Plan reporting controversy.

The Department of Labor has proposed revising form 5500 to reduce the reporting requirements for plan sponsors. Sponsors still would have to maintain the same information as before and make it available on demand but would not have to attach it to the form. Pension rights advocates are protesting what they see as a loss of information. Rebecca J. Miller, a member of the AICPA employee benefit plans committee, spoke with the Journal about the pros and cons of each side's position.

"On the committee, we agree that plan participants need access to meaningful information. But in most plans, some of this information is not particularly meaningful," said Miller, referring to two schedules the DOL proposed to eliminate. One is the schedule of assets held for investment purposes -- this applies to large plans subject to audits. "Such plans already have to disclose in footnotes any assets representing at least 5% of the plan," she said. Although, theoretically, a highly diversified plan could have no assets in this category, Miller said this probably would be rare.

The second schedule is for reportable transactions, which essentially says that if there are any purchases or sales of an investment type where the transaction is more than 5% of the asset value, that transaction must be disclosed. Miller said this information would be obvious in a participant-directed 401 (k), for example, but not necessarily in other plans. "However, auditors would look for this in a full-scope audit. Although a limited-scope audit would not cover this area, presumably fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) are responsible for certifying investment activity."

Suggested compromise

Miller said in her 22 years of working on ERISA reporting issues, she has not seen many cases when investment activity is being mismanaged. Of the few she has encountered, most have been related party transactions. Such transactions remain subject to specific, annual audit procedures and, if prohibited, annual ERISA disclosure. She suggested the majority of plans could be freed from burdensome reporting requirements if only certain criteria triggered an increased reporting requirement. For example, she cited the new schedule FIN-SP which raises some specific questions: Only plans that hold assets in certain categories that the DOL has found prone to abuse have to make extensive reports.

Alternatively, the same rules currently found in ERISA regulation 2520.103-11(b)(2) could be applied. This regulation already reduces the reporting responsibility for ERISA schedule of assets bought and sold during the plan year by eliminating, for example, any transactions in government securities, registered investment companies (mutual funds), certain bank certificates of deposit, participations in a bank common or collective trust or insurance company pooled separate accounts and traded securities purchased through a registered broker/dealer.