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

GAO-05-491 Published: Jun 03, 2005. Publicly Released: Jun 03, 2005.
Jump To:
Skip to Highlights
Highlights

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.

Skip to Recommendations

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Labor 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.
Closed – Implemented
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.
Internal Revenue Service 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.
Closed – Implemented
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.
Pension Benefit Guaranty Corporation 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.
Closed – Implemented
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.
Department of Labor 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.
Closed – Implemented
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.
Department of Labor 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.
Closed – Implemented
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.
Department of Labor 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.
Closed – Implemented
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.
Internal Revenue Service 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.
Closed – Implemented
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.
Pension Benefit Guaranty Corporation 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.
Closed – Implemented
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.
Department of Labor 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.
Closed – Implemented
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.
Internal Revenue Service 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.
Closed – Implemented
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.
Pension Benefit Guaranty Corporation 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.
Closed – Implemented
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.

Full Report

GAO Contacts