Reporting Issues –
Form 5500 and Form 990
Jim Cole
Groom Law Group, Chtd.
jvc@groom.com
(202) 861-0175
NECA Labor Relations Conference
October 14, 2009
San Antonio, Texas
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Disclosure Regulation – “Themes”
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Disclosure burden shifts to non-fiduciary service providers, with
enforcement mechanisms
For service providers – complex new requirements to interpret
and implement
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Disclosure of “indirect compensation”
Reporting relief for “bundled” arrangements
Coordination with other service providers
For participants/plan sponsors – more information
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Disclosure Regulation
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Amendment of Form 5500 Schedule C requires more disclosure
of compensation paid directly and indirectly for plan services,
after compensation is paid.
“Point of Sale” Disclosure - Proposed amendment of ERISA
section 408(b)(2) regulation (services exemption) will require
disclosure by “covered” service providers. 72 Fed. Reg. 70988
(Dec. 13, 2007).
Proposed rules would enhance disclosures provided to
participants in participant-directed pension plans. 73 Fed. Reg.
43014 (July 23, 2008).
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Disclosure Regulation
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Proposed amendments to ERISA section 408(b)(2) regulation,
and proposed participant disclosure regulation, were not finalized
before January 20, 2009.
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H.R. 1984, the “401(k) Fair Disclosure for Retirement Security Act
of 2009” and S. 401, the “Defined Contribution Fee Disclosure Act
of 2009” would impose new disclosure requirements for service
providers and establish new standards for disclosure to participants
in participant-directed plans.
Amendments to the Form 5500 are final and effective for 2009
plan year.
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Service Provider Disclosure
Form 5500 – Schedule C
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Form 5500 is an annual report filed with the DOL by ERISAcovered plans.
Significant new Form 5500 package published November 16,
2007
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Generally effective for 2009 plan year filing.
Significant changes to Schedule C.
Affects both pension and welfare plans.
 72 Fed. Reg. 64710 and 64731.
DOL FAQs issued July 14, 2008.
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Service Provider Disclosure
Schedule C – Responsibilities
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Plan administrators, not service providers, are obligated to
complete Form 5500.
Schedule C requires the plan administrator to report service
providers who refuse to provide necessary information following
a request.
DOL’s may use Form 5500 as an enforcement tool.

FAQs provide relief to service providers that notify plans trial they
have made a good faith effort to collect information, but could not
complete recordkeeping changes for 2009 plan year.
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Service Provider Disclosure
Form 5500 – Schedule C
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Report service providers receiving $5000 or more direct or
indirect compensation paid by the plan
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Applies if plan has more than 100 participants.
Key changes 
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New definitions - “indirect” compensation, bundle, investment
fund
Report “source” of “indirect compensation”
Reporting relief for “eligible indirect compensation” and “bundled
arrangements”
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Schedule C – Indirect Compensation
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Indirect compensation means payments from sources other than the
plan or plan sponsor that are “in connection with services to the
plan or the person’s position with the plan.”
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Include compensation received if the person’s eligibility for the
payment or the amount of the payment is based, in whole or in part,
on services rendered to the plan or transactions with the plan.
Don’t include compensation that would have been received had the
service not been provided or the transaction had not taken place and
that cannot be allocated to services.
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Schedule C – Indirect Compensation
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Examples provided by Schedule C:
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Finder’s fees, float, brokerage commissions, soft dollars and “other
transaction-based fees” received in connection with transactions or
services involving the plan.
Amounts charged to the plan’s investments and reflected in unit value,
e.g., investment management fees, 12b-1 fees.
Not included – “investment fund” operating expenses, e.g.,
portfolio brokerage expenses.
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Schedule C – Indirect Compensation
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Meals and entertainment received by employees of sponsors and
service providers may be reportable indirect compensation.
“Insubstantial” non-monetary compensation (e.g., “gifts and
meals of insubstantial value”) need not be reported if:
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the compensation is tax deductible to the payor and excluded from
taxable income for the recipient, and
the gift is valued at under $50 and total gifts to the recipient from
the same source during the year do not exceed $100.
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Schedule C – Mechanics
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Line 2 (Part I) of Schedule C requires for each service provider
(receiving > $5,000):
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Service Provider Name, EIN
Amount of “direct” compensation
Report of “indirect” compensation
 FAQs clarify that indirect compensation may be reported as a
“formula” rather than an amount or estimate.
Line 3 (Part I) requires identification of “source” of indirect
compensation, if (a) over $1,000, or (b) reported as a formula.
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Schedule C – Alternative Reporting
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If a Service Provider receives “Eligible Indirect Compensation”
(EIC) and no other compensation in connection with the plan,
plan reporting is limited.
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Plan administrator still receives detailed information.
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Schedule C identifies person who provided information.
Even if other compensation received by a Service Provider
(direct or ineligible direct) is reported, amount of EIC need not
be reported.
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Line 3 “source” reporting not required for EIC.
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Schedule C – Alternative Reporting
Eligible Indirect Compensation includes:
 Fees charged against investment funds, e.g., investment
management fees
 Finder’s fees, float, brokerage commissions, soft dollars
 Other transaction-based fees paid for transactions or services
involving the plan, if charged against the plan’s investment.
Disclosure required for EIC:
 The existence of indirect compensation, and service provided or
other purposes of payment
 The amount or an estimate of, or the formula to calculate, the fee
 The identity of the parties paying and receiving the fee.
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Schedule C –
Bundled Arrangements
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A “bundled arrangement”
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A service arrangement where the plan hires one company to
provide a range or services either directly or indirectly from the
company, through affiliates or subcontractors, or through a
combination, which are priced to the plan as a single package
rather than on a service-by-service basis.
An investment transaction in which the plan receives a range of
services either directly from the investment provider, through
affiliates or subcontractors, or through a combination.
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Schedule C –
Bundled Arrangements
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Payments received by the bundled provider’s affiliates or
subcontractors are not reported, unless amounts are –
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Set on a per transaction basis (e.g., brokerage);
Fees charged against the value of the plan’s investments (e.g.,
management fees); or
Finder’s fees, float, soft dollars, and non-monetary compensation
earned by certain providers (fiduciary, investment manager or
adviser, consultant, recordkeeper, broker).
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Form 5500 – Schedule C
Schedule C Implementation Issues
 Scope of covered “indirect compensation”
 EIC definition; disclosure formats
 Defining a “bundle”
 Service provider disclosure obligations
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Disclosing fees received
Disclosing fees paid to other persons in connection with plan
services
Duties of service providers responsible for Form 5500 preparation
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What Has Changed for the Form 990?
Procedures for investments with taxable entities
 Disclosure of policies to the public
 Employee and independent contractor compensation
 Lobbying activities
 Affiliates – common control
 UBIT
 Charitable contributions and events
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What Has Changed for the Form 990?
Compensation practices and expenses
 Excess benefit transactions
 Loans and transactions with interested parties
 Gifts from third parties
 Conflict of interest policy
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Monitor and enforce
 Annual disclosure
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Whistleblowers
 Document retention
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Reporting Issues –
Form 5500 and Form 990
Jim Cole
Groom Law Group, Chtd.
jvc@groom.com
(202) 861-0175
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