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entitled 'Private Pensions: Targeted Revisions Could Improve 
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United States Government Accountability Office: 
GAO: 

Report to the Ranking Member, Committee on Education and the 
Workforce, House of Representatives: 

June 2014: 

Private Pensions: 

Targeted Revisions Could Improve Usefulness of Form 5500 Information: 

GAO-14-441: 

GAO Highlights: 

Highlights of GAO-14-441, a report to the Ranking Member, Committee on 
Education and the Workforce, House of Representatives. 

Why GAO Did This Study: 

The Form 5500 is the primary means of collecting information for use 
by the federal government and the private sector on retirement plan 
assets, which exceeded $6 trillion in fiscal year 2011. Stakeholders, 
including those who prepare and use the form, have raised concerns 
about the quality and usefulness of form data. GAO was asked to review 
Form 5500 plan investment and fee information. 

In this report, GAO examined: (1) stakeholder problems with Form 5500 
plan investment information; (2) stakeholder problems with Form 5500 
service provider fee information, and (3) challenges DOL, IRS, and 
PBGC face in collecting and revising Form 5500 information. GAO 
surveyed a panel of plan sponsors, service providers, representatives 
of plan participants, and researchers; interviewed agency officials; 
and reviewed studies on Form 5500 data. 

What GAO Found: 

In a two-phase online GAO survey, stakeholders identified problems 
with the usefulness, reliability, and comparability of data from the 
Form 5500 (see table). Despite longstanding concerns with the Form 
5500—the annual report that employee benefit plans file with the 
federal government—agency officials have made only minimal changes 
over the last 3 years. 

Table: Key Challenges Identified with Form 5500: 

Weaknesses in the format: 
Plan asset categories break out plan assets differently from the 
investment industry, and provide little insight into plan investments, 
their structure, or the level of associated risk. In particular, the 
majority of respondents indicated that the “other” plan asset category 
in the form is too broad because it can include many disparate types 
of investments. Respondents also indicated challenges in identifying 
the underlying holdings of plan assets invested in indirect 
investments. 

Challenges in finding key information: 
The form lacks detailed information on plan investments because there 
is no standard, searchable format for attachments to the form and the 
filing requirements on plan investments is limited for small plans, 
which have less than 100 participants. 

Inconsistent data: 
Naming conventions and identification numbers may be inconsistent, 
making it difficult to collect and accurately match records. 

Source: GAO analysis of survey responses from our two-phase Form 5500 
stakeholders panel. 

[End of table] 

Stakeholders said the form's information on service provider fees was 
misaligned with other required fee disclosures, and also cited various 
exceptions and gaps in current reporting requirements as major 
challenges. Specifically, Form 5500 service provider fee information 
does not align with other information that service providers must 
disclose to plan sponsors, forcing providers to produce two different 
sets of information. Also, differences in service provider 
compensation types and the lack of definitions for codes designating 
the types of services provided can result in inconsistent and 
incomplete data being reported. Other exceptions and gaps in service 
provider information result in an incomplete picture of plan fees. For 
example, large plans—those with 100 or more participants—are not 
required to report fee information for certain types of compensation 
and small plans file only limited fee information. 

The Department of Labor (DOL), the Internal Revenue Service (IRS), and 
the Pension Benefit Guaranty Corporation (PBGC) face significant 
administrative, statutory, and contractual challenges to collecting 
and revising the annual reporting information required for regulating 
private pensions. While the rulemaking process and other informal 
efforts to solicit stakeholder input have provided opportunities for 
public reaction to proposed changes to the form, these opportunities 
have been limited and have not included the advance testing OMB 
guidance suggests. Stakeholder input could lower costs by reducing 
subsequent changes, improve filer comprehension, and increase the 
comparability and reliability of the form's data. Additionally, a 
statutory prohibition against requiring electronic filing caused IRS 
to remove certain data elements from the Form 5500 after DOL mandated 
electronic filing of the form. If IRS were able to require electronic 
filing, it could add the data elements back to the form, which would 
improve its compliance, restore robust information to its enforcement 
activities, and decrease its data collection costs. 

What GAO Recommends: 

GAO recommends DOL, Treasury, and PBGC consider modifying Form 5500 
plan investment and service provider fee information to address 
challenges identified by our panel. DOL, Treasury, and PBGC should 
look for options to conduct advance testing when making major 
revisions to the form. Congress should consider granting Treasury 
authority to require Form 5500 data be filed electronically. PBGC 
agreed with the recommendations. DOL and Treasury did not state 
whether they agreed or disagreed with the recommendations; however, 
they identified actions underway to address the first recommendation. 
GAO continues to believe the recommendations are valid. 

View GAO-14-441. For more information, contact Charlie Jeszeck at 
(202) 512-7215 or jeszeckc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Stakeholders Cited Challenges with Plan Asset Reporting Format, 
Missing Information, and Inconsistent Data: 

Stakeholders Cited Misalignment with Other Fee Disclosures and 
Inconsistent Reporting of Service Provider Fee Information as 
Problematic: 

DOL, IRS, and PBGC Face Administrative, Statutory, and Contractual 
Challenges to Collecting More Useful Form 5500 Information: 

Conclusions: 

Recommendations for Executive Actions: 

Matter for Congressional Consideration: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Selected Results for Suggested Changes to Plan Investment 
and Service Provider Fee Information from the Phase 2 Survey of our 
Two-phase Form 5500 Stakeholder Panel: 

Appendix III: 2013 Form 5500 and Select Schedules: 

Appendix IV: Comments from Department of Labor: 

Appendix V: Comments from Department of Treasury/Internal Revenue 
Service: 

Appendix VI: Comments from the Pension Benefit Guaranty Corporation: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Related GAO products: 

Tables: 

Table 1: Top Challenges with Form 5500 Plan Investment Information 
Identified by Survey Respondents: 

Table 2: Plan Assets in Indirect Investment Vehicles for Large Single-
employer Plans (2010): 

Table 3: Top Challenges with Form 5500 Service Provider Fee 
Information Identified by Survey Respondents: 

Table 4: Participation by Form 5500 Stakeholder Type Throughout Two-
phase Online Panel Survey: 

Table 5: Key Questions from the Phase 1 Online Questionnaire from the 
Two-Phase Form 5500 Stakeholder Panel: 

Table 6: Top Changes with Form 5500 Plan Investment Information 
Suggested by Survey Respondents in our Two-Phase Survey Panel: 

Table 7: Top Service Provider Fee Changes Suggested by Survey 
Respondents in our Two-Phase Survey Panel: 

Figures: 

Figure 1: Complexity of Multi-layer Investment of Plan Assets, as 
Illustrated by a Hypothetical Example: 

Figure 2: Form 5500 Annual Return/Report of Employee Benefit Plan 
(2013): 

Figure 3: Schedule C - Service Provider Information (2013): 

Figure 4: Schedule H - Financial Information (2013): 

Figure 5: Schedule I - Financial Information - Small Plan: 

Abbreviations: 

103-12 IE: 103-12 Investment Entity: 

APA: Administrative Procedure Act: 

ASPPA: American Society of Pension Professionals & Actuaries: 

CCT: Common/Collective Trust: 

CUSIP: Committee on Uniform Securities Identification Procedures: 

DFE: Direct Filing Entity: 

DOL: Department of Labor: 

EBSA: Employee Benefits Security Administration: 

EFAST: ERISA Filing Acceptance System: 

EIN: Employer Identification Number: 

ERISA: Employee Retirement Income Security Act of 1974: 

FAQ: frequently asked questions: 

Form 5500: Form 5500 Annual Return/Report of Employee Benefit Plan: 

IRC: Internal Revenue Code: 

IRPAC: Information Reporting Program Advisory Committee: 

IRS: Internal Revenue Service: 

MTIA: Master Trust Investment Account: 

OMB: Office of Management and Budget: 

PBGC: Pension Benefit Guaranty Corporation: 

PN: Plan Number: 

PRA: Paperwork Reduction Act: 

PSA: Pooled Separate Account: 

RIC: Registered Investment Company: 

SSA: Social Security Administration: 

TIGTA: Treasury Inspector General for Tax Administration: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

June 5, 2014: 

The Honorable George Miller: 
Ranking Member: 
Committee on Education and the Workforce: 
House of Representatives: 

Dear Mr. Miller: 

Private sector pension plans in the United States represent trillions 
of dollars in assets and are a fundamental source of financial 
security for millions of Americans. To protect this key source of 
retirement security, the federal government needs information to 
ensure that plans are operated in accordance with certain prescribed 
standards and that sufficient information is provided to protect 
participant interests. The Form 5500 Annual Return/Report of Employee 
Benefit Plan (Form 5500) is the primary source of information for both 
the federal government and the private sector regarding the funding, 
assets, investments, and fees of pension and other employee benefit 
plans.[Footnote 1] The Department of Labor (DOL), the Department of 
the Treasury's Internal Revenue Service (IRS), and the Pension Benefit 
Guaranty Corporation (PBGC), jointly developed the form so plan 
sponsors could satisfy annual reporting requirements under the 
Employee Retirement Income Security Act of 1974 (ERISA) and the 
Internal Revenue Code (IRC)[Footnote 2]. The three agencies use the 
Form 5500 to collect information for their various roles in regulating 
and monitoring private pension plans. Close to 700,000 plans filed a 
Form 5500 in 2011, representing over $6 trillion in assets and more 
than 130 million participants and beneficiaries.[Footnote 3] 
Additional federal agencies and many private sector stakeholders use 
the plan investment and service provider fee information collected via 
the Form 5500 to assess plan benefits, fees, economic trends, public 
policy implications, and other issues. Although a large number of 
retirees rely on employer-sponsored plans, participants rarely review 
Form 5500 data themselves. Instead, participant advocates such as 
ERISA plaintiff's attorneys and retirement counselors use the data to 
help protect participants' interests. 

Despite widespread use of and reliance on Form 5500 data, concerns 
have long been raised by stakeholders--especially those who prepare 
and use the form data--about the quality and usefulness of data it 
collects on plan investments and service provider fees. Data on those 
fees are crucial in assessing the financial risk, health, and cost of 
the plans, including service provider fee disclosures. Along with some 
researchers, we have expressed concerns that the form does not collect 
all of the information stakeholders need, including sufficient detail 
to fully understand plan investments, performance, and fees. We and 
the filing community have also found aspects of the form to be 
burdensome to complete and difficult to interpret. For example, in 
2009, we found that plans were confused over DOL's Schedule C 
reporting requirements and distinctions between compensation types 
(eligible indirect compensation vs. reportable indirect compensation). 
[Footnote 4] GAO was asked to review the usefulness of plan investment 
and service provider fee information collected via Form 5500. Given 
these competing concerns, we examined (1) what aspects of the Form 
5500 information on plan investments stakeholders find problematic; 
(2) what aspects of the Form 5500 information on service provider fees 
stakeholders find problematic; and (3) what, if any, challenges DOL, 
IRS, and PBGC face in collecting and revising key annual reporting 
information on plan investments and service provider fees needed from 
plan sponsors. 

To address these objectives, we interviewed knowledgeable agency 
officials and non-government Form 5500 stakeholders (representatives 
of plan sponsors, service providers, retirement consultants, 
attorneys, and researchers); reviewed industry publications along with 
relevant federal laws, regulations, and agency guidance, and inspected 
a nonrepresentative sample of 20 Form 5500 filings--10 defined 
contribution large plan filings and 10 defined benefit large plan 
filings--for the 2012 plan year.[Footnote 5] To address the first and 
second research objectives, we gathered the opinions of pension 
professionals outside government who either work with Form 5500 or 
rely on it for their work by conducting a two-phase online panel 
survey of 43 non-government stakeholders. To ensure a range of views 
on our panel, we identified a non-representative sample of 
nongovernmental stakeholders from several backgrounds, including 
representatives of plan sponsors, participants, and services 
providers, as well as researchers and academics. We identified 
panelists from a variety of sources, including contacts developed in 
past related reports, participants in our 2011 and 2012 Comptroller 
General's Retirement Security Advisory Panel sessions, Form 5500 users 
identified by DOL, and large pension and investment plan 
administrators and consultants. 

We conducted our work from November 2012 to June 2014 in accordance 
with generally accepted government auditing standards. These standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings 
and conclusions based on our audit objectives. We believe that the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Background: 

ERISA and Internal Revenue Code Requirements for Form 5500: 

Private pension plans are governed by ERISA and the IRC, whose annual 
reporting requirements may generally be satisfied through filing a 
Form 5500 Annual Return/Report of Employee Benefit Plan (Form 5500) 
and its accompanying schedules.[Footnote 6] Any sponsor of an employee 
benefit plan subject to ERISA must file detailed information about 
each benefit plan every year. To satisfy the annual reporting 
requirements, DOL, IRS, and PBGC jointly developed and maintain the 
Form 5500. The form is the primary source of information collected by 
the federal government regarding the operation, funding, expenses, and 
investments of employee benefit plans.[Footnote 7] In 2011, plan 
sponsors filed close to 700,000 Form 5500 reports, covering more than 
130 million active participants and more than $6 trillion in 
investments.[Footnote 8] The Form 5500 Return includes nine schedules 
and attachments that collect information on particular plan aspects 
and fulfill specific filing requirements[Footnote 9] including: 

* plan investment and service provider fee information, 

* plan financial condition, 

* annual participant contributions, 

* certain investment income, 

* plan type (i.e., defined benefit or defined contribution), 

* funding methods, and: 

* number of participants. 

For example, Schedule C requires plans to provide information on fees 
charged by select service providers. Schedules H and I require large 
and small plans respectively to provide information on plan 
investments. Plans are also required to include attachments, such as a 
Report of Independent Qualified Public Accountant. Form 5500 data are 
made publicly available. Given the form's valuable information and its 
widespread use, we have conducted a number of reviews of it over the 
past few years, including examinations of the timeliness and content 
of the form, fee reporting, oversight of multiemployer plans, and the 
clarity of required disclosures.[Footnote 10] 

Federal Role and Other Form 5500 Stakeholders: 

Form 5500 constitutes an integral part of the enforcement, research, 
and policy formulation programs of DOL, IRS, and PBGC--the primary 
federal agencies that use it to support their role in regulating and 
monitoring private plans. DOL's Employee Benefits Security 
Administration (EBSA) uses the Form 5500 as a tool to monitor and 
enforce plan administrators and other fiduciaries and service 
providers' responsibilities under Title I of ERISA. IRS uses the form 
to enforce standards that relate to such matters as how employees 
become eligible to participate in benefit plans, how they become 
eligible to earn rights to benefits, and the minimum amount employers 
must contribute. PBGC uses the form as a tool to inform its efforts to 
insure the benefits of participants in most private sector defined 
benefit pension plans and help carry out its mission under Title IV of 
ERISA to encourage the continuation and maintenance of private pension 
plans. In March 2014, the DOL Office of Inspector General issued an 
audit report examining whether EBSA was effectively overseeing the 
Form 5500 reporting process.[Footnote 11] Additionally, other federal 
agencies and Congress use information collected through the form to 
assess economic trends and develop policy initiatives. The Form 5500 
is also a source of information and data for various nongovernmental 
stakeholders, who use it to assess employee benefit, tax, and economic 
trends and policies. Private plan sponsors are required to file annual 
reports concerning, among other things, the financial condition and 
operation of their plans. Form 5500 disclosure and reporting was 
intended to protect the interests of participants and their 
beneficiaries by, among other things, requiring disclosure and 
reporting to participants and beneficiaries of financial and other 
information. 

Agency Initiatives: 

In 1999, DOL, IRS, and PBGC implemented a new computerized system 
called the ERISA Filing Acceptance System (EFAST) to improve 
processing of Form 5500 returns. Because there was no electronic 
filing requirement when EFAST was implemented, most forms were 
submitted on paper. In January 2010, DOL completed its effort to begin 
collecting Form 5500 information electronically, an initiative known 
as ERISA Filing Acceptance System (EFAST2). DOL contracted with an 
information technology firm to design, develop, test, implement, 
operate, and maintain the EFAST2 system. While the form and its 
attachments are collected electronically, attachments are not all 
required to be in a single structured, data-searchable format. The 
move to EFAST2 and the implementation of an electronic filing 
requirement have addressed some long-standing issues with the 
timeliness of Form 5500 data, but additional timeliness concerns have 
not been addressed. Specifically, in a 2005 report we raised concerns 
about the timeliness of Form 5500 information due to statutory 
reporting requirements that allow filers a substantial amount of time 
to file the Form 5500, which did not change with the implementation of 
EFAST2.[Footnote 12] 

DOL issued regulations revising the form in November 2007 in an effort 
to facilitate the transition to an electronic filing system; reduce 
and streamline annual reporting burdens; and update the annual 
reporting forms to reflect current issues, agency priorities, and 
requirements of the Pension Protection Act of 2006.[Footnote 13] Among 
other things, these changes expanded the fee and compensation 
disclosures of the Form 5500. According to DOL officials, these 
changes were made to increase transparency regarding the fees and 
expenses employee benefit plans pay. DOL officials explained that they 
also wanted to ensure that plan officials would obtain the information 
needed to assess the compensation paid for services rendered to the 
plan while taking into consideration revenue-sharing arrangements 
among plan service providers and potential conflicts of interest. 
Since the 2009 plan year, Schedule C requires plan sponsors to 
classify the fees they pay service providers as either "direct" or 
"indirect" compensation. These fees are separated into those the plan 
pays directly to a service provider and those that service providers 
receive from third parties (such as another service provider) or plan 
investments. 

DOL, IRS, and PBGC have established committees to work collectively on 
a number of initiatives related to the form. The tri-agency Form 5500 
working group, which consists of representatives from all three 
agencies, meets monthly to propose updates and discuss how to 
implement updates provided by each agency that should be made to the 
Form 5500. Proposed updates include minor technical changes, changes 
to the instructions, and changes that must be made as a result of 
statutory or regulatory changes. This working group facilitates 
discussion between the agencies, but according to DOL officials it is 
not a decision-making body. Each of the three agencies decides 
independently whether to proceed with changes to the form. Recently 
the three agencies established the 21st Century Initiative to examine, 
among other things, the possibility of modernizing the form by making 
major, substantive revisions to all its parts. In addition, the 
initiative plans to examine the feasibility of streamlining the 
lengthy rulemaking process which generally requires DOL to take 
several steps, including obtaining review and clearance to publish by 
the Office of Management and Budget (OMB) and publishing a notice of 
proposed rulemaking in the Federal Register, providing interested 
persons the opportunity to comment on the proposed regulation, and 
publishing a final regulation. EBSA's Office of Technology and 
Information Services is focused on, among other things, improving the 
flexibility of the next EFAST system contract when the current 
contract expires in 2020. 

In 2012, OMB issued a memorandum to provide guidance to agencies on 
testing and simplifying federal forms that collect information from 
the public.[Footnote 14] The memo further directed agencies to engage 
in advance testing of information collections--including lengthy and 
complex forms--where feasible and appropriate, in order to: (1) ensure 
that they are not unnecessarily complex, burdensome, or confusing; (2) 
discover the likely burden on members of the public (including small 
businesses); and (3) identify ways to make the form as simple and easy 
to use as possible. The memorandum further advised that advance 
testing[Footnote 15] should occur either before proposing information 
collections to the public or during the public comment period required 
by the Paperwork Reduction Act of 1995 (PRA), which sets forth the 
requirements that agencies must meet when collecting information. 
[Footnote 16] 

Stakeholders Cited Challenges with Plan Asset Reporting Format, 
Missing Information, and Inconsistent Data: 

Form 5500 stakeholders identified challenges to the usefulness, 
reliability, and comparability of plan asset information. Through a 
two-phase online panel survey process, respondents[Footnote 17] first 
generated a wide range of challenges and potential changes related to 
Form 5500 plan investment information. Then, in the second phase of 
the survey, respondents rated those challenges and potential changes 
identified in first phase.[Footnote 18] The highest rated challenges 
fell into three categories: (1) challenges with the reporting format 
of plan asset categories, (2) challenges arising from missing key 
information, and (3) challenges with inconsistent information. Table 1 
lists the top challenges respondents to the second phase of the survey 
rated as having a very or extremely significant impact to their work 
with the Form 5500. 

Table 1: Top Challenges with Form 5500 Plan Investment Information 
Identified by Survey Respondents: 

Challenge category: Reporting format; 

Potential challenge: "Other" plan asset category in Schedule H 
(Financial Information) line 1c-15 is too broad and may include 
different types of investments, such as swaps, hedge funds, private 
equity, etc.; 
Very significant: 12; 
Extremely significant: 5; 
Number of responses: 31; 
Percent of responses very or extremely significant: 54.8%. 

Potential challenge: Many plans invest assets through Master Trust 
Investment Accounts (MTIA)[A] or Common/Collective Trusts (CCT)[B]; 
however, Schedule H, Part I allows plan sponsors to lump investments 
in all trusts all together. This does not provide 
transparency into the breakdown of investments held within each trust; 
Very significant: 8; 
Extremely significant: 6; 
Number of responses: 31; 
Percent of responses very or extremely significant: 45.2%. 

Potential challenge: Plan asset information collected in Schedule H, 
Part I asks plan sponsors to break out their plan assets quite 
differently from how the investment industry reports on this 
information; 
Very significant: 6; 
Extremely significant: 4; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Potential challenge: Difficult to match up an individual plan's 
investments and returns from the Direct Filing Entity (DFE)[C]; 
Very significant: 8; 
Extremely significant: 2; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Challenge category: Missing key information; 

Potential challenge: Cannot determine administrative expenses deducted 
from returns when a plan invests with a registered investment company; 
Very significant: 6; 
Extremely significant: 8; 
Number of responses: 31; 
Percent of responses very or extremely significant: 45.2%. 

Potential challenge: No information on the default investment option 
in the plan; 
Very significant: 5; 
Extremely significant: 6; 
Number of responses: Challenge category: 30; 
Percent of responses very or extremely significant: 36.7%. 

Potential challenge: No standard reporting format or unique identifier 
for funds listed in Schedule H line 4i - plan assets attachment; 
Very significant: 4; 
Extremely significant: 7; 
Number of responses: 31; 
Percent of responses very or extremely significant: 35.5%. 

Potential challenge: Schedule I (Financial Information--Small Plan) is 
lacking detailed information on plan assets; 
Very significant: 6; 
Extremely significant: 5; 
Number of responses: 31; 
Percent of responses very or extremely significant: 35.5%. 

Potential challenge: No information on the breakdown of assets held by 
individual participant accounts within a plan; 
Very significant: 4; 
Extremely significant: 6; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Potential challenge: Administrative expenses reported on Schedule H, 
Part II do not include certain indirect expenses[D]; 
Very significant: 3; 
Extremely significant: 7; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Challenge category: Inconsistent information; 

Potential challenge: Data provided on plan investments is not timely; 
Very significant: 7; 
Extremely significant: 5; 
Number of responses: 31; 
Percent of responses very or extremely significant: 38.7%. 

Potential challenge: Inconsistent use of names and Employer 
Identification Numbers (EIN)[E]; 
Very significant: 8; 
Extremely significant: 3; 
Number of responses: 31; 
Percent of responses very or extremely significant: 35.5%. 

Potential challenge: Employer company stock and real property are 
often not recorded properly on Schedule H; 
Very significant: 6; 
Extremely significant: 5; 
Number of responses: 31; 
Percent of responses very or extremely significant: 5.5%. 

Potential challenge: Confusion about including or excluding mutual 
funds on Schedule D (DFE/Participating Plan Information); 
Very significant: 7; 
Extremely significant: 3; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Source: GAO analysis of survey responses from GAO's two-phase Form 5500 
stakeholders panel. 

Note: Table shows plan investment challenges for which 10 or more 
panelists indicated it was a "very significant" or "extremely 
significant". 

[A] For purposes of annual reporting, the instructions of the Form 
5500 define a Master Trust Investment Account (MTIA) as a trust for 
which a regulated financial institution serves as trustee or custodian 
(regardless of whether such institution exercises discretionary 
authority or control with respect to the management of assets held in 
the trust), and in which assets of more than one plan sponsored by a 
single employer or by a group of employers under common control are 
held. 

[B] For purposes of annual reporting, the Form 5500 instructions 
define a Common/Collective Trust (CCT) as a trust maintained by a 
bank, trust company, or similar institution which is regulated, 
supervised, and subject to periodic examination by a state or federal 
agency for the collective investment and reinvestment of assets 
contributed thereto from employee benefit plans maintained by more 
than one employer or controlled group of corporations. 

[C] The Form 5500 instructions define a Direct Filing Entity (DFE) as 
any MTIA, CCT, Pooled Separate Account, 103-12 Investment Entity, or 
Group Insurance Arrangement who files a Form 5500 and for which all 
required attachments are filed in accordance with the DFE Filing 
Requirements. Some plans participate in certain trusts, accounts, and 
other investment arrangements that may file their own Form 5500. Plans 
that have plan assets in DFEs are eligible for certain annual 
reporting relief on their Form 5500 filings. 

[D] According to DOL, reporting third party compensation on the 
Schedule H would be inconsistent with the balance sheet accounting 
principles of those portions of the schedule. 

[E] IRS defines an Employer Identification Number (EIN) as a nine-
digit number that IRS assigns to identify the tax accounts of 
employers and certain others who have no employees. For employee 
plans, an alpha (for example, P) or the plan number (e.g., 003) may 
follow the EIN. The IRS uses the number to identify taxpayers that are 
required to file various business tax returns. EINs are used by 
employers, sole proprietors, corporations, partnerships, non-profit 
associations, trusts, estates of decedents, government agencies, 
certain individuals, and other business entities. 

[End of table] 

Challenges with Plan Asset Categories: 

Some Form 5500 stakeholders[Footnote 19] stated that the plan asset 
categories on Schedule H are not representative of current plan 
investments, which has several consequences.[Footnote 20] Ten of 31 
respondents noted that it's a very or extremely significant challenge 
to break out plan assets on Schedule H differently than the investment 
industry typically reports this information. That makes it difficult 
to determine how to properly categorize investments based on the asset 
categories provided, according to a plan fiduciary. For example, large 
plans typically use an investment manager for each asset category 
(such as fixed income, equities, hedge funds, or private equity), but 
Schedule H's plan asset categories are broken out by the type of 
investment vehicle (such as partnerships, collective trusts, pooled 
separate accounts, or mutual funds). Thus, it can be difficult to 
understand the categories, apply them, and disaggregate the data by 
investment vehicle rather than asset class. As one pension consultant 
said, the asset categories provide little insight into the investments 
themselves, the level of associated risk, or the structures of these 
investments. Furthermore, as one preparer pointed out, the trust 
reports and the audited financial statement do not match Form 5500 
asset categories--forcing plan sponsors and their service providers to 
produce multiple sets of information. In addition, they often found 
inconsistencies, incomplete information, or miscategorized investments 
in the information service providers submitted. 

A second consequence of misaligned plan asset categories, according to 
Form 5500 stakeholders, is that the "other" plan asset category is too 
broad. The "other" plan asset category may contain a variety of 
different types of disparate investments, such as options, index 
futures, state and municipal securities, hedge funds, and private 
equity. Seventeen of the 31 respondents indicated that the "other plan 
asset" category is too broad and poses a very or extremely significant 
challenge to their work with Form 5500 data. One respondent said that 
while hedge fund and private equity have very different risk, return, 
and disclosure considerations from state and municipal securities, all 
these investments could be included in the "other plan asset" 
category. This is a growing issue as plan investment in some of these 
vehicles has grown considerably in recent years. As we found in 2012, 
according to a Pensions & Investments survey, the percentage of large 
plans (as measured by total plan assets) investing in hedge funds grew 
from 47 percent in 2007 to 60 percent in 2010 and the percentage of 
large plans that invested in private equity grew from 80 percent to 92 
percent.[Footnote 21] Similarly, several respondents said they have 
seen forms where large portions of plan assets were recorded in the 
"other" category. 

A third consequence of misaligned plan asset categories is that the 
current reporting format of plan investments makes it difficult to see 
the underlying holdings of indirect investments.[Footnote 22] 
According to a recent study[Footnote 23], large single-employer 
defined benefit plans invested about 64 percent of their total assets, 
on average, in four types of indirect investments in 2010 (see table 
2). Thus, a majority of the assets of large single-employer defined 
benefit plans are reported only as "undifferentiated indirect 
investments" on Schedule H.[Footnote 24] Similarly, large single-
employer defined contribution plans in 2010 held about 34 percent of 
their total assets, on average, in indirect investments (see table 2). 
Almost half of our survey respondents indicated that Schedule H's lack 
of transparency into the breakdown of investments held within each 
trust was a very or extremely significant challenge. Eight out of 11 
researchers and 5 of 6 participant representatives from our survey 
panel indicated this was a very or extremely significant challenge. 
[Footnote 25] One ERISA attorney we spoke to noted that he needed to 
hire a consulting actuary to provide clarity of one plan's financial 
investments. Without clear information on these indirect investment 
vehicles, it is more difficult for Form 5500 stakeholders to assess 
and analyze the risk of underlying investments of plans using Form 
5500 data. For example, PBGC officials acknowledged that plan asset 
information as currently reported is not very useful to their work and 
that they have to ask plans for additional information, such as 
actuarial reports and audited financial statements, to help identify 
the underlying assets in indirect investments to assess the financial 
health of the plan. 

Table 2: Plan Assets in Indirect Investment Vehicles for Large Single-
employer Plans (2010): 

Indirect Investment Vehicle: Master Trust Investment Account (MTIA); 
Percent of large defined benefit plan total assets: 49.4%; 
Percent of large defined contribution plan total assets: 20.4%. 

Indirect Investment Vehicle: Common/Collective Trust (CCT); 
Percent of large defined benefit plan total assets: 11.7%; 
Percent of large defined contribution plan total assets: 9.9%. 

Indirect Investment Vehicle: 103-12 Investment Entities (103-12 IE); 
Percent of large defined benefit plan total assets: 1.8%; 
Percent of large defined contribution plan total assets: [Empty]. 

Indirect Investment Vehicle: Pooled Separate Accounts (PSA); 
Percent of large defined benefit plan total assets: 1.4%; 
Percent of large defined contribution plan total assets: 3.5%. 

Indirect Investment Vehicle: Total; 
Percent of large defined benefit plan total assets: 64.3%; 
Percent of large defined contribution plan total assets: 33.8%. 

Source: GAO analysis of data from Wiedenbeck, Hinkle, and Martin, 
"Invisible Pension Investments," 591. 

Note: Large plans refer to plans covering 100 or more participants at 
the start of the plan year, annually filing Form 5500 Schedule H. 

Source: GAO analysis of data from Wiedenbeck, Hinkle, and Martin, 
"Invisible Pension Investments," 591. 

[A] For the purposes of this report, indirect investments refers to 
plan investment in any number of pooled investment vehicles that are 
not registered investment companies and may file their own Form 5500s 
as a Direct Filing Entity. Direct Filing Entities include Master Trust 
Investment Accounts (MTIA), Common/Collective Trusts (CCT), Pooled 
Separate Accounts (PSA), and 103-12 Investment Entities (103-12 IE), 
which are pooled investment entities that include plan assets from 
more than one employee benefit plan, that are not MTIAs, CCTs, or 
PSAs. Real estate investment funds, hedge funds, and private equity 
funds may be categorized as a 103-12 IE. 

[End of table] 

The ability to see into the underlying holdings of indirect 
investments is further complicated by the difficulty in matching a 
plan's investments and returns with those reported in the indirect 
investment's filing.[Footnote 26] Seven of 11 researchers and 3 of 6 
participant representatives from our panel cited difficulty in 
matching up an individual plan's investment and returns from indirect 
investments as a very or extremely significant challenge.[Footnote 27] 
When plan assets are invested in indirect investments, plan sponsors 
file a Schedule D, which lists the plan's interests in each indirect 
investment; the indirect investment's filing then provides a breakdown 
of assets in its own Schedule H (see figs.1 and 2). Although indirect 
investments are required to file their own Form 5500, they report on 
their general asset holdings, not the holdings of individual plans 
invested with them. According to one respondent, there is no way to 
calculate the fees charged to individual plans. Furthermore, the 
information reported on Schedule D may not be reliable or complete and 
may not match the information in the indirect investment's filing. 
According to a recent study of 2008 plan year Form 5500 data, more 
than 35 percent of plans that invested in indirect investments 
reported data on their Schedules H and D that were inconsistent. 
[Footnote 28] In addition to internal inconsistencies, the study 
showed that matching a plan's indirect investments with the indirect 
investment's own filing can be challenging since 18 percent of 
reported plan investments could not be matched to a corresponding 
indirect investment filing. Furthermore, there may be multiple layers 
of indirect investment entities that complicate efforts to identify 
the underlying investments individual plans held because it required 
linking multiple indirect investment filings to a single plan filing 
(see figure 1). 

Figure 1: Complexity of Multi-layer Investment of Plan Assets, as 
Illustrated by a Hypothetical Example: 

[Refer to PDF for image: illustration] 

Plan A: 
Investments: 
RIC 1; 
RIT 2; 
PSA 1; 
PSA 2; 
MTIA 2; 
MTIA 3; 
MTIA 4. 

A1%: 
MTIA 1 (Plan B): 
Investments;
A2%; 
CCT1 (Plan C, IRAs): 
Investments; 
A3%; 
CCT2 (Government Plan A, Government Plan B, Plan D, Plan E, Private 
Trusts); 
Investments. 

MTIA = Master Trust Investment Account; 
RIC = Registered Investment Company (e.g. mutual funds); 
CCT = Common/Collective Trust; 
PSA = Pooled Separate Account; 
DFE = Direct Filing Entity[A]; 
A1% = Amount of plan interest; 
A2% = Amount of Master Trust Investment Account 1 interest; 
A3% = Amount of Common/Collective Trust 1 interest. 

Data on Plan A holdings are found in 7 schedules across 4 different 
form 5500 filings: 

Plan A: Form 5500 filings: 
Schedule D: Amount of plan interest (A1%) in Master Trust Investment 
Account 1 (MTIA 1) and other Direct filing entities (DFEs); 
Schedule H: Amount of plan investment in all Master Trust Investment 
Accounts (MTIAs). 

Master Trust Investment Account 1: Form 5500 filings: 
Schedule D: Amount of Master Trust Investment Account 1 (MTIA 1) 
interest (A2%) in Common/Collective Trust 1 (CCT 1) and other Direct 
filing entities (DFEs); 
Schedule H: Amount of Master Trust investment Account 1 (MTIA 1) 
investment in all Common/Collective Trusts (CCTs). 

Common/Collective Trust 1: Form 5500 filings: 
Schedule D: Amount of Common/Collective Trust 1 (CCT 1) interest (A3%) 
in Common/Collective Trust 2 (CCT 2) and other Direct filing entities 
(DFEs); 
Schedule H: Amount of 
Common/Collective Trust 1 (CCT 1) investment in all Common/Collective 
Trusts (CCTs). 

Common/Collective Trust 2: Form 5500 filings: 
Schedule D: No information reported; 
Schedule H: Underlying investments of Common/Collective Trust 2 (CCT 2) 
broken into plan asset categories and lists individual investments in 
schedule of plan assets attachment. 

Source: GAO analysis of Form 5500 series (investment information). 

Note: The figure represents a simplified illustration of hypothetical 
Plan A's investment of plan assets. The figure also shows the 
interests of other potential investors in these hypothetical pooled 
investment vehicles and the reporting requirements for a large plan 
sponsor and its indirect investments. The composition of plan assets, 
the structure of the vehicles holding plan assets, and the degree to 
which plan assets are held in pooled investment vehicles will vary 
from plan to plan. 

[End of figure] 

The top rated change to plan investment information suggested by 
respondents was to revise Schedule H asset categories to better match 
current investment vehicles (see appendix II). Consistent with the 
results of our survey panel, DOL, IRS, and PBGC officials all 
concurred that plan asset categories do not reflect investments in the 
current marketplace and should be revised. 

Challenges with Finding Key Information: 

In addition to challenges with the reporting format, Form 5500 
stakeholders identified various instances where information is not 
collected or easily extracted from Form 5500 data. For example, 11 of 
31 respondents indicated that having no standard reporting format for 
the Schedule of Assets Attachments (Schedule H line 4i) was a very or 
extremely significant challenge. Attachments to the form can be large-
-some may be as long as 400 pages--presenting a challenge for users to 
find necessary information. Also, it can be difficult to conduct 
aggregate analyses of the information without a unique identifier, 
such as a Committee on Uniform Securities Identification Procedures 
(CUSIP) number, as one respondent suggested.[Footnote 29] Our survey 
results showed that while most researchers indicated that a lack of a 
standard reporting format or unique identifier for plan assets 
attachment is a major challenge, representatives of plan sponsors and 
service providers and participant representatives did not.[Footnote 
30] However, 22 of 31 respondents indicated that standardizing the 
format would be a somewhat positive or very positive change and only 3 
respondents indicated this change would have a negative impact. Both 
DOL and PBGC officials said there is no uniform format or uniform 
identifier to the Schedule of Assets Attachments; however, they 
acknowledged that attachments would be more useful if they were 
submitted in a structured, data-searchable format. 

Respondents also identified additional plan investment information 
that would be beneficial to add to the Form 5500. First, some 
respondents--mainly researchers and participant representatives--
indicated that a lack of detailed plan asset information on Schedule I 
(Financial Information-Small Plan) creates a very or extremely 
significant challenge for their work with the Form 5500.[Footnote 31] 
In addition, the Schedule H (Financial Information) is required only 
with larger plans (plans with 100 or more participants)--which account 
for approximately 12.5 percent of all plans that filed a form in 2011--
leaving the vast majority of plan filings without this critical 
information. According to one respondent, without the Schedule H, it 
is not possible to build a complete picture of a plan's health. 
Schedule H and the accompanying attachments can help determine if a 
plan provides a variety of investment options, can help calculate the 
total cost of the plan for participants, and provide a more complete 
understanding of plan investments. However, another respondent 
cautioned against treating small employers like large employers and 
burdening them with additional filing requirements to satisfy 
researchers or commercial data mining firms. Second, although the form 
requires plan sponsors to indicate if a plan includes an auto 
enrollment feature through the plan characteristic codes, it does not 
capture which default investment is used.[Footnote 32] Although 11 of 
30 respondents indicated that not knowing the default investment is a 
very or extremely significant challenge, it was a top-rated suggested 
change, with only one respondent citing it would have a negative 
impact. For a list of all the top changes rated by our survey 
respondents, see appendix II. 

Challenges with Identifying Plans and Funds Consistently and Other 
Issues: 

Form 5500 stakeholders also cited challenges with understanding 
instructions and interpreting inconsistently reported data. Eleven of 
31 respondents indicated that inconsistent naming conventions and 
Employer Identification Numbers (EIN) throughout the form presented a 
very or extremely significant challenge.[Footnote 33] One plan 
preparer said that compiling and recording EINs and Plan Numbers (PN) 
for each entity recorded on Schedule D can be difficult and time-
consuming because plan sponsors, trustees, or service providers do not 
always provide this information. In addition, one researcher stated 
that plans often report the wrong number for indirect investments, 
which hinders the ability to link the indirect investment's filing 
with the plan's filing and prevents accurate attribution of indirect 
investments. Thirteen of 31 respondents indicated that providing a 
central repository of EINs and PNs would be a very positive change. 
PBGC officials also acknowledged that inconsistent EINs and PNs can 
hinder their ability to analyze records across years. While IRS 
officials said they have a repository of EINs and assign EINs to 
filers, they do not share the EINs with the other agencies or make 
this information publicly available to filers. DOL has taken some 
steps to improve the reliability of PNs, EINs, and names that filers 
reported. For example, EFAST2 enables filers to identify previously 
used names and EINs and form instructions state filers should use the 
same name and PN as in previous years. In addition, DOL examines plans 
that stop filing Form 5500s as part of its enforcement activities, and 
often finds that plans have continued filing, but with inconsistent 
identification. According to DOL, in an effort to improve filer 
consistency in entering key identifying information, such as the EIN, 
PN and Plan Name, DOL's EFAST program office is developing 
specifications for cross-year edit checks. These checks aim to verify 
identifying information submitted on the Form 5500 in order to notify 
the filer and government agencies of instances where inconsistencies 
may exist. IRS works with filers to file amended returns to update and 
correct EINs when they become aware of an issue, according to IRS 
officials. 

Some respondents still find the timeliness of Form 5500 to be 
problematic (see table 1). According to one independent fiduciary, 
current plan assets are usually quite different from the assets listed 
in the Form 5500. PBGC officials expressed frustration with Form 5500 
reporting deadlines as well. The EFAST2 system has reduced the time it 
takes to publish Form 5500 data to the public once it is submitted. 
Under ERISA, however, plan sponsors have a normal deadline of 210 days 
after the end of the plan year to file and may then apply to IRS for 
an annual automatic one-time 2 ½ month extension. Thus, plan sponsors 
can take up to 285 days from the end of the plan year to file their 
Form 5500 reports. 

In addition to the challenges and suggested changes mentioned above, 
respondents identified a number of other changes to Form 5500 
investment information that could have a positive impact, such as 
clarifying: 

* when to use fair value versus contract value on the Schedules H and 
I, and: 

* if a "contract administrator" referred to in Schedule H includes 
record keepers. 

For a complete list of suggested changes identified by respondents 
through our two-phase online panel survey, see appendix II. 

Stakeholders Cited Misalignment with Other Fee Disclosures and 
Inconsistent Reporting of Service Provider Fee Information as 
Problematic: 

Stakeholders identified a wide range of challenges related to Form 
5500 service provider fee information. Representatives of plan 
sponsors and their service providers cited the burden of being 
required to produce different sets of fee information--one for ERISA 
fee disclosures and one for the Form 5500. Participant representatives 
found the format confusing to understand and ineffective for 
estimating total plan costs. Researchers found the current Schedule C 
reporting format unhelpful because it provides an incomplete picture 
of plan fees and aggregate data are not very reliable or comparable. 
Table 3 lists the top challenges respondents of our two-phase online 
panel survey identified as having a very significant or extremely 
significant impact to their work with the Form 5500. 

Table 3: Top Challenges with Form 5500 Service Provider Fee 
Information Identified by Survey Respondents: 

Potential challenge: Service provider fee information provided to form 
preparers is inconsistent because of different reporting formats; 
Very significant: 13; 
Extremely significant: 4; 
Number of responses: 31; 
Percent of responses very or extremely significant: 54.8%. 

Potential challenge: Schedule C (Service Provider Information) does not 
align with 408(b)(2) fee disclosure requirements[A]; 
Very significant: 10; 
Extremely significant: 6; 
Number of responses: 30; 
Percent of responses very or extremely significant: 53.3%. 

Potential challenge: Compensation paid to the service provider by the 
plan sponsor does not have to be disclosed; 
Very significant: 4; 
Extremely significant: 10; 
Number of responses: 30; 
Percent of responses very or extremely significant: 46.7%. 

Potential challenge: Definitions of eligible indirect, reportable 
indirect, and direct compensation are unclear; 
Very significant: 6; 
Extremely significant: 8; 
Number of responses: 31; 
Percent of responses very or extremely significant: 45.2%. 

Potential challenge: The revenue sharing arrangement information can be 
provided in descriptive format and may vary significantly across 
providers; 
Very significant: 5; 
Extremely significant: 9; 
Number of responses: 31; 
Percent of responses very or extremely significant: 45.2%. 

Potential challenge: Confusion and inconsistent reporting of service 
provider codes in Schedule C; 
Very significant: 8; 
Extremely significant: 5; 
Number of responses: 31; 
Percent of responses very or extremely significant: 41.9%. 

Potential challenge: Rules on soft dollar disclosure[B] are confusing; 
Very significant: 4; 
Extremely significant: 6; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Potential challenge: Inconsistencies in reporting period for fees 
(accrued fees versus fees paid in given year); 
Very significant: 9; 
Extremely significant: 1; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Potential challenge: Hard for Form 5500[C] preparers to determine if a 
fund/fee should be treated as Eligible Indirect Compensation because 
notice is not required to be sent to plan administrator; 
Very significant: 8; 
Extremely significant: 2; 
Number of responses: 31; 
Percent of responses very or extremely significant: 32.3%. 

Source: GAO analysis of survey responses from GAO's two-phase Form 5500 
stakeholders panel. 

Note: Table shows service provider fee challenges for which 10 or more 
panelists indicated it was a "very significant" or "extremely 
significant". 

[A] Certain service providers are required to disclose fee information 
to plan fiduciaries of defined benefit and defined contribution 
pension plans to satisfy disclosure requirements under Title I of 
ERISA. See 29 U.S.C. § 1108(b)(2) and 29 C.F.R. § 2550.408b-2. 

[B] According to the 2012 Form 5500 instructions, "Soft dollar" 
compensation refers to research or other products or services received 
from a broker-dealer or other third party in connection with 
securities transactions. 

[C] Form 5500 is the annual report that employee benefit plans file 
with the federal government. 

[End of table] 

Form 5500 Service Provider Information Is Not Aligned with Other Plan 
Fee Disclosures: 

More than half of respondents indicated that Schedule C reporting 
misalignment with similar service provider fee disclosures required by 
ERISA--such as ERISA 408(b)(2) disclosures--as an extremely or very 
significant challenge[Footnote 34] (see table 3). As we reported in 
2009, this misalignment creates competing sets of fee information for 
sponsors and service providers, contributes to confusion over what 
Schedule C requires, is time-consuming for plan sponsors to collect, 
and is costly for service providers to prepare.[Footnote 35] One 
respondent noted that the confusion partly stems from the inconsistent 
definitions of indirect compensation--fees plans pay "indirectly" to 
service providers--for ERISA fee disclosures and Schedule C. Another 
respondent cited confusion among fund managers and plan recordkeepers 
over the ability for ERISA fee disclosures to satisfy the disclosure 
requirements for eligible indirect compensation, as defined in 
Schedule C. 

The majority of survey respondents indicated that coordinating service 
provider compensation information on Schedule C with ERISA fee 
disclosure requirements would be a very positive change and only one 
respondent indicated this would be a very negative change (see 
appendix II). In 2009, we recommended that DOL coordinate revisions to 
the form with the publication of its final 408(b)(2) regulations to 
reduce the potential for additional costs and burden on service 
providers.[Footnote 36] Although DOL agreed with our recommendation, 
the agency has not yet taken action to fully implement it.[Footnote 
37], [Footnote 38] DOL officials agreed that there is an ongoing need 
to better align Form 5500 service provider fee disclosures to plan 
sponsors and said they are considering addressing this issue as part 
of a joint DOL, IRS, and PBGC initiative to revise the form. 

Challenges with Inconsistent Reporting of Compensation Types: 

Stakeholders identified various challenges to consistently reporting 
information on service provider compensation. Without consistent 
information, comparability across plans is limited and, therefore, 
identifying questionable fees may be difficult. Fourteen of 31 
respondents indicated that unclear definitions of eligible indirect 
compensation, reportable indirect compensation, and direct 
compensation created a very or extremely significant challenge. 
According to a 2013 letter from the American Society of Pension 
Professionals & Actuaries (ASPPA) submitted to DOL, ASPPA members 
noted that there have been conflicting interpretations of the 
instructions for Schedule C. For example, one disclosure might reflect 
certain compensation and expenses of a mutual fund as reportable on 
one line of Schedule C, while another disclosure for the same type of 
payments might be reportable on a different line of Schedule C. This 
uncertainty results in the same types of information being reported 
inconsistently, as most preparers are not inclined to challenge where 
the disclosure should appear and, therefore, preparers typically 
report the information as it is provided to them. While this satisfies 
the plan's disclosure obligations, it produces incomparable and less 
reliable data. Adding to inconsistencies in fee reporting is 
continuing confusion with the rules on soft dollar disclosure. 
[Footnote 39] Ten respondents indicated confusion about the rules on 
soft dollar disclosure was a very or extremely significant challenge. 
DOL officials said that it published frequently asked questions (FAQ) 
in 2009 and 2010 respectively, which included clarification on the 
reporting of soft dollar compensation, but some respondents indicated 
confusion and inconsistencies still exist. 

Stakeholders also identified challenges with collecting compensation 
information from service providers. Eleven of 15 representatives of 
plan sponsors and their service providers responding to our survey 
indicated that receiving service provider fee information in differing 
formats is extremely or very challenging.[Footnote 40] According to 
one preparer, the onus is on the plan sponsor and their preparers to 
collect the necessary information on Schedule C, since there is no 
requirement for service providers to report compensation information 
in a format similar to Schedule C.[Footnote 41] However, service 
providers may or may not interpret certain compensation as reportable, 
leaving DOL with incomplete and incomparable information. For example, 
service providers may not list certain breakdowns of compensation 
information in a format that is similar to the Form 5500. In addition, 
some forms of compensation are not included in information sent to 
plan preparers. One preparer said they may look at trust reports or 
public disclosures to try to determine compensation amounts, but 
compensation may not be reported in the format required for Schedule C 
and may not include all forms of indirect compensation. Furthermore, 
for indirect compensation to be considered "eligible" and thus 
reported on the Schedule C in a more limited fashion, the plan sponsor 
or plan administrator must receive written materials from the service 
provider. There is no requirement to send these materials to the plan 
preparer, so they often cannot independently verify disclosure 
requirements have been met.[Footnote 42] Ten of 31 survey respondents 
indicated that this was a very or extremely significant challenge. 
Further, in 2010, the Investment Company Institute stated in a letter 
to DOL that there is a lack of consensus within the mutual fund 
industry regarding disclosure requirements for documents provided to 
plan sponsors that would also fulfill eligible indirect compensation 
disclosure for Schedule C. 

Challenges with Completeness of Service Provider Fee Information: 

Stakeholders also identified issues with the completeness of service 
provider and fee information. For example, plan sponsors must report 
the name, address, and the EIN of the service provider for eligible 
indirect compensation, but not the compensation amounts or services 
provided on Schedule C. Compensation categorized as eligible can 
encompass many services and a significant portion of compensation that 
plans and participants pay.[Footnote 43] In addition, service 
providers may also choose to disclose only the formulas they use to 
determine reportable indirect compensation, making it difficult for 
sponsors to calculate fees or understand business arrangements. For 
example, information on revenue sharing arrangements can be provided 
in descriptive format and reporting may vary significantly from 
provider to provider. Fourteen respondents indicated that this was a 
very or extremely significant challenge. Plans with fewer than 100 
participants are not required to complete a Schedule C (Service 
Provider Information). Furthermore, one respondent pointed out several 
other exceptions in the Schedule C reporting requirements that apply 
to large plans that have more than 100 participants. These include: 

* stable value contracts[Footnote 44] (filers are not required to 
report certain insurance company costs and expenses), 

* service providers paid less than $5,000 do not have to be listed, 

* compensation reported on Schedule A, and: 

* group annuity contracts[Footnote 45] and some associated fees may 
not be recorded. 

Given these various exceptions to fee reporting requirements, Schedule 
C may not provide participants, the government, or the public with 
information about a significant portion of plan expenses and limits 
the ability to identify fees that may be questionable. 

Most stakeholders indicated that DOL should clarify Schedule C 
instructions so that plan fees are reported more consistently. Popular 
suggestions on how to achieve this included: 

* improving instructions for direct, eligible indirect, and reportable 
indirect compensation (19 of 31 respondents said this would have a 
very positive impact), 

* improving consistency between DOL's definition of direct 
compensation and generally accepted accounting principles (14 of 31 
respondents said this would have a very positive impact), and: 

* eliminating any distinction between eligible and reportable indirect 
compensation (13 of 30 respondents said this would have a very 
positive impact). 

See appendix II for a complete list of these and other top suggested 
changes related to fees based on responses from our two-phase online 
panel survey. 

DOL officials said that the definition of indirect compensation was 
intentionally broad to ensure comprehensive reporting of hidden 
service provider fees. However, they agreed that further clarification 
of fee reporting is being considered as part of a joint DOL, IRS, and 
PBGC initiative to revise the form. In 2009, we recommended that asset-
based fees should be explicitly reported.[Footnote 46] We also 
recommended that DOL provide additional guidance regarding the 
reporting of indirect compensation and require that all indirect 
compensation be disclosed. DOL generally agreed with our 
recommendations; however, these recommendations remain open. 

Challenges with Service Codes: 

Stakeholders also identified inconsistent reporting of service codes 
used to describe the types of services provided and compensation 
received by service providers as a challenge. Thirteen of 31 survey 
respondents indicated inconsistent reporting of service codes on 
Schedule C was a very or extremely significant challenge. Without 
definitions for each service code, the filing community may interpret 
these codes differently, creating incomparable information across 
filings. Preparers must select from 55 service codes, and one 
respondent said that several service codes appear to overlap making it 
difficult to understand the differences between service codes without 
more guidance. Plan sponsors and their preparers primarily rely on the 
service codes that service providers submit, and sometimes service 
providers report only one code regardless of the number of services 
they provide. Other service providers break out compensation by 
service codes, creating a record in Schedule C for each service code 
instead of including several service codes in one entry which can 
result in double-counting. One preparer said they may look at the 
service provider contracts to determine what services were provided 
and what corresponding service codes to include, but the contracts do 
not always reflect all the services provided or provide compensation 
amounts attached to those services. Thirteen of 29 respondents 
indicated that reducing and simplifying the number of service codes 
and adding definitions would be a very positive change. Recently, 
ASPPA offered an example of simplified service codes that could be a 
model to agency officials.[Footnote 47] 

DOL, IRS, and PBGC Face Administrative, Statutory, and Contractual 
Challenges to Collecting More Useful Form 5500 Information: 

Agencies' Administrative Processes for Revising the Form and Limited 
Efforts to Solicit Stakeholder Input Pose Challenges: 

DOL, IRS, and PBGC stated that the process for making form changes is 
lengthy and involved, and also noted that it varies by agency. DOL 
officials noted their view that any material changes to the Form 5500 
require the use of the informal rulemaking process under the 
Administrative Procedure Act (APA), which they said can be a time and 
resource intensive process.[Footnote 48] IRS and PBGC on the other 
hand view the form as a data collection instrument and handle changes 
to the form in compliance with the Paperwork Reduction Act (PRA). 
Regardless of whether any changes are made to the form, under PRA, 
each agency is required to solicit public comments on proposed 
collections of information, such as Form 5500, every 3 years.[Footnote 
49] However, officials from each agency noted that the comments they 
receive through the PRA process are generally limited because the 
notice is focused on reducing respondent burden. As a result, DOL 
officials told us these comments are not typically useful in gaining 
insight into the retirement industry's perception of the challenges 
they experience with the Form 5500. 

Side bar: 

Brief Summary of the Informal Rulemaking Process under the 
Administrative Procedure Act (APA): 

Making changes to the Form 5500 using the informal rulemaking process 
requires a number of steps, including, but not limited to, the 
following: 

* Agency Develops Proposed Rule: The agency drafts a notice of 
proposed rulemaking which proposes to add, change, or delete 
regulatory text. Proposed rules determined to be "significant" are 
subject to review by OMB; 

* Publication of Proposed Rule and Request for Public Comment: 
Proposed rules are published in the; Federal Register and include a 
request for public comment. The standard comment period is 60 days; 

* Agency Prepares the Final Rule: In developing the final rule, the 
agency considers comments submitted by the public in response to the 
proposed regulation. The final regulation sets forth the regulatory 
changes and may vary from the proposed rule. Final rules determined to 
be "significant" are subject to review by OMB prior to their 
publication in the; Federal Register; 

* Publication of Final Rule: The final regulation is published in the; 
Federal Register. 

Source: GAO analysis of 5 U.S.C. § 553 and The Reg Map Informal 
Rulemaking, ICF Consulting with the cooperation of the U.S. General 
Services Administration's Regulatory Information Service Center, 
available at: [hyperlink, 
http://www.reginfo.gov/public/reginfo/Regmap/index.jsp]. 

[End of side bar] 

Through a separate effort, IRS also solicits input from stakeholders 
through the Information Reporting Program Advisory Committee (IRPAC), 
which consists of members of the IRS tax form professional community, 
such as accounting firms and financial services firms, and meets 
approximately five times a year to discuss issues with all IRS forms. 
Published IRPAC reports for the last 3 years have included only one 
recommendation related to making material changes to the Form 5500. 
[Footnote 50] In addition, according to PBGC, the Intersector Group, 
which is composed of representatives from the American Academy of 
Actuaries, Society of Actuaries, Conference of Consulting Actuaries, 
and ASSPA, meet twice a year with PBGC and IRS to discuss regulatory 
and other issues affecting pension practice, including issues 
involving the Form 5500. 

The agencies also use informal methods to solicit stakeholder 
feedback, but do not systematically collect feedback on an ongoing 
basis. Officials noted that they attend industry conferences and other 
venues throughout the year to maintain an informal, ongoing 
communication with the filing community and often receive comments or 
suggestions for changes to the form. Additionally, DOL and IRS have 
call centers that handle questions related to the form, although we 
found the information collected from these calls was limited. 
Specifically, DOL officials told us they only collect substantive data 
on more complex questions call center staff are unable to answer. 
These calls--representing about 10 percent of calls--are forwarded to 
DOL's Office of the Chief Accountant. Similarly, IRS officials noted 
that the call centers do not track substantive data on the types of 
questions received and call center staff do not answer specific 
questions on the Schedules, but may forward them to knowledgeable IRS 
officials. These officials track information on the questions they 
receive, which can be used to gain some insight into issues such as 
lack of form clarity. While PBGC does not have its own Form 5500 call 
center, the DOL call center forwards specific questions or issues to 
PBGC. However, officials from all three agencies noted that calls are 
not generally about suggesting changes to the form. In addition to 
using call centers, stakeholders may choose to provide the agencies 
comments on various aspects of the form at any time. DOL provided us 
with a few examples of letters they received from stakeholders 
regarding suggested improvements. These letters included suggestions 
also mentioned by our panelists, including aligning service provider 
fee disclosure requirements and standardizing plan asset reporting. 

Despite agencies' efforts to solicit stakeholder input through 
rulemaking and other means, stakeholders expressed concerns about 
their ability to fully participate in the Form 5500 change process. 
Specifically, several made the following observations about the 
agencies' efforts to solicit input: 

* agency officials are not clearly conveying to stakeholders at 
conferences and other venues that they wish to solicit feedback and 
comments; 

* the agencies' overall efforts to solicit informal input is not 
apparent; 

* DOL and IRS did not appear interested in the thoughts of the filing 
community regarding changes to the form; and: 

* DOL and IRS generally do little to solicit input from non-government 
stakeholders even when taking into consideration the notice and 
comment process, although the agencies solicit direct input from 
stakeholders on an ad hoc basis. 

Additionally, while the agencies have solicited comments through 
rulemaking processes and other means, several found that these methods 
do not necessarily allow the public to contribute to changes that 
would be most beneficial for non-federal stakeholders. One stakeholder 
stated that it would be beneficial if the agencies consulted both 
preparers and the employee benefits plan industry early in the 
development of changes using focus groups and other means of advance 
testing. However, none of the agencies have used advance testing 
methods, such as focus groups, in-person observations, or users' 
perception of forms and questions, to obtain non-governmental 
stakeholder input into changes to the form, despite recent OMB 
guidance advising such a process be used for complex forms. While DOL 
officials did not view these techniques as helpful--stating that it 
would add costs and time and that they were not sure it would help 
gather constructive, actionable feedback from the filing community--
the agency has used focus groups in the rulemaking process to improve 
the readability of disclosure notices.[Footnote 51] IRS officials have 
also noted the potential value in using advance testing methods, 
stating that some agency sections use these methods in the development 
and revisions of tax forms and that IRS was willing to consider it for 
the Form 5500. Further, officials noted that the IRS considered 
advance testing when developing an annual report pension plans file to 
identify separated participants with deferred vested benefits, 
although they ultimately decided to use a notice and public comment 
process.[Footnote 52] The agency revised the instructions the year 
after the form was adopted due to confusion that one official noted 
may have been avoided had the form been advance tested. 

Statutory Prohibition on Mandatory Electronic Filing Limits IRS 
Information Collection on the Form 5500: 

The IRS has significantly limited its Form 5500 data collection due to 
a statutory prohibition on mandatory electronic filing. Currently, the 
IRS is prohibited by statute from requiring persons who file fewer 
than 250 returns annually to submit information electronically, with 
limited exceptions.[Footnote 53] Consequently, IRS removed all 
information collected exclusively for its benefit from Form 5500 once 
DOL moved the form to an exclusively electronic filing platform in 
2010. As a result, some IRS-only information is no longer collected in 
any manner, while other information that IRS is statutorily required 
to collect was moved to newly created paper-based forms. For example, 
information on minimum coverage--used to determine whether employees 
that qualify for retirement benefits are properly included--is no 
longer collected. Conversely, the IRS issued Form 8955-SSA starting in 
plan year 2009 to satisfy its statutory obligation to provide these 
data for the Social Security Administration (SSA). 

Since IRS has stopped collecting certain data elements using the Form 
5500, it has expressed concerns about its ability to effectively 
conduct enforcement activities and to remain current with any 
statutory and other changes to plans. Further, IRS enforcement 
officials told us they are no longer able to include data that had 
been collected via the Form 5500 in the risk models used to identify 
plans for audits. The Department of the Treasury Inspector General for 
Tax Administration (TIGTA) examined this issue in 2011 and found that 
information formerly collected was used to: 

* identify abusive transactions, 

* identify funding or minimum coverage requirements issues, and: 

* conduct special projects to target potentially noncompliant 
retirement plans.[Footnote 54] 

Both TIGTA in its report and IRS officials were concerned that the 
lack of these data would impact IRS' ability to effectively focus on 
specific indicators of noncompliance when selecting plans for 
examination. Specifically, officials noted such information would 
allow them to better identify noncompliant plans which would, in turn, 
reduce plan burden and unnecessary examinations. IRS officials also 
told us that it has resorted to obtaining much of these data while 
conducting audits rather than to inform the selection of plans to 
audit, preventing them from taking an efficient risk-based approach to 
enforcement. Additionally, IRS officials were concerned that their 
inability to require electronic data collection further hindered their 
ability to enforce tax provisions that also serve to protect pension 
benefits, as they are unable to revise the form to collect new plan 
data critical to compliance and enforcement. 

Although officials stated that anything short of a statutory change 
would fall short of achieving the full efficiency of mandatory 
electronic filing, IRS has made other efforts to foster electronic 
filing and to allow for more flexibility in making changes to the 
form.[Footnote 55] Specifically IRS has: 

* negotiated with DOL to use the form to collect some data that would 
be of interest to IRS (pursuant to DOL's authority in light of the 
limitation on IRS's authority),[Footnote 56] 

* included in the past 4 years of the President's Budget Request, a 
legislative proposal to provide Treasury with the authority to require 
additional information be included in electronically filed Form 5500 
annual reports, and [Footnote 57] 

* initiated regulatory action governing electronic filing by proposing 
in August 2013 regulations that would require electronic filing for 
plan sponsors and others who file more than 250 returns annually. 
[Footnote 58] 

Despite these efforts, IRS officials noted that the agency is still 
required to maintain a parallel paper filing system for those who file 
fewer than 250 returns annually and do not voluntarily elect to file 
electronically. The processing of paper Form 5500s was proven to be 
more burdensome and inaccurate. In June 2005, we found that paper-
based processing took three times longer and had twice as many errors 
than electronically processed returns.[Footnote 59] Additionally, 
while the IRS has a goal to receive 80 percent of all major tax types 
of tax returns electronically, the Form 5500, which is filed 
electronically with DOL, is not included in this goal. For the private 
plan data IRS continues to collect, such as the Form 8955-SSA and the 
Form 5500-EZ, IRS maintains both paper and electronic systems--with 
paper potentially costing over 20 times more than electronic.[Footnote 
60] 

Agencies' Concerns with Contractual Costs Limits Action on Desirable 
Form Changes: 

DOL, IRS, and PBGC have identified form changes that would improve 
data collection, but have made limited changes under the current 
EFAST2 contract. The tri-agency Form 5500 working group meets 
regularly to identify and discuss annual changes to the form; however, 
as DOL officials noted, the working group is not a decision-making 
body, and the ultimate decision to make changes--with any associated 
administrative and fiscal burdens--comes from each agency's various 
authorities. According to IRS and DOL officials, in 2010 the agencies 
agreed to impose a "no change year" where they disallowed material 
changes that would need to be pursued through the rulemaking process 
based on the desire for the EFAST2 contractor to focus on any problems 
associated with the new system roll out. After 2010, according to DOL, 
each agency could independently request form changes at their 
discretion based on their respective authority, budget, and policy 
considerations and constraints. However, IRS cannot currently make 
changes to the electronic form under the EFAST2 contract because the 
agency is statutorily prohibited from requiring electronic filing. 
Generally, the agencies have made minimal changes to the plan 
investment and service provider fee information in the form. According 
to a recent DOL IG report, from fiscal years 2010-2012, the tri-agency 
Form 5500 working group proposed 13 form changes of which 7 were 
adopted. Adopted changes were minor or pursuant to new laws.[Footnote 
61] The working group is finalizing its revisions for 2014, and has 
begun its discussions for 2015. 

While officials from DOL and PBGC stated that they could elect to make 
changes to the form under the current EFAST2 contract, specific 
contractual limitations apply. The contract provides that the 
contractor shall update and adapt EFAST2 to accommodate changes in the 
form from plan year to plan year. The contract further provides that 
the contractor is responsible for changes that are "typical" in number 
and substance. Specifically, the contract provides that typical 
changes are generally minor and related to system functionality. Under 
the current contract, the contractor is responsible for implementing a 
typical level of no-cost annual changes into the system at no 
additional cost to the government. For example, the agencies did not 
incur additional costs for the seven minor or legislative changes made 
by the tri-agency working group between fiscal years 2010 and 2012. 
However, the contract stipulates that in the event of non-typical 
changes, the contractor and government shall work collaboratively to 
determine an approach for working through the contractual and/or cost 
implications. 

Given the potential additional associated costs with non-typical 
changes, among other reasons, DOL and PBGC officials generally 
expressed reluctance to make desirable changes, including those 
identified during the annual tri-agency review. While DOL, IRS, and 
PBGC officials expressed concern that non-typical changes would be 
costly, none of the agencies have obtained cost estimates for 
potential changes.[Footnote 62] Despite this lack of information on 
potential additional costs, agency officials have determined that any 
cost above the current contract costs would be considered too costly 
to implement. For example, in addition to the added cost of making non-
typical changes, DOL officials noted that accommodating such changes 
to the Form 5500 into EFAST2 would require contract modifications. 
Agency officials also noted that they view the contract provision 
related to non-typical changes as inflexible, despite the ability to 
negotiate these changes and associated costs. To address these 
concerns, DOL officials told us that as part of their 21st Century 
initiative, they have begun to prepare for the next contract, 
scheduled for 2020, and are considering various contractual and system 
developmental methodologies that could provide more flexibility in 
adjusting the processing system to accommodate significant forms 
changes. However, officials noted that such additional flexibility 
would likely increase the cost of the contract. 

Conclusions: 

The Form 5500 is the primary source of information covering $6.35 
trillion in pension assets in plan year 2011 and the over 130 million 
participants and beneficiaries relying on these funds for a secure 
retirement. For years, we and others have raised concerns regarding 
the data collected via the Form 5500. The challenges identified by our 
broad-based panel, while not generalizable to the broader filing 
community, provide insight into the difficulties that preparers, 
researchers, and participant advocates still face with respect to 
reporting and analyzing critical information on plan investments and 
fees. The challenges preparers expressed are particularly troubling as 
DOL and IRS depend on this information to conduct crucial compliance 
and enforcement activities. As OMB guidance has suggested, poorly 
designed and unduly complicated forms can prove difficult and 
confusing to complete. Moreover, if enforcement agencies are working 
from incomplete, inconsistent, and incomparable data to understand, 
assess, and oversee plans, vital enforcement activities may be at 
risk. Despite these long-standing concerns, agency officials have made 
only routine changes to the plan investment and service provider fee 
information in the form over the last 3 years. 

While the rulemaking process and other informal efforts to solicit 
stakeholder input have provided opportunities for public reaction to 
proposed changes to the form, these opportunities have been limited 
and they have not, as OMB guidance suggests, allowed for sufficient 
input to help shape changes to the form. This input could reduce the 
agencies' costs of making subsequent changes, improve filer 
comprehension, and increase the comparability and reliability of data 
provided. In addition, it is important that all agencies have the 
authority to require useful information be collected in a more 
efficient electronic reporting format. Electronic filing would present 
an opportunity to reduce costs and potential errors, increase the 
quantity and quality of information available, and allow for more 
timely use of the data in protecting the retirement security of 130 
million participants. IRS currently lacks the authority to fully 
address this challenge and, without legislative intervention, will not 
have all the information it needs to protect the nation's retirement 
assets. The 21st Century Plan initiative provides a unique opportunity 
to address long-standing challenges, identify ways to meet the needs 
of both federal and non-federal stakeholders, and significantly 
improve the efficiency, usefulness, and integrity of the information 
collected. However, the inherent risks of incomplete, inconsistent, 
and incomparable data warrant immediate action and, as the only 
nationally-representative data on over $6 trillion in employee 
benefits, it is critical that these data be of the highest quality. 

Recommendations for Executive Actions: 

To improve the usefulness, reliability, and comparability of Form 5500 
data for all stakeholders while limiting the burden on the filing 
community, we recommend the Secretaries of DOL and Treasury, and the 
Director of PBGC consider implementing the findings from our panel 
when modifying plan investment and service provider fee information, 
including: 

* revise Schedule H plan asset categories to better match current 
investment vehicles and provide more transparency into plan 
investments; 

* revise the Schedule of Assets attachments to create a standard 
searchable format; 

* develop a central repository for EIN and PN numbers for filers and 
service providers to improve the comparability of form data across 
filings; 

* clarify Schedule C instructions for direct, eligible indirect, and 
reportable indirect compensation so plan fees are reported more 
consistently and, as we recommended in the past, better align with the 
408(b)(2) fee disclosures; and: 

* simplify and clarify Schedule C service provider codes to increase 
reporting consistency. 

To ease the burden on preparers and ensure the collection of 
consistent and reliable data, we recommend that the Secretaries of DOL 
and Treasury, and the Director of PBGC conduct advance testing--such 
as focus groups, in-person observations and users' perception of forms 
and questions--as appropriate and before proposing major changes to 
the form for public comment, in addition to its other outreach efforts. 

Matter for Congressional Consideration: 

To improve IRS's enforcement and compliance efforts, decrease the 
administrative and financial burden of maintaining both electronic and 
paper-based form processing systems, and reduce plan reporting costs, 
Congress should consider providing the Department of the Treasury with 
the authority to require that the Form 5500 series be filed 
electronically. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOL, Treasury, and PBGC for 
review. PBGC generally agreed with our recommendations. DOL and 
Treasury did not state whether they agree or disagree with our 
recommendations; but, they stated that actions are underway that would 
address our first recommendation. GAO continues to believe the 
recommendations are still valid. DOL, Treasury, and PBGC comments are 
reproduced in appendices IV, V, VI respectively. 

PBGC agreed with our first recommendation and stated that the form's 
current plan asset categories do not provide users with the means to 
identify the nature of plan investments and the level of investment 
risks, adding that improvements in this area are critical to PBGC's 
efforts to protect and sustain their insurance programs and monitor 
plan financial status. PBGC also stated it will work with Treasury and 
DOL as part of the 21st Century Initiative to address challenges 
identified in our report. DOL and Treasury did not state whether they 
agreed or disagreed with the recommendations. DOL stated that in 2013 
DOL, Treasury, and PBGC initiated an overall re-examination of the 
Form 5500, as part of the 21st Century Initiative, whose scope 
includes all of our recommendations for improvement of Form 5500 plan 
investment and service provider fee information. While we agree that 
the 21st Century Initiative was formed during our review in 2013, DOL 
only provided internal deliberative materials that reflected 
preliminary thoughts on possible areas for change in the form. 
Furthermore, our recommendation calls for more than just 
identification of potential improvements, it calls for action to be 
taken by the agencies to implement these modifications to the form. 
Treasury noted that the concerns identified in our study appear valid 
and the 21st Century Initiative would address some of the suggested 
changes in our recommendation. However, Treasury noted that it would 
defer to DOL on suggested changes to service provider fee information 
since Schedule C is solely within DOL's jurisdiction. Regarding 
developing a central repository of Employer Identification Numbers and 
Plan Numbers, Treasury said that it could improve the comparability of 
form data across filings and it would need to evaluate the impact of 
this recommendation in light of major, ongoing initiatives across the 
IRS to reduce the risk of identity theft and protect taxpayer privacy. 

PBGC agreed with our second recommendation, and stated that it would 
work with DOL and Treasury to explore options to conduct advance 
testing when making revisions to the form. Treasury and DOL did not 
state whether they agreed or disagreed with the recommendation. 
Treasury said it would consult with DOL and PBGC on the potential 
benefits and costs of conducting advance testing before proposing 
changes to the form. DOL noted that advance testing can be helpful in 
some cases, but expressed concerns that conducting advanced testing of 
Form 5500 changes would require additional expense and delay in their 
lengthy process of making changes to the form. DOL said that changes 
to the form already include a very transparent and public process of 
notice and comment rulemaking. However, as noted in the report, 
stakeholders we spoke to expressed concerns about their ability to 
fully participate in the Form 5500 change process, noting that agency 
efforts to solicit feedback were not apparent. DOL also stated that 
success of the Form 5500 depends on the careful management of 
software, technology, procurement, and regulatory structures and input 
from the Form 5500 reporting community, which includes a myriad of 
stakeholders. It is for these reasons that we believe DOL, Treasury, 
and PBGC should undergo advance testing prior to proposing major 
changes to the form. Such input could help ensure that any changes are 
understood by the service provider and filing community to improve the 
reliability of the information reported, potentially reduce the burden 
of annual reporting, and provide greater transparency to all users of 
form data. We recognize the complexity involved in making changes to 
the Form 5500 and the variety of stakeholders affected by any changes. 
Because of this complexity, we feel that it is important to increase 
input from non-government stakeholders to minimize misunderstanding 
and confusion and reduce the need to make additional revisions to 
changes after they are implemented in various systems. This outreach 
would also have the added bonus of increasing user awareness and 
understanding of what the form requires. 

In responding to our draft report, DOL also expressed concern 
regarding our characterization of recent changes to the Form 5500. 
Specifically, DOL stated that the report criticizes the agencies for 
making "minimal changes to the form over the last 3 years" and asserts 
that the process of making form changes has largely been impeded by 
"reluctance" on the part of the agencies to engage in negotiations 
with the contractor that operates the EFAST2 about the possible costs 
of such changes. DOL stated that the Form 5500 recently was subjected 
to a major public notice and comment revision in connection with the 
agencies' move to a wholly electronic form processing system (EFAST2), 
and identified other important changes that have occurred over the 3 
year time period referenced in our report. However, the changes 
mentioned in DOL's comments do not relate to Form 5500 plan investment 
and service provider fee information. Nonetheless, we amended our 
report to include these actions taken by the agencies to make changes 
to other areas of the form. In our report we acknowledge that the 
agencies face significant administrative, statutory, and contractual 
challenges to collecting and revising the Form 5500. For example, we 
noted DOL's lengthy informal notice and comment rulemaking process 
under the Administrative Procedure Act (APA) as well as Treasury's 
statutory prohibition on mandatory electronic filing. As we noted in 
the report, while DOL, IRS, and PBGC officials expressed concern that 
non-typical changes would be costly, none of the agencies have 
obtained cost estimates for potential changes. 

Each agency also provided technical comments, which we incorporated as 
appropriate. 

As arranged with your office, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
30 days from the date of this letter. At that time, we will send 
copies to the Secretary of Labor, Secretary of the Treasury, and 
Director of the Pension Benefit Guaranty Corporation. In addition, the 
report will be available at no charge on the GAO website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix VII. 

Sincerely yours, 

Signed by: 

Charles A. Jeszeck, Director: 
Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our study sought to examine the following research objectives: 

1. Aspects of the Form 5500 Annual Return/Report of Employee Benefit 
Plan (Form 5500) information on plan investments stakeholders find 
problematic, 

2. Aspects of the Form 5500 information on service provider fees 
stakeholders find problematic, 

3. Challenges the Department of Labor (DOL), the Department of the 
Treasury's Internal Revenue Service (IRS), and the Pension Benefit 
Guaranty Corporation (PBGC) face in collecting and revising key annual 
reporting information on plan investments and service provider fees 
needed from plan sponsors. 

To address these research objectives, we used various databases and 
search tools to identify agency, industry, and academic publications 
and notices on Form 5500 reporting requirements. We also reviewed 
regulations and agency guidance on changes to these requirements. We 
focused our review on our key objectives: disclosure requirements 
regarding plan investments and service provider fees. This research 
helped us develop key themes for our two-phase survey of non-
government stakeholders. Additionally, we reviewed relevant federal 
laws, regulations, and agency documentation and guidance related to 
the administration and maintenance of the Form 5500 series, including 
proposed rules, documentation of current initiatives aimed towards 
Form improvement, and the ERISA Filing Acceptance System (EFAST2) 
vendor contract. 

To address the research questions in terms of recent changes to Form 
5500's disclosure requirements and possible issues related to the 
form, we conducted interviews with knowledgeable individuals and 
organizations and reviewed relevant agency documents. Specifically, we 
conducted interviews with relevant officials at DOL, IRS, and PBGC. We 
also conducted interviews with non-government parties who interact 
with the Form 5500 in different ways--representatives of plan 
sponsors, service providers, retirement consultants, attorneys, and 
researchers--to learn how they use the form and what recent 
challenges, if any, they have encountered. In addition, we reviewed a 
nonrepresentative sample of 20 Form 5500 Annual Return/Report filings--
10 defined contribution plan filings and 10 defined benefit plan 
filings--from the DOL's 2012 Freedom of Information Act EFAST2 Form 
5500 data set to find potential examples of some of the challenges 
identified by non-government Form 5500 stakeholders. Specifically, we 
limited our universe of plan fillings based on the following criteria: 

* filings with plan year ending in calendar year 2012, 

* filings for a defined benefit or defined contribution plan, 

* filings that included a Schedule C, H, and a Schedule of Assets 
Attachments, and: 

* filings that have a non-zero value in the "Other" plan asset 
category in Schedule H. 

Based on these criteria, our universe included 4,782 defined 
contribution plans and 1,361 defined benefit plans. Then, we randomly 
selected 10 records from defined benefit plans and defined 
contribution plans from the universe for review. We chose to pull our 
sample from the Form 5500 dataset for the 2012 plan year because it 
was the most current and accurate dataset available as of December 
2013. To assess the reliability of DOL's data, we conducted data 
reliability discussions with EBSA officials to understand the 
limitations to the data and ensure we were using the correct variables 
to develop our universe of plans to sample. We found the dataset to be 
sufficiently reliable for the purposes of our study. 

Two-phase Online Panel Survey: 

To further address the first and second research questions, we 
gathered the opinions of a non-representative sample of professionals 
outside government who interact with the Form 5500 or rely on it in 
their work by conducting a two-phase questionnaire survey of a panel 
of 43 non-government stakeholders. We identified initial candidates 
for this panel from the following sources: 

* Contacts developed from past reports related to employee benefit 
plan investment and service provider fee information, 

* Participants in our 2011 and 2012 Comptroller General's Retirement 
Security Advisory Panel sessions, 

* Form 5500 users identified by the DOL: 

* Large pension and investment plan administrators and plan 
consultants, and: 

* Contacts obtained during interviews and research for our present 
study. 

To ensure we had a range of views in our panel, we identified 
stakeholders from several backgrounds: representatives of plan 
sponsors, participants, and service providers; researchers and 
academics; and other subject matter experts from relevant national 
organizations. We contacted an initial list of 102 stakeholders to 
explain our research, invite them to participate in our panel, and ask 
for the names of other potential panelists who may have had expertise 
in this area. This allowed us to both expand our initial list of 
potential panelists and to validate the relevance of the potential 
panelists we had already identified. To be eligible for the panel, we 
required stakeholders to have at least 5 years of experience with Form 
5500. We categorized eligible panelists into one of three groups: 
representatives of participants, representatives of plan sponsors and 
their service providers, and researchers. Of the 102 stakeholders we 
contacted, 43 stakeholders were eligible and agreed to participate in 
our two-phase panel survey. Panelists had an average of 16 years 
experience with the Form 5500. In the first phase, we asked this 
sample of panelists to identify challenges with the Form 5500 plan 
investment and service provider fee data collection, and to suggest 
changes that could improve the efficiency, clarity, and usefulness of 
those data. We compiled their answers and aggregated them into lists 
of distinct challenges and suggested changes. In the second phase, we 
asked panelists to rate the importance and potential impact of those 
challenges and suggested changes respectively. The numbers of 
panelists surveyed and the sample outcomes of this non-probability 
sample over both phases are shown in table 4. Additional details of 
the design and administration of the two phases are provided below. 

Table 4: Participation by Form 5500 Stakeholder Type Throughout Two-
phase Online Panel Survey: 

Initial sample: 
Plan Participants: 14; 
Plan Sponsors and their Service Providers: 16; 
Researchers: 13; 
Total: 43. 

First phase: 

Contacted for first phase (updated roles[A] ); 
Plan Participants: 11; 
Plan Sponsors and their Service Providers: 18; 
Researchers: 14; 
Total: 43. 

Ineligible[B]; 
Plan Participants: 2; 
Plan Sponsors and their Service Providers: 0; 
Researchers: 0; 
Total: 2. 

No response; 
Plan Participants: 2; 
Plan Sponsors and their Service Providers: 1; 
Researchers: 3; 
Total: 6. 

Completed first phase; 
Plan Participants: 7; 
Plan Sponsors and their Service Providers: 17; 
Researchers: 11; 
Total: 35. 

Second phase: 

Contacted for second phase; 
Plan Participants: 7; 
Plan Sponsors and their Service Providers: 17; 
Researchers: 11; 
Total: 35. 

No response; 
Plan Participants: 1; 
Plan Sponsors and their Service Providers: 2; 
Researchers: 0; 
Total: 3. 

Completed second phase; 
Plan Participants: 6; 
Plan Sponsors and their Service Providers: 15; 
Researchers: 11; 
Total: 32. 

Source: GAO summary of participation in GAO two-phase Form 5500 
stakeholder panel. 

[A] During our initial contacts with sampled panelists, we determined 
that of three stakeholders initially self-identifying their primary 
roles as plan participants, two were best categorized as plan sponsors 
and one as a researcher. 

[B] We determined two panelists were ineligible because they didn't 
meet our minimum requirement of having 5 years with the Form 5500. 

[End of table] 

In the first phase of the survey, which was conducted from May 28th to 
July 9th, 2013, we asked panelists questions about their roles and 
experiences related to Form 5500 and asked them to describe, in two 
open-ended questions, any specific challenges that (1) plan investment 
information, and (2) service provider and fee information collected on 
the Form 5500 presented for their work. We then asked them, in two 
corresponding open-ended questions, to suggest potential changes to 
improve the form. The wording of the four key open-ended questions is 
presented in table 5 below. 

Table 5: Key Questions from the Phase 1 Online Questionnaire from the 
Two-Phase Form 5500 Stakeholder Panel: 

Plan investment questions: 

1. What, if any, Challenges does the plan investment information 
currently required to be reported on the Form 5500, including 
Schedules and attachments or related instructions, present for your 
work? This includes plan investment information on Schedules A, D, H, 
or I, or any other part of the Form 5500. Examples of challenges 
include the Form's instructions being unclear, requiring information 
in a format that is inconsistent with industry reporting practices, 
reporting some data in a way that hinders your research, or omitting 
details that would be helpful in your understanding of a plan's 
financial status. Please describe one issue per row below. The boxes 
in the web form will expand as you type. 

2. What, if any, Changes to the Form 5500 plan investment information, 
including Schedules and attachments or related instructions, would you 
suggest to improve the clarity, efficiency, or usefulness of plan 
investment information for your work? This includes plan investment 
information on Schedules A, D, H, or I, or any other part of the Form 
5500. Suggestions can include additions, deletions, or other changes. 
These changes can be unrelated to the challenges you mentioned 
earlier. Please provide one suggestion per row below. The boxes in the 
web form will expand as you type. 

Service provider fee questions: 

3. What, if any, Challenges does the service provider and fee 
information currently required to be reported on the Form 5500, 
including Schedules and attachments or related instructions, 
present for your work? This includes service provider and fee 
information on Schedules A or C or any other part of the Form 5500. 
Examples of challenges include the Form's instructions being unclear, 
requiring information in a format that is inconsistent with industry 
reporting practices, reporting some data in a way that hinders your 
research, or omitting details that would be helpful in your 
understanding of a plan's financial status. Please describe one issue 
per row below. The boxes in the web form will expand as you type. 

4. What, if any, Changes to the Form 5500 service provider and fee 
information, including Schedules and attachments or related 
instructions, would you suggest to improve the clarity, efficiency, or 
usefulness of service provider and fee information for your work? This 
includes service provider and fee information on Schedules A or C or 
any other part of the Form 5500. Suggestions can include additions, 
deletions, or other changes. These changes can be unrelated to the 
challenges you mentioned earlier. Please provide one suggestion per 
row below. The boxes in the web form will expand as you type. 

Source: Phase 1 online questionnaire from the Two-Phase Form 5500 
Stakeholder Panel. 

[End of table] 

Thirty-five of the 43 panelists completed the first phase of the 
survey, and two of the original panelists had been determined 
ineligible during the survey due to insufficient experience with the 
form, resulting in an 85 percent response rate. Panelists who did not 
complete the first phase were dropped from the panel and did not 
participate in the second phase. 

We performed a content analysis on responses from the first phase to 
the four open-ended questions to aggregate responses into lists of 
distinct challenges and suggested changes. Two GAO analysts developed 
an initial coding scheme and coded each of the participant's responses 
together and, when necessary, the coding scheme was updated to reflect 
participants' responses. We re-contacted respondents when a response 
to be coded was unclear. Any disagreements in coding decisions were 
discussed until consensus was reached. A third GAO analyst reviewed a 
sample of the coded responses to check the validity of the coding 
decisions. We used the lists of coded answers to each of the four 
survey questions to develop closed-ended rating questions for the 
second phase of the survey. 

In the second phase of the survey, which was conducted from October 
23rd to December 11th, 2013, we asked each panelist to rate the 
significance of the challenges and the impact of the suggested changes 
the panel had collectively identified in the first phase. 
Specifically, in the second phase panelists were asked whether each 
potential challenge was "Not at all," "Slightly," Moderately," "Very," 
or "Extremely" significant or if they had "No basis to judge," and 
were asked whether each suggested change would have "Very negative," 
"Somewhat negative," "Neutral," "Somewhat positive," or "Very 
positive" impact or if they had "No basis to judge." Usable responses 
were provided by 32 of the 35 participants in the second phase, 
resulting in an overall response rate of 78 percent across both 
phases. Because the surveys were not administered to a probability 
sample of all Form 5500 stakeholders, the results cannot be 
statistically generalized to all Form 5500 stakeholders; the results 
describe only the experiences and opinions of the stakeholders we 
included in our panel. Tabulations of the results of the Phase 2 
ratings and corresponding question wording are presented in appendix 
II. 

We administered both phases of the survey over the Internet. For both 
phases, we sent each stakeholder an email invitation to complete the 
survey on a GAO web server using a unique username and password. 
Because our sample of panelists constituted the entire, unique 
population of stakeholders we had identified, the survey results are 
not subject to sampling error. However, the practical difficulties of 
conducting any survey may introduce other errors. We took steps to 
minimize errors in measurement, from nonresponse, and in data 
processing. 

To minimize the risk of measurement error, we designed draft 
questionnaires for both phases in close collaboration with GAO survey 
specialists. Two independent GAO staff members familiar with Form 5500 
provided technical comments on the draft questionnaires. We pretested 
the questionnaires in paper form with 5 individuals representing the 
range of our stakeholders (representatives of plan sponsors and their 
service providers, representatives of plan participants, and 
researchers). We made revisions of the questionnaires based on these 
efforts before we finalized the surveys. We applied eligibility 
criteria in the selection of our panelists to ensure that they had 
sufficient qualifications for their role. We performed quality checks 
on response data to identify and edit specific response errors. 

To reduce the impact of nonresponse error, panelists received several 
emails and phone calls encouraging them to complete the surveys. To 
increase participation and the validity of answers, panelists were 
informed that their personally-identifiable information would not be 
linked to their responses during the survey nor in the final report. 
We examined the distribution of those not responding across the three 
stakeholder categories in the survey population, and determined that 
response rates did not differ markedly across them. A second analyst 
checked the accuracy of all computer analyses to minimize the 
likelihood of errors in data processing. 

We conducted our work from November 2012 to June 2014 in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings 
and conclusions based on our audit objectives. We believe that the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Selected Results for Suggested Changes to Plan Investment 
and Service Provider Fee Information from the Phase 2 Survey of our 
Two-phase Form 5500 Stakeholder Panel: 

In the second phase of the survey of our two-phase Form 5500 
stakeholder panel, we asked each panelist to rate the significance of 
the challenges and impact of the changes the panel had collectively 
identified in the first phase. In the second phase, panelists were 
asked whether each potential challenge was "Not at all", "Slightly", 
"Moderately", "Very", or "Extremely" significant or if they had "No 
basis to judge", and were asked whether each suggested change would 
have "Very negative", "Somewhat negative", "Neutral", "Somewhat 
positive", or "Very positive" impact or if they had "No basis to 
judge." 

For plan investment changes, we specifically asked: How much of a 
positive or negative impact (please consider costs, resources, burden, 
and benefit) for your (and your clients') work would each of the 
following potential changes to Form 5500 have on the overall clarity, 
efficiency, or usefulness of plan investment information? Table 6 
lists the top plan investment potential changes indicated by survey 
respondents. 

Table 6: Top Changes with Form 5500 Plan Investment Information 
Suggested by Survey Respondents in our Two-Phase Survey Panel: 

Potential change: Revise Schedule H (Financial Information) plan asset 
categories to better match current investment vehicles; 
Very positive: 18; 
Very Negative: 0; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 58.1%; 
Average score[1]: 1.42. 

Potential change: Add more internal consistency checks of Form 5500a 
data; 
Very positive: 15; 
Very Negative: 0; 
Number of responses: 30; 
Percent of respondents indicating "very positive:" 50.0%; 
Average score[1]: 1.20. 

Potential change: Department of Labor provides a central repository for 
Employer Identification Numbers (EIN)/Plan Numbers; 
Very positive: 13; 
Very Negative: 1; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 41.9%; 
Average score[1]: 1.13. 

Potential change: Provide further clarification on when to use fair 
value vs. contract value on the Schedules H and I (Financial 
Information-Small Plan) for synthetic guaranteed investment contracts 
or stable value products; 
Very positive: 12; 
Very Negative: 1; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 38.7%; 
Average score[1]: 1.07. 

Potential change: Clarify if a "contract administrator" referred to in 
Schedule H income and expense statement (line 2i(2)) includes record 
keepers; 
Very positive: 6; 
Very Negative: 0; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 19.4%; 
Average score[1]: 1.07. 

Potential change: Standardize Schedule H, line 4i plan assets 
attachment and make it machine-readable; 
Very positive: 16; 
Very Negative: 3; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 51.6%; 
Average score[1]: 1.00. 

Potential change: Indicate which investment is the plan's default 
investment option; 
Very positive: 13; 
Very Negative: 1; 
Number of responses: 30; 
Percent of respondents indicating "very positive:" 43.3%; 
Average score[1]: 0.97. 

Potential change: Create a field that discloses a single dollar amount 
for all the money being paid from plan assets for admin/revenue share; 

Very positive: 12; 
Very Negative: 4; 
Number of responses: 29; 
Percent of respondents indicating "very positive:" 41.4%; 
Average score[1]: 0.79. 

Potential change: Require reporting of mutual fund share classes on the 
Schedule H, line 4i plan assets attachment; 
Very positive: 10; 
Very Negative: 5; 
Number of responses: 30; 
Percent of respondents indicating "very positive:" 33.3%; 
Average score[1]: 0.47. 

Potential change: Require reporting of information on the top three 
service providers to the plan on Schedule I; 
Very positive: 10; 
Very Negative: 5; 
Number of responses: 30; 
Percent of respondents indicating "very positive:" 33.3%; 
Average score[1]: 0.37. 

Source: GAO analysis of survey responses from GAO's two-phase Form 5500 
stakeholders panel. 

Note: The table shows plan investment challenges for which 10 or more 
panelists indicated it was a "very positive" or an average score 
greater than 1.0. 

[A] average score is based on assigning +2 points to a "very positive" 
answer, +1 to a "somewhat positive" answer, 0 to a "neutral" answer, 
-1 to a "somewhat negative" answer, -2 to a "very negative" answer, 
and 0 to a "no basis to judge" answer. 

[B] Form 5500 is the annual report that employee benefit plans file 
with the federal government. 

[End of table] 

For service provider fee changes, we specifically asked: How much of a 
positive or negative impact (please consider costs, resources, burden, 
and benefit) for your (and your clients') work would each of the 
following potential changes to Form 5500 have on the overall clarity, 
efficiency, or usefulness of service provider and fee information? 
Table 7 lists the top service provider fee potential changes indicated 
by survey respondents. 

Table 7: Top Service Provider Fee Changes Suggested by Survey 
Respondents in our Two-Phase Survey Panel: 

Potential change: Clarify Schedule C (Service Provider Information) 
instructions so that plan fees are reported more consistently; 
Very positive: 22; 
Very Negative: 0; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 71.0%; 
Average score[1]: 1.61. 

Potential change: Improve instructions for direct compensation, 
eligible indirect, and reportable indirect compensation; 
Very positive: 19; 
Very Negative: 0; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 61.3%; 
Average score[1]: 1.39. 

Potential change: Coordinate the service provider compensation 
information on Schedule C with the 408(b)(2) fee disclosure 
requirements[A] so plan sponsors do not have to provide two different 
sets of information on plan fees; 
Very positive: 16; 
Very Negative: 1; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 51.6%; 
Average score[1]: 1.23. 

Potential change: Reduce and simplify the number of service codes and 
add definitions behind them; 
Very positive: 13; 
Very Negative: 0; 
Number of responses: 29; 
Percent of respondents indicating "very positive:" 44.8%; 
Average score[1]: 1.17. 

Potential change: Improve consistency between DOL's definition of 
direct compensation and generally accepted accounting principles; 
Very positive: 14; 
Very Negative: 0; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 45.2%; 
Average score[1]: 1.16. 

Potential change: Eliminate the distinction between eligible and 
reportable indirect compensations on Schedule C; 
Very positive: 13; 
Very Negative: 3; 
Number of responses: 30; 
Percent of respondents indicating "very positive:" 43.3%; 
Average score[1]: 0.77. 

Potential change: Align Schedules H (Financial Information) and I 
(Financial Information-Small Plan) with new fee disclosure rules to 
determine if they capture all fees possible. The schedules should 
indicate whether all fees are disclosed or whether some fees are 
embedded; 
Very positive: 10; 
Very Negative: 1; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 32.3%; 
Average score[1]: 0.77. 

Potential change: Department of Labor should maintain a list of unique 
company identifiers (e.g. Employer Identification Number) for commonly 
used service providers for easy reference for preparers; 
Very positive: 10; 
Very Negative: 2; 
Number of responses: 30; 
Percent of respondents indicating "very positive:" 33.3%; 
Average score[1]: 0.77. 

Potential change: Include all individuals and companies who receive 
compensation for services provided to the plan in the Form 5500b 
without exceptions or exemptions; 
Very positive: 11; 
Very Negative: 9; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 35.5%; 
Average score[1]: 0.10. 

Potential change: Require plans to attach the 408 (b)(2) fee 
disclosures to their Form 5500s[B]; 
Very positive: 11; 
Very Negative: 9; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 35.5%; 
Average score[1]: 0.10. 

Potential change: Eliminate Sch. C Part I line 3 (Indirect 
compensation); 
Very positive: 10; 
Very Negative: 12; 
Number of responses: 31; 
Percent of respondents indicating "very positive:" 32.3%; 
Average score[1]: -0.13. 

Source: GAO analysis of survey responses from GAO's two-phase Form 5500 
stakeholders panel. 

Note: Table shows service provider challenges for which 10 or more 
panelists indicated it was a "very positive" or an average score 
greater than 1.0. 

[A] average score is based on assigning +2 points to a "very positive" 
answer, +1 to a "somewhat positive" answer, 0 to a "neutral" answer, 
-1 to a "somewhat negative" answer, -2 to a "very negative" answer, 
and 0 to a "no basis to judge" answer. 

[B] Certain service providers are required to disclose fee information 
to plan fiduciaries of defined benefit and defined contribution 
pension plans to satisfy disclosure requirements under Title I of 
ERISA. See 29 U.S.C. § 1108(b)(2) and 29 C.F.R. § 2550.408b-2. 

[C] Form 5500 is the annual report that employee benefit plans file 
with the federal government. 

[End of table] 

[End of section] 

Appendix III: 2013 Form 5500 and Select Schedules: 

Figure 2: Form 5500 Annual Return/Report of Employee Benefit Plan 
(2013): 

[Refer to PDF for image: sample form] 

Source: [hyperlink, http://www.dol.gov/ebsa/5500main.html]. 

[End of figure] 

Figure 3: Schedule C - Service Provider Information (2013): 

[Refer to PDF for image: sample form] 

Source: hyperlink, http://www.dol.gov/ebsa/5500main.html]. 

[End of figure] 

Figure 4: Schedule H - Financial Information (2013): 

[Refer to PDF for image: sample form] 

Source: hyperlink, http://www.dol.gov/ebsa/5500main.html]. 

[End of figure] 

Figure 5: Schedule I - Financial Information - Small Plan: 

[Refer to PDF for image: sample form] 

Source: hyperlink, http://www.dol.gov/ebsa/5500main.html]. 

[End of figure] 

[End of section] 

Appendix IV: Comments from Department of Labor: 

U.S. Department of Labor: 
Assistant Secretary for Employee Benefits Security Administration: 
Washington, D.C. 20210: 

May 27, 2014: 

Charles A. Jeszeck: 
Director, Education, Workforce, and Income Security: 
United States Government Accountability Office: ;
Washington, DC 20548: 

Dear Mr. Jeszeck: 

Thank you for the opportunity to review the Government Accountability 
Office's (GAO) draft report entitled "Private Pensions: Targeted 
Revisions Could Improve Usefulness of Form 5500 Information." Your 
draft report suggests that the Department of Labor (DOL), Internal 
Revenue Service (IRS), and Pension Benefit Guaranty Corporation (PBGC) 
consider implementing recommendations to improve the usefulness, 
reliability, and comparability of plan investment and service provider 
data collected in the Form 5500 Annual Return/Report of Employee Benefit
Plan ("Form 5500") that GAO developed from a survey panel of 
researchers, industry, and participant stakeholders. 

We are pleased to note that DOL, IRS, and PBGC (the Agencies) already 
initiated in 2013 an overall re-examination of the Form 5500, which we 
informally refer to as the 21st Century Initiative. The Initiative is 
part of a long-term strategic project with IRS and PBGC to modernize 
and improve the Form 5500. As your report states, the "21st Century 
Initiative" is an opportunity to identify new and better ways to meet 
the needs of both federal and non-federal stakeholders, and improve 
the efficiency, usefulness, and integrity of the information collected.
The 21st Century Initiative already included within its scope 
consideration of all of the Recommendations for Executive Actions in 
your draft report, which we view as broadly supportive of our efforts 
in this regard. Specifically, our initiative is already considering: 

* Revising and modernizing the financial schedules that are part of 
the Form 5500 to collect better information on investment vehicles and 
provide more transparency regarding plan investment; 

* Revising and requiring more attachments to the Form 5500 to be filed 
in data mineable formats, for example, the Schedules of Assets that 
contains information on each individual investment held by pension 
plans that file the Schedule H; 

* Revising the Schedule C filed by large plans to be more consistent 
with recently finalized fee transparency regulations and to collect 
better data on services provided and revenue sharing and other 
compensation that plan service providers receive from third parties; 
and; 

* Improving comparability of form data from year to year, as well as 
between plans and investment vehicles that file separate Form 5500 
data. 

The draft report also recommends that the Agencies conduct advance 
testing such as focus groups, in-person observations and users' 
perceptions of forms and questions as appropriate before proposing 
changes to the Form 5500 for public comment. EBSA believes advance focus
groups can be helpful in some cases. However, in the case of the Form 
5500, we are concerned that focus groups would add another layer of 
expense and delay. Changes to the Form 5500 already involve a very 
transparent and public process of notice and comment rulemaking 
governed by the Administrative Procedures Act, unlike many other 
federal forms that only undergo Paperwork Reduction Act review. 
Further, we solicit and consider comments from the public in other 
forms or forums. For example, the introductory pages of the Form 5500
instructions includes a section on how to get assistance with 
directions and on how to contact DOL and IRS online or by phone. The 
Paperwork Reduction Act notice published at the back of the 
instructions sets forth burden estimates and asks for suggestions from 
the public on making the forms simpler. The EFAST PMO annually 
participates in a Form 5500 software developers' conference at which 
substantive, as well as technical feedback is often provided. 

The report criticizes the Agencies for making only "minimal changes to 
the form over the last three years" and asserts that the process of 
making form changes has largely been impeded by "reluctance" on the 
part of the Agencies to engage in negotiations with the contractor that
operates the ERISA Filing Acceptance System (EFAST) about possible 
costs of such changes. We believe it is important to clarify a couple 
statements in the draft report. Although the Agencies strive to 
respond to requests for changes from the service provider community 
where feasible and appropriate, the success of the Form 5500 program 
critically depends on the careful management of complex software, 
technology, procurement, and regulatory structures. In order to comply 
with annual reporting obligations, plans, employers, accountants, 
actuaries, lawyers, recordkeepers, and others have to collect data, 
maintain software systems and perform myriad tasks, all of which 
depend on the success of the systems and structures that the Agencies 
have put in place to support the filings. Because of the size of the 
undertaking and its broad impact on so many private actors, DOL is 
careful to coordinate major form and information collection changes 
with the EF AST procurement process and system development 
requirements. The failure to properly take these factors into account 
would create a serious risk of excessive administrative costs and 
burdens to the detriment of filers, plan participants, and taxpayers. 

The Form 5500 recently was subject to a major public notice and 
comment revision in connection with the Agencies' move to a wholly 
electronic form processing system--EFAST2. The move to EFAST2 was 
itself a major multi-year procurement and system development exercise 
that required a balancing of available technology, funding, ease of 
use for the filing community, and usefulness of the system for end 
users. The DOL engaged in a separate rulemaking process at that time 
to mandate electronic filing of the Form 5500. Those regulatory
processes started with two separate notices in 2006 seeking public 
comment on proposed form changes. That process resulted in the 2009 
and 2010 Form 5500 being published together so they were both 
available for electronic filing on January 1, 2010. The public 
comments were posted on DOL's website and the Agencies again published 
a notice in the Federal Register discussing the public comments and 
the form and instruction changes being adopted. 

Thus, in addition to notice and comment rulemaking issues, and as we 
explained at some length in our various discussions with GAO staff, 
decisions on substantive changes to the form are determined by 
coordinated action among the Agencies, evaluation of data needs of the 
Agencies, a cost-benefit analysis of the impact of the form changes on 
plans, employers and other plan sponsors, realities of agency 
appropriations and EFAST funding issues. 

Nonetheless, even during the three year time period referenced in your 
report, the Agencies made some important changes. For example, the 
Depa1iment of Labor engaged in notice and comment rulemaking to add 
questions regarding Form M-l Compliance by group health plans beginning
with plan year 2013 to address statutory changes made to ERISA by the 
Affordable Care Act. Also, IRS and PBGC made focused changes to the 
Form 5500 actuarial schedules, which required the DOL to publish a 
Federal Register Notice in 2011. 

Overall, we appreciate your recommendations, and please be assured 
that we will consider them as we move forward with the 21st Century 
Initiative. 

Sincerely, 

Signed by: 

Phyllis C. Borzi: 
Assistant Secretary: 

[End of section] 

Appendix V: Comments from Department of Treasury/Internal Revenue 
Service: 

Department of The Treasury: 
Internal Revenue Service: 
Commissioner: 
Tax Exempt and Government Entities Division: 
Washington, D.C. 20224 

May 21, 2014: 

Charles A. Jeszeck, Director: 
Education, Workforce, and Income Security: 
United States Government Accountability Office: 
441 G Street, NW, Room 5968: 
Washington, DC 20548: 

Dear Mr. Jeszeck: 

Thank you for the opportunity to review the draft report of the 
Government Accountability Office entitled "Targeted Revisions Could 
Improve Usefulness of Form 5500 Information" (GAO-14-441). The 
recommendations in the draft report focus on Form 5500 reporting 
requirements relating to plan investments and service provider fee
information applicable to private sector retirement plans pursuant to 
the Internal Revenue Code and the Employee Retirement Income Security 
Act. The Department of the Treasury, the Internal Revenue Service, the 
Department of Labor, and the Pension Benefit Guaranty Corporation 
(collectively, the Agencies) regulate these requirements. 

The draft report provides a number of recommendations to the Agencies 
to address challenges involving the Form 5500 plan investment and 
service provider fee information that were identified to GAO by 
stakeholders from a variety of backgrounds who work with this 
information. The stakeholders included plan sponsors and their 
advisors who complete the Form; plan service providers who provide 
certain required information; plan participants and participant 
advocates, including ERISA plaintiffs' attorneys; and researchers, 
academics, and other federal agencies. Many of the concerns identified 
by these stakeholders appear valid. At the outset, however, it is
important to recognize that IRS's statutory authority for collecting 
information via Form 5500 is limited to the purpose of assisting the 
IRS in the discharge of its responsibilities to administer and enforce 
the tax laws. 

With that as background, enclosed are comments on the draft report's
recommendations directed to the Agencies. In addition to the 
recommendations for Agency action, the draft report also recommends 
that Congress consider providing the Department of the Treasury with 
the authority to require that the Form 5500 series be filed 
electronically in order to improve IRS' enforcement and compliance 
efforts and decrease the administrative and financial burden of 
maintaining both electronic and paper-based form processing systems, 
as well as the burden of plan reporting costs. 

An all-electronic Form 5500 filing capability is a critical priority 
for the Department of the Treasury and IRS for the reasons identified 
in the Administration's FY 2015 Revenue Proposals and in the draft 
report. Authority for the Department of the Treasury and IRS to 
require all-electronic filing of both the Form 5500 series and the 
Form 8955-SSA has been included in the Administration's updated budget 
proposal. The IRS deeply appreciates the inclusion of this suggestion. 

The IRS is committed to ensuring that the Form 5500 is designed to 
collect useful and reliable data while also limiting burdens on the 
filing community. We appreciate having had the opportunity to review 
and comment on the draft report. Please do not hesitate to contact us 
if you have questions concerning this response or if we can be of 
further assistance. 

Sincerely, 

Signed by: [Illegible] for: 

Sunita B. Lough: 
Commissioner, Tax-Exempt and Government Entities: 

Enclosure: 

Recommendations: 

The draft report recommends that: "To improve the usefulness, 
reliability and comparability of Form 5500 data for stakeholders while 
limiting the burden on the filing community, we [GAO] recommend the 
Secretaries of DOL and Treasury, and the Director of PBGC consider 
implementing the findings from the [report's stakeholder] panel when 
modifying plan investment and service provider fee information, 
including: 

* Revise Schedule H plan asset categories to better match investment 
vehicles and provide more transparency into plan investments; 

* Revise the Schedule of Assets attachments to create a standard 
searchable format;" 

Comment: 

As part of the Agencies' 21st Century Plan Initiative referred to in 
the draft report, the Agencies are working to (1) develop Schedule H 
plan asset categories that better match investment vehicles and 
provide more transparency into plan investments, and (2) develop a 
standard format for the Schedule of Assets attachment to Schedule H.
This is part of a multi-year effort by the Agencies to substantially 
revise and update the Form 5500 series content and technology. 

Recommendation: 

* "Develop a central repository for Employer Identification Numbers 
(EINs) and Plan Numbers (PNs) for filers and service providers to 
improve the comparability of form data across filings;" 

Comment: 

The IRS understands that a central repository of EINs and PNs could be 
useful to improve the comparability of form data across filings. 
However, the IRS will need to evaluate the impact of this 
recommendation in light of major, ongoing initiatives across the IRS 
to reduce the risk of identity theft and protect taxpayer privacy. 
These efforts are especially relevant to situations involving the easy 
availability of taxpayer identification numbers. For example, the IRS 
and the Department of the Treasury are in the process of preparing 
final regulations to enable filers to replace standard 9-digit social 
security numbers and EINs with 4-digit truncated taxpayer 
identification numbers (TINs) for certain information returns that are 
also issued as payee statements (e.g., Forms 1098, 1099,5498). 

Recommendations: 

* "Clarify Schedule C instructions for direct, eligible indirect, and 
reportable indirect compensation, so plan fees are reported more 
consistently and, as recommended in the past, provide better alignment 
with the 408(b)(2) fee disclosures; 

* Simplify and clarify Schedule C service provider codes to increase 
reporting consistency; and" 

Comment: 

With respect to the Schedule C service provider information, the 
collection of information via Schedule C is solely within the 
jurisdiction of the DOL under Title I of ERISA. Accordingly, the IRS 
must defer to the DOL on those recommendations. 

Recommendation: 

* "Conduct advanced testing, such as focus groups, in-person 
observations and users' perception of forms and questions, as 
appropriate and before proposing changes to the form for public 
comment, in addition to other outreach efforts." 

Comment: 

IRS will consult with our colleagues at the Department of Labor and 
the PBGC on the potential benefits and costs of conducting advanced 
testing such as focus groups and in-person observations and users' 
perceptions of forms and questions before proposing changes to the 
form for public comment. 

[End of section] 

Appendix VI: Comments from the Pension Benefit Guaranty Corporation: 

Pension Benefit Guaranty Corporation: 
Office of the Director: 
1200 K Street, N.W. 
Washington, D.C. 20005-4026: 

May 22, 2014: 

Charles A. Jeszeck: 
Director, Education, Workforce, and Income Security: 
United States Government Accountability Office: 
Washington, DC 20548: 

Re: Government Accountability Office (GAO) June 2014 Draft Report GAO-
14-441-"Private Pensions: Targeted Revisions Could Improve Usefulness 
of Form 5500 Information" 

Dear Mr Jeszeck: 

Thank you for the opportunity to review the referenced draft GAO 
report. We appreciate GAO's taking time to identify ways to improve 
Form 5500 reporting of plan investment and service provider fee 
information. 

As detailed in the attachment to this response, we agree with the 
report's recommendations. We agree with the report 's conclusion that 
existing plan asset categories do not provide users with the means to 
identify the nature of plan investments and the level of investment 
risk. Improvements in this area are critical to PBGC's efforts in 
protecting and sustaining PBGC's insurance programs and monitoring 
plan financial status. We are already working with DOL and Treasury as 
part of the 21st Century Initiative to make improvements in this area. 

We appreciate your asking Congress to consider providing the Treasury 
Department with the authority to require that the Form 5500 series be 
filed electronically. Based on our collaboration with the IRS in the 
Form 5500 development process, we agree that this would improve IRS's 
enforcement and compliance efforts, decrease the administrative and 
financial burden to IRS of maintaining both electronic and paper-based 
form processing systems, and decrease plan reporting costs. 

However, we wish GAO would go further in this report, as there are 
many other important limitations in the current Form 5500. To mention 
one example, the reporting timelines derive from the era before 
electronic submission and, as a result, Form 5500 data is outdated by 
the time we receive it. Consequently, PBGC is forced to make business 
decisions affecting millions of participants based, in part, on obsolete
information. The current statutory reporting deadline for completing 
the Form 5500 is up to 210 days (7 months) after the close of the plan 
year,[Footnote 1] and with the IRS automatic extension period of 2 1/2 
months,[Footnote 2] filers have up to 9 Y2 months after the close of 
the plan year to file their returns. These deadlines do not reflect 
current IT capabilities of most plan sponsors and the actuarial 
community. Your report notes these concerns, but hasn't recommended 
changes. We urge you to consider doing so. 

There are other improvements to the Form 5500 that would be helpful, 
such as improvements to Schedule MB (Multiemployer Defined Benefit 
Plan and Certain Money Purchase Plan Actuarial Information). 
Information on multiemployer plans is critical to PBGC's operations 
and our work in protecting the endangered multiemployer plan insurance 
program. We will continue to actively work with DOL and Treasury on
improving this schedule; however, some statutory changes may be 
necessary to improve reporting. 

The Form 5500 is a key tool in helping PBGC to monitor plans and 
identifying plans that are at risk. We appreciate GAO's thoughtful 
work in this area and hope you will continue it. 

Sincerely, 

Signed by: 

Josh Gotbaum: 

Attachment: 

Footnotes: 

[1] ERISA section 104. 

[2] IRS Form 5558, Application of Extension to File Certain Employee 
Plan Returns. 

Attachment: 

GAO Recommendation: 

To improve the usefulness, reliability, and comparability of Form 5500 
data, for all stakeholders while limiting the burden on the filing 
community, we recommend that the Secretaries of DOL and Treasury, and 
the Director of PBGC consider implementing the findings from our panel 
when modifying plan investment and service provider fee information. 

PBGC Response: 

We agree with the recommendation that DOL, Treasury and PBGC consider 
modifying Form 5500 plan investment and service provider fee 
information to address challenges identified by GAO's panel. Please 
note that the specific recommendations for revisions to Schedule C 
(Service Provider Information) and Schedule H (Financial Information)
identified on page 32 of the report are already being considered by 
the agencies as part of the 21st Century 5500 Initiative. 

GAO Recommendation: 

To ease the burden on preparers and ensure the collection of 
consistent and reliable data, we recommend that the Secretaries of DOL 
and Treasury, and the Director of PBGC conduct advance testing - such 
as focus groups, in-person observations, and users' perception of 
forms and questions - as appropriate and before proposing changes to the
form for public comment, in addition to its other outreach efforts. 

PBGC Response: 

We also agree with the recommendation that DOL, Treasury, and PBGC 
look for options to conduct advance testing when making final 
revisions to the Form 5500. We will work with our colleagues at DOL 
and the Treasury in exploring our options to address this Issue. 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Charles A. Jeszeck, Director, (202) 512-7215 or jeszeckc@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, David Lehrer (Assistant 
Director), Suzanna Clark, Carl Ramirez, Ryan Siegel, Michael Silver, 
Salvatore Sorbello, and Amber Yancey-Carroll made key contributions to 
this report. Also contributing to this report were Amy Bowser, Holly 
Dye, Kathy Leslie, Kristine Hassinger, Sheila McCoy, Jonathan 
McMurray, Libby Mixon, Mimi Nguyen, Jason Palmer, Roger Thomas, Robyn 
Trotter, Craig Winslow, and Jill Yost. 

[End of section] 

Related GAO products: 

Private Pensions: Clarity of Required Reports and Disclosures Could Be 
Improved. [hyperlink, http://www.gao.gov/products/GAO-14-92]. 
Washington, D.C.: November 21, 2013. 

Private Pensions: Revised Electronic Disclosure Rules Could Clarify 
Use and Better Protect Participant Choice. [hyperlink, 
http://www.gao.gov/products/GAO-13-594]. Washington, D.C.: September 
13, 2013. 

Private Sector Pensions: Federal Agencies Should Collect Data and 
Coordinate Oversight of Multiple Employer Plans. [hyperlink, 
http://www.gao.gov/products/GAO-12-665]. Washington, D.C.: September 
13, 2012. 

401(k) Plans: Increased Educational Outreach and Broader Oversight May 
Help Reduce Plan Fees. [hyperlink, 
http://www.gao.gov/products/GAO-12-325]. Washington, D.C.: April 24, 
2012. 

E-Filing Tax Returns: Penalty Authority and Digitizing More Paper 
Return Data Could Increase Benefits. [hyperlink, 
http://www.gao.gov/products/GAO-12-33]. Washington, D.C.: October 5, 
2011. 

401(k) Plans: Improved Regulation Could Better Protect Participants 
from Conflicts of Interest. [hyperlink, 
http://www.gao.gov/products/GAO-11-119]. Washington, D.C.: January 28, 
2011. 

Private Pensions: Additional Changes Could Improve Employee Benefit 
Plan Financial Reporting. [hyperlink, 
http://www.gao.gov/products/GAO-10-54]. Washington, D.C.: November 5, 
2009. 

Private Pensions: Government Actions Could Improve the Timeliness and 
Content of Form 5500 Pension Information. [hyperlink, 
http://www.gao.gov/products/GAO-05-491]. Washington, D.C.: June 3, 
2005. 

[End of section] 

Footnotes: 

[1] For the purposes of this report, we will be discussing Form 5500 
reports as they relate to private pension plans. 

[2] Pub. L. No. 93-406, 88 Stat. 829 (codified as amended at 26 U.S.C. 
§§ 401-436 and 4971-4982 and 29 U.S.C. §§ 1001-1453). 

[3] U.S. Department of Labor, Employee Benefits Security 
Administration, Private Pension Plan Bulletin, Abstract of 2011 Form 
5500 Annual Reports, (June 2013). Participant types are active 
participants, retired or separated participants receiving benefits, 
and other retired or separated participants with a vested right to 
benefits. Beneficiaries include deceased participants whose 
beneficiaries are receiving or entitled to benefits. While some 
private sector employer-sponsored group health plans are required to 
file a Form 5500, they are outside the scope of our report. Generally, 
a plan has 210 days from the end of the plan year to file its Form 
5500, but filers may apply for an extension of an additional 2½ 
months; therefore, 2011 was the most current data available. 

[4] GAO, Private Pensions: Additional Changes Could Improve Employee 
Benefit Plan Financial Reporting, [hyperlink, 
http://www.gao.gov/products/GAO-10-54], (Washington, D.C.: November 
2009). 

[5] We chose 2012 plan data because it was the most recent publicly 
available dataset where the majority of filings were filed at the time 
of our data analysis. Specifically, we limited our sample of plan 
fillings based on: 1) filings for plan year ending in calendar year 
2012, 2) filings for a defined benefit or defined contribution plan, 
3) filings that included a Schedule C (Service Provider Information), 
H (Financial Information), and a Schedule of Assets Attachments, and 
4) filings that have a non-zero value in the "Other" plan asset 
category in Schedule H. Based on these criteria, our potential sample 
of Form 5500s included 1,361 DB plans and 4,782 DC plans. See appendix 
I for more details on our sampling methodology. 

[6] Certain pension and welfare plans with fewer than 100 participants 
at the beginning of the plan year may be eligible to file the Form 
5500-SF, the Short Form Annual Return/Report of the Small Employee 
Benefit Plans, which is a simplified annual report form, instead of 
the Form 5500. Form 5500-SF filers generally are not required to file 
schedules or attachments, except for defined benefit pension plans, 
which must file the appropriate actuarial schedule. 

[7] Most plan sponsors must submit some version of a Form 5500 each 
year for each plan they sponsor, but other reports are also sometimes 
required depending on the plan's specific design and circumstances. 
For more details, see GAO, Private Pensions: Clarity of Required 
Reports and Disclosures Could Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-14-92], (Washington, D.C.: November 
2013). 

[8] Some plans maintain plan assets in certain trusts, accounts, and 
other investment arrangements that file their own Form 5500 annual 
return/report as a Direct Filing Entity (DFE). 

[9] The schedules and attachments required to be filed for a plan 
varies based on plan type and plan size. For example, pension plans 
with less than 100 participants do not have to file Schedules C, G, or 
H. More information on the 2013 filing requirements of different types 
of plans is available in the Form 5500 instructions at [hyperlink, 
http://www.dol.gov/ebsa/pdf/2013-5500inst.pdf]. 

[10] See GAO, Private Pensions: Government Actions Could Improve the 
Timeliness and Content of Form 5500 Pension Information, [hyperlink, 
http://www.gao.gov/products/GAO-05-491], (Washington, D.C.: June 
2005); [hyperlink, http://www.gao.gov/products/GAO-10-54]; GAO, 401(k) 
Plans: Increased Educational Outreach and Broader Oversight May Help 
Reduce Plan Fees, [hyperlink, http://www.gao.gov/products/GAO-12-325], 
(Washington, D.C.: April 2012); GAO, Private Sector Pensions: Federal 
Agencies Should Collect Data and Coordinate Oversight of Multiple 
Employer Plans, [hyperlink, http://www.gao.gov/products/GAO-12-665], 
(Washington, D.C.: September 2012); and GAO, Private Pensions: Clarity 
of Required Reports and Disclosures Could Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-14-92], (Washington, D.C.: November 
2013). 

[11] Department of Labor, Office of Inspector General, Office of 
Audit, EBSA Could Improve Its Usage of Form 5500 Data, 05-14-003-12-
121(Washington, D.C.: March 31, 2014). 

[12] [hyperlink, http://www.gao.gov/products/GAO-05-491]. 

[13] Annual Reporting and Disclosure, 72 Fed. Reg. 64,710 (November 
16, 2007). Codified at 29 C.F.R. pt. 2520. 

[14] Office of Management and Budget, Office of Information and 
Regulatory Affairs, Testing and Simplifying Federal Forms, Memorandum 
for the Heads of Executive Departments and Agencies, and of the 
Independent Regulatory Commissions (Washington, D.C.: August 9, 2012). 

[15] Examples of advance testing can include focus groups, in-person 
observations of users' perceptions of the forms and questions, web-
based experiments, and randomized controlled experiments. 

[16] See 44 U.S.C. § 3501 et seq. 

[17] While 32 panelists participated in second phase of our online 
survey, not all panelists provided a rating for each individual 
challenge or suggested change presented. Throughout the report, we 
refer to those panelists who provided a rating to an individual 
challenge or change suggestion as a respondent. For more information 
on our two-phase panel survey, see appendix I. 

[18] In the first phase of the panel survey, panelists were asked open-
ended questions, to list specific challenges and suggest potential 
changes to improve the plan investment and service provider fee 
information on the form. We performed a content analysis on the 
responses to the open-ended questions to aggregate responses into 
lists of distinct challenges and suggested changes. In the second 
phase of the survey, we asked each panelist to rate the significance 
of the challenges and the impact of the suggested changes that the 
panel had collectively identified in the first phase. See appendix I 
for more information on the methodology of our two-phase panel survey. 

[19] In this report, we use the term "Form 5500 stakeholders" to refer 
to respondents of our two-phase online panel survey and other service 
providers, researchers, and representatives of plan participants we 
spoke to who did not participate in our panel survey. 

[20] Plan asset categories are reported on Part I of the Schedule H. 

[21] GAO analysis of Pension & Investments annual survey data, 2001-
2010. For the purposes of this analysis, large plans refer to plans 
with $1 billion or more in total assets. See GAO, Defined Benefit 
Plans: Recent Developments Highlight Challenges of Hedge Fund and 
Private Equity Investing, [hyperlink, 
http://www.gao.gov/products/GAO-12-324] (Washington, D.C.: Feb. 16, 
2012). 

[22] For the purposes of this report, indirect investments refers to 
plan investment in any number of pooled investment vehicles that are 
not registered investment companies and may file their own Form 5500s 
as a Direct Filing Entity (DFE). DFEs include Master Trust Investment 
Accounts (MTIA), Common/Collective Trusts (CCT), Pooled Separate 
Accounts (PSA), and 103-12 Investment Entities (103-12 IE), which are 
pooled investment entities that include plan assets from more than one 
employee benefit plan, that are not MTIAs, CCTs, or PSAs. Real estate 
investment funds, hedge funds, and private equity funds may be 
categorized as a 103-12 IE. 

[23] Peter J. Wiedenbeck, Rachel K. Hinkle, and Andrew D. Martin, 
"Invisible Pension Investments," Virginia Tax Review, vol. 32, no.4 
(2013). 

[24] Plan sponsors are required to break out the underlying assets in 
CCTs and PSAs into the appropriate plan asset categories on Schedule H 
if the entity does not file its own Form 5500. 

[25] Only 1 out of 15 representatives of plan sponsors and their 
service providers indicated Schedule H's lack of transparency into the 
breakdown of investments held within each trust was a very or 
extremely significant challenge. 

[26] Some plans participate in certain trusts, accounts, and other 
indirect investment arrangements, such as an MTIA, CCT, PSA, 103-12 
Investment Entity, or Group Insurance Arrangement. Plans that have 
plan assets in these indirect investments that file their own Form 
5500s are eligible for certain annual reporting relief on their Form 
5500 filings regarding their interests in these indirect investments. 

[27] None of 15 representatives plan sponsors and service providers 
indicated difficulty in matching up an individual plan's investment 
and returns from indirect investments as a very or extremely 
significant challenge. 

[28] Wiedenbeck, Hinkle, and Martin, "Invisible Pension Investments," 
591. 

[29] A CUSIP number identifies most securities, including stocks of 
all registered U.S. and Canadian companies, and U.S. government and 
municipal bonds. The number uniquely identifies a company or issuer 
and the type of security. 

[30] Eight of 11 researchers, 2 of 15 plan sponsor and service 
provider representatives, and 1 of 6 plan participant representatives 
indicated that a lack of a standard reporting format or unique 
identifier for plan assets attachment is a very or extremely 
significant challenge. 

[31] Seven of 11 researchers, 3 of 6 plan participant representatives, 
and 1 of 15 plan sponsor representatives indicated that Schedule I 
lacking detailed plan asset information is a very or extremely 
significant challenge. 

[32] A default investment is a vehicle in which employee contributions 
will be invested absent a specific choice by the plan participant. PPA 
included various provisions designed to encourage greater retirement 
savings among workers eligible to participate in 401(k) plans, such as 
provisions that facilitate plan sponsors' adoption of automatic 
enrollment policies. See Pub. L. No. 109-280, § 902, 120 Stat. 780, 
1033. 

[33] An EIN is s a unique nine-digit number assigned by the IRS to 
business entities for the purposes of identification. 

[34] See 29 U.S.C. § 1108(b)(2) and 29 C.F.R. § 2550.408b-2. 

[35] GAO, Private Pensions: Additional Changes Could Improve Employee 
Benefit Plan Financial Reporting, [hyperlink, 
http://www.gao.gov/products/GAO-10-54] (Washington, D.C.: November 5, 
2009). 

[36] [hyperlink, http://www.gao.gov/products/GAO-10-54], 21. 

[37] DOL issued final 408(b)(2) regulations in 2012, but these 
regulations did not fully address our recommendation because no 
changes were made to harmonize the final 408(b)(2) service provider 
disclosures with Form 5500 schedule C service provider reporting 
requirements. See Reasonable Contract or Arrangement Under Section 
408(b)(2) - Fee Disclosure, 77 Fed. Reg. 5632 (February 3, 
2012)(codified at 29 C.F.R. pt. 2550) and Amendment Relating to 
Reasonable Contract or Arrangement Under Section 408(b)(2) - Fee 
Disclosure/Web Page, 77 Fed. Reg. 41,678 (July 16, 2012)(codified at 
29 C.F.R. pt. 2550). 

[38] In March 2014, DOL announced its intention to conduct focus 
groups to evaluate the effectiveness of 408(b)(2) fee disclosures. 
Proposed Information Collection Request Submitted for Public Comment; 
Evaluating the Effectiveness of the 408(b)(2) Disclosure Requirements, 
79 Fed. Reg. 14,085 (March 12, 2014). This effort is being undertaken 
in connection with new amendments to the 408(b)(2) regulation DOL is 
also proposing. Amendment Relating to Reasonable Contract or 
Arrangement Under Section 408(b)(2) - Fee Disclosure, 79 Fed. Reg. 
13,949 (March 12, 2014)(to be codified at 29 C.F.R. pt. 2550). 

[39] According to the 2012 Form 5500 instructions, "soft dollar" 
compensation refers to research or other products or services received 
from a broker-dealer or other third party in connection with 
securities transactions. 

[40] Four of 11 researchers and 2 of 6 plan participant 
representatives indicated that receiving service provider fee 
information in differing formats is extremely or very challenging. 

[41] Covered service providers must disclose compensation and other 
information related to their service arrangements upon the request of 
the plan fiduciary or plan administrator of defined benefit or defined 
contribution plan; however, the format and the information disclosed 
follows ERISA 408(b)(2) requirements, which differs from Schedule C 
reporting requirements. See 29 C.F.R. § 2550.408b-2. 

[42] For indirect compensation to be considered eligible, the plan 
sponsor must receive written materials from the service provider that 
include: 1) the existence of indirect compensation, 2) services 
provided for this compensation, 3) formulas used to calculate the 
value of this compensation, 4) who received the compensation, and 5) 
who paid the compensation. 

[43] Types of indirect compensation that may be reported as eligible 
indirect compensation include fees or expense reimbursement payments 
charged to investment funds, finder's fees, "soft dollar" revenue, 
brokerage commissions or other transaction-based fees that were not 
paid directly by the plan or plan sponsor. 

[44] A stable value contract is an insurance company general account 
investment that promises a guaranteed rate of return and takes into 
account various factors, including insurance company costs and 
expenses, in establishing the guaranteed crediting rate. DOL has said 
that such insurance company costs and expenses do not involve the 
insurer receiving reportable compensation for providing services, such 
as investment management services, for an investment fund portfolio in 
which the plan invests. 

[45] A group annuity contract is an annuity contract entered into by 
the owner for the benefit of a designated group, such as plan 
participants. Insurance companies frequently offer a range of 
investment alternatives for individual account plans through a group 
variable annuity contract between an insurance company and an employer 
on behalf of a plan. Variable annuities include one or more insurance 
elements, which are not present in other investment alternatives. 
Generally, these elements include an annuity feature, interest and 
expense guarantees, and any death benefit provided during the term of 
the contract. The variable annuity contract "wraps" around investment 
alternatives, often a number of mutual funds. In addition to 
investment management fees and administration fees, these contracts 
may also contain sales expenses, mortality risk charges, and the cost 
of issuing and administering contracts, as well as surrender and 
transfer charges. 

[46] [hyperlink, http://www.gao.gov/products/GAO-10-54], 20. 

[47] See ASSPA's website [hyperlink, 
http://www.asppa.org/Resources/Comment-Letters]. 

[48] According to DOL officials, streamlining the rulemaking process 
to make it more flexible and timely is something they will seek to 
address as part of their 21ST Century Initiative. 

[49] Before requiring or requesting information from the public, the 
PRA requires federal agencies to (1) seek public comment on proposed 
collections and (2) submit proposed collections for review and 
approval by OMB. OMB's Office of Information and Regulatory Affairs 
reviews agency information collection requests for approval or 
disapproval. Under PRA, OMB may approve collection for up to 3 years 
at a time. To extend the expiration date of a collection, an agency 
must provide the public with an opportunity to comment on the 
continuation of the collection and resubmit the information collection 
request. 

[50] The 2010 IRPAC Annual Report contained a recommendation for IRS 
to clarify the rules and procedures for obtaining EINs for qualified 
plans and trusts, including encouraging plan sponsors to obtain a 
trust EIN for qualified plans. 

[51] Most recently, in a March 2014 Federal Register Notice DOL 
announced it will conduct focus groups to evaluate the effectiveness 
of 408(b)(2) fee disclosures. Proposed Information Collection Request 
Submitted for Public Comment; Evaluating the Effectiveness of the 
408(b)(2) Disclosure Requirements, 79 Fed. Reg. 14,085 (March 12, 
2014). This effort is being undertaken in connection with new 
amendments to the 408(b)(2) regulation DOL is also proposing. 
Amendment Relating to Reasonable Contract or Arrangement Under Section 
408(b)(2) - Fee Disclosure, 79 Fed. Reg. 13,949 (March 12, 2014)(to be 
codified at 29 C.F.R. pt. 2550). 

[52] These tests involved Form 8955-SSA (Annual Registration Statement 
Identifying Separated Participants With Deferred Vested Benefits), 
which IRS administers on behalf of the Social Security Administration. 

[53] 26 U.S.C. § 6011(e). 

[54] Treasury Inspector General for Tax Administration (TIGTA) report, 
The Employee Plans Function Should Continue Its Efforts to Obtain 
Needed Retirement Plan Information, September 20, 2011, 2011-10-108. 

[55] Federal laws and regulations also prescribe the conditions that 
must be met for plans sponsors to use electronic means to provide 
disclosures to plan participants. For more information on that topic 
see GAO, Private Pensions: 

Revised Electronic Disclosure Rules Could Clarify Use and Better 
Protect Participant Choice, [hyperlink, 
http://www.gao.gov/products/GAO-13-594] (Washington, D.C.: September 
2013). 

[56] While IRS officials noted that not all their negotiations with 
DOL were successful, they were able to add questions related to ESOP 
on the Schedule R under DOL authority as these were issues also under 
the agency's jurisdiction. 

[57] Department of Treasury, Congressional Justifications of 
Appropriations for FY 2015, 2014, 2013, and 2012. 

[58] Employee Retirement Benefit Plan Returns Required on Magnetic 
Media, 78 Fed. Reg. 53,704 (Aug. 30, 2013)(to be codified at 26 C.F.R. 
pt. 301). The comment period closed on October 29, 2013. IRS has not 
yet issued the final regulation. 

[59] [hyperlink, http://www.gao.gov/products/GAO-05-491]. 

[60] In November 2013, we issued a report examining required pension 
plan reports and disclosures and recommended that Congress consider 
legislation shifting the responsibility and necessary resources of 
collecting Form 8955-SSA information to DOL, which has the authority 
to require electronic collection. See [hyperlink, 
http://www.gao.gov/products/GAO-14-92]. A statutory change that would 
authorize IRS to require electronic filing of Form 5500 information 
would negate the need to shift this responsibility. 

[61] According to DOL, they engaged in notice and comment rulemaking 
process to add questions regarding Form M-1 Compliance by group health 
plans beginning with plan year 2013 to address statutory changes made 
to ERISA by the Patient Protection and Affordable Care Act. Also, IRS 
and PBGC made focused changes to the Form 5500 actuarial schedules. 
Also, in 2010 the agencies made form and instruction changes in 
response to industry requests for an "e-signature alternative" that 
allows a third party service provider to register for Form 5500 filing 
and signing credentials. 

[62] According to PBGC, while the agencies have inquired with the 
DOL's EFAST Program Management Office and the EFAST2 contractor to 
request cost estimates, they ultimately decided not to obtain those 
estimates because of the additional costs that would be incurred to 
obtain those cost estimates, as well as the fact that cost estimates 
may not be accurate. 

[End of section] 

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