Private Pensions:

Government Actions Could Improve the Timeliness and Content of Form 5500 Pension Information

GAO-05-491: Published: Jun 3, 2005. Publicly Released: Jun 3, 2005.

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The Form 5500 is the primary source of information for both the federal government and the private sector regarding the operation, funding, assets, and investments of private pension and other employee benefit plans. Currently, the Department of Labor (Labor) requires about 3 years to provide certain usable Form 5500 information to the public, leading to complaints that the information is not timely. We have prepared this report under the Comptroller General's authority, and it is intended to assist Congress in improving the timeliness and content of Form 5500 information. This report is addressed to the congressional committees of jurisdiction. It examines: (1) the information reported on the form and how it is used, (2) factors that affect the timeliness of Form 5500 information, and (3) issues affecting the content of the form.

Detailed information on private pension plans is reported on the Form 5500, and Labor, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) use the information for compliance, research, and public disclosure purposes. Information collected on the form includes basic plan identifying information as well as detailed information including assets and liabilities, insurance, and financial transactions. The principal users of Form 5500 Reports--Labor, IRS, and PBGC--use the reports primarily as a compliance tool to identify actual and potential violations of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. Other federal agencies and policy researchers also use Form 5500 information. Statutory reporting requirements, processing issues, and current Labor practices affect the timeliness of the release of Form 5500 information, resulting in a 3 year lag, in some cases, in releasing certain usable computerized Form 5500 information to the non-principal federal agencies and others. First, under the current statutory reporting requirements, filers can have up to 285 days after the end of the plan year to file their Form 5500. Second, 98 percent of filings are in a paper format. These take more than three times as long as electronic filings to process and have twice as many errors. Third, the release of the Form 5500 information in the research file--the Form 5500's most practical form--is further delayed because Labor waits until all filings for that plan year are processed, which can take up to 2 years. Despite the efforts of Labor, IRS, and PBGC to improve its content, the Form 5500 lacks key information. These agencies have taken certain steps to improve the content of the Form 5500, such as reviewing the Form 5500 annually to ensure that the form is collecting all the information required by law. However, the form still lacks key information that could better assist Labor, IRS, and PBGC in identifying and tracking all plans over time and monitoring multiemployer plans. Federal and private sector researchers also told us the form could collect better plan financial information, such as 40l(k) plan fees. In addition, federal agency officials told us certain information could be reported earlier than the current filing deadline, such as information on a plan's funding status, as well as its assets and liabilities.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Given the improved timeliness and reduced errors associated with electronic filing, Labor, IRS, and PBGC should require the electronic filing of the Form 5500. In doing so, Labor should also make improvements to the current electronic filing process to make it less burdensome, such as revising the procedure for signing and authenticating an electronic filing.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The Department of Labor issued a final regulation mandating electronic filing of all Form 5500 reports filed with the agency beginning with the 2009 plan year. Labor, in cooperation with the IRS and the Pension Benefit Guaranty Corporation (PBGC), also issued revised and simplified versions of the Form 5500 with one major objective being to facilitate the move to electronic filing. Part of that effort involved revising the form in a way that addressed statutory limitations in the Internal Revenue Code on the IRS's authority to require electronic filing of annual return information. In cooperation with the IRS and PBGC, Labor also awarded a contract for the development of EFAST 2, the new wholly electronic filing system. The specifications addressed GAO's recommendations on signing and authenticating electronic filings by requiring the development of a streamlined and simplified process of obtaining electronic signatures under the EFAST 2 system.

    Recommendation: Given the improved timeliness and reduced errors associated with electronic filing, Labor, IRS, and PBGC should require the electronic filing of the Form 5500. In doing so, Labor should also make improvements to the current electronic filing process to make it less burdensome, such as revising the procedure for signing and authenticating an electronic filing.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: The IRS supports electronic filing of the Form 5500. The Department of Labor issued a final regulation mandating electronic filing of all Form 5500 reports filed with the Department beginning with the 2009 plan year. Labor in cooperation with the IRS and the Pension Benefit Guaranty Corporation (PBGC) also issued revised and simplified versions of the Form 5500 with one major objective being to facilitate the move to electronic filing. Part of that effort involved revising the form in a way that addressed statutory limitations in the Internal Revenue Code on the IRS's authority to require electronic filing of annual return information. In cooperation with the IRS and PBGC, Labor also awarded a contract for the development of EFAST 2, the new wholly electronic filing system. The specifications addressed GAO's recommendations on signing and authenticating electronic filings by requiring the development of a streamlined and simplified process of obtaining electronic signatures under the EFAST 2 system.

    Recommendation: Given the improved timeliness and reduced errors associated with electronic filing, Labor, IRS, and PBGC should require the electronic filing of the Form 5500. In doing so, Labor should also make improvements to the current electronic filing process to make it less burdensome, such as revising the procedure for signing and authenticating an electronic filing.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The Pension Benefit Guaranty Corporation (PBGC) agreed that electronic filing will reduce errors and speed processing time--EFAST is inefficient and slow because it's paper-based. The Department of Labor issued a final regulation mandating electronic filing of all Form 5500 reports filed with the Department beginning with the 2009 plan year. Labor, in cooperation with PBGC and the IRS, also issued revised and simplified versions of the Form 5500 with one major objective being to facilitate the move to electronic filing. Part of that effort involved revising the form in a way that addressed statutory limitations in the Internal Revenue Code on the IRS's authority to require electronic filing of annual return information. In cooperation with the IRS and PBGC, Labor also awarded a contract for the development of EFAST 2, the new wholly electronic filing system. The specifications addressed GAO's recommendations on signing and authenticating electronic filings by requiring the development of a streamlined and simplified process of obtaining electronic signatures under the EFAST 2 system.

    Recommendation: To improve timeliness, reduce errors, and maximize efficiency, Labor should modify its current EFAST processing methods. In doing so, Labor should consider: streamlining its data correction processes by ensuring that filings are checked for errors before they are accepted for processing by the EFAST system; and developing an electronic-based correspondence process, whereby the agencies can notify filers of errors electronically, thereby eliminating the 30 days that officials at Labor estimate it takes to mail the paper-based correspondence back and forth. Also this will allow for fliers to be notified of errors on a more timely basis.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: The Department of Labor's new system for electronic filing addresses GAO's recommendation on error checking and correspondence by requiring the system to electronically check filings for errors at the earliest possible point in time (upon receipt of the filing). Filers would be electronically notified of such filing errors within minutes. EFAST 2 is scheduled to be operational on January 1, 2010. In the meantime, Labor has made improvements to the current electronic filing process in EFAST. For example, Labor modified procedures and instructions so that electronic filers can fax rather than mail their application for an electronic signature.

    Recommendation: Considering the need for federal agencies, Congress, and the public to have access to timely and usable Form 5500 information as soon as possible, Labor should evaluate ways to speed up the release of its research file, including considering making information available from the file on an interim basis prior to its completion and final release to the public.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The Employee Benefits Security Administration's (EBSA) public disclosure operation makes information available to the public as it is processed. This is the same information that goes into building the research file. Researchers who wish to access data before the research file is complete frequently access it this way. Additionally, with the implementation of EFAST 2, the Department's website will publicly disclose Form 5500 information on an individual filing basis beginning January 1, 2010. The information released will be timely as it will be posted within one day of receipt of a successful filing submission. The Department's research file is an aggregate of individual filings and can not be released until filings are combined and analyzed. As EFAST 2 will process filings within minutes rather than months, the Department should be able to complete and release the research file months earlier than it had been using EFAST processed data.

    Recommendation: To more effectively identify and track individual plans across years, especially when plans change EINs and plan numbers, and to take into account Labor's need to be able to verify if all required employers are meeting the statutory requirement to file a Form 5500 annually, Labor, IRS, and PBGC should work collectively to better identify and track the same plan from one year to the next.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The Department of Labor (Labor), Pension Benefit Guaranty Corporation (PBGC), and the IRS currently apply computerized "entity control" tests to Form 5500 filings as part of the EFAST processing system, which are designed to track individual plans and determine if consistent identifying data is reported each year for a particular filer in order to maintain accurate year-to-year records. Labor coordinates with the IRS to monitor compliance with the annual reporting requirements. The most productive area of coordination between the two agencies involves the IRS marketing the availability of Labor's Delinquent Filer Voluntary Compliance Program (DFVCP) through its late and stop-filer programs. In its enforcement correspondence, the IRS prominently suggests the DFVCP as a means of avoiding severe, late and non-filer sanctions under the Internal Revenue Code. The IRS is marketing DFVCP to 100% of the late filers and a significant number of stop-filers. Through these efforts, the three agencies can track and ensure plans are meeting the statutory requirement to file a Form 5500 annually. In terms of tracking plan filings, Labor knows which ones are late by running a query in the Form 5500 database. However, Labor is leveraging IRS's resources to communicate with 100% of plan administrators who filed late. Similar to IRS' late filer program, Labor is working with the IRS to establish a large scale stop-filer program. In this way, the IRS can identify 100% of the employee benefit plans that inappropriately stopped filing and provide Labor with data containing the stop filers against whom the IRS assessed penalties.

    Recommendation: To more effectively identify and track individual plans across years, especially when plans change EINs and plan numbers, and to take into account Labor's need to be able to verify if all required employers are meeting the statutory requirement to file a Form 5500 annually, Labor, IRS, and PBGC should work collectively to better identify and track the same plan from one year to the next.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: The Department of Labor (Labor), Pension Benefit Guaranty Corporation (PBGC), and the IRS currently apply computerized "entity control" tests to Form 5500 filings as part of the EFAST processing system, which are designed to track individual plans and determine if consistent identifying data is reported each year for a particular filer in order to maintain accurate year-to-year records. Labor coordinates with the IRS to monitor compliance with the annual reporting requirements. The most productive area of coordination between the two agencies involves the IRS marketing the availability of Labor's Delinquent Filer Voluntary Compliance Program (DFVCP) through its late and stop-filer programs. In its enforcement correspondence, the IRS prominently suggests the DFVCP as a means of avoiding severe, late and non-filer sanctions under the Internal Revenue Code. The IRS is marketing DFVCP to 100% of the late filers and a significant number of stop-filers. Through these efforts, the three agencies can track and ensure plans are meeting the statutory requirement to file a Form 5500 annually. In terms of tracking plan filings, Labor knows which ones are late by running a query in the Form 5500 database. However, Labor is leveraging IRS's resources to communicate with 100% of plan administrators who filed late. Similar to IRS' late filer program, Labor is working with the IRS to establish a large scale stop-filer program. In this way, the IRS can identify 100% of the employee benefit plans that inappropriately stopped filing and provide Labor with data containing the stop filers against whom the IRS assessed penalties.

    Recommendation: To more effectively identify and track individual plans across years, especially when plans change EINs and plan numbers, and to take into account Labor's need to be able to verify if all required employers are meeting the statutory requirement to file a Form 5500 annually, Labor, IRS, and PBGC should work collectively to better identify and track the same plan from one year to the next.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: The Pension Benefit Guaranty Corporation (PBGC), the IRS and the Department of Labor (Labor) have agreed on certain processing enhancements to aid the existing EFAST entity control system. The three agencies apply computerized "entity control" tests to Form 5500 filings as part of the EFAST processing system, which are designed to track individual plans and determine if consistent identifying data is reported each year for a particular filer in order to maintain accurate year-to-year records. Labor coordinates with the IRS to monitor compliance with the annual reporting requirements. The most productive area of coordination between the two agencies involves the IRS marketing the availability of Labor's Delinquent Filer Voluntary Compliance Program (DFVCP) through its late and stop-filer programs. In its enforcement correspondence, the IRS prominently suggests the DFVCP as a means of avoiding severe, late and non-filer sanctions under the Internal Revenue Code. The IRS is marketing DFVCP to 100% of the late filers and a significant number of stop-filers. Through these efforts, the three agencies can track and ensure plans are meeting the statutory requirement to file a Form 5500 annually. In terms of tracking plan filings, Labor knows which ones are late by running a query in the Form 5500 database. However, Labor is leveraging IRS's resources to communicate with 100% of plan administrators who filed late. Similar to IRS' late filer program, Labor is working with the IRS to establish a large scale stop-filer program. In this way, the IRS can identify 100% of the employee benefit plans that inappropriately stopped filing and provide Labor with data containing the stop filers against whom the IRS assessed penalties.

    Recommendation: To improve the federal government's ability to regulate multiemployer defined benefit pension plans and improve participant information, we recommend that Labor, IRS, and PBGC modify the Form 5500 to collect additional information on multiemployer pension plans that would enable Labor, IRS, and PBGC to monitor and manage potential risks associated with events such as employer bankruptcies, withdrawals, and labor strikes and the attendant consequences for these plans, plan participants, and PBGC's multiemployer insurance program. In doing so, Labor, IRS, and PBGC should consider requiring multiemployer plans to report the following information on the Form 5500: information sufficient to identify all of the employers associated with a particular plan and their annual contributions to the plan; plan specifics on determining employer contributions (per hour, per unit of output, etc.); and the distribution by employer of responsibility for unfunded or underfunded plan liabilities.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The IRS agrees with the Pension Benefit Guaranty Corporation's (PBGC) recommendations to modify the Form 5500 Schedule R Retirement Plan Information to collect additional information on multiemployer pension plans. As a result of the form review conducted by these three agencies, and enactment of the Pension Protect Act of 2006 (PPA), these three agencies developed new reporting requirements for multiemployer defined benefit plans. These new reporting requirements were published in the Federal Register for public comment as part of a Notice of Supplemental Proposed Forms Revisions designed to implement certain PPA-mandated annual reporting requirements and to supplement proposed revisions to the Form 5500 published prior to the enactment of the PPA. The multiemployer defined benefit plan changes are included in a new Schedule MB (Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information) and revised Schedule R (Retirement Plan Information), which was incorporated into the Form 5500 series beginning with the 2008 plan year. The Schedule MB and Schedule R revisions have already been published as final form revisions in the Federal Register (see "Notice of Adoption of Revisions to Annual Return/Report Forms," 72 Fed. Reg. 64731, November 16, 2007). The questions on the form are similar to the questions GAO recommended that the agencies address.

    Recommendation: To improve the federal government's ability to regulate multiemployer defined benefit pension plans and improve participant information, we recommend that Labor, IRS, and PBGC modify the Form 5500 to collect additional information on multiemployer pension plans that would enable Labor, IRS, and PBGC to monitor and manage potential risks associated with events such as employer bankruptcies, withdrawals, and labor strikes and the attendant consequences for these plans, plan participants, and PBGC's multiemployer insurance program. In doing so, Labor, IRS, and PBGC should consider requiring multiemployer plans to report the following information on the Form 5500: information sufficient to identify all of the employers associated with a particular plan and their annual contributions to the plan; plan specifics on determining employer contributions (per hour, per unit of output, etc.); and the distribution by employer of responsibility for unfunded or underfunded plan liabilities.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: As a result of the form review conducted by the Department of Labor (Labor), IRS and the Pension Benefit Guaranty Corporation, and enactment of the Pension Protect Act of 2006 (PPA), these three agencies developed new reporting requirements for multiemployer defined benefit plans. These new reporting requirements were published in the Federal Register for public comment as part of a Notice of Supplemental Proposed Forms Revisions designed to implement certain PPA-mandated annual reporting requirements and to supplement proposed revisions to the Form 5500 published prior to the enactment of the PPA. The multiemployer defined benefit plan changes are included in a new Schedule MB (Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information) and revised Schedule R (Retirement Plan Information), which was incorporated into the Form 5500 series beginning with the 2008 plan year. The Schedule MB and Schedule R revisions have already been published as final form revisions in the Federal Register (see "Notice of Adoption of Revisions to Annual Return/Report Forms," 72 Fed. Reg. 64731, November 16, 2007). The questions on the form are similar to the questions GAO recommended that the agencies address.

    Recommendation: To improve the federal government's ability to regulate multiemployer defined benefit pension plans and improve participant information, we recommend that Labor, IRS, and PBGC modify the Form 5500 to collect additional information on multiemployer pension plans that would enable Labor, IRS, and PBGC to monitor and manage potential risks associated with events such as employer bankruptcies, withdrawals, and labor strikes and the attendant consequences for these plans, plan participants, and PBGC's multiemployer insurance program. In doing so, Labor, IRS, and PBGC should consider requiring multiemployer plans to report the following information on the Form 5500: information sufficient to identify all of the employers associated with a particular plan and their annual contributions to the plan; plan specifics on determining employer contributions (per hour, per unit of output, etc.); and the distribution by employer of responsibility for unfunded or underfunded plan liabilities.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: As a result of the form review conducted by the Department of Labor (Labor), IRS and the Pension Benefit Guaranty Corporation, and enactment of the Pension Protect Act of 2006 (PPA), these three agencies developed new reporting requirements for multiemployer defined benefit plans. These new reporting requirements were published in the Federal Register for public comment as part of a Notice of Supplemental Proposed Forms Revisions designed to implement certain PPA-mandated annual reporting requirements and to supplement proposed revisions to the Form 5500 published prior to the enactment of the PPA. The multiemployer defined benefit plan changes are included in a new Schedule MB (Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information) and revised Schedule R (Retirement Plan Information), which was incorporated into the Form 5500 series beginning with the 2008 plan year. The Schedule MB and Schedule R revisions have already been published as final form revisions in the Federal Register (see "Notice of Adoption of Revisions to Annual Return/Report Forms," 72 Fed. Reg. 64731, November 16, 2007). The questions on the form are similar to the questions GAO recommended that the agencies address.

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