of certain tax
qualification and other compliance information by retirement plans, and
transfer to the DOL Form M-1 (Report for Multiple Employer Welfare
Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs))
participating employer information for multiple-employer welfare
arrangements that are required to file the Form M-1. 86 FR 51488 (Sept.
15, 2021). The DOL simultaneously published a proposed rulemaking
(NPRM) required to implement the proposed forms revisions. 86 FR 51284
(Sep. 15, 2021). The NPFR and the NPRM are collectively referred to as
the September 2021 proposal.
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\8\ The SECURE Act was enacted December 20, 2019, as Division O
of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-
94).
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The Agencies received 114 comments on the September 2021 proposal.
The comments, which were all posted on the DOL's website, generally
focused on the proposed changes for the 2022 plan year forms and on
future rulemakings.
In December 2021, the DOL published a final forms revisions
rulemaking (2021 Final Forms Revisions) that set forth a narrow set of
changes to the instructions for the Form 5500 and Form 5500-SF,
effective for plan years beginning on or after January 1, 2021. 86 FR
73976 (Dec. 29, 2021). Those instruction changes generally implemented
annual reporting changes for MEPs, including pooled employer plans
(PEPs), that were described in the September 2021 proposal. The DOL
noted in that publication that other changes to the Form 5500 Annual
Return/Report would be the subject of one or more separate and later
final notices to address other elements of the September 2021 proposal.
That rule is also referred to herein as Final Rule Phase I.\9\
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\9\ See/<a href="http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202204&RIN=1210-AB97">www.reginfo.gov/public/do/eAgendaViewRule?pubId=202204&RIN=1210-AB97</a>.
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In May 2022, the Agencies published a second final forms revisions
rulemaking effective for plan years beginning on or after January 1,
2022. 87 FR 31133 (May 23, 2022). Those forms and instructions
revisions generally implemented annual reporting changes for defined
benefit plans on Schedules MB, SB and R, but also added certain plan
characteristics codes for MEPs, including one to specifically identify
PEPs, to the list of plan characteristics the plans must use to
describe the plan on their annual report. That 2022 rule is referred to
herein as Final Rule Phase II.
The Agencies stated in the 2022 Final Forms Revisions notice that
the remaining proposed changes from the September 2021 proposal to the
Form 5500 Annual Return/Report would be addressed either in a further
final forms revisions notice or possibly re-proposed with modifications
in a separate proposal as part of a broader range of improvements to
the annual reporting requirements.\10\ The decision to defer further
changes until a third final rule was also based on the need to
coordinate the careful consideration of public comments and other
regulatory processes for adopting final changes to the Form 5500 Annual
Return/Report with a separate contractual development schedule for
integrating forms and instructions changes into the wholly-electronic
EFAST2 filing system that receives and displays Form 5500 Annual
Return/Report filings.\11\
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\10\ As noted in the September 2021 proposal, the DOL has a
separate regulatory project on its semi-annual agenda in
coordination with the IRS and PBGC to: (i) modernize the financial
and other annual reporting requirements on the Form 5500 Annual
Return/Report; (ii) continue an ongoing effort to make investment
and other information on the Form 5500 Annual Return/Report more
data mineable; and (iii) consider potential changes to group health
plan annual reporting requirements, among other improvements that
would enhance the Agencies' ability to collect employee benefit plan
data in a way that best meets the needs of compliance projects,
programs, and activities. See <a href="http://www.reginfo.gov">www.reginfo.gov</a> for more information.
\11\ EFAST2 is an all-electronic system designed by the Agencies
to simplify and expedite the submission, receipt, and processing of
the Form 5500 and Form 5500-SF. Under EFAST2, filers choose between
using EFAST2-approved vendor software or an EFAST website (IFILE) to
prepare and submit the Form 5500 or Form 5500-SF. Completed forms
are submitted via the internet to EFAST2 for processing. EFAST2 is
operated by a private sector government contractor on behalf of the
Agencies. Each year the EFAST2 system is rolled over for the coming
year's annual return/report filings; for example, the system must be
updated to reflect changes from the 2022 plan year return/report
filings to the 2023 plan year return/report filings. That rollover
process is governed by a contractual development schedule with
deadlines designed to ensure that forms and instructions changes are
smoothly integrated into the EFAST2 system and the products
developed by private software developers to provide filing services
to employee benefit plans. Integration of the regulatory and EFAST2
processes is less complicated in years that do not involve material
changes to the forms or instructions. These processes, however, are
more complex when the Agencies make substantial changes to the forms
and instructions.
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This third rulemaking document (herein referred to as Final Rule
Phase III) addresses the remaining subjects included in the September
2021 proposal, including DCG reporting arrangements, Schedule DCG and
related audit issues, Schedule MEP and related reporting requirements
regarding MEPs, financial statement improvements to the Schedule H and
Schedules of Assets, changes in participant counting methodology for
determining eligibility for small plan reporting purposes, including
the conditional waiver of the Independent Qualified Public Accountant
(IQPA) audit requirements, and additional questions on pension plan
compliance with certain Code requirements. Some changes in those areas
are being adopted in final form and others that were included in the
September 2021 proposal are being deferred for further development and
public input as part of a more general Form 5500 improvement project
listed on DOL's semi-annual regulatory agenda. The final forms and
instructions changes adopted in this Final Rule Phase III generally
apply beginning with the 2023 plan year Form 5500 Annual Return/Report.
C. Overview of SECURE Act Changes Related to Form 5500 Annual Reporting
Changes
The SECURE Act, which overall was designed to expand and preserve
workers' retirement savings, is the most significant legislation
impacting ERISA and Code provisions pertaining to retirement plans
since the Pension Protection Act of 2006. Among other things, the
SECURE Act directed the Secretaries of the Departments of Labor and
Treasury (together the ``Departments'') to develop a new aggregate
annual reporting option for certain groups of retirement plans and
included other statutory amendments that directly impact annual
reporting requirements for MEPs. In relevant part, the SECURE Act's
expansion of MEPs and direction for the Departments to
[[Page 11986]]
establish a consolidated reporting option for defined contribution
pension plans that share certain key characteristics should help expand
retirement coverage by making it easier for record keepers and other
financial services providers to offer attractive retirement plan
alternatives and for employers, especially small ones, to pick from an
array of retirement plan alternatives and structure that works best.
Section 101 of the SECURE Act amended ERISA section 3(2) and added
ERISA sections 3(43) and 3(44) to allow for a new type of ERISA-covered
MEP--a defined contribution pension plan called a ``pooled employer
plan'' (PEP), operated by a ``pooled plan provider'' (PPP). PEPs allow
multiple unrelated employers to participate without the need for any
common interest among the participating employers (other than having
adopted the plan).\12\ Under ERISA section 3(2), a PEP is treated for
purposes of ERISA as a single plan that is a MEP. A PEP is defined in
ERISA section 3(43) as a plan that is an individual account plan
established or maintained for the purpose of providing benefits to the
employees of two or more employers; that is a qualified retirement
plan, a plan that consists of annuity contracts described in Code
section 403(b) that also meets the requirements of Code section
403(b)(15),\13\ or a plan funded entirely with individual retirement
accounts (IRA-based plan); and the terms of which must meet certain
requirements set forth in the statute.\14\
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\12\ DOL sought comments through a Request for Information
published on July 31, 2019, on ``open'' MEP structures (those
without the need for any commonality among the participating
employers or other genuine organization relationship unrelated to
participation in the plan) being treated as one multiple-employer
plan for purposes of compliance with ERISA. The DOL does not have
any current plan to take further action regarding defined
contribution open MEPs due to the SECURE Act provisions permitting
PEPs as a type of open MEP.
\13\ After the final rule had been submitted to OMB on November
21, 2022, for review under Executive Order 12866, the SECURE Act 2.0
of 2022 (SECURE Act 2.0) was signed into law on December 29, 2022,
as Division T of the Consolidated Appropriations Act, 2023, H.R.
2617, as amended. Section 106 of the SECURE Act 2.0 amended ERISA
section 3(43) and added a new subparagraph 15 to Code section 403(b)
to permit 403(b) PEPs for plan years beginning after December 31,
2022. This notice of final forms revision includes certain SECURE
2.0 updates to the definition of a PEP in the Schedule MEP
instructions and general instructions for Form 5500 and Form 5500-
SF.
\14\ 29 U.S.C. 1002(43).
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ERISA section 3(43) further provides that PEPs do not include
multiemployer plans as defined in ERISA section 3(37) or plans
maintained by employers that have a common interest other than having
adopted the plan.\15\ The term PEP also does not include a plan
established before the date the SECURE Act was enacted unless the plan
administrator elects to have the plan treated as a PEP and the plan
meets the ERISA requirements applicable to a PEP established on or
after such date. The PPP for a PEP must file a registration statement
with the Secretary of Labor and the Secretary of Treasury pursuant to
ERISA section 3(44) and section 413(e)(3)(A)(ii) of the Code. On
November 16, 2020, as part of implementing the SECURE Act section 101,
the DOL published a notice of final rulemaking establishing Form PR
(Pooled Plan Provider Registration) (Form PR) and making its filing the
registration requirement for PPPs. 85 FR 72934 (Nov. 16, 2020). The
Treasury, DOL, and the IRS have advised that filing the Form PR with
the DOL will satisfy the requirement to register with the Secretary of
the Treasury.\16\ The instructions to the Form PR tell PPP registrants
to use the same identifying information on the Form 5500 Annual Return/
Reports filed by the PEPs, particularly name; EIN for the PPP; any
identified affiliates providing services; trustees; and plan name and
number for each PEP.
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\15\ In establishing a PEP as a new type of multiple-employer
plan, the SECURE Act in section 101(c) specifically referred to
plans maintained by employers that have a common interest other than
having adopted the plan. For example, the DOL's recent final
association retirement plan regulation, at 29 CFR 2510.3-55,
published July 31, 2019, clarified and expanded the types of
arrangements that could be treated as MEPs under Title I of ERISA to
include plans established and maintained by a bona fide group or
association of employers or by a professional employer organization
(PEO). The SECURE Act provision excluding a ``plan maintained by
employers that have a common interest'' from the definition of a PEP
does not preclude employers with a common interest other than
participating in the plan from establishing or participating in a
PEP. Rather, in the Departments' view, the SECURE Act provision
means that if a group of employers with a common interest other than
participating in the plan establish a MEP based on a common interest
among the employers, e.g., an association retirement plan under the
DOL's regulation, the MEP will not be subject to the SECURE Act
requirements for a plan to be a PEP.
\16\ Like other pooled plan providers, pooled plan providers for
403(b) PEPs authorized in SECURE Act 2.0 are subject to the Form PR
registration requirements.
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Section 101 of the SECURE Act also amended ERISA section 103(g) for
MEPs. Section 103(g) of ERISA requires that the Form 5500 Annual
Return/Report of a MEP generally must include a list of participating
employers and a good faith estimate of the percentage of total
contributions made by each participating employer during the plan year.
The SECURE Act amended section 103(g) to expand the participating
employer information that must be reported on the Form 5500 Annual
Return/Report \17\ also to require the aggregate account balances
attributable to each employer in the plan (determined as the sum of the
account balances of the employees of each employer and the
beneficiaries of such employees), and applied section 103(g) to
retirement plans that currently meet the definition of a MEP under
ERISA section 210(a), including any PEPs, for plan years beginning on
or after January 1, 2021.\18\ With respect to a PEP, section 103(g)
further requires that the annual return/report must include the
identifying information for the person designated under the terms of
the plan as the PPP.
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\17\ SECURE Act Section 101(d).
\18\ SECURE Act Section 101(e)(1).
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Section 101 of the SECURE Act also amended ERISA section
104(a)(2)(A) to permit the Secretary of Labor to prescribe by
regulation simplified reporting for MEPs subject to ERISA section
210(a) with fewer than 1,000 participants in total, so long as each
participating employer has fewer than 100 participants.
Section 202 of the SECURE Act provides that the Departments, shall,
in cooperation, modify the Form 5500 Annual Return/Report so that all
members of a group of defined contribution pension plans that are
individual account plans described in section 202 may file a single
consolidated annual return/report satisfying the requirements of both
section 6058 of the Code and section 104 of ERISA, effective for plan
years beginning on or after January 1, 2022.\19\ The SECURE Act further
provides that, in developing the consolidated return/report, the
Departments may require any information regarding each plan in the
group determined to be necessary or appropriate for the enforcement and
administration of the Code and ERISA. The SECURE Act also mandates that
the consolidated reporting by such a group must include such
information as will enable participants in each of the plans to
identify any aggregated return/report filed with respect to their plan.
Section 202 provides that to constitute an eligible group of plans, all
of the plans in the group must be either individual account plans or
defined contribution plans as defined in section 3(34) of
[[Page 11987]]
ERISA or in section 414(i) of the Code; must have the same trustee as
described in section 403(a) of ERISA; the same one or more named
fiduciaries as described in section 402(a) of ERISA; the same
administrator as defined in section 3(16)(A) of ERISA and plan
administrator as defined in section 414(g) of the Code; must have plan
years beginning on the same date; and must provide the same investments
or investment options to participants and beneficiaries. Section 202
further provides that a plan not subject to Title I of ERISA shall be
treated as meeting these requirements for being eligible to be part of
a consolidated reporting group of plans, if the same person that
performs each of the functions described in the above requirements, as
applicable, for all other plans in such group performs each of such
functions for such plan.\20\
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\19\ The SECURE Act Section 202 appears to use the terms
``combined,'' ``aggregated,'' and ``consolidated'' interchangeably
when directing the Departments to develop a new alternative method
for the Form 5500 Annual Report/Return for DCGs. This final rule
generally uses the term ``consolidated'' to describe the DCG
reporting arrangement filing.
\20\ SECURE Act Section 202(c).
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Accordingly, the statutory authorization to develop a new type of
consolidated reporting arrangements for groups of plans (i.e., DCGs),
the establishment of a new type of multiple-employer plan (i.e., PEP),
and the changes to the required reporting on participating employers in
multiple-employer plans required some adjustments to the Form 5500
Annual Return/Report.
D. Overview of Final Form and Instruction Changes and Discussion of
Public Comments
After consideration of the written comments received, the Agencies
have determined to adopt various elements of the proposed forms and
instructions changes with some modifications as set forth below. The
forms and instructions changes fall into seven major categories: (1)
adding a DCG consolidated reporting option; (2) adding Schedule MEP to
collect MEP information; (3) adding certain new Code compliance
questions; (4) changing the methodology for counting participants in
defined contribution plans for purposes of determining eligibility for
small plan reporting options; (5) additional defined benefit plan
reporting improvements; (6) adding new breakout categories to the
``Administrative Expenses'' category of the Income and Expenses section
of the Schedule H balance sheet; and (7) miscellaneous and conforming
changes to forms and instructions. The DOL is also concurrently
publishing a separate final rule that adds new regulations at 29 CFR
2520.103-14 and 2520.104-51, pursuant to section 110 of ERISA, and
revises existing reporting regulations as needed to conform the Title I
annual reporting regulations to the forms and instructions changes
being adopted in this notice.
1. SECURE Act Section 202 DCG Reporting Arrangements
As noted above, section 202 of the SECURE Act directs the
Departments to modify the Form 5500 to allow certain groups of defined
contribution pension plans to file a single consolidated annual return/
report. For a group of plans to be able to file a consolidated return/
report, section 202(c) of the SECURE Act provides that all plans must
be individual account plans or defined contribution plans that have the
same trustee; the same one or more named fiduciaries; the same plan
administrator under ERISA and the Code; the same plan year; and provide
the same investments or investment options for participants and
beneficiaries. The SECURE Act also provides that in developing the
consolidated return/report for such arrangements, the Departments shall
require such information as will enable a participant in a plan to
identify any consolidated return or report filed with respect to the
plan. The SECURE Act statutory provision further expressly provides the
Departments with the authority to require such return/report to include
any information regarding each plan in the group they determine is
necessary or appropriate for the enforcement and administration of the
provisions of ERISA and the Code.
The Departments explained in the proposal, and continue to believe,
that the conditions in section 202 of the SECURE Act suggest that the
section was primarily aimed at plans of unrelated small businesses that
adopt a plan that has received approval from the IRS as to its form
through the IRS Pre-Approved Program (pre-approved plan) offered by the
same provider, and that section 202 was intended to provide this type
of business structure with annual reporting cost efficiencies similar
to those that MEPs and PEPs can offer to their participating employers.
The Departments gave significant weight to that view of the purpose of
the SECURE Act provision as they considered public comments and reached
conclusions on final forms revisions in this area.
After considering the public comments on the proposal, the
Departments continue to believe that an efficient and effective
approach to establishing such a consolidated return/report option is to
amend the Form 5500 Annual Return/Report and its related instructions
to provide that the filing requirements for large pension plans and
direct filing entities (DFEs) will generally apply to this new type of
DFE--a defined contribution group (DCG) reporting arrangement--except
that an additional schedule (Schedule DCG Individual Plan Information)
to report individual plan-level information will have to be attached
for each plan included in the DCG filing. As described in more detail
below, the final rule is largely consistent with the September 2021
proposal, although several changes are being made in response to public
comments, including eliminating the requirements that the DCG reporting
arrangement and participating plans use a ``single trust'' and obtain
an IQPA audit of that single trust, and that the investments of all
participating plans be in investments that satisfy the qualifying
assets condition that currently applies for small plans to be eligible
to file a Form 5500-SF and for the small plan audit waiver. The
separate Notice of Final Rulemaking being published with these final
form revisions adds new DOL regulations at 29 CFR 2520.103-14 and
2520.104-51, pursuant to section 110 of ERISA, that set forth this DCG
reporting arrangement option as an alternative method of compliance for
eligible plans to satisfy the generally applicable requirement under
Title I of ERISA to file their own separate Form 5500.
a. Conditions Applicable to DCG Reporting Arrangements
This final rule provides that a DCG reporting arrangement is
treated as a new type of DFE that is required to: (1) file a Form 5500
under rules and conditions generally applicable to large defined
contribution pension plans; (2) report specific plan-level information
on the new Schedule DCG regarding each individual plan in the DCG,
which shall include an IQPA audit report for each large plan and each
small plan that does not meet the conditions in 29 CFR 2520.104-46 for
a waiver of the IQPA audit and opinion requirements in ERISA section
103; and (3) ensure that each individual plan included in the DCG
filing meets specified eligibility conditions that are consistent with
SECURE Act Section 202 statutory criteria and designed to meet
necessary and appropriate financial accountability and oversight
protections.
The final rule sets forth the eligibility conditions for a defined
contribution pension plan to file as part of a DCG reporting
arrangement, and thus rely on this alternative method of compliance to
satisfy the annual reporting obligation in section 104 of ERISA and in
section 6058 of the Code. To satisfy such annual reporting obligations,
all defined contribution pension plans filing as part
[[Page 11988]]
of a DCG must meet the following eligibility conditions with respect to
such DCG:
All plans are individual account plans or defined contribution
plans that--
(1) Have the same trustee meeting the requirements set forth in
ERISA section 403(a) (``common trustee'');
(2) Have the same one or more named fiduciaries designated in
accordance with the requirements set forth in ERISA section 402(a)
(``common named fiduciaries''), except that an individual employer may
be a named fiduciary of each employer's own plan, provided that the
other named fiduciaries are the same and common to all plans;
(3) Have a designated administrator under ERISA section 3(16)(A)
that is the same plan administrator and common to all plans (``common
plan administrator'');
(4) Have plan years beginning on the same date (``common plan
year'');
(5) Provide the same investments or investment options to
participants and beneficiaries in all the plans (``common investments
or investment options'') (as discussed below, a single dedicated
brokerage window provided by the same designated registered broker-
dealer common to all plans that restricts participant and beneficiary
investments solely to assets with a readily determinable fair market
value as described in 29 CFR 2520.103-1(C)(2)(ii)(C) will be treated as
a ``common investment option'' for purposes of this paragraph);
(6) Do not hold any employer securities at any time during the plan
year, except that this condition does not prohibit investments in any
employer's publicly traded securities within an otherwise ``common
investment or investment option'' available to all participants and
beneficiaries in the plans participating in the DCG;
(7) Either obtain an audit by an IQPA and file the IQPA report with
the DCG consolidated Form 5500, or be eligible for the waiver of the
annual examination and report of an IQPA under 29 CFR 2520.104-46; \21\
and
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\21\ After the final rule had been submitted to OMB on November
21, 2022, for review under Executive Order 12866, the SECURE Act 2.0
of 2022 (SECURE Act 2.0) was signed into law on December 29, 2022,
as Division T of the Consolidated Appropriations Act, 2023, H.R.
2617, as amended. The SECURE Act 2.0 includes a specific direction
to the DOL and the Treasury Department on audit requirements for the
DCG consolidated Form 5500 reporting option. Specifically, section
345 of SECURE Act 2.0 provides that with respect to the IQPA audit
provisions in section 103 of ERISA ``any opinions required by
section 103(a)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1023(a)(3)) shall relate only to each individual
plan which would otherwise be subject to the requirements of such
section 103(a)(3).'' This final forms revisions notice and the
related final rule notice being published concurrently include DCG
plan-level audit provisions that are consistent with the SECURE Act
2.0 direction.
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(8) Are not a MEP (including a PEP) or a multiemployer plan.
The Form 5500 also includes a new checkbox on the Form 5500 (Part
II, line 10a(4)) to indicate that at least one Schedule DCG is attached
to the Form 5500, with a space for the filer to enter the number of
Schedules DCG (one per participating plan) attached to the Form 5500
filing.
These conditions are designed to meet SECURE Act section 202
statutory criteria for plans participating in a group filing as well as
related administrative requirements for DCG compliance and agency
enforcement, including important information and transparency
requirements that enable participants to find information in DCG
filings regarding their particular plan. This approach also responds to
public comments that asked the Departments to reconsider some of the
proposed conditions for DCG reporting in an effort to reduce the costs
and administrative burdens, particularly with respect to audit costs
and for smaller plans, while continuing the benefits of having
appropriate financial transparency and accountability for plans
participating in, and persons managing and operating, DCG reporting
arrangements.\22\
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\22\ See also discussion in DOL-only final rule being published
concurrently in this issue of the Federal Register titled ``Annual
Reporting and Disclosure'' that adopts a new regulatory section at
29 CFR 2520.104-51 to set forth, for ERISA Title I purposes, the DCG
eligibility and plan participation conditions.
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b. Eliminating the Single DCG Trust, DCG Trust Audit, and ``Eligible
Plan Assets'' Requirements for All Investments in DCG Reporting
Arrangements
The September 2021 Proposal included conditions that the investment
assets of the plans participating in the DCG would have to be held in a
single trust and the consolidated Form 5500 Annual Return/Report filed
by the DCG would have to include an audit of the single trust's
financial statements. The proposal also required that all investments
of the participating plans be 100% invested in certain secure, easy to
value assets that are treated as having a ``readily determinable fair
market value'' under 29 CFR 2520.103-1(c)(2)(ii) and that participating
plans satisfy the small plan audit waiver under 29 CFR 2520.104-46 by
virtue of having 95% or more of their assets as ``qualifying plan
assets'' and not by virtue of enhanced bonding. For the reasons
discussed below, these conditions are revised in the final forms
revisions and rule. The DCG reporting arrangement may, but is not
required to, use a single trust to satisfy the SECURE Act condition
that all plans in the DCG have the ``same trustee.'' Rather, the plans
participating in the DCG must instead hold all plan assets in trust by
one or more trustees in accordance with section 403(a) of ERISA,\23\
with the condition that such trustee(s) be the same, i.e., a common
trustee, for all plans participating in the DCG. The common trustee or
trustees are required to be either named in the trust instrument or in
the plan instrument or appointed by a person who is a named fiduciary
of the participating plan. Upon acceptance of being named or appointed,
such trustee or trustees must have exclusive authority and discretion
to manage and control the assets of the plan, except to the extent that
the authority to manage, acquire, or dispose of assets of the plan is
delegated to one or more investment managers pursuant to section
402(c)(3) of ERISA or the plan expressly provides that the trustee or
trustees are subject to the direction of a named fiduciary who is not a
trustee (in which case the trustees must be subject to proper
directions of such fiduciary which are made in accordance with the
terms of the plan and which are not contrary to ERISA).
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\23\ Section 403(a) of ERISA states that, except as provided in
ERISA section 403(b), all assets of an employee benefit plan shall
be held in trust by one or more trustees. The issue of Code section
403(b) plans' ability to participate in a DCG is discussed in detail
in a subsequent part of this Federal Register notice.
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With respect to requiring use of a single trust, several commenters
argued that nothing in the SECURE Act limits DCGs to only those plans
that utilize a single group trust arrangement, noting that the statute
directive was to use the ``same trustee.'' Two commenters argued that
there were no strong practical or policy reasons for treating sub-
trusts of a single trust as qualitatively different from separate
trusts with the same trustee for DCG eligibility purposes. Two
commenters noted that some DCG structures may want to use a master
trust, with sub-trusts for each individual plan in the DCG, while other
DCGs may use pre-approved plan documents and identical trust documents
that name the same entity as trustee. Another commenter pointed out
that many trust agreements are negotiated in a custom way to fit a
particular employer's requirements, so that requiring all employers in
a particular DCG to be bound by the same trust terms is unnecessarily
restrictive. One commenter expressed concern
[[Page 11989]]
about the potential inapplicability of section 3(a)(2) of the
Securities Act of 1933 and section 3(c)(11) of the Investment Company
Act of 1940, which contain similar registration exemptions for
interests and participations in a single trust fund issued in
connection with ERISA plans and for collective trust funds maintained
by a bank through the exercise of substantial investment authority over
trust assets. The commenter argued that SEC staff has historically
taken the view that, for purposes of both exemptions, a single trust
fund must be maintained in connection with a single-employer plan or in
connection with plans sponsored by a group of commonly controlled or
otherwise closely related plan sponsors. The commenter expressed
concern about additional costs and burdens for DCG arrangements if the
SEC registration exemptions are unavailable to a DCG ``single trust.''
Finally, a commenter suggested that, as an alternative to requiring use
of a single trust, the DOL revise the proposal to permit both use of a
single trust or multiple trusts.
With respect to the audit requirements, one commenter supported
both the trust level audit and the separate audit requirement for any
large plan that elects to participate in a DCG and rely on the DCG's
consolidated Form 5500 to satisfy the plan's annual reporting
obligation. One commenter opposed the concept of auditing different
types of plans together on the basis that there are significant
differences in the standards for and operation of plans so that they
should not be treated the same and not audited together. Most
commenters, however, raised various concerns regarding the cost and
administrative burdens related to obtaining IQPA audits. Some
commenters claimed that the cost of a plan-level audit would be in the
range of an average of $15,000-$25,000 per plan and complained that
this cost would negate cost savings that a DCG consolidated reporting
option was supposed to provide. One commenter argued that the
objectives of an audit to validate funds flowing in and out of the
plan, identify late or missing contributions, obtain confirmation that
the plan has sufficient controls to prevent and detect errors, and
confirm compliance with DOL rules generally can be achieved through
other less expensive means. A few commenters argued that they read the
SECURE Act's provisions on a consolidated or aggregated annual report
as envisioning some type of consolidated or aggregated audit as part of
the DCG filing and, based on that premise, argued that requiring any
individual plan audits would frustrate the SECURE Act's goal of easing
administrative burdens associated with the Form 5500 filing
requirement. Several other commenters suggested the DOL should allow
for a ``consolidated audit'' of all the plans participating in a DCG
reporting requirement, rather than requiring separate audits by each
participating plan. One commenter argued that requiring plan-level
audits puts DCGs at a commercial disadvantage relative to PEPs and MEPs
because under Generally Accepted Auditing Standards (GAAS), PEPS and
MEPS are subject to a single audit of the single plan. One commenter
suggested that separate audits should be required only when the auditor
discovers something in a consolidated audit requiring further
investigation at the individual plan level. Some commenters supported a
consolidated trust audit but only in lieu of individual plan audits if
the single trust condition was retained. Another commenter suggested
DOL consider an alternative where DCGs are treated similar to a master
trust (or MTIA), which itself is not subject to audit and, if each plan
within a master trust has fewer than 100 participants and otherwise
meets the requirements to be exempt from audit, there would be no audit
at the plan or master trust level. A commenter suggested that the new
Schedule DCG for Form 5500 could require additional information from
the plan administrator that would provide transparency and
accountability at a lower cost than a plan-level audit.\24\
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\24\ One commenter appears to have misunderstood the SECURE Act
provision giving the DOL the discretionary authority to decide
whether to provide a simplified reporting option for MEPs with fewer
than 1,000 participants in total as long as each participating
employer has fewer than 100 participants. The SECURE Act did not
establish a new audit threshold for MEPs. Rather, section 101 of the
SECURE Act amended ERISA section 104(a)(2)(A) to permit the
Secretary of Labor to prescribe by regulation simplified reporting
for MEPs subject to ERISA section 210(a) with fewer than 1,000
participants in total, as long as each participating employer has
fewer than 100 participants. The DOL explained in the September 2021
proposal that it was not proposing to amend the current reporting
rules to establish a ``simplified report'' for such plans. The DOL
asked interested stakeholder for comments on why MEPs should be
subject to different reporting requirements than single-employer
plans that cover fewer than 1,000 participants and, if they thought
there were reasons for different treatment, to identify appropriate
conditions and limitations for such a simplified report that would
ensure transparency and financial accountability comparable to that
for other large retirement plans. Thus, contrary to the commenter's
suggestion, there is no 1,000 participant audit threshold for MEPS.
Further, the SECURE Act's grant of discretionary authority for MEPs
does not include DCG reporting arrangements.
---------------------------------------------------------------------------
With respect to the requirement that participating plans be 100%
invested in ``eligible plan assets,'' some commenters argued that the
DOL exceeded its statutory authority claiming that the SECURE Act limit
is that investments or investment options be the same for each DCG
participating plan. Another argued that the requirement hindered cost
efficiencies for large plans that participate in a DCG, hampered an
investment fiduciary's ability to prudently select investment
alternatives for participants, and placed indirect restrictions on the
range of plans that could join DCGs by prohibiting individual account
plans that use ``white label'' funds from joining a DCG.
In the September 2021 proposal, the DOL explained that the single
trust requirement was designed to allow for DCG reporting arrangements
to have a single trust level audit, and also to reflect DOL's thoughts
that a trust level audit would provide important financial
accountability and oversight protections for arrangements that may be
reporting on very large sums of plan assets in the aggregate. The DOL
also explained that the ``single trust'' structure was based in part on
the single trust structure used by plans of unrelated small businesses
that adopt a plan offered by the same provider that has received
approval from the IRS as to its form through the IRS Pre-Approved
Program (pre-approved plan).\25\ The DOL also noted that an efficiency
that would flow from an audit of a DCG single trust would be that the
versions of the separate schedules referenced in ERISA section
103(a)(3)(A) and 29 CFR 2520.103-10(b) filed as part of the DCG
consolidated Form 5500 would be treated as ERISA section 103(b)(3)
supplemental schedules for purposes of the required IQPA's opinion on
whether those schedules were presented in conformity with DOL rules and
regulations, including the delinquent participant contributions
schedule filed by the DCG in connection with line 4a of its Form 5500,
Schedule H. The single trust, taken together with the condition that
[[Page 11990]]
plans relying on the DCG consolidated Form 5500 report arrangement must
be 100% invested in eligible plan assets and be eligible for the small
plan audit waiver under 29 CFR 2520.104-46, but not by reason of
enhanced bonding (which are current requirements for small plans being
eligible to file the Form 5500-SF), was expected to simplify the audit
requirement for the DCG single trust and the audits of participating
plans subject to a separate plan-level audit because all the
investments would be secure, easy-to-value assets.
---------------------------------------------------------------------------
\25\ In the September 2021 proposal, the Departments noted that,
historically, IRS conditions applicable to many pre-approved plans
required that employers who used what was known as a ``master'' plan
were required to use the same trust or custodial account, whereas
each employer had a separate trust or custodial account in a
``prototype plan.'' Under the proposal, the ``same trust''
requirement for the consolidated report would have been satisfied by
the same trust structure historically used by employers using
``master'' plans. The proposal also provided that use of sub-trusts
of the DCG trust would be permitted, but that separate plans using a
separate trust for investments would not be permitted. The final
rule changes the proposal's restrictions on single trusts and sub-
trusts.
---------------------------------------------------------------------------
In the September 2021 proposal, the DOL also explained that an
audit of a DCG trust would not be an adequate substitute for plan-level
audits of the plans relying on the DCG consolidated Form 5500 filing.
Although the line items on the trust's financial statement would be
audited, the underlying participating plans themselves would not be
audited, so that compliance with the provisions of the plans that are
invested in and funded by the trust would not be audited. In a trust
audit, the amount of contributions received by the trust might be
tested against the contributions remitted by participating plans, but,
whether those contribution amounts remitted are in accordance with the
individual plan provisions would not be tested, as they would be tested
in an audit of the plan. There could be undisclosed, material errors in
the amount of contributions remitted to the trust versus what should
have been remitted. Similarly, in a trust audit, the benefit payments
to participants might be tested in terms of amounts paid and whether
they were authorized, but whether such payments were in compliance with
plan provisions, such as vesting provisions, would not be tested as
they would be tested in a plan's audit. In a plan audit, participant
data is tested. Participant data testing involves determining whether
employees are properly included or excluded from participating and
whether the census data upon which eligibility for certain
contributions and distributions are made is accurate. The audit of a
trust would not test this at all. Finally, the materiality threshold
for a trust audit could be significantly higher than that which would
apply in the case of an individual participating plan because the trust
threshold would be based on total assets in the trust rather than
assets in each individual plan.
Although the DOL continues to believe that the single trust
proposal carried reporting and efficiency benefits, the DOL also agrees
that adopting an alternative approach suggested by some commenters that
permits use of either a single DCG-level trust or multiple plan-level
trusts would provide more flexibility to DCG arrangements in attempting
to realize the operational efficiencies and cost savings for
participating plans that DCGs were intended to achieve.
Thus, the final rule addresses commenters' concerns by providing
flexibility to utilize one or more separate trusts as part of a DCG
reporting arrangement, including trusts that may be set up for
particular employers. It similarly removes the restriction on types of
sub-trusts that can be used, should a particular DCG choose to utilize
a single trust. The above structure serves to treat plans that join a
DCG, versus those that do not, on a level playing field with respect to
audits, and will support plans freely entering and exiting DCG
reporting arrangements according to plan needs and in the best
interests of plan participants and beneficiaries. Although the
``eligible plan asset'' restriction on investments is not being adopted
as part of the final forms revisions, the Departments expect that the
SECURE Act requirement that all plans participating in the DCG
reporting arrangement have the same investments or investment options,
together with the requirement for a plan-level audit for small plans
that do not meet the conditions for the DOL small pension plan audit
waiver regulation, will likely result in DCG reporting arrangements
requiring participating small plans to invest in ``eligible plan
assets'' in any event. Thus, it is expected that plan assets covered by
the DCG report would generally be held by regulated financial
institutions.
However, consistent with the September 2021 proposal, this final
rule retains the requirement that a large plan that elects to
participate have a plan-level audit. Also, the final rule requires that
small plans participating in the DCG either separately meet the audit
waiver conditions or have a plan-level audit and attach the audit
report to the DCG's consolidated Form 5500 filing.\26\
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\26\ As discussed below, the final forms revisions and the
related amendment to the DOL annual reporting regulations includes a
change in the methodology of counting participants for purposes of
determining eligibility for certain simplified reporting options for
small plans, which is based on whether the individual has an account
balance rather than whether the individual is eligible to
participate in the plan, even if the individual does not choose to
participate. Thus, plans participating in the DCG will be able to
rely on that new counting methodology for determining whether the
plan is able to use the conditional audit waiver.
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As explained in the September 2021 proposal, the DOL views an IQPA
audit at the plan level as an important financial transparency and
accountability condition for DCG reporting arrangements. Generally,
pension plans and funded welfare plans with 100 or more participants
are required to have an audit of the plan's financial statements
performed by an IQPA. The DOL explained that in an audit of the DCG
trust, the line items on the trust's financial statement are audited,
but, because the underlying participating plans themselves are not
audited, compliance with the provisions of the plans that are invested
in and funded by the trust are not audited. Therefore, in a trust
audit, the amount of contributions received by the trust might be
tested against the contributions remitted by participating plans, but,
whether those contribution amounts remitted are in accordance with the
individual plan provisions would not be tested, as they would be tested
in an audit of the plan. There could be undisclosed, material errors in
the amount of contributions remitted to the trust versus what should
have been remitted. Similarly, in a trust audit, the benefit payments
to participants might be tested in terms of amounts paid and whether
they were authorized, but whether the payments were in compliance with
plan provisions, such as vesting provisions, would not be tested as
they would be tested in an audit at the plan level. In a plan audit,
participant data is tested. Participant data testing involves
determining whether employees are properly included or excluded from
participating and whether the census data upon which eligibility for
certain contributions and distributions are made is accurate. The audit
of a trust would not test this at all. Finally, the materiality
threshold for a trust audit could be significantly higher than the
threshold that would apply in the case of an individual participating
plan. This is because the trust threshold would be based on total
assets in the trust rather than assets in each individual plan. In
comparison, under Statement on Auditing Standards No. 136 (SAS 136),
Forming an Opinion and Reporting on Financial Statements of Employee
Benefit Plans Subject to ERISA, independent qualified public
accountants are required to consider relevant plan provisions that
affect the risk of material misstatement for various transactions,
account balances, and related disclosures. Areas such as participant
eligibility, plan contributions, benefit payments and participant loans
are all covered as part of a plan-level audit. Additionally, auditors
are required to communicate
[[Page 11991]]
reportable findings to the plan that are identified during the audit of
the plan. For example, it has been the DOL's experience that plan
audits lead to increased reporting of prohibited transactions, such as
identifying and disclosing delinquent participant contributions. The
DOL has not changed its views in this regard and disagrees with the
commenter who suggested that the IQPA audit could be replaced with
lesser safeguards and reliance on certain other filings to report plan
noncompliance with specific plan asset requirements.
Thus, after considering the public comments, the DOL continues to
believe that a plan-level audit in accordance with the requirements of
section 103 of ERISA, and accompanying regulations, is necessary and
appropriate for plans participating in a DCG unless the plan
individually meets the conditions for an audit waiver under the DOL's
regulations.\27\ The final rule, however, does not require that all
plans (both large and small) be 100% invested in the types of assets
that are required for a plan to be able to file the Form 5500-SF. The
final rule also does not include the requirement that plans must be
eligible for the small plan audit waiver by virtue of having 95% or
more of its assets invested in ``qualifying plan assets'' under 29 CFR
2520.104-46(b)(1)(i)(A)(1), and not by reason of enhanced bonding.
These elements of the proposal have not been included in the final
changes and have been replaced with a more ``audit neutral'' approach
to the DCG reporting arrangement requirements under which an IQPA audit
and IQPA audit report are required unless the plan meets the conditions
for the existing small plan audit waiver that would be available to any
small plan, regardless of whether the plan participates in a DCG
reporting arrangement.
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\27\ See, 29 CFR 2520.104-41; 29 CFR 2520.104-46.
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With respect to the commenters who argued that the SECURE Act's
provisions on a consolidated or aggregated annual report envision some
type of consolidated or aggregated audit as part of the DCG filing, the
DOL disagrees. The September 2021 proposal explained that it was not
possible under GAAS to have a consolidated audit of all the
participating plans in the DCG reporting arrangement. Rather, for a
GAAS audit, the audit would have to be of the participating plans in
the DCG reporting arrangement. Comments submitted by accounting
industry stakeholders confirmed that conclusion. Nothing in the SECURE
Act indicates that Congress intended to make wholesale changes to
ERISA's GAAS and Generally Accepted Accounting Principles (GAAP)
requirements applicable to plan audits and opinions of plan financial
statements. The DOL also does not interpret the SECURE Act to provide
for any new IQPA audit exceptions or exclusions for plans in a DCG. The
statute directs the Departments to jointly modify requirements under
Code Section 6058 and ERISA Section 104 to allow a group of plans to
file a single aggregated return or report that meets the requirements
of both sections. Section 202 of the SECURE Act makes no mention of
audit relief for plans participating in a DCG. It also does not amend
sections 103 or 104 of ERISA for DCG reporting arrangements, which set
forth the generally applicable plan audit requirements and authorizes
the DOL to provide conditional audit waivers through regulation.\28\ To
the contrary, SECURE Act section 202(b) specifically provides the
Departments with authority to include any information regarding each
plan in the DCG reporting arrangement determined to be necessary or
appropriate for enforcement and compliance with the Code and ERISA.
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\28\ Section 104(a)(2) of ERISA sets forth reporting
requirements for employee benefit plans and includes a grant of
regulatory authority to the DOL to provide for simplified annual
reporting by small pension plans. Section 103(a)(3)(A) of ERISA
permits the DOL Secretary to waive audit requirements for small
plans that are eligible for simplified reporting under Section
104(a)(2).
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As for commenters arguing for DCGs receiving analogous audit
requirements to those applicable to MEPS, including PEPs, the DOL does
not view DCGs as analogous to MEPs for audit purposes. Unlike MEPs,
which are single plans subject to a single plan audit, DCGs are a
collection of separate plans. Further, as described above, under GAAS,
which is expressly incorporated into ERISA as the source of audit
standards for plans, it is not possible to have a consolidated audit of
all the individual plans in the DCG reporting arrangement. Commenters
also provided no substantial evidence that a DCG consolidated report
would provide better or different protections for plan participants
with regard to risks a plan audit addresses, such as financial
misstatements in plan books and records or plan-level failures to
comply with applicable Code or ERISA Title I requirements.\29\
---------------------------------------------------------------------------
\29\ Some commenters did cite duplication of audit procedures at
the trust and plan level, but with the removal of the trust level
audit in this final rule, that objection is rendered moot.
---------------------------------------------------------------------------
Thus, the final forms revisions do not provide for a ``consolidated
audit'' of all the plans in the DCG for purposes of complying with
ERISA IQPA audit and reporting requirements.
c. Content Requirements for DCG Form 5500
The final forms notice also adopts content requirements for the
consolidated Form 5500 return/report filed by the DCG reporting
arrangement that, except for the single trust and audit provisions
described above, are largely unchanged from the proposal. Under the
final forms revisions, DCG reporting arrangements must file a Form 5500
Annual Return/Report that includes largely the same information that
large pension plans and other DFEs are required to file, except that a
DCG reporting arrangement would also be required to include in its
annual report a Schedule DCG (described below) to report individual
participating plan information for each plan that is a part of the DCG
reporting arrangement. One commenter expressed support for a separate
Schedule DCG for each plan saying it allows for participants to know
where they stand in relation to their separate plans; but otherwise
cautioned against too much streamlining in other DCG reporting areas.
Another commenter urged individual plan disclosures on DCG be as
streamlined as possible, saying most questions should be answered on a
group basis and asserting that supplemental information should only be
supplied with respect to plans with compliance issues, rather than
requiring broader disclosures. Another commenter expressed concerns
with reconciling plan-level information on Schedule DCG, suggesting
development of a separate schedule or attachment, similar to Schedule
MEP, for DCG participating employers. As discussed below, the final
forms revisions attempt to strike a balance between important plan
information required to be disclosed on Schedule DCG, and other
information that is disclosed on an aggregate basis on Form 5500 and
specified Schedules as applicable to particular DCG filings.
Specifically, the content of the DCG annual return/report would
include a Form 5500 Annual Return/Report of Employee Benefit Plan and
any statements or schedules required to be attached to the form for
such entity, completed in accordance with the instructions for the
form, including Schedule A (Insurance Information), Schedule C (Service
Provider Information), Schedule D (DFE/Participating Plan Information),
Schedule G (Financial Transaction Schedules), Schedule H (Financial
Information), Schedule DCG (Individual
[[Page 11992]]
Plan Information), schedules described in Sec. 2520.103-10(b)(1) and
(b)(2) with information aggregated for all the participating plans
unless otherwise provided in the instructions to the Form 5500, and,
for DCG consolidated Form 5500 filings that cover large plans
(generally those with 100 or more participants) and small plans that do
not meet the regulatory conditions for the small pension plan audit
waiver, an IQPA audit report and the related financial statements for
each such plan, attached to the Schedule DCG for the plan. This would
include separate financial statements described in ERISA section
103(a)(3)(A) and Sec. 2520.103-1(b)(2) if such financial statements
are prepared in order for the independent qualified public accountant
to form the required opinions on the individual participating plans
subject to the audit requirement.
Information reported on the various schedules to the Form 5500,
other than Schedule DCG, would be reported for all participating plans
in the aggregate. Thus, a Schedule A would be required for all
insurance contracts that constitute one of the common investments or
investment alternatives available to the participants in all the
participating plans, regardless of whether certificates were to be
issued to individual plans or participants upon selection of that
option by a participant. Similarly, service providers to the DCG
arrangement and to each of the participating plans would all be
reported on Schedule C, even if the service provider did not actually
provide services or charge fees to a particular plan because, for
example, the service provider provided investment management services
with respect to a particular investment option that was not selected by
any of the participants in a particular plan. The $5,000 threshold for
a service provider to be reported on Schedule C would be based on the
total amount received by the service provider from all sources, not
broken down and measured on a per plan or other allocated method. For
example, reporting on Schedule C would still be required if the total
amount was $5,000 or more, even if the amount paid by or charged
against the assets of each of the participating plans or otherwise
allocated to each plan was less than $5,000 per plan. Reportable
transactions on Schedule G would include all reportable transactions
for all the participating plans. For reporting delinquent participant
contributions on Schedule H, Line 4a, the DCG filing would be required
to answer ``yes'' and report the aggregate of all delinquent
participant contributions for all the plans covered by the DCG filing,
but would not file a Schedule of Delinquent Participant Contributions.
The individual plans would report delinquent participant contributions
for the plan on the plan's Schedule DCG, and plans subject to the IQPA
audit requirements would attach a Schedule of Delinquent Contributions
to their Schedule DCG. For Schedule H, Line 4i, Schedule of Assets
information is reported on a consolidated basis for all plans in the
DCG reporting arrangement; some of that information would come from the
Schedule of Assets attached to Schedule DCG for those plans required to
have an audit. For plans not subject to an audit, the common plan
administrator would maintain the necessary records to prepare the
consolidated Schedule of Assets, showing all plans' assets, that is
attached to Schedule H of the DCG reporting arrangement's Form 5500.
The Departments expect that this will help streamline the process
of answering compliance questions by having the question answered on a
group basis rather than by each plan and allowing the common
administrator of all the participating plans to use a consolidated
supplemental schedule to identify only the plans with compliance
issues.
d. Schedule DCG (Individual Plan Information)
Section 202(b) of the SECURE Act specifically provides that the
Departments may require the consolidated Form 5500 return/report filed
by the DCG reporting arrangement to include any information regarding
each plan in the group as IRS and DOL may determine necessary or
appropriate for the enforcement and administration of the Code and
ERISA. The IRS examines individual plans, not groups of plans, to
ensure that plan sponsors and/or employers comply with the tax laws
governing retirement plans, and to help protect the retirement benefits
of participants and beneficiaries. Although various provisions of Title
I of ERISA, including the fiduciary responsibility provisions, apply to
investments and financial and administrative services providers, the
DOL similarly focuses much of its enforcement and oversight on plan
level compliance. The Departments concluded that it is necessary and
appropriate for their enforcement and administration of the Code and
ERISA to require information with respect to a plan's qualification,
investments, financial condition, and operation on a separate basis for
each plan relying on the DCG consolidated Form 5500. Thus, consistent
with the proposal, the final forms revision provides that a separate
Schedule DCG is required for each individual plan relying on the DCG
consolidated Form 5500 to satisfy their annual return/report filing
obligation. The Schedule DCG includes:
<bullet> Part I--DCG Information includes the DCG name, EIN, and
plan number. Information in Part I must match the DCG information
reported on Part II of the consolidated Form 5500.
<bullet> Part II--Individual Schedule DCG Information includes
checkboxes to confirm that the plan for which the Schedule DCG is being
filed is a single-employer plan (as noted above, MEPs and multiemployer
plans may not participate in a DCG) or a collectively bargained plan;
and checkboxes to indicate if the Schedule DCG is a first filing, an
amended filing, or a final filing.
<bullet> Part III--Basic Individual Plan Information, including the
plan name, plan number, plan effective date; plan sponsor's information
(name and address, EIN, telephone number, and business code); plan
administrator's information (name and address, EIN, and telephone
number); total number of participants; total number of active
participants; number of participants with account balances; and number
of participants who terminated employment during the plan year with
accrued benefits that were less than 100% vested.
<bullet> Part IV--Plan Financial Information, including total plan
assets (including participant loans); total plan liabilities; net plan
assets; contributions received or receivable in cash from the employer,
participants, and others; noncash contributions and total
contributions; benefit payments; corrective distributions, and certain
deemed distributions of participant loans; direct expense information;
net income; and assets transferred to (from) plans.
<bullet> Part V--Plan Characteristics, including two-digit boxes
for entry of all applicable codes in the List of Plan Characteristics
Codes in the instructions to the Form 5500.
<bullet> Part VI--Compliance Questions, including delinquent
participant contributions, nonexempt transactions, plan assets/
liabilities transferred from the plan, indication of whether the plan
is a defined contribution plan subject to section 412 of the Code, plan
coverage and nondiscrimination information, and whether a plan is a
pre-approved plan that received a favorable IRS Opinion Letter.
[[Page 11993]]
<bullet> Part VII--Accountant Opinion Information for Participating
Plans, including questions regarding the required individual IQPA
report and financial statements that must be filed with the Schedule
DCG filed for participating large plans (generally, plans that cover
100 or more participants with account balances as of the beginning of
the plan year) and small plans that do not meet the audit waiver
conditions.
One commenter expressed support for the DCG reporting proposal,
saying a separate Schedule DCG allows participants to know where they
stand in relation to their plan, adding that the Schedule DCG requires
less information than a plan would provide on a single Form 5500.
Another commenter said the DCG schedule will create more work for
auditors because they must separately review each Schedule DCG and
reconcile the form at the plan level. The commenters argued that this
will require more audit work and more work by record keepers to provide
the data. They suggested the DCG file a new consolidated attachment for
all the participating plans using a schedule similar to Schedule MEP
for employers participating in a multiple-employer plan.
The Departments view the Schedule DCG as consistent with and
supported by the SECURE Act's express direction to provide a
consolidated filing option in a way that enables participants to find
information on their plan. The Departments agree with the commenter
supporting the new Schedule DCG as providing participants with
important and streamlined information regarding their plan. Further, as
previously mentioned, the consolidated filing for DCG reporting
arrangement is different from a MEP filing since it essentially
aggregates the information of many separate plans, as opposed to the
MEP which is one plan with multiple participating employers. Moreover,
since there is a plan at the MEP level, MEP level information, with a
supplementary schedule showing a list of participating employers and
certain information on each employer's account balances and other
specific data items is what the SECURE Act section 101 requires for
MEPs.\30\ For a DCG reporting arrangement, since it is an aggregate
report on many different separate plans, the additional details in
Schedule DCG provide important plan-level information for purposes of
DOL and IRS oversight and enforcement obligations and also provide a
straightforward way for participants in a plan relying on the DCG
consolidated Form 5500 to find information on their particular plan.
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\30\ Section 101 of the SECURE Act amended ERISA section 103(g)
for MEPs. Section 103(g) of ERISA requires that the annual return/
report of a MEP generally include a list of participating employers
and a good faith estimate of the percentage of total contributions
made by each participating employer during the plan year. The SECURE
Act amended section 103(g) to expand the participating employer
information that must be reported on the Form 5500 Annual Return/
Report by requiring reporting of the aggregate account balances
attributable to each employer in the plan (determined as the sum of
the account balances of the employees of each employer and the
beneficiaries of such employees), and applied section 103(g) to
retirement plans that currently meet the definition of a MEP under
ERISA section 210(a), including any pooled employer plans, for plan
years beginning on or after January 1, 2021. With respect to a
pooled employer plan, section 103(g) further requires that the
annual return/report must include identifying information for the
person designated under the terms of the plan as the pooled plan
provider.
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Another commenter recommended that the agencies allow a DCG to file
a single Form 8955-SSA, Annual Registration Statement Identifying
Separated Participants with Deferred Vested Benefits, on behalf of all
individual plans filing a Form 5500 as part of a DCG reporting
arrangement. The commenter also suggested that filing of the Form 8955-
SSA be incorporated into the DOL EFAST2 system, because, according to
the commenter, the EFAST2 system is a more scalable, robust system and
better suited for enterprise-level processing. Section 202 of the
SECURE Act provides for the filing of a combined annual report for a
group of plans that satisfies the annual reporting requirements under
Code section 6058 and ERISA section 104. Section 202 of the SECURE Act
does not apply to the annual registration statement (Form 8955-SSA)
that is required under Code section 6057.\31\ Accordingly, the IRS
declined to provide for the filing of a combined annual registration
statement for the Form 8955-SSA as part of the DCG consolidated
reporting option.
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\31\ Form 8955-SSA is an IRS form used to satisfy the reporting
requirements of Code section 6057(a). The information reported on
Form 8955-SSA is transmitted to the Commissioner of Social Security,
as required by Code section 6057(d). The Social Security
Administration (SSA) is then able to provide this information, in
accordance with section 1131(a) of the Social Security Act, to
individuals and beneficiaries who apply or are eligible for social
security benefits or hospital insurance benefits. Form 8955-SSA
currently can be filed electronically through the IRS ``Filing
Information Returns Electronically'' (FIRE) System, which provides
for data transmittal to SSA. Thus, Form 8955-SSA is not part of this
final rulemaking.
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e. Other DCG Participating Plan Conditions
i. Same Fiduciary
The September 2021 proposal included the SECURE Act section 202
condition that plans in a DCG reporting arrangement must have the
``same one or more named fiduciaries.'' ERISA section 402 separately
provides that every employee benefit plan shall be established and
maintained pursuant to a written instrument and that the ``named
fiduciaries'' must be identified in that instrument.\32\ The DOL stated
in the proposal that they understand that it is customary for the
employer/plan sponsor to be a named fiduciary of the employer's plan
and do not believe the SECURE Act intended that each employer in a
group of plans be a named fiduciary of every plan in the group. The
proposal included an exception under which the employer/plan sponsor
can be a named fiduciary of each employer's own plan, provided that the
other named fiduciaries under the plans are the same and common to all
plans. There were no significant comments on this requirement or the
exception. Accordingly, this requirement is being adopted in these
final forms revisions unchanged from the proposal.
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\32\ ERISA section 402 requires that such instrument shall
provide for one or more named fiduciaries who jointly or severally
have authority to control and manage the operation and
administration of the plan. Section 402 of ERISA further provides
that the term ``named fiduciary'' means a fiduciary who is named in
the plan instrument, or who, pursuant to a procedure specified in
the plan, is identified as a fiduciary (A) by a person who is an
employer or employee organization with respect to the plan or (B) by
such an employer and such an employee organization acting jointly.
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ii. Same Plan Administrator
The SECURE Act requires that all the plans have the same
administrator as defined in section 3(16)(A) of ERISA and plan
administrator as defined in Code section 414(g). As explained in the
September 2021 proposal, in general, under ERISA and the Code the
``plan administrator'' or ``administrator'' is the person specifically
so designated by the terms of the instrument under which the plan is
operated. If an administrator is not so designated, the administrator/
plan administrator is the plan sponsor, as defined in ERISA section
3(16)(B). The Departments explained that they do not believe that the
default ``plan sponsor'' provision is workable in the context of a
statutorily mandated construct for a consolidated annual report
covering multiple separate plans. No significant comments were received
[[Page 11994]]
raising concerns with the proposal or suggesting alternatives.
Accordingly, the final forms revisions require that there be a
designated common plan administrator for all the participating plans of
the DCG reporting arrangement and that the common plan administrator
(which is expected to be an entity or organization) must be identified
as the administrator on the DCG Form 5500 and any applicable schedules
pursuant to the Form 5500 instructions, which have been updated to
accommodate DCG filers.
iii. Same Investments or Investment Options
The SECURE Act further requires that all the participating plans of
the DCG provide the ``same investments or investment options'' to
participants and beneficiaries to be able to rely on the DCG
consolidated Form 5500 as satisfying their annual reporting obligation.
In the Departments' view, the ``same investments'' requirement covers
individual account plans in which some or all of the investments are
not subject to participant direction, and the ``same investment
options'' requirement applies to those aspects of the plan's
investments that are subject to participant direction. This statutory
requirement was, in part, intended to allow for appropriate
transparency in the aggregated financial information that will be filed
by the DCG consistent with the objective of the DCG to provide plans
with a more efficient and less burdensome filing alternative. The
Committee Report of the House Ways and Means Committee for the House
version of the SECURE Act expressly states that the DCG provisions were
intended to apply to identical plans: ``The Committee believes that, in
the case of identical plans (that is, plans with the same plan year,
trustee, administrator and investments) maintained by unrelated
employers, permitting a single Form 5500, containing information
specific to each plan, rather than requiring a separate Form 5500 for
each plan as under present law, can reduce aggregate administrative
costs, making it easier for small employers to sponsor a retirement
plan and thus improving retirement savings.'' \33\
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\33\ H.R. Report No. 116-65 Part 1 at pages 81-82 (2019).
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Commenters did not raise objections or concerns with this ``common
investments'' condition in general, but some commenters did raise
questions regarding whether there would be further clarifications or
examples provided regarding the criteria for the offering of the ``same
investments or investment options,'' with one specifically asking about
use of investment platforms that allow participating plans to choose
investments to offer their participants from a menu of available
investments. The commenters suggested that DOL should clarify that the
``same investments or investment options'' condition is met in the case
of a common investment platform in which participating plans may select
from available investments but each participating plan is not required
to make all available investments available to their participants. A
few commenters focused on the related provision in the proposal that
prohibited the use of brokerage windows and investments in employer
securities, saying that the proposal inappropriately limited these plan
features from the DCG reporting arrangement and urged the Agencies to
reconsider.
On the brokerage window prohibition in the proposal, one commenter
opposed inclusion of brokerage windows in DCG reporting arrangements.
That commenter believes the type of disclosures necessary are
unworkable in group reporting arrangements and that plans with
brokerage windows would not meet the ``same investment option''
requirement the commenter deems crucial to DCG reporting requirements
because of the wider range of investments in brokerage windows. Most
commenters, however, cited varying reasons for supporting inclusion of
brokerage windows, also known as self-directed brokerage accounts
(SDBAs), including arguments that: (1) a wider choice of investments
improves participant engagement with the plan, (2) allowing a brokerage
window allows plan sponsors to otherwise offer a smaller menu of plan
investments, (3) almost half of defined contribution pension plans use
SBDAs, and (4) SBDAs are considered an important retirement plan
offering.
Commenters that supported allowing brokerage windows argued that
the brokerage window itself, not each underlying investment available
through the window, should be classified as the ``investment or
investment option.'' \34\ However, views diverged as to whether all
plans within a DCG must offer brokerage windows to their participants
and whether the investment options offered through brokerage windows
must be the same for each plan participating in a DCG. One commenter
argued that a SDBA with a designated brokerage provider with the same
types of investments for all the plans within a DCG should be seen as
meeting the SECURE Act requirement. This commenter also recommended
that ``Qualifying SDBA'' should be defined as: a self-directed
brokerage account or window available to all plans in the DCG as an
investment alternative in addition to other investment options offered
to such plans and that meets the following conditions: (1) it is
provided by a single designated registered broker-dealer, and (2) the
only permitted investments in the Qualifying SDBA are assets with a
readily determinable fair market value as described in 29 CFR 2520.103-
1(c)(2)(ii)(C).\35\ Other commenters suggested that the SECURE Act's
investment commonality requirement could be achieved if all individual
plans within a DCG were offered the same brokerage window; but that
each such individual plan should not be required to make all of the
investments in the brokerage platform available to its participants.
One association commenter stated that some of its members believe
commonality would be achieved only if all individual plans within a DCG
offer a brokerage window, while other members believe commonality would
be achieved if each such individual plan within a DCG has
[[Page 11995]]
the option of whether to make the brokerage window available to its
participants.
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\34\ As an alternative interpretation of Section 202 of the
SECURE Act, a commenter suggested considering brokerage windows a
``valuable service to a participant offered through a broker dealer,
rather than an investment or investment option,'' as supposedly
consistent with DOL guidance that brokerage windows are not
designated investment alternatives. The DOL does not believe that
this is a viable interpretation of the SECURE Act, especially if the
brokerage window ``service'' allows for non-uniform investment
options for different participating plans. Such an interpretation
could authorize a DCG reporting arrangement to have plans that only
provide a ``brokerage window'' service and effectively read out of
the statute the requirement that participating plans have the same
investment or investment options.
\35\ 29 CFR 2520.103-1(c)(2) sets forth conditions for small
pension plans to be eligible to file the Form 5500-SF, including
requirements in 29 CFR 2520.103-1(c)(2)(ii)(C) that focus on whether
the plan's investments are in assets that have a readily
determinable fair market value. The regulation generally defines
assets that have a readily determinable fair market value as shares
issued by an investment company registered under the Investment
Company Act of 1940; investment and annuity contracts issued by any
insurance company (subject to certain state business qualification
and valuation disclosures), bank investment contracts issued by a
bank or similar financial institution (See, 29 CFR 2550.408b-4(c))
subject to annual valuation disclosures, securities (except employer
securities) traded on a public exchange; government securities
issued by the United States or by a State; cash or cash equivalents
held by a bank or similar financial institution (See 29 CFR
2550.408b-4(c)) by an insurance company, by a registered broker-
dealer under, or by any other organization authorized to act as a
trustee for individual retirement accounts under Code section 408;
and any loan meeting the requirements of ERISA section 408(b)(1),
and the regulations issued thereunder.
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One commenter supporting inclusion of SBDAs did not support any
changes to the Form 5500 requiring additional information regarding
SDBAs, participants using SDBAs, or the individual assets held by plans
as a result of investments made through SDBAs, assuming the DOL adopts
the commenter's definition for ``Qualifying SDBAs.'' Under that
definition, as described above, a ``Qualifying SDBA'' would not include
tangible personal property, loans, partnerships or joint-venture
interests, real property, employer securities, or investments that
could result in a loss in excess of the account balance of the
participant or beneficiary who directed the transaction. Those are the
classes of assets that the Form 5500-SF currently requires to be
reported separately even if held through a brokerage window. Other
commenters argued that assets in brokerage window investments should be
reported in the aggregate generally as one asset held for investment
purposes and that brokerage window investments should not be broken
down further. The commenter argued that further detail would be too
costly due to the need to involve third parties and also asserted that
more detailed information would not provide valuable information to the
Agencies.
With respect to allowing employer securities as a DCG investment
option, one commenter expressed support for the restriction on the
holding of employer securities as an investment and three others
supported allowing employer securities as an investment. The commenters
stated that the proposal would exclude existing plans that offer
employer securities to its participants from participating in DCGs. One
of those commenters cited the example of the separate retirement plans
of a parent company and its subsidiaries that would qualify to file a
consolidated report except for the presence of one plan in the group
that offers employer securities. That same commenter also was concerned
that employers should not be forced to choose between making employer
securities available as an investment option (which ERISA specifically
contemplates and encourages) and participating in a DCG reporting
arrangement. All of the commenters who addressed the employer security
issue argued that indirect holding of employer securities in a bank
collective investment fund or insurance company pooled separate account
should not preclude a plan from joining a DCG reporting arrangement.
The commenters asked the DOL to clarify that a plan with a diversified
pooled investment fund, such as a collective investment trust, under
which participants may indirectly invest in employer securities, would
be eligible to participate in a DCG arrangement, as long as the
diversified pooled investment fund option is offered to all plans in
the DCG.
The DOL disagrees with commenters who argued that the SECURE Act
precludes the exercise of regulatory discretion to place reasonable
guardrails on the use of the DCG alternative reporting method, given
the cited authorities under SECURE Act Section 202(b) and ERISA section
110. Rather, under existing ERISA authorities, the DOL must find that a
simplified reporting option is ``appropriate'' under ERISA's protective
provisions. Similarly, for the DOL to establish an alternative method
of complying with the generally applicable annual reporting
requirements under ERISA, the DOL would need to make findings that: (1)
the alternative method provides adequate disclosure to participants and
beneficiaries and adequate reporting to the Secretary; (2) the
application of the requirement of part 1 of Title I of ERISA would (A)
increase the costs to the plan, or (B) impose unreasonable
administrative burdens with respect to the operation of the plan; and
(3) the application of part 1 would be adverse to the interests of plan
participants in the aggregate. The Departments do not view the SECURE
Act as directing them to ignore the protective conditions of ERISA and
look only to the specific enumerated criteria in section 202(b) of the
SECURE Act in establishing a consolidated reporting option for DCGs.
Rather, such a reading of the SECURE Act would compromise enforcement
and administration of ERISA and the Code and impair the disclosure
interests of plan participants and beneficiaries in plans that rely on
a DCG consolidated return/report.
The DOL also is not persuaded by commenters arguments that
Congress' direction of ``sameness'' for investments, and other
indications that a DCG is intended for essentially ``identical'' plans,
should be ignored in favor of allowing substantial variation in the
menu of investment options available to participants in different plans
covered by the DCG Form 5500, including employer securities. In the
DOL's view, allowing substantial variation in the investments or
investment options of participating plans is not an appropriate reading
of the SECURE Act terminology requiring the ``same'' investments or
investment options. That kind of investment structure also would
require more detailed financial reporting at the plan level on the
Schedule DCG to provide appropriate oversight and accountability and,
therefore, would be inconsistent with the objective of reduced
aggregate administrative costs of annual reporting for plans in DCG
reporting arrangements. Accordingly, the final forms revisions and
related final rule would not permit a DCG to satisfy the same
investments or investment options requirement by offering a common
investment platform with a broad array of available investments with
each participating plan potentially having unique investment option
menus selected from that broad platform. Further, the Departments note
that a DCG is just one alternative reporting method that eligible plans
may use. Separate annual reporting alternatives remain in place for
plans that would prefer a broader range of investment choices or a more
customized plan design. The fact that certain types of plans might not
be able to file as part of a DCG based on types of investments they
wish to offer as options does not outweigh the interest in following
Congress' directive to develop a new filing option aimed at simplifying
filing and reducing costs (while still meeting important transparency
safeguards) for plans with key common characteristics, including plan
investments, plan trustees, plan fiduciaries and plan administrators.
Nonetheless, the Departments agree that some modifications to the
proposal regarding brokerage windows and employer securities could be
adopted that would provide more flexibility to plans and DCGs while
still providing for an adequate level of uniformity, financial
transparency and accountability. Specifically, the DOL and IRS
concluded that they could permissibly interpret the SECURE Act to
classify a brokerage window as the ``same investment option'' provided
that: (1) the brokerage window is available through a single designated
brokerage window provider that is a registered broker-dealer, and (2)
the only permitted investments in the brokerage window are assets with
a readily determinable fair market value as described in 29 CFR
2520.103-1(c)(2)(ii)(C). Also, the Departments agree that publicly
traded securities of a particular employer held in a DCG common
investment option, such as a mutual fund or some type of collective
trust or pooled account investment option, that is otherwise a prudent
plan option and is an available option to all
[[Page 11996]]
DCG participating plans, would not preclude a plan sponsored by the
issuing employer from being included in the DCG reporting arrangement,
provided all other DCG structural requirements are met. In this case,
the DOL views the indirect holding to be part of the otherwise ``same
investment'' option holding such security, rather than being the
investment option itself. The Departments are not adopting the
commenters' other suggested loosening of the ``same investments or
investment options'' because the Departments concluded that the
suggested further loosening was not consistent with the SECURE Act
requirements and underlying goal of improving the administrative
simplicity and efficacy of annual reporting for plans in a DCG
reporting arrangement.
f. DCG Eligibility for Plans Without a Trustee
Although, as described above, section 202 of the SECURE Act
includes a requirement that eligible plans must have the same
``trustee'' as described in section 403(a) of ERISA, the DOL and IRS
note that it is commonplace for ERISA-covered plans to use insurance
(e.g., individual account plans using variable annuity structures and
Code section 403(b)(1) plans) and custodial accounts (e.g., Code
section 403(b)(7) plans) as funding vehicles. ERISA section 403(b)
includes explicit exceptions to the trust requirement for such plan
designs. There is no legislative history for SECURE Act section 202
discussing why the provision was limited to plans with ``trustees.''
Although, in the September 2021 proposal, the DOL and IRS expressed
concern about whether the SECURE Act section 202 requirement for a
``trustee'' could be read to include plans without trustees funded by
insurance or custodial accounts pursuant to the trust exceptions in
ERISA section 403(b), the DOL and IRS specifically solicited comments
on whether they should, pursuant to their general regulatory authority,
provide a consolidated reporting option for plans that use the same
custodial account or insurance policy as the funding vehicle for their
plans, and if so, whether special conditions should apply in light of
the absence of a trustee or trustees.
A number of commenters responded to the request and said they
support and encourage expanding DCG reporting to 403(b) plans, even
though they technically do not have trustees but instead use annuities
or custodial accounts. Notwithstanding the explicit trust requirement
in the statutory provision, a number of commenters said there was no
evidence of intent by Congress to exclude 403(b) plans and urged the
DOL and IRS to allow 403(b) plans to participate in DCGs.\36\ Several
commenters said the Departments have the regulatory authority to expand
access to 403(b) plans and encouraged exercising it in this instance.
Several commenters said that such plans that use the same insurance
company or the same custodian are functionally equivalent to groups of
plans that have a common trustee, and another commenter said limiting
DCG reporting to only trusteed plans was unnecessarily restrictive.
Other commenters cited section 403 of ERISA and 401(f) of the Code as
providing support for custodial accounts and contracts to be treated
similar to trusts for DCG purposes, since they are treated similar to
trusteed plans in other contexts. Notwithstanding the fact that section
202(c)(2)(A) of the SECURE Act requires all plans in a DCG to have
``the same trustee (as described in section 403(a) of [ERISA] . . .),''
one commenter said they found no legal or policy basis to preclude such
plans from the cost efficiencies that SECURE Act section 202 was
intended to offer.
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\36\ Several commenters argued that it is a permissible reading
of the statute to say that Congress by requiring the ``same
trustee'' meant to include plans that lack a trustee because having
``no trustee'' is the ``same trustee'' (i.e., none). The Departments
are not prepared to conclude that the identical plan conditions in
the SECURE Act can reasonably be read to say that a plan having no
trustee is the same as that plan having the same trustee or trustees
as other plans participating in the DCG.
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After considering the comments, the Departments continue to believe
that the SECURE Act provision is limited to plans with trustees but
agree that it may still be possible pursuant to their general
regulatory authority to provide a DCG reporting option for 403(b) plans
notwithstanding the fact that the plans' assets are held by an
insurance company or a custodian rather than a trustee. However, the
Departments anticipate that any rules that would permit 403(b) plans to
participate in a DCG would require a DCG to consist of only 403(b)
plans because it does not appear to be possible for a 403(b) plan to
meet the commonality requirements of SECURE Act section 202 with 401(a)
plans participating in a DCG. There may be other unique complications
with properly structuring a DCG reporting option for 403(b) plans that
need to be identified and addressed. Accordingly, before exercising any
regulatory authority to permit 403(b) plans to participate in a DCG,
the Departments request comments on how such an arrangement would be
implemented. The Departments are particularly interested in comments
(1) concerning whether a 403(b) plan DCG should include (a) only 403(b)
plans consisting of only Code section 403(b)(1) annuity contracts
offered by the same insurance company or of only Code section 403(b)(7)
custodial accounts maintained by the same custodian, or (b) a group of
403(b) plans, each of which consist of both annuity contracts under
Code section 403(b)(1) offered by the same insurance company and
custodial accounts under Code section 403(b)(7) maintained by the same
custodian, (2) concerning arrangements described in (1)(b) above, (a)
views on how the SECURE Act's investment commonality requirement would
be met given that, unlike trustees in 401(a) plans, the insurance
companies and custodians that hold plan assets in 403(b) plans also are
responsible for deciding the investments available under the plan, and
(b) views on how the common plan administrator requirement will be
satisfied if the insurance company and custodian are not related
entities.
g. No DCG Participation by Multiemployer Plans or MEPs
With respect to the condition in the proposal that prohibited
multiemployer plans and MEPs from being part of DCG reporting
arrangements, the September 2021 proposal solicited public comments on
whether the final rule should include multiemployer plans and MEPs, and
if so, what conditions should apply to DCG reporting arrangements that
would include such plans. Two commenters supported the restrictions on
the ability of multiemployer plans' and MEPs' to participate in a DCG.
One representative of audit professionals cited complicating audit
procedures as a reason for such exclusion. No comments raised
substantial concerns or proposed alternatives. The DOL and IRS do not
believe that section 202 of the SECURE Act was focused on allowing
groups of multiemployer plans or MEPs, which already file a single Form
5500 that covers all of the employers that participate in the plan, to
file a single consolidated Form 5500 covering the group of
multiemployer plans or MEPs. Further, the DOL and IRS are concerned
that allowing a single consolidated Form 5500 in the case of such
plans, for example, in the case of a group of multiemployer section
401(k) plans, could result in an undesirable reduction in transparency
and financial accountability. Accordingly, the DOL and IRS retain this
restriction in the final forms revisions.
[[Page 11997]]
h. Form 5558 Extension for DCG Reporting Arrangements
The September 2021 proposal did not expressly allow for plans
participating in a DCG reporting arrangement to use a single filing of
a Form 5558 to obtain an extension of the due date for their annual
return report. The proposal did, however, request public comments on
that issue. The current Form 5558, Application for Extension of Time To
File Certain Employee Plan Returns, is the IRS Form used by a plan
sponsor to apply for an extension of time to file a Form 5500 series
return, Form 8955-SSA, and Form 5330. The commenters expressed concerns
that requiring a separate Form 5558 for each participating employer
would be burdensome, be likely to result in inadvertent mistakes by
plan sponsors who were relying on the DCG to satisfy their plan's
annual reporting obligations, and not be necessary to ensure
appropriate accountability. The commenters on this issue recommended
that the Agencies permit a DCG reporting arrangement to file a single
Form 5558 requesting an extension of time to file the Form 5500 for all
plans that participate in the DCG reporting arrangement. The commenters
further recommend that a list of participating employers' EINs and plan
numbers be attached to the single Form 5558. The Agencies agreed that
the commenters' recommendation would reduce burdens and still provide
appropriate accountability. Accordingly, the final forms revisions
permit a DCG reporting arrangement to file a single Form 5558 for an
extension of time to file a Form 5500 return that includes a list of
the individual plans participating in the DCG reporting arrangement
covered by the single Form 5558 request for an extension. Form 5558 is
also revised to allow electronic filing with EFAST2.
i. No Form 5500-SF or Form 5500-EZ Filing Options for DCGs
The September 2021 proposal noted the Departments' expectation that
savings for plans relying on a DCG filing compared to plans filing
separately would generally only begin to emerge when the DCG
collectively exceeds an aggregate participant count of 100
participants. In other words, it was not expected that a DCG filing
would provide meaningful cost savings for plans, as compared to the
plans filing their own annual report, in the case of DCG arrangements
with an aggregate participant count of under 100 participants. Rather,
it was expected in such cases involving participant counts of under 100
participants that the individual plans would likely qualify to file on
Form 5500-SF and that they would likely find it more cost effective to
file their own separate Form 5500-SF rather than relying on a DCG
filing.\37\ Accordingly, the proposed rule did not provide any ``small
plan'' option for a DCG consolidated annual report. The September 2021
proposal, however, solicited comments on whether stakeholders expect
there to be ``small'' DGCs, whether a ``small'' DCG alternative should
be made available, and what the content requirements for such an
alternative should be, e.g., whether the content of the ``small'' DCG
annual return/report should include Schedule I instead of Schedule H,
whether it should include the IQPA audit report on the DCG trust, and
whether it should include the Schedule C.\38\ One commenter opposed
simplified DCG reporting as a general matter and also specifically
opposed allowing DCGs to file as small plan filers, citing a lack of
transparency regarding plan information that could occur should that be
permitted.
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\37\ See Section III.A.1 of the September 2021 proposal, which
discussed the Departments' view that creating a consolidated group
filing for employers required to file a Form 5500-EZ is similarly
unlikely to generate administrative efficiencies for those
employers, as compared to continuing to file separately.
\38\ Since the aggregate participant count of the entire DCG
would be less than 100, there could be no ``large plans''
participating in such a ``small'' DCG, so the issue of an individual
audit for a participating large plan would not arise.
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The final forms revisions do not include an option under which such
a ``small'' DCG could file as a small plan filer. The final rule also
does not adopt a separate DCG reporting arrangements for one-
participant plan sponsors. Two commenters provided input regarding
whether the IRS should establish a separate DCG reporting arrangement
for one-participant plan sponsors that file the Form 5500-EZ. One
commenter did not think any of their clients currently filing Form
5500-EZ would be interested in participating in a DCG reporting
arrangement. This is because investments in the commenter's clients'
one-participant plans are typically customized to meet the needs of the
single participant and differ from investment alternatives under a plan
with participant-directed investments. Another commenter encouraged the
IRS to develop a DCG reporting arrangement for Form 5500-EZ filers--
particularly a structure under which Form 5500-EZ filers would be
permitted to file as part of a group consisting only of Form 5500-EZ
filers. As discussed in the September 2021 proposal, the IRS views the
current Form 5500-EZ as a simple and streamlined method for one-
participant plan sponsors to satisfy the annual reporting requirement
under Code section 6058. Consequently, creating a separate DCG
reporting arrangement for one-participant plan sponsors would not
effectively reduce filing burdens and would be unlikely to generate the
administrative efficiencies and cost-savings that were the purpose
behind the inclusion of a consolidated group filing structure in the
SECURE Act. The information requested on the Schedule DCG that is
required to be completed by each individual plan participating in a DCG
reporting arrangement would be almost identical to the information
requested on the current Form 5500-EZ. Additionally, the IRS would
incur significant costs and use substantial resources to develop and
process a separate DCG reporting arrangement for the Form 5500-EZ
filers. The IRS will continue evaluating and communicating with
stakeholders to determine if it is in their best interests to have a
DCG reporting arrangement for one-participant plan sponsors in the
future and will consider revisiting its decision not to have a DCG
reporting arrangement for Form 5500-EZ filers, if stakeholders
demonstrate a significant demand for this structure.
2. Schedule MEP (Multiple-Employer Pension Plan Information) and MEP
Reporting
Consistent with the proposal, the final rule adds a new Schedule
MEP (Multiple-Employer Pension Plan Information) to the Form 5500
Annual Return/Report, and also adds a limited number of additional data
items elsewhere on the Form 5500 relevant to MEPs. The Schedule MEP
will generally consolidate SECURE Act related reporting for a MEP filer
in one easily identifiable schedule. The Schedule MEP will report
information specific to MEPs, including the ERISA section 103(g)
participating employer information and aggregate account
information.\39\ Questions intended to satisfy the SECURE Act's
reporting requirements for PEPs and questions to link the Form PR
(Pooled Employer Registration) and the Form 5500 for each plan operated
by a PPP will also be on the Schedule MEP. A new checkbox will be added
to the Form 5500 (Part II, line 10a(5)) to indicate that
[[Page 11998]]
Schedule MEP is attached to the Form 5500. The Schedule MEP will
require information consistent with that which was required to be
reported via attachment for 2021 and 2022 forms revisions, but will
also accommodate certain SECURE Act 2.0 changes related to 403(b)
plans, and will be largely consistent with the changes set forth in the
proposal to create a new Schedule MEP. As discussed in more detail in
later sections of the preamble, the DOL took into account commenters'
input on certain items of information proposed on part III of Schedule
MEP.
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\39\ The requirement to add the aggregate account balance and
the new PEP information was already implemented beginning with the
2021 forms pursuant to the Final Rule Phase I. The change being
adopted in this final forms revision is to have the information
reported in standardized format on the Schedule MEP itself, rather
than as a non-standard attachment to the Form 5500.
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Schedule MEP, Part I, like the other schedules to the Form 5500,
requires filers to enter identifying information (which must match the
information entered on the Form 5500) and to indicate the plan type by
checkbox. The instructions provide general definitions for purposes of
annual reporting for the various categories of pension plans that must
complete the Schedule MEP. The different types of MEP checkbox choices
set forth in Part I of Schedule MEP are: (a) group or association
retirement plans within the meaning of 29 CFR 2510.3-55(b) (i.e.,
association retirement plans); (b) professional employer organization
plans within the meaning of 29 CFR 2510.3-55(c) (i.e., PEO plans): (c)
pooled employer plans within the meaning of ERISA section 3(43) (PEPs);
and (d) other MEPs covering the employees of two or more employers that
are not single or multiemployer plans for annual reporting purposes.
Multiemployer plans, as defined under section 3(37) of ERISA, are not
required to complete the Schedule MEP.\40\
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\40\ Multiemployer defined benefit pension plans are required to
provide on Form 5500, Schedule R (Retirement Plan Information),
identifying information and the percentage of contributions for
those plans that are five percent or more contributors for the plan
year being reported.
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Schedule MEP, Part II includes a repeating line item on which all
MEPs would report information under ERISA section 103(g) regarding
participating employers, including employer/plan sponsor name, EIN, the
percentage of total contributions to the plan or arrangement by each
participating employer, and, for defined contribution plans only, the
aggregate account balances information the SECURE Act added to ERISA
section 103(g). That information is currently collected for MEPs as a
non-standard attachment to the Form 5500 and Form 5500-SF, including,
pursuant to the SECURE Act, the new data element added by the Final
Rule Phase I to require reporting of the aggregate account balances for
each participating employer in defined contribution MEPs only. Thus,
the final forms revisions continue the provision in the September 2021
proposal and Final Rule Phase I confirming that defined benefit MEPs
are not required to report the aggregate account balances. Also,
consistent with the September 2021 proposal, Part II includes special
instructions and questions 2(e) through 2(g) for ``working owners''
(see 29 CFR 2510.3-55(d)(2)) or other individuals who are participants
or beneficiaries who are no longer associated with a participating
employer or participating employer plan.\41\
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\41\ As noted above, the September 2021 proposal included
changes that would have transferred to the DOL Form M-1 (Report for
Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities
Claiming Exception (ECEs)) (Form M-1) participating employer
information for multiple-employer welfare arrangements that are
required to file the Form M-1. The public comments on the proposal
were mixed. Some supported the reporting of participating employer
information by MEWAs, including plan and non-plan MEWAs, and the
transfer of the reporting requirement to the Form M-1 for MEWAs that
are group health plans and non-plan MEWAs that provide benefits
consisting of medical care. Others, however, opposed both the
collection in general and the transfer to the Form M-1 citing
alleged absence of statutory authority to require such reporting
either as part of the Form 5500 or the Form M-1 and privacy concerns
with the reported information being included in the web available
copies of filed Form 5500 and Form M-1 reports. After considering
the public comments, the DOL decided to defer any transfer of the
reporting requirement to the Form M-1 and to consider that change as
part of the Agencies' broader Form 5500 improvement project. The
DOL's semi-annual regulatory agenda describes the improvement
project as including potential changes to group health plan annual
reporting requirements. The DOL concluded that changes to the
current requirements relating MEWA reporting of participating
employer information would be better considered as part of that
broader initiative. The Department, however, does not agree with the
commenters who claimed the DOL lacked statutory or regulatory
authority to require MEWA plans, including multiple employer group
health plans, to report participating employer information as part
of the Form 5500. The DOL's position on its legal authority was set
forth in the September 2021 proposal. Accordingly, multiple-employer
welfare plans required to file a Form 5500 are required to continue
to report the participating employer information as an attachment to
the Form 5500.
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Schedule MEP, Part III is comprised of only the two questions that
were added to the annual report by the Final Rule Phase I as
information reported via non-structured attachment (i.e., for form
years 2021 and then until further notice). This final forms revisions
transfers that data collection from being reported on a non-structured
attachment to being reported on the Schedule MEP, Part III, Line 3. On
Line 3, PEPs are required to indicate whether they are in compliance
with the Form PR registration requirements and provide the Ack ID
number for their latest Form PR filing.\42\
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\42\ Ack ID is the acknowledgement code generated by the IRS in
response to a completed filing for the most recent Form PR
submitted. The instructions to the Form PR advise the pooled plan
provider that it must keep, under ERISA section 107, the electronic
receipt for the Form PR filing as part of the records of each pooled
employer plan operated by the pooled plan provider.
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Two commenters expressed support for a separate Schedule MEP. One
commenter pointed out that a new Schedule MEP makes it possible to
systematically track and evaluate recently established plan types;
significantly improves the disclosure and reporting regime for all
plans (including MEPs), and eases access to, and use of, Form 5500
information. Another commenter agreed, noting that a new Schedule MEP
is consistent with changes necessary under the SECURE Act. Some
commenters opposed a Schedule MEP as singling out PEPs for special
reporting requirements that are not imposed on other MEPs. Others did
not object to the idea of a Schedule MEP in general but expressed
concern about some elements of Part III of the proposed Schedule
MEP.\43\ Comments raising concerns with reporting on Form PR compliance
were addressed in the Final Rule Phase I,\44\ and will not be revisited
here as this final forms revisions notice simply transfers those
questions regarding Form PR compliance from being answered in a non-
standard attachment to the Schedule MEP without substantive change to
the questions (i.e., simply renumbering to conform to the Schedule MEP
format). The remaining comments on other questions proposed in 2021 for
Schedule MEP, Part III are set forth below.
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\43\ Several had more general concerns regarding audits of PEPs
that were previously addressed in the 2021 Final Forms Revisions.
See Final Rule Phase I, 86 FR 73976, 73977 fn.7 and related text
(Dec. 29, 2021).
\44\ 86 FR 7396, (Dec. 29, 2021).
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In the Final Rule Phase I, the DOL stated it read certain
commenter's questions as primarily directed at issues that may arise in
the context of a standardized Schedule MEP structure for reporting this
information. One commenter said that the instructions to Part II should
be clarified. The amounts listed in line 2c and line 2f must equal 100%
(with a permitted variance of less than 1% due to rounding). The
amounts listed in line 2d and 2g must equal the amount listed on line
1l(b) of the Schedule H or on line 1c(b) of the Schedule I (with a
permitted variance of less than 1% of the amount from Schedule H or
Schedule I due to rounding). Another commenter requested clarification
of the requirement to report the ``Percentage of Total Contributions
for the Plan Year'' on line 2c (element 3 for the 2021 non-standard
attachment). Specifically, the
[[Page 11999]]
commenter asked whether the total of all participating employers must
equal 100 percent, and whether it will cause red flags with the DOL/IRS
if it does not. They also asked whether filers should round the
percentage entry for each employer to decimal places, and if so, how
many. Two commenters noted that the information on participating plans
will be reported in a structured format on Schedule MEP and recommended
DOL consider implementing checks within the filing system to ensure
these summations are valid before accepting filings to reduce errors
and align with the instructions. The Agencies have taken into account
these comments in designing the form and developing appropriate
instructions and edit tests consistent with principles on rounding set
forth in the 2021 Final Forms Revisions.\45\ The DOL also reiterates
that the SECURE Act expressly states that the aggregate account
balances information should be determined as the sum of the account
balances of the employees of the employer and the beneficiaries of such
employees. In the DOL's view, an end-of-year valuation is an
appropriate reporting requirement, as it will provide the most up-to-
date value for the plan year covered by the Form 5500 report. The final
instructions for the 2023 Form 5500 include directions to that effect.
Further, rounding to the nearest dollar, as with the financial
reporting on other parts of the Form 5500 and schedules, will be used
for data entered on Schedule MEP. The final instructions to 2021 Form
5500 were revised to provide this clarification as well.\46\
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\45\ The 2021 Final Forms Revisions provided that, for the 2021
reporting year, it would be acceptable for filers to round to the
nearest whole number similar to rounding conventions that apply to
the Form 5500 financial statements and schedules. It further stated
that to the extent the filer's concern is whether rounding could
result in the total reported percentage either slightly above or
slightly below 100 percent, the filer can indicate that on the non-
standard attachment as part of its filing.
\46\ The DOL understands from some comments on the proposal
that, depending on the treatment of receivables and forfeitures by
the plan, the sum of the account balances of the employees of each
employer and the beneficiaries of such employees may not match the
net asset value reported on Schedule H or I. The DOL believes that
the aggregate account balance information should be calculated and
reported in accordance with the statutory direction in the SECURE
Act. Filers can attach an explanatory statement to the extent they
wish to explain any difference between that sum and other total
asset values reported on the Form 5500.
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Some commenters opposed new PEP specific questions arguing that
their inclusion without specific guidance on PEP's administrative
duties under section 3(44)(C) is beyond the scope of Congress'
directive to the Agencies (specifically DOL) and also not supported by
the text of the SECURE Act. For example, one commenter said that the
question regarding whether the PPP operating the plan is in compliance
with the PPP registration statement is ambiguous and unclear, including
due to pending agency rulemakings (e.g., IRS one bad apple guidance).
That commenter, and others, also indicated that, while the SECURE Act
adds specific disclosures for PEPs, it does not include a special
reporting standard for PEPs. They claimed subjecting a PEP to
heightened reporting requirements, when other plans treated as single
plans are not, is arbitrary and unsupported by statute. As indicated
below, the final Schedule MEP, Part III, includes only questions
already added in 2021 and 2022 by the Final Rule Phase I regarding Form
PR compliance for reasons articulated in the Final Rule Phase I.
The largest number of commenters expressed a concern with adding
questions regarding prohibited transactions before guidance is issued,
with one saying ERISA section 3(44)(D) specifically provides for a good
faith reliance standard before ERISA section 3(44)(C) statutory
guidance is issued. One commenter said that Schedule H already requires
the disclosure of any nonexempt transactions with any party-in-interest
and noted that adding required disclosures on the subject on the
Schedule MEP would be burdensome on businesses, including small
businesses entering the PEP service provider market. Four commenters
said that adding Part III, Line 6, of the proposed Schedule MEP
provides little benefit and that this line should not be added before
issuing additional guidance. Five commenters said not to add questions
before DOL addresses the issues raised in the RFI related to PEPs,
which specifically requested information relating to conflicts and
prohibited transaction exemptions (PTEs). One commenter argued that the
prohibited transaction rules are complex. Requiring a disclosure that
boils complex legal opinions down to a few sentences will likely result
in many disclosures that are confusing and potentially misleading. One
commenter had very specific concerns for PEO compliance with Part III
of Schedule MEP, saying it introduces requirements that would apply
only to a subset of multiple-employer retirement plans. That commenter
said that the proposed rule would have the effect of establishing
different sets of reporting requirements for PEOs, depending on whether
the PEO is sponsoring a MEP or acting as a PPP for a PEP. For the
latter, the proposed Schedule MEP would require completion of Part III
of Schedule MEP. Among other requirements, the commenter noted that, as
proposed, Part III would have obligated a PEP to indicate whether the
PPP has complied with the registration requirements for PPPs and to
indicate whether certain services were provided by an affiliate and, if
relying on a PTE for the use of an affiliate, to identify the
prohibited transaction exemption. Finally, two commenters pointed out
that the instructions for the proposed Part III PPP questions included
a reporting requirement related to ``affiliates or other related
parties'' to the PPP that did not define ``other related parties.''
They noted that to the extent that ``related party'' is intended to
encompass any entity in which the PPP may have an interest which may
affect its best judgement as a fiduciary, this is a very intensive
facts and circumstances inquiry for which even DOL itself will not
issue advisory opinions.
After considering the public comments, the DOL decided to not
include some questions originally proposed for Part III on the final
Schedule MEP. Some questions regarding Form PR compliance were already
added to the Schedule MEP, Part III, by the Final Rule Phase I on 2021
form changes. This final forms revision transfers those two PEP
specific questions from Form 5500, Part I, Line A checkbox instructions
to Schedule MEP, Part III, Line 3a and Line 3b, starting with the 2023
Form 5500 Annual Return/Report. The specific changes to accomplish this
transfer can be found in Appendix A, which sets forth the new Schedule
MEP and related instructions, and Appendix F, dealing with conforming
and other miscellaneous changes to forms and instructions.
In the September 2021 proposal, the DOL solicited comments on
enhancing fee transparency, specifically on whether more tailored
questions should be added, in addition to those already on the
Schedules C and H, to report fee and expense information on PEPs and
other MEPs, including information on how fees and expenses are
allocated among participating employers and among covered participants
and beneficiaries. Two commenters expressed opposition to more
questions on fees and expenses. One simply opined that currently
required fee and expense reporting and disclosure is sufficient for
MEPs. The second commenter provided a more detailed comment stating
that in the case of a defined benefit MEP, generating and
[[Page 12000]]
reporting an expense amount per participant would be particularly
unhelpful because expenses do not reduce or affect the benefit to which
a participant is entitled, and requiring disclosure of expenses with
respect to each employer would require that this amount be calculated,
as it is not currently a metric used or found useful by such plans. One
commenter supporting the DOL's proposal for more disclosures on fees
and expenses, noting that research suggests that for multiple-employer
plans disclosure about services provided by affiliates, as well as
comprehensive disclosure about the allocation of fees and expenses, is
critical for effective monitoring and oversight. The commenter
identified a variety of PEO situations involving PEO MEPs, saying it is
necessary to consider how the bundling of services and costs for a
variety of HR services may affect the required disclosures on Form
5550. The commenter noted that PEOs may offer various benefits,
including retirement plans, health insurance, workers' compensation,
and unemployment insurance policies. In this capacity, the PEO may pay
itself or an affiliated entity for the provision of administrative or
investment services to a plan, charge a markup on rates that the
``pool'' can obtain, and pay itself insurance broker fees. This
commenter noted that individual client employers, meanwhile, may have
limited ability and incentive to monitor their PEO-sponsored benefit
plans, particularly if the fees for various HR services and benefits
are bundled, and if leaving a PEO entails high switching costs. This
final forms revision does not include such additional PEP and other MEP
specific disclosures, but does include some enhancement of fee
disclosures on administrative expenses for all filers, including MEP
and PEP filers. Those enhancements are discussed below in the section
on breaking out certain administrative expense categories on Schedule
H.
Further, as finalized for the 2021 Forms and instructions, the
Schedule MEP and related Form 5500 and Form 5500-SF instructions will
provide that all PEPs, similar to the current rule for multiemployer
plans (and for DCGs as provided elsewhere in this final rule), file the
Form 5500 regardless of whether they would otherwise be eligible to
file the Form 5500-SF. Making the filings across plan types more
uniform provides more consistent and informed oversight of collective
retirement arrangements. Small PEPs, like other small plans that file
the Form 5500, could file the Schedule I instead of the Schedule H and
its financial attachments, are not required to complete the Schedule C
or Schedule G, and may file without having an IQPA audit and attaching
an IQPA report if the PEP meets the conditions for the small plan audit
waiver.
One commenter noted that while PEPs currently can only be offered
as 401(a) plans, there are legislative proposals that, if enacted,
would allow for 403(b) plan PEPs.\47\ The commenter urged agencies to
finalize the Schedule MEP and instructions in a way that would make it
easy for 403(b) plan PEPs to fill out Form 5500, should that bill be
enacted into law. As noted above in the overview section, the SECURE
Act 2.0 of 2022 (SECURE Act 2.0), which was modeled in some aspects on
H.R. 2954, was signed into law on December 29, 2022, and included
changes to the Code and ERISA that would permit 403(b) plans meeting
certain criteria to participate in PEPs for plan years beginning after
December 31, 2022. This final forms revision amends the definition of a
PEP in the Schedule MEP instructions to reflect that change.
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\47\ The commenter points to the Securing a Strong Retirement
Act of 2021, H.R. 2954 Sec. 103, as an example of such legislation.
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3. Internal Revenue Code Compliance Questions
A limited number of new IRS tax compliance questions are being
added to the forms, schedules, and instructions beginning with the 2023
plan year reports, including questions on the new Schedule DCG that are
answered at the individual plan level (not the DCG level). The changes
are largely unchanged from the September 2021 proposal and are in three
major areas:
<bullet> Add a nondiscrimination and coverage test question to Form
5500-SF, Schedule R, and new Schedule DCG. The question asks if the
employer aggregated plans in testing whether the plan satisfied the
nondiscrimination and coverage tests of Code sections 401(a)(4) and
410(b).\48\
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\48\ This question was on Schedule T before that schedule was
eliminated from the Form 5500 Annual Return/Report beginning with
2005 plan year filings.
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<bullet> Add a question to Form 5500-SF, Schedule R, and new
Schedule DCG, for section 401(k) plans, asking whether, if applicable,
the plan sponsor used the design-based safe harbor rules or the ``prior
year'' or ``current year'' ADP test.
<bullet> Add a question to Form 5500-SF, Form 5500-EZ, Schedule R,
and new Schedule DCG asking whether the employer is an adopter of a
pre-approved plan that received a favorable IRS Opinion Letter, the
date of the favorable Opinion Letter, and the Opinion Letter serial
number.\49\
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\49\ The list of plan characteristics codes for Lines 8a and 8b
of Form 5500 and Lines 9a and 9b of Form 5500-SF are being amended
to add ``403(b)'' after ``403(a),'' to read as follows: ``3D: Pre-
approved pension plan--A pre-approved plan under sections 401,
403(a), 403(b), and 4975(e)(7) of the Code that is subject to a
favorable opinion letter from the IRS.''
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a. Revisions to IRS Tax Compliance Questions for Coverage,
Nondiscrimination Testing, and Safe Harbor Status
With respect to adding tax compliance questions, fifteen commenters
submitted views on additional IRS tax compliance questions and other
IRS-related changes that were included in the September 2021 proposal.
Some of those commenters strongly supported the IRS including the tax
compliance questions and recommended adding more questions. Other
commenters recommended revising the IRS compliance questions to capture
more accurately the information sought and to streamline data capture.
One commenter recommended specifically that questions relating to
coverage and nondiscrimination testing reflect that a plan may comply
with nondiscrimination testing using multiple testing methods for
different portions of the plan. The IRS revised the questions and
instructions to gather information with respect to different testing
methods used for different portions of the plan.
One commenter recommended exempting multiple-employer 401(k) plans
from answering nondiscrimination questions because these plans may have
many participating employers, each of which is required to pass
nondiscrimination testing separately. The commenter further noted that
participating employers in a MEP, including in a PEP, may use different
methods to separately satisfy nondiscrimination requirements. The IRS
revised the instructions to exempt MEPs and PEPs from answering certain
nondiscrimination questions.
That same commenter also recommended simplifying the
nondiscrimination questions by asking whether a plan uses ADP or ACP
testing without regard to whether the testing is based on prior-year or
current-year testing. The IRS is not adopting this recommendation. This
nondiscrimination testing information enables the IRS to more precisely
select issues and returns for audits and assists IRS agents in
performing pre-audit
[[Page 12001]]
analysis and preparing initial audit information and document requests.
One commenter expressed concern that completing the Code section
410(b) coverage and ADP test results reported on a Form 5500 may not
match the Form 5500 reporting period. The IRS believes that the plan's
coverage and nondiscrimination tests (such as the ADP test) must be
reported for the plan year for which those tests are completed. For
each plan year, a 401(k) plan that is not a safe harbor plan is
required to perform ADP testing. In calendar-year 401(k) plans, the
current-year ADP test for a plan year is usually performed around the
end of January of the following plan year. The due date for filing Form
5500 for the plan year is the last day of the 7th calendar month after
the end of the plan year, so the IRS expects that testing data will be
available for reporting on the Form 5500 for that plan year.
The final revisions include an additional nondiscrimination and
coverage test question for the 2023 Form 5500 and Form 5500-SF. The
question asks whether a plan maintained by an employer that has
aggregated plans in its testing group satisfies the nondiscrimination
and coverage tests of Code sections 401(a)(4) and 410(b). Adding this
question allows the IRS to identify plans that have an increased risk
of being non-compliant. The question is also helpful to the IRS in
performing pre-audit analysis and allows the IRS to focus audit
inquiries on information that is specifically relevant to the plan
sponsor. This question also reflects an increased need to gather
specific testing-group information in light of the elimination of
optional coverage and nondiscrimination demonstrations under the IRS
determination letter process. See Rev. Proc. 2012-6, 2012-1 I.R.B. 235,
and Announcement 2011-82, 2011-52 I.R.B. 1052.
The final revisions also include an additional question on the Form
5500 and Form 5500-SF, with respect to section 401(k) plans, that asks
whether the plan sponsor used a design-based safe harbor approach or,
if applicable, the ``prior year'' or ``current year'' ADP test. Adding
this question will allow the IRS to distinguish between section 401(k)
plans that use ADP testing and those that use designed-based safe
harbor approaches. This question will also help the IRS perform pre-
examination analysis and, for design-based safe harbor plans, verify
whether safe harbor contributions comply with the terms of the plan and
applicable safe harbor requirements.
b. Revisions to IRS Compliance Questions for Pre-Approved Plan Adopters
One commenter recommended that the IRS eliminate or delay a new
question included in the NPFR requiring disclosure by the adopter of a
pre-approved plan document of the date and serial number of the pre-
approved plan document's favorable opinion letter, on the grounds that
this information is not currently maintained in the adopter's
recordkeeping systems. Further, the commenter urged that, if this
question is added, that it be significantly delayed. The IRS does not
agree with either of these recommendations. The IRS believes that a
pre-approved plan document provider should make pre-approved plan
information, including a favorable IRS opinion letter date and serial
number, available to each adopting employer. Accordingly, the favorable
opinion letter should be readily available when an adopting employer
prepares a Form 5500 series return. Pre-approved plan information
provided in response to the new question will assist the IRS in
determining if the plan document is up to date for all required law
changes.
Accordingly, the final forms revisions include an additional
question on the Form 5500, Form 5500-SF, and Form 5500-EZ, which asks
whether the employer is an adopter of a pre-approved plan that received
a favorable IRS opinion letter, and the date and serial number of the
favorable IRS opinion letter. This question will help the IRS identify
whether an employer has adopted a pre-approved plan and to determine
whether the plan was timely adopted and amended.
In addition, one commenter requested clarification in the
instructions regarding whether an employer that makes modifications to
a pre-approved plan document loses reliance on the favorable IRS
opinion letter and, accordingly, is no longer a pre-approved plan
adopter. The IRS agrees with the recommendation and revises the
instructions to clarify that, pursuant to Revenue Procedure 2017-41,
2017-29 IRB 92, an adopting employer is an employer that adopts a pre-
approved plan offered by a provider, including a plan that is word-for-
word identical to, or a minor modification of, a plan of a mass
submitter. If a pre-approved plan is modified in such a way as to lose
reliance on the favorable IRS opinion letter for that plan, then the
plan is treated as an individually designed plan and, consequently, the
adopting employer is no longer a pre-approved plan adopter.
c. Trust Questions are Removed From the 2023 Form 5500 Series
As discussed in the NPFR, adding trust questions to the Form 5500
series would enable the Agencies to focus on compliance concerns more
efficiently for retirement plan trusts, including those for PEPs and
DCG reporting arrangements. The Agencies received several comments
regarding the new trust questions. Some commenters agreed that
information about trusts should be reported on the Form 5500 and
recommended adding an additional trust question to increase
transparency if plans utilize multiple trusts. Some commenters
expressed concerns about administrative costs and burdens of answering
the new trust questions, because trust EINs often are not used and
distributions are typically reported under a service provider EIN, and
requested that these questions either be eliminated or made optional.
Additionally, commenters noted that certain plans that are required to
file a Form 5500 do not have a trust, such as 403(b) plans subject to
Title I of ERISA. For those plans, the plan sponsor cannot confirm the
trust's EIN or whether the IRS has deactivated the trust's EIN. One
commenter also expressed concern that the plan's trust EIN is not an
item of information currently maintained in most recordkeeping systems.
Another commenter requested elimination of the trust questions because
Announcement 2007-63, 2007-30 IRB 236, eliminated the employee benefit
trust reporting requirement that had been included in the now-
discontinued Schedule P (Form 5500), Annual Return of Fiduciary of
Employee Benefit Trust. Some commenters expressed concerns that trust
questions do not fit the business model for insurance companies that
provide recordkeeping services for retirement plans. Many of these
commenters' clients utilize insurance company products, such as
contracts with separate accounts, and do not have trusts. One commenter
recommended that plans should be directed to skip these questions if
the plans have engaged an insurance company to provide both insurance
contract and recordkeeping services, because the trust-related
questions do not fit an insurance-contract-only arrangement. One
commenter requested clarification that leaving the trust questions
blank in such cases would not increase the probability of an audit.
Under Announcement 2007-63, the IRS elected to treat a plan's Form
5500 series return as a filing for the plan's trust for purposes of
starting the statute of limitations period under Code section
[[Page 12002]]
6501(g)(2). After consideration of all comments, the IRS has decided
not to add trust questions to the 2023 Form 5500 series return.
However, the IRS intends to continue evaluating possible alternative
approaches for reporting trust information.
d. Declining To Add Certain New 403(b) Plan Questions To Form 5500 and
Form 5500-SF
One commenter recommended adding two new questions to the Form 5500
and Form 5500-SF for 403(b) plans that would ask whether the 403(b)
plan has notified all newly eligible participants of their eligibility
to participate in the plan, and whether the 403(b) plan has
communicated eligibility requirements annually to all eligible
employees. This sort of additional annual reporting on 403(b) plans was
not included in the September 2021 proposal, and would benefit from
more public comment on the merits of asking such questions as part of
an annual filing. Accordingly, although the Departments will continue
to consider the relative costs and benefits of annual reporting on
those subjects, such questions are not being added to the 2023 Form
5500 and Form 5500-SF.
e. Declining To Add New Questions for Qualified Plan Loan Offsets
Three commenters recommended adding qualified plan loan offset
questions to Schedule H. Commenters expressed concerns that qualified
plan loan offsets are a leading cause of premature distributions from
401(k) plans and other similar defined contribution retirement plans,
but that these loan offsets are not separately reported on Form 5500. A
plan loan offset occurs when, pursuant to loan terms, a participant's
benefit is reduced to repay the loan. A plan loan offset is treated as
a distribution for tax purposes. Form 1099-R and its instructions
already provide information for plan distributions including qualified
plan loan offsets (as qualified plan loan offsets are reported using
Distribution Code M).
The Agencies note that in 2019 the Government Accountability Office
recommended that DOL, in coordination with IRS, revise the Form 5500 to
require plan sponsors to report qualified plan loan offsets as a
separate line item distinct from other types of distributions to better
identify the incidence and amount of loan offsets in 401(k) plans
nationwide. In 2021, DOL advised GAO that a project to improve Form
5500 data reporting was being reopened and that the specifics of the
project were still under development. As noted above, that Form 5500
general improvement project is on DOL's semi-annual agenda, and the DOL
expects to focus on that project once final actions implementing the
September 2021 proposal are completed.
The IRS considered the public comments submitted on this issue and
concluded that it does not need this information on Form 5500 for
compliance audit purposes. The September 2021 proposal did not include
a proposed addition of a line item to report loan offsets for Form 5500
or Form 5500-SF filers. The DOL believes public comments on a proposal
should be the next step and does not believe it is in a position to
adopt such an annual reporting requirement as part of this final forms
revisions notice. Accordingly, the Agencies are not adding such a
question to the 2023 Form 5500, but DOL intends to consider GAO's
recommendations and those of the public commenters noted above in
connection with evaluating the specifics of its general Form 5500
improvement project.
4. Participant-Count Methodology for Determining Eligibility for Small
Plan Simplified Reporting Options for Individual Account Plans
Both Form 5500 and 5500-SF and their instructions are being revised
to reflect a change in the reporting methodology related to the number
of participants used in the current threshold (i.e., less than 100
participants) for determining when a defined contribution pension plan
may file as a small plan. This change in methodology also includes
eligibility for the waiver of the requirement for small plans to have
an audit and include the report of an independent qualified public
accountant (IQPA) with their annual report.
The September 2021 proposal included a proposed change to the
method of counting participants for determining when a defined
contribution pension plan would be eligible for small plan reporting
options, including the conditional waiver from the IQPA audit and
report requirements. Currently, defined contribution pension plans
determine whether they may file as small plans and whether they qualify
for an audit waiver based on the number of participants with plan
accounts as of the beginning of the plan year and on the number of
participants who are eligible to elect to have contributions made under
a section 401(k) qualified cash or deferred arrangement, even if they
have not elected to participate and do not have an account balance in
one of these plans. Specifically, the Form 5500 instructions currently
instruct filers to ``[u]se the number of participants required to be
entered in line 5 of the Form 5500 to determine whether a plan is a
``small plan'' or ``large plan.'' Individual account plan filers are
instructed to include on line 5 any individuals who are currently in
employment covered by the plan and who are earning or retaining
credited service under the plan. The instructions explain that ``[t]his
includes any individuals who are eligible to elect to have the employer
make payments under a Code section 401(k) qualified cash or deferred
arrangement.'' \50\ The ``Who May File'' section of the Form 5500-SF
Instructions lists among the eligibility conditions for filing the Form
5500-SF that: ``The plan (a) covered fewer than 100 participants at the
beginning of the plan year . . . '' and instructs filers to ``see
instructions for line 5 on counting the number of participants.'' Those
instructions instruct pension plan filers to include in their
participant count ``any individuals who are eligible to elect to have
the employer make payments under a Code section 401(k) qualified cash
or deferred arrangement . . . .'' \51\
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\50\ 2021 Form 5500 instructions at page 19.
\51\ 2021 Form 5500-SF instructions at pages 4, 11.
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Under the September 2021 proposal, instead of using all those
eligible to participate, filers would look to the number of
participants/beneficiaries with account balances as of the beginning of
the plan year (the first plan year would use an end- of- year measure).
This change was proposed partly in light of section 112 of the SECURE
Act, which provides that long-term, part-time workers that have reached
specified minimum age requirements and worked at least 500 hours in
each of three consecutive 12-month periods must be permitted to make
elective contributions to a Code section 401(k) qualified cash or
deferred arrangement for plan years beginning on or after January 1,
2024.\52\ This could add to the number of participants who are eligible
to, but might not, elect to participate in a plan, and carry the
unintended consequence of having more plans with fewer than 100 active
participants being subject to more extensive and costly annual
reporting
[[Page 12003]]
obligations applicable to large plans merely as a result of a statutory
requirement to offer plan participation to long-term part-time workers.
The policy underlying the proposed change was to reduce expenses for
small employers to establish and maintain a retirement plan, and as a
consequence, encourage more employers to offer workplace-based
retirement savings plans to their employees.\53\
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\52\ Under section 125 of SECURE Act 2.0, this three year
measurement period is reduced to two years with the effect that
long-term, part-time workers must be treated as meeting the time in
service requirements to participate in Code section 401(k) qualified
cash or deferred arrangements and, as added by section 125 of the
SECURE Act 2.0, Code section 403(b) plans once they have worked two
consecutive years (with at least 500 hours of service per year)
effective for plan years starting on or after January 1, 2025.
\53\ See 86 FR 51284 at pages 51298-99 (DOL discusses burden
change and how it is consistent with policy goal of ``pension plan
establishment and maintenance, particularly in the small business
community . . .'').
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The DOL received nearly 100 comment letters that included the issue
of counting participants for plan audits, a large majority of those
comments commented solely, or mainly, on this issue. Approximately one-
third of those commenters, primarily benefit plan auditors and
associations of audit professionals, opposed the September 2021
proposal with some commenters asking the DOL to, at a minimum, delay
its implementation. The auditors and related associations argued the
risks associated with this proposal exceed any potential savings.
Generally, the commenters opposing the proposal expressed two main
concerns: (1) small plans are particularly vulnerable to control,
compliance, and operations errors, and it would leave them without
adequate protections; and (2) it would discourage employers from
encouraging eligible employees to participate in their plans in order
to avoid an audit requirement.
Several commenters suggested that the DOL reevaluate the small plan
audit waiver to consider adding additional conditions for eligibility
to address control, compliance, and operations errors that are not
currently addressed by the exemption and, at the least, make auto-
enrollment a condition for eligibility for the waiver should this
proposal go forward. Commenters also suggested the development of a
cost-effective alternative to the IQPA audit for small plans that would
focus more on operational and compliance issues rather than financial
statements, with several suggestions for different types of periodic
compliance assessments. Some commenters expressed concern with the
timing of the proposal, stating that the pandemic has left small plans
at heightened risk because of plan disruptions and difficulty hiring
staff.
Conversely, about two-thirds of all commenters on audit issues,
made up primarily of small plan sponsors, third party administrators
(TPAs), and associations representing employers supported the September
2021 proposed changes. A few commenters also mentioned that employers
could increase their contributions rather than incur the expense of an
audit. Commenters also stated that the current audit requirement deters
plan formation and results in inconsistent treatment of plans and that
the proposal provides a clear and logical way for participants to be
counted which will prevent counting mistakes and does not require new
data elements. TPA commenters also took issue with auditor comments
regarding TPA knowledge of ERISA and their ability to help plans with
compliance and expressed a belief the auditor comments are self-serving
because of the potential for business loss under the proposal. One
commenter stated TPAs often know ERISA, the Code, and DOL regulations
better than auditors and provide better value than an audit.
Additionally, many small plan sponsors disputed auditor assertions that
employers would discourage participation in their plans to avoid the
audit. Several commenters argued that the expense and continual rising
costs of getting an audit outweighs the benefit of an audit for small
plans and that eliminating the audit will encourage smaller employers
to establish retirement plans.
Several commenters suggested delaying changes not related to the
SECURE Act to lessen cost and administrative burden impacts on plans
that already will be making changes associated with the SECURE Act and,
in some cases, to make it part of a larger Form 5500 reform project.
However, others recommended immediate implementation because of their
belief that no additional data elements would be required for forms in
order to implement the change.
After considering the public comments, the Agencies decided to
adopt the proposed counting method change for defined contribution
individual account plans by adding a new line item on both the Form
5500 and Form 5500-SF for defined contribution pension plans to report
participants with account balances at the beginning of the plan year
(there already is a line item for reporting the number of participants
with account balances at the end of the plan year). Instead of using
all those eligible to participate, defined contribution plan filers
will look at the number of participants/beneficiaries with account
balances as of the beginning of the plan year (the first plan year
would use an end- of- year measure) when determining if they are
eligible for small plan reporting options, e.g., the Form 5500-SF.
Conforming changes are also made to the short plan year filings and the
``80-120'' Participant Rule instructions to reflect this new counting
method. See Appendix C for details on changes to forms and instructions
related to this audit-related participant counting method change.
The DOL believes it is striking the right balance among the
interest in providing secure retirement savings for participants and
beneficiaries, the interest in minimizing costs and burdens on small
pension plans and the sponsors of those plans, and the interest in
promoting the establishment of retirement plans, especially by small
businesses, to provide a workplace retirement savings option for their
employees.
As described in greater detail in the regulatory impact analysis,
making this revision to participant counting methods would be expected
to reduce expenses for a significant number of plans. That analysis
estimates that there would be a reduction of 19,442 large plan filings
for defined contribution pension plans. Each plan would save an
estimated $7500 (or more) on audit expenses. The reduction in expenses
could encourage more employers to offer workplace-based retirement
savings plans to their employees and might free up resources for more
generous employer contributions.
With respect to concerns that small employers may seek to avoid
enrolling otherwise eligible employees in order to avoid an audit, the
DOL has seen no evidence, other than conjecture on the part of some
commenters, indicating that employers would purposely discourage
enrollment in their plans if this change is implemented. However, the
DOL does take commenters' concerns regarding this issue seriously and
notes that in addition to enforcement actions the DOL and individuals
have available under Section 502 of ERISA in cases where participants
are denied benefits, Section 510 of ERISA specifically provides
protections to participants against employers interfering with their
rights to attainment of benefits by making it unlawful.
Some commenters suggested an alternative to the proposal that would
ensure that eligible participants are provided with opportunities to
enroll in their retirement plans, such as making automatic enrollment a
condition for eligibility for the small plan audit waiver, at least for
defined contribution plans. The DOL declines to implement such a
condition as part of this regulatory action. The proposal did not
include any provision similar to what the commenter suggested. Current
[[Page 12004]]
statutory provisions on automatic enrollment permit, but do not
require, automatic enrollment for any size defined contribution
retirement plan.\54\ In the DOL's view, such a substantial departure
from current statutory and regulatory provisions governing automatic
enrollment, even if in the context of an additional condition for the
small plan audit waiver, would require at least an opportunity for
public comment and possibly a statutory amendment to alter the
voluntary nature of that plan feature.
---------------------------------------------------------------------------
\54\ See 29 CFR 2550.404c-1, ERISA Section 404(c) Plans.
---------------------------------------------------------------------------
As to commenter concerns about compliance errors that might go
undetected without an audit, that concern applies broadly to all small
plans that are eligible for the audit waiver, not just on the plans
that will be newly eligible for the conditional small plan audit waiver
based on the new counting methodology. The DOL does not believe that it
would be appropriate to eliminate the audit waiver for all small plans.
Rather, the DOL concluded many years ago that a conditional audit
waiver struck an appropriate balance for small plans.\55\ Also, under
the new counting methodology, plans with equal numbers of active
participants would be treated similarly rather than one plan with fewer
than 100 active participants being eligible for the audit waiver while
another with an equal number of active participants being required to
pay for an audit simply because in the latter case there are enough
eligible but not participating employees to push the participant count
to 100 or above.
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\55\ The Department notes that these final forms revisions do
not prohibit any particular plan or DCG provider from conducting
annual or periodic audits or other agreed upon reviews of compliance
issues.
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5. Additional Defined Benefit Plan Reporting Improvements
On August 29, 2022, PBGC published a Proposed Submission of
Information Collection for OMB Review at 87 FR 52822 (Aug. 29, 2022).
PBGC received one comment, in support of the collection of information.
On November 4, 2022, PBGC published a Submission of Information
Collection for OMB Review at 87 FR 66762 (Nov. 4, 2022).
a. Schedule R Modifications
In summary, and as described in more detail below, the changes to
Schedule R, line 19 and its instructions, include the following: (1)
modify Schedule R, line 19a, to require that all defined benefit
pension plans (except DFEs) with 1,000 or more participants at the
beginning of the plan year show the end-of-year distribution of assets,
broken down in seven reconfigured categories of plan assets, and
provide clarification concerning classification of atypical
investments; (2) modify Schedule R, line 19b, to change the available
categories for current average duration; and (3) eliminate Schedule R,
line 19c.
i. Line 19a--Percentage of Plan Assets Held by Category
Currently, line 19a of Schedule R requires that all defined benefit
plans (except DFEs) that have 1,000 or more participants at the
beginning of the plan year provide a breakdown of plan assets by
reporting the percent of assets held in five categories of investments,
with the percentages reported reflecting the asset allocation as of the
beginning of the plan year. Currently, the five categories of
investments are: Stock, Investment-Grade Debt, High-Yield Debt, Real
Estate, and Other.
In the solicitation for public comment, PBGC proposed to
reconfigure the categories to: Public Equity; Private Equity;
Investment-Grade Debt and Interest Rate Hedging Assets; High-Yield
Debt; Real Assets; Cash or Cash Equivalents; and Other. In addition,
for certain investments, PBGC proposed to modify the instructions to
clarify how certain atypical investments should be categorized for this
purpose. For example, as currently drafted, it is not clear whether
cash equivalents should be included in the ``Investment-Grade Debt''
category or in the ``Other'' category. Similarly, it is not clear
whether infrastructure investments should be included in the ``Real
Estate'' or the ``Other'' category. No comments were received. By
expanding the list of categories and modifying the instructions, the
more detailed information should be reported consistently, which will
enable PBGC to better model important characteristics of plan
portfolios. Accordingly, the Agencies are adopting these changes as
proposed.
PBGC also proposed to modify the instructions for line 19a so that
the percentages reported reflect the asset allocation as of the end of
the plan year instead of the beginning of the plan year. No comments
were received. Having more recent information will lead to better
projections and more accurate analysis by PBGC, and because the Form
5500 isn't due until several months after the end of the plan year,
this change should not create any timing issues for filers.
Accordingly, the Agencies are adopting this change as proposed.
ii. Line 19b--Average Duration
Currently, line 19b of Schedule R requires applicable filers to
check the box that shows the average duration of the plan's combined
Investment-Grade and High-Yield Debt portfolio. In the solicitation for
public comments, PBGC proposed changes to line 19b (average duration)
and its instructions. Under modified line 19b, applicable filers would
be required to check a box to indicate the average duration of the
plan's Investment-Grade Debt and Interest Rate Hedging Assets
portfolio, thereby replacing the current requirement to check the box
that shows the average duration of the plan's combined Investment-Grade
and High-Yield Debt portfolio. The average duration ranges were also
adjusted from multiple 3-year periods to multiple 5-year periods, with
the last choice being a period of 15 or more years. No comments were
received. Accordingly, the Agencies are adopting this change as
proposed.
iii. Line 19c--Duration Measure
Line 19c currently asks for the duration measure used to calculate
line 19b. PBGC has proposed to eliminate line 19c in the solicitation
for public comment. Because the alternative duration measures do not
provide meaningfully different results, PBGC has proposed to eliminate
line 19c. No comments were received. Accordingly, the Agencies are
adopting this change as proposed.
b. Schedule SB Modifications
In summary, and as described in more detail below, the changes to
Schedule SB include the following: (1) modify Schedule SB, line 6
(Target Normal Cost), and its instructions, to address a possible,
albeit unlikely, situation in which the amount reported on line 6c
would not be consistent with IRS regulations and the statute if the
calculation was done in accordance with the instructions, (2) change
the current instructions for line 26a to revise a line reference, and
(3) change the current instructions for the Schedule SB, line 26b
attachment (projected benefit payments), for situations where a plan
assumes some, or all, benefits are paid in a lump sum, and uses the
annuity substitution rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to
determine the funding target.
1. Line 6--Target Normal Cost
The Schedule SB for the 2022 plan year requires that two components
of target normal cost be reported: (1) the present value of current
plan year benefit accruals reduced by mandatory
[[Page 12005]]
employee contributions, but not below zero, and (2) the expected plan-
related expenses. Those items are summed up and reported as the target
normal cost on line 6c. In the solicitation for public comment, PBGC
proposed modifications to Schedule SB, line 6 (Target Normal Cost), and
its instructions, to address a possible, albeit unlikely, situation in
which line 6c (Target Normal Cost) reported on Schedule SB would not be
consistent with IRS regulations and the statute if lines 6a and 6b were
determined in accordance with the current line 6 instructions. This
situation would arise only if (1) a plan requires mandatory employee
contributions and (2) the mandatory employee contributions for the plan
year exceed the present value of benefits accruing during the plan
year. PBGC's proposed changes to lines 6a and 6c of the instructions,
and to line 6c of the Form, will rectify this situation by requiring
that the amount to be reported in line 6a is the present value of
expected benefit accruals (i.e., not reduced by mandatory employee
contributions) and by modifying the instructions for line 6c to require
reporting the sum of lines 6a and 6b, ``reduced (but not below zero) by
any mandatory employee contributions expected to be made during the
plan year.'' No comments were received. Accordingly, the Agencies are
adopting this change as proposed.
2. Line 26a--Schedule of Active Participant Data
The current instructions for Line 26a of Schedule SB provide that a
plan reporting 1,000 or more active participants on line 3d, column
(1), must also provide average compensation data. However, the correct
line reference should be to line 3c, column (1). Accordingly, the
Agencies are adopting this change with this final rule.
3. Line 26b--Projected Benefit Payments (Attachment)
Line 26b of Schedule SB currently requires plans covered by Title
IV of ERISA that have 1,000 or more participants as of the valuation
date to provide a 50-year projection of expected benefit payments and
that, for purposes of the projection, benefits are assumed to be paid
in the form assumed for valuation purposes. In the solicitation for
comments, PBGC noted that, in situations where a plan assumes some, or
all, benefits are paid as a lump sum, but uses the annuity substitution
rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to determine the funding target,
those instructions suggest projected benefits be shown in a different
form of payment than what was used to determine the funding target. To
clarify that this was not the intent, PBGC proposed changing the
instructions to provide that, in such situations, the attachment may
show projected benefits payable in the annuity form instead of in the
form of payment assumed for valuation purposes. PBGC did not receive
any comments. Accordingly, the Agencies are adopting this change as
proposed.
4. Schedule H Schedules of Assets Changes and Breakout Categories for
Administrative Expense
a. Deferring Schedules of Asset Changes for Re-Proposal as Part of
DOL's General Form 5500 Improvement Project
The September 2021 proposal included revisions to the content
requirements for the ``Schedule of Assets Held for Investment'' and the
``Schedule of Assets Held and Disposed of within the Plan Year'' to
modernize the data elements required to be reported about a plan's
investments and to require that the schedules be filed electronically
in a structured format so that they are data-minable. The proposed
changes were designed to improve the consistency, transparency, and
usability of information reported regarding plan investments. For
example, there is no efficient method for the DOL to identify all of
the ERISA plans that invest in a specific investment such as a
collective investment trust, mutual fund, or limited partnership.
Better data about plan investments would assist the DOL, IRS, and the
PBGC more effectively and efficiently provide oversight, assist with
compliance, and enforce the provisions of ERISA and the Code.
Standardizing an electronic format for the plan's investment schedules
would allow data aggregation and review, which could be used both by
the DOL and IRS for enforcement and oversight, but also by private
sector organizations.
The Agencies received several comments in response to this proposed
change. While many commenters supported establishing a standardized
electronic format for the plan's investment schedules, some said that
further consultation with stakeholder groups is needed, especially
custodians who would likely be called upon to provide asset information
needed to satisfy the proposed new data elements on the Schedules of
Assets. Several commenters requested delaying the effective date to
give sufficient lead time for filers and service providers to implement
the changes and update the recordkeeping systems. Some commenters
opposed the proposed change, expressing concerns about potential
burdens and costs associated with creating a mandatory electronic
filing requirement for the Schedules of Assets, especially for large
plans where information is not currently provided in a data-capturable
format. Two commenters provided extensive comments regarding reordering
and regrouping the data elements of the proposed Schedules of Assets to
minimize confusion and variability in the data entries. Some commenters
raised concerns regarding the proposed new checkbox to identify if an
asset is a hard-to-value asset. Three commenters requested
clarification and made suggestions on proposed elements to add legal
entity and other industry and regulatory identifiers for investment
assets. The Agencies also received comments on other proposed elements,
including the checkboxes to identify if an asset is a designated
investment alternative or qualified default investment alternative in a
defined contribution plan.
After considering the public comments, the Agencies decided that
the improved transparency and financial accountability goals of the
September 2021 proposal would best be furthered by using the public
comments to refine the Schedule of Asset changes and include them in
the proposal that is part of the more general Form 5500 improvement
project currently on the DOL semi-annual regulatory agenda.
b. Schedule H Breakout of Administrative Expenses Paid by the Plan
The final forms revisions update Schedule H to add new breakout
categories to the ``Administrative Expenses'' category of the Income
and Expenses section of the Schedule H balance sheet. As discussed in
the NPFR, the Agencies have determined that to get a better picture of
plan expenses, particularly those related to service providers, more
detail in this category is warranted. The data element breakouts for
Administrative Expenses will now be ``Salaries and allowances,''
``Contract administrator fees,'' ``Recordkeeping fees,'' ``IQPA audit
fees,'' ``Investment advisory and investment management fees,'' ``Bank
or trust company trustee/custodial fees,'' ``Actuarial fees,'' ``Legal
fees,'' ``Valuation/appraisal fees,'' ``Other Trustee fees/expenses,''
and ``Other expenses.''
Commenters complained that the new breakout categories are
unnecessary and burdensome, and add layers of expense and difficulty to
Form 5500 filing without added useful information. The
[[Page 12006]]
commenters argued that the DOL should justify, both on a substantive
and economic basis, which breakouts are useful for the purpose of the
annual return/report and eliminate those that are not useful. One
commenter asserted that the proposed changes lack clarity, would
require substantial additional information, and provide very little
lead time to adjust systems and processes. Another commenter claimed
that adding additional break-out categories to the expenses lines will
significantly and unnecessarily heighten the risk of frivolous
litigation because the plaintiffs' bar focuses on these lines for
purposes of bringing litigation in connection with 401(k) fees. Another
commenter expressed concerns with the two categories of data element
breakouts to report fees related to trusts, saying the DOL should
provide additional clarity on reporting by bank trustees vs. individual
trustees, and also suggested that trustee fees exclude reporting of
pass-through entity trustee fees relating to custody of assets.
Transparency and improved reporting of fees and expenses is an
ongoing objective for the DOL and an important goal for continuing to
improve the Form 5500 as a tool for financial transparency and
accountability among employee benefit plans.
The new breakouts will also supplement and allow for some cross-
testing of amounts that should be recorded as a payment of direct
compensation to a service provider on line 2 of Schedule C, to the
extent that the service provider receives more than $5,000 from the
plan during the year. Since those amounts are already required to be
reported on the Schedule C, it should be a relatively straightforward
exercise in arithmetic to sum up the Schedule C entries for purposes of
reporting them on the Schedule H expense statement. Also, the total
currently reported on the Schedule H should include all of the items
that would be reported in the new breakouts, so plans should already
have collected and recorded those payments to satisfy current Schedule
H requirements. To the extent filers believe that they may have
challenges in classifying particular payments into one of the breakout
categories, the instructions will provide that the administrator can
use any reasonable method of classifying expenses into appropriate
categories (although the categories are sufficiently distinct that the
DOL does not expect plans to face significant difficulty in this area).
Also, other than IQPA audit fees and bank or trust company trustee/
custodial fees, the new breakouts are similar to breakouts of plan
expenses that were reported for many years until the detail of expense
reporting on the Schedule H was reduced as part of a paperwork
reduction and reporting simplification project implemented with the
1999 Form 5500 in connection with the implementation of the first stage
of the EFAST filing system.\56\ The DOL did not observe plans having
difficulty with this level of reporting at that time, and improvements
in systems and technologies for plan administration since that time
presumably should make it easier to report the required level of detail
on expenses paid by the plan.
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\56\ See 1998 Form 5500, line 32(g).
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5. Miscellaneous and Conforming Changes for Forms and Instructions
Various other technical, formatting, and conforming changes to the
forms, schedules, and instructions are being adopted as part of this
final forms revisions notice. The changes primarily are needed to
reflect the new DCG consolidated reporting option and the new Schedule
MEP for multiple-employer pension plans, including PEPs, and Schedule
MB to clarify special financial assistance reporting requirements for
multiemployer plans. A conforming change was made to the Form 5500
instructions for the ``Limited Pension Plan Reporting'' option for IRA-
based plans to require IRA-based MEPs relying on the option to complete
the Schedule MEP, which replaced a participating employer and PEP
reporting attachment requirement for Part I, Line A of the 2022 Form
5500 that applied to such IRA-based MEPs. Other technical and
conforming changes include minor technical amendments applicable to
plan years starting after December 31, 2022, to update several line
instructions for Form 5500-SF and Schedules H and I for information
reported by plans regarding plan benefits payments and unpaid required
minimum distributions.\57\
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\57\ As noted above, SECURE Act 2.0 was enacted subsequent to
the September 2021 proposal. Section 107 of the SECURE Act 2.0
amends Code Section 401(a)(9) to increase the age at which required
minimum distributions are required, from age 72 currently to age 75
by 2032. The instructions to the Form 5500, 5500-SF, and Schedules
DCG, H and I have been updated accordingly to reflect language that
refers to a statutory applicable age rather than a fixed age.
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The instructions defining what constitutes a MEP for purposes of
the Form 5500 include conforming changes in appropriate places
throughout to include references to PEPs, DCGs, Schedule MEP, and
Schedule DCG. The Form 5500 instructions for Part I, DFE box, are being
updated to add a code for DCGs, which would include an instruction to
check the DFE box and enter the DCG code. Entries for the Schedule MEP
and Schedule DCG would be added to the checkbox list on the Form 5500
pension schedules. DCG filers would have to check that they are adding
the Schedule DCG and enter the number of Schedule DCG attached. The
Form 5500-SF instructions are being amended to add DCGs to those types
of filers that are not permitted to file a Form 5500-SF, but must
instead file the Form 5500, with all required schedules and
attachments. The Form 5500 and Schedule D instructions are being
revised to state that PEPs and DCGs cannot use master trust investment
account (MTIA) reporting designed for master trust investments of
affiliated plans. This is because the purpose of the MTIA provisions is
to provide an annual reporting structure for groups of affiliated plans
(e.g., separate plans of controlled group members) that utilize master
trusts for the collective investment of the assets of the affiliated
plans. The DOL does not believe that separate PEPs or plans in DCGs are
``affiliated'' in the way that was envisioned for MTIA reporting and
may in fact create an overly complex and undesirable lack of
transparency if used in the case of PEPs and DCGs.
In the September 2021 proposal, the Agencies specifically requested
comments on whether the final rule should require more detailed
reporting regarding fee and expense information on the Form 5500,
noting that useful comments would include, for example, suggestions on
how to improve reporting of direct and indirect service provider
compensation, generally and in particular with respect to PEPs, other
MEPs, and DCG reporting arrangements (including information about how
the fees and expenses are allocated among participating plans,
employers, and plan participants and beneficiaries, as applicable).
Another example of an area of interest on fee information is whether
the Form 5500 would be an appropriate vehicle for collecting
information on fees charged to participants or alternate payees by a
retirement plan--including plan service provider fees the plan passes
on to participants--for review and qualification of domestic relations
orders.\58\
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\58\ See Government Accountability Office (GAO) Report GAO 20-
541, ``Retirement Security: DOL Could Better Inform Divorcing
Parties About Dividing Savings,'' which recommended that ``EBSA
should explore ways to collect information on fees charged to
participants or alternate payees by a retirement plan--including
plan service provider fees the plan passes on to participants--for
review and qualification of domestic relations orders and evaluate
the burden of doing so. For example, DOL could consider collecting
fee information as part of existing reporting requirements in the
Form 5500.''
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[[Page 12007]]
This final forms revisions notice also amends the Form 5500 and
Form 5500-SF instructions and makes conforming changes to the other
parts of the forms, schedules, and instructions to implement the
changes described above to the participant count methodology for
individual account plans for determining whether such plans have to
file as a large plan and whether they have to attach an IQPA report.
III. Paperwork Reduction Act Statement
In accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44
U.S.C. 3506(c)(2)(A)), the Agencies solicited comments concerning the
information collection requests (ICRs) included in the revision of the
Form 5500 Annual Return/Report.\59\ At the same time, the Agencies also
submitted ICRs to the Office of Management and Budget (OMB), in
accordance with 44 U.S.C. 3507(d).
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\59\ 86 FR 51488.
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The Agencies did not receive comments that specifically addressed
the paperwork burden analysis of the information collection requirement
contained in the proposed rule.
In connection with publication of the final regulations and final
forms revision, the Agencies are submitting ICRs to OMB requesting a
revision of the collections of information under OMB Control Numbers
1210-0110 (DOL), 1545-1610 (IRS), 1212-0057 (PBGC) and 1210-0040 (DOL
for SAR) reflecting the final regulations and instruction changes being
finalized in this document. The Agencies will notify the public when
OMB approves the ICRs.
A copy of the ICRs may be obtained by contacting the PRA addressee
shown below or at www.RegInfo.gov. PRA ADDRESSEE: Address requests for
copies of the ICRs to James Butikofer, Office of Research and Analysis,
U.S. Department of Labor, Employee Benefits Security Administration,
200 Constitution Avenue NW, Room N-5655, Washington, DC 20210 or email:
<a href="/cdn-cgi/l/email-protection#2b4e49584a05445b596b4f4447054c445d"><span class="__cf_email__" data-cfemail="20454253410e4f505260444f4c0e474f56">[email protected]</span></a>. ICRs submitted to OMB also are available at <a href="http://www.RegInfo.gov">http://www.RegInfo.gov</a>.
The burden analysis is based on data from the 2020 Form 5500
filings (the latest year for which complete data are available). The
burden analysis includes the burden of the current information
collection and adjusts it for changes made by the final rule and final
forms revisions. Burden estimates consider the change in plan counts
due to the creation of PEPs and DCGs, with an increase in MEPs and a
decrease in single-employer plans, reflecting some single-employer
plans moving to PEPs or filing as a DCG. The burden also includes the
additional burden from the changes to the 2023 Form 5500 and related
schedules.
The Agencies' burden estimation methodology excludes certain
activities from the calculation of ``burden.'' If the activity is
performed for any reason other than compliance with the applicable
Federal tax administration system or the Title I annual reporting
requirements, it was not counted as part of the paperwork burden. For
example, most businesses or financial entities maintain, in the
ordinary course of business, detailed accounts of assets and
liabilities, and income and expenses for the purposes of operating the
business or entity. These recordkeeping activities were not included in
the calculation of burden because prudent business or financial
entities normally have that information available for reasons other
than Federal tax or Title I annual reporting. Only time for gathering
and processing information associated with the tax return/annual
reporting systems, and learning about the law, was included. In
addition, an activity is counted as a burden only once if performed for
both tax and Title I purposes. The Agencies also have designed the
instruction package for the Form 5500 Annual Return/Report so that
filers generally will be able to complete the Form 5500 Annual Return/
Report by reading the instructions without needing to refer to the
statutes or regulations. The Agencies, therefore, have considered in
their PRA calculations the burden of reading the instructions and find
there is no recordkeeping burden attributable to the Form 5500 Annual
Return/Report.
A summary of paperwork burden estimates follows. As noted above,
these estimates include the burden of the overall Form 5500 information
collection for all three agencies and makes adjustments for the final
revisions to the instructions included in this document. It also
reflects updates to the Summary Annual Report for DOL.
Agency: DOL-EBSA.
Type of Review: Revision of existing collection.
Title of Collection: Annual Information Return/Report of Employee
Benefit Plan.
OMB Control Number: 1210-0110.
Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
Forms: Form 5500 and Schedules.
Total Respondents: 839,382.
Total Responses: 845,028.
Frequency of Response: Annually.
Estimated Total Burden Hours: 2,872,410.
Total Annualized Costs: 0.
Agency: Department of Treasury--IRS.
Type of Revision: Revision of existing collection.
Title of Collection: Annual Return/Report of Employee Benefit Plan.
OMB Control Number: 1545-1610.
Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
Forms: Form 5500 and Schedules.
Total Respondents: 984,008.
Total Responses: 984,008.
Frequency of Response: Annually.
Estimated Total Burden Hours: 1,878,544.
Total Annualized Costs: 0.
Agency: PBGC.
Type of Revision: Revision of existing collection.
Title of Collection: Annual Information Return/Report.
OMB Control Number: 1212-0057.
Affected Public: Individuals or households; Private Sector--
Business or other for-profit; Not-for-profit institutions.
Forms: Form 5500 and Schedules.
Total Respondents: 25,260.
Total Responses: 25,260.
Frequency of Response: Annually.
Estimated Total Burden Hours: 15,089.
Total Annualized Costs: 0.
Agency: DOL-EBSA.
Type of Revision: Revision of existing collection.
Title of Collection: Summary Annual Report Requirement.
OMB Control Number: 1210-0040.
Affected Public: Not-for-profit institutions, Businesses or other
for- profits.
Total Respondents: 809,901.
Total Responses: 178,211,549.
Frequency of Response: Annually.
Estimated Total Burden Hours: 1,114,751.
Total Annualized Costs: $18,423,119.
The DOL solicited comments regarding whether or not any
recordkeeping beyond that which is usual and customary is necessary to
complete the Form 5500 Annual Return/Report. No comments were received
on this issue. Comments were also solicited on whether the Form 5500
Annual Return/Report instructions are generally sufficient to enable
filers to complete the Form 5500 Annual Return/Report without needing
to refer to the statutes or regulations. No comments were received on
this issue.
[[Page 12008]]
Paperwork and Respondent Burden: Estimated time needed to complete
the forms listed below reflects the combined requirements of the IRS,
the DOL, and the PBGC. The times will vary depending on individual
circumstances. The estimated average times are:
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Pension plans
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Large Small, filing Form 5500 Small, filing 5500-SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................ 1 hr, 50 min........... 1 hr, 19 min...........
Sch A................................ 2 hr, 52 min........... 2 hr, 52 min...........
Sch MB............................... 8 hr, 52 min........... 8 hr, 40 min........... 8 hr, 40 min.
Sch SB............................... 6 hr, 38 min........... 6 hr, 49 min........... 6 hr, 49 min.
Sch C................................ 2 hr, 51 min...........
Sch D................................ 1 hr, 39 min........... 20 min.................
Sch G................................ 14 hr, 49 min..........
Sch H................................ 7 hr, 40 min...........
Sch I................................ ....................... 2 hr, 6 min............
Sch R................................ 1 hr, 43 min........... 1 hr, 7 min............
Form 5500-SF......................... ....................... ....................... 2 hr, 35 min.
----------------------------------------------------------------------------------------------------------------
Welfare plans that include health benefits
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Large Small, unfunded, combination unfunded/fully
insured, or funded with a trust 5500-SF
----------------------------------------------------------------------------------------------------------------
Form 5500............................ 1 hr, 45 min........... 1 hr, 14 min.
----------------------------------------------------------------------------------------------------------------
Sch A................................ 3 hr, 40 min........... 2 hr, 43 min.
----------------------------------------------------------------------------------------------------------------
Sch C................................ 3 hr, 38 min...........
----------------------------------------------------------------------------------------------------------------
Sch D................................ 1 hr, 52 min........... 20 min
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[…truncated; see source link]Indexed from Federal Register on February 24, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.