Federal agencies have tried to find a middle ground in the battle over how benefit plans should report the cost of bundled and unbundled services.

Officials with the Employee Benefits Security Administration, the Internal Revenue Service and the Pension Benefit Guaranty Corp. have included the plan service cost reporting rules in the newly released 2009 Form 5500 series forms.

Sponsors of most benefit plans over a minimum size use Form 5500 series forms to report on their activities to EBSA, to the IRS, and, in the case of defined benefit plans, to the PBGC.

The agencies have revised the forms to incorporate changes required by the Pension Protection Act of 2006, streamline the filing process, and shift employers toward an electronic-only filing environment.

The changes will affect 800,000 pension and welfare plans with 150 million participants and $4.3 trillion in assets.

The new form rules take effect Jan. 15, 2008, but, in most cases, will not affect the forms plans file until plan years starting on or after Jan. 1, 2009, officials say in a preamble to the revised forms published in the Federal Register.

The version released today is based on a proposal published in July 2006 and a supplemental notice published in December 2006.

The revisions will create a new, 2-page version of Form 5500, Form 5500-SF, for small plans that hold only easily valued assets, and they will require plan sponsors to file annual returns electronically for all information other than information required only by the IRS.

Because the IRS does not have the authority to make taxpayers file tax returns electronically, taxpayers will have to use a different method to file the IRS-only information.

The revisions also will require sponsors of 403(b) nonprofit employer retirement plans governed by the Employee Retirement Income Security Act to provide annual reports similar to those provided by other ERISA plans, and it will require employers to provide a list of insurers that have failed to provide compensation breakdowns and other information necessary to file complete annual returns.

Other sections deal with matters such as reserves for claims that have been incurred but not reported, actuarial reports for defined benefit pension plans, and asset allocation information for very large defined benefit pension plans.

One section that has attracted attention concerns efforts to provide detailed reports on the cost of plan services, such as investment management services and recordkeeping.

Insurance companies, banks and other financial services companies that often sell bundled packages of retirement plan services have complained that providing detailed information about how much specific plans pay for specific services would be difficult and expensive.

Trade groups representing independent firms that sell plan services on an unbundled, “a la carte” basis said in comments that letting bundled providers report one bundled cost number while requiring the unbundled providers to report many different numbers “could make it appear as if the unbundled arrangements included more fees,” officials write in the preamble to the revised forms.

A plan and its vendors will not necessarily have to explain how different companies or departments of a single company have split plan administration services revenue, but, in many cases, “any person in the bundle who is a fiduciary to the plan or provides one or more of the following services to the plan – contract administrator, consulting, investment advisory (plan or participants), investment management, securities brokerage, or recordkeeping – receiving amounts as commissions (including finders’ fees), soft dollars or other nonmonetary compensation, float revenue, or transaction-based charges … must be separately reported … if their total reportable compensation exceeds $5,000,” officials write.

The charges probably would be relevant to a benefit plan fiduciary trying to evaluate possible conflicts of interest involving either affiliate groups or unaffiliated providers, officials write.

Although plan sponsors will report a large portion of plan cost information on Form 5500 Schedule C, they will report most insurance information on another schedule, Form 5500 Schedule A.

Plan sponsors will not have to report the value of insubstantial business gifts from vendors, such as pens with a company’s logo printed on them, on Schedule C, but they will have to report gifts that cost more than $50, officials write.

The notice about the revised forms is available ‘>Document Link

A copy of a related final rule concerning pension and welfare plan disclosure requirements is available