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Statement of Need: In the 20 years since Congress enacted ERISA to protect pension and other employee benefit promises made to employees, the laws and regulations have become more complex. There are many reasons for this: the desire for employers to have a high degree of flexibility in designing plans that best suit their work force; policies designed to ensure that all employees receive tax and savings benefits from retirement and other benefit plans that are comparable to those available to highly compensated employees and business owners; the need to protect the integrity of Federal tax revenues; and the prevention of tax-shelter abuses. ^PWhile each of these causes may have merit, and the private sector employee benefit system has been greatly strengthened as a result of ERISA, the cumulative result--together with frequent legislative changes--has been to raise compliance and administrative costs to a level that has created a disincentive for employers, and particularly small employers, to offer pension and other benefit plans to their employees. ^PA source of complexity and costs has been the Form 5500 Annual Return/Report Series, which is filed annually by an estimated 750,000 employee benefit plans. The Form 5500 Series is a joint Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation form and serves as the principal source of financial information and data available to the Agencies, and participants and beneficiaries, concerning the operations of employee benefit plans. The proposed revision to the Form 5500 Series is being coordinated with the Internal Revenue Service, the Treasury Department, and the Pension Benefit Guaranty Corporation as part of the process of implementing the President's pension simplification proposal. ^PTitle I of ERISA, sections 101 through 105, 107, 209, and 606, impose specific reporting and disclosure obligations on administrators of employee benefit plans. Section 104(a)(3) and 110 of ERISA provide the Secretary with the authority to prescribe exemptions and alternative methods of compliance for employee welfare benefit plans and employee pension benefit plans. Section 505 provides the Secretary with general authority to prescribe regulations necessary or appropriate to carry out the provisions of Title I of ERISA.

Alternatives: The annual reporting requirement could be left unaltered. However, the Pension and Welfare Benefits Administration (PWBA) believes that compliance with the requirement may be facilitated without harming the security of the employment-based benefits system. Simplifying the Form 5500 Series is one step in improving ERISA's reporting and disclosure system. This initiative includes revision of the Form 5500 Series and related regulations. Filer costs from preparing forms and government costs for processing the Form 5500 Series can be reduced while enhancing the ability of the Government to protect workers' benefits by receiving more accurate and timely information on the operation, funding, investments, usefulness, and safety of employee pension and welfare benefit plans.

Anticipated Costs and Benefits: Meaningful burden hour, and cost reductions can be achieved only through an integrated implementation of changes to both the Form 5500 Series and the processing system. By simplifying the Form 5500 and creating an automated processing system for the filed reports, it is anticipated that filer costs of preparing forms, as well as Government processing costs, will be reduced. It is the goal of the Department to eliminate reporting requirements for information that is not needed to discharge its statutory responsibilities, while ensuring that participants and beneficiaries have access to the information they need to protect their rights and benefits under ERISA.

Risks: The Form 5500 Series is part of ERISA's reporting and disclosure framework, which is intended to assure that employee benefit plans are operated and managed in accordance with certain prescribed standards and that participants and beneficiaries, as well as regulators, are provided or have access to sufficient information to protect the rights and benefits of participants and beneficiaries under employee benefit plans. Better focused annual reporting, through regulatory changes, should serve to facilitate compliance by plan administrators, thereby reducing litigation and penalty risks to plan administrators, fiduciaries, and sponsors, without increasing risks of benefit losses by participants and beneficiaries.