[Federal Register Volume 63, Number 227 (Wednesday, November 25, 1998)]
[Notices]
[Pages 65506-65507]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31524]



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Part VIII





Department of Labor





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Pension and Welfare Administration



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Notice on Annual Reporting Enforcement Policy

Federal Register / Vol. 63, No. 227, Wednesday, November 25, 1998 / 
Notices

[[Page 65506]]



DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
RIN 1210 AA57


Notice on Annual Reporting Enforcement Policy

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Notice.

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SUMMARY: The purpose of this notice is to announce the Department of 
Labor's decision not to adopt the proposed annual reporting enforcement 
policy described in a notice published in the Federal Register on March 
13, 1997 (62 FR 11929). Under the proposal, the Department would not 
have rejected the annual report (Form 5500) of a multiemployer welfare 
benefit plan solely because the accountant's opinion accompanying the 
report was ``qualified'' or ``adverse'' due to a failure to account and 
report for post-retirement benefit obligations in accordance with 
American Institute of Certified Public Accountants (AICPA) Statement of 
Position (SOP) 92-6, or otherwise was affected by or reflected 
noncompliance with the financial statement disclosure requirements of 
SOP 92-6. The proposed enforcement relief also was made available on an 
interim basis for the 1996, 1997, and 1998 plan years to provide time 
for consideration of public comments on the proposal. Although the 
Department has decided not to adopt the proposed enforcement policy, to 
provide multiemployer welfare benefit plans with adequate time to 
comply with SOP 92-6's requirements, the Department, by this notice, is 
extending the interim reporting relief to cover 1999 plan year annual 
reports filed by multiemployer welfare benefit plans. Annual reports of 
multiemployer welfare benefit plans filed for plan years commencing on 
or after January 1, 2000, however, will be subject to rejection if 
there is any material qualification in the accountant's opinion 
accompanying the annual report due to a failure to comply with the 
requirement of SOP 92-6.

FOR FURTHER INFORMATION CONTACT: Eric A. Raps, Office of Regulations 
and Interpretations, Pension and Welfare Benefits Administration 
(PWBA), U.S. Department of Labor, Washington, DC 20210, (202) 219-8515 
(not a toll free number).

SUPPLEMENTARY INFORMATION:

A. Background

    In general, the administrator of an employee benefit plan with 100 
or more participants at the beginning of a plan year is required under 
Title I of the Employee Retirement Income Security Act of 1974, as 
amended (ERISA), and the Department's regulations issued thereunder, to 
file an annual report and to include as part of that report the opinion 
of an independent qualified public accountant.\1\ These annual 
reporting requirements are satisfied by filing the Form 5500 Annual 
Return/Report in accordance with its instructions and related 
regulations. The requirements governing the content of the opinion and 
report of the independent qualified public accountant are set forth in 
ERISA section 103(a)(3)(A) and 29 CFR 2520.103-1(b)(5). ERISA section 
104(a)(4) permits the Department to reject an annual report if it 
determines that there is a material qualification by an accountant 
contained in the opinion required to be submitted pursuant to section 
103(a)(3)(A). If the Department rejects a filing under section 
104(a)(4), and the administrator fails to submit a satisfactory filing 
within 45 days, the Department may, among other things, assess a civil 
penalty of up to a $1,000 a day against the administrator for failing 
or refusing to file an annual report.\2\
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    \1\ See ERISA sections 101(b)(1) and 103, and 29 CFR 2520.103-1.
    \2\ ERISA sections 104(a)(5) and 502(c)(2), and 29 CFR 
2560.502c-2. See 29 CFR 2570.502c-2 which, in accordance with the 
requirements of the Federal Civil Penalties Inflation Adjustment Act 
of 1990, as amended, increased the civil penalty from $1,000 a day 
to $1,100 a day for violations occurring after July 29, 1997.
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    On March 13, 1997, the Department published a notice in the Federal 
Register (62 FR 11929) inviting public comment on a proposed annual 
reporting policy for multiemployer welfare benefit plans. Under this 
proposed policy, the Department would not reject the annual report of a 
multiemployer welfare benefit plan solely because the accountant's 
opinion accompanying the report is ``qualified'' or ``adverse'' due to 
a failure to account and report for post-retirement benefit obligations 
in accordance with the financial statement disclosure requirements of 
SOP 92-6. To allow sufficient time for considering public comments on 
the proposal, the Department announced in the Federal Register notice 
that the Department would not reject 1996 and 1997 plan year 
multiemployer welfare benefit plan annual reports due to such qualified 
or adverse accountant's opinions. In response to questions, the 
Department subsequently clarified the scope of the relief indicating 
that it would not reject the subject annual reports because the 
accountant's opinion reflects or is otherwise affected by noncompliance 
with any aspect of SOP 92-6.\3\ This interim report relief was later 
extended to the 1998 annual reports filed by multiemployer welfare 
benefit plans.
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    \3\ See letter to Cary Hammond from Assistant Secretary Olena 
Berg (July 11, 1997).
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B. Non-Adoption of Proposed Enforcement Policy

    The Department received public comments supporting and opposing 
adoption of the proposed policy. After carefully evaluating all of the 
comments received, the Department has decided not to adopt the proposed 
enforcement policy.
    Section 103(a)(3)(A) of ERISA provides, in relevant part, that the 
administrator of an employee benefit plan must engage an independent 
qualified public accountant to conduct an examination of any financial 
statements, books and records of the plan necessary to enable the 
accountant to form an opinion as to whether the financial statements 
and schedules, required to be included in the annual report, are 
presented fairly and in conformity with Generally Accepted Accounting 
Principles or ``GAAP,'' Because the accounting profession establishes 
the requirements pertaining to GAAP, it has been the Department's 
longstanding position that it generally will not rule as to the 
acceptability of methods of accounting or auditing for purposes of the 
accountant's opinion required to be attached to the annual report. See, 
e.g., Advisory Opinion 84-45A (November 16, 1984).
    Although the Department believes that the questions raised relating 
to the usefulness of the post-retirement benefit obligation disclosure 
required under SOP 92-6 for multiemployer and other welfare benefit 
plans have merit, the Department, following consideration of the 
comments, has concluded that the accounting profession, rather than the 
Department through reporting enforcement policies, should be 
responsible for addressing problems attendant to the application of 
accounting principles. For this reason, the Department has determined 
not to adopt the proposed enforcement policy. The Department, however, 
continues to encourage the AICPA, as well as the Financial Accounting 
Standards Board, as they review SOP 92-6 to continue to work with the 
multiemployer plan community and other interested parties and develop 
accounting methodologies for assessing post-retirement benefit 
obligations that will serve to produce

[[Page 65507]]

meaningful financial information that will be useful to plan 
fiduciaries, plan participants and beneficiaries and the Department of 
Labor.

C. Interim Relief and Applicability Date

    This notice does not affect the Department's previous announced 
interim reporting relief for annual reports filed by multiemployer 
welfare benefit plans for 1996, 1997 and 1998 plan years. In addition, 
to ensure that multiemployer welfare benefit plans have an adequate 
opportunity to prepare their financial recordkeeping and other related 
systems so that financial statements can be prepared to comply with SOP 
92-6, the Department hereby announces that this same interim reporting 
relief will apply for the 1999 plan year annual reports filed by 
multiemployer welfare benefit plans. In particular, the Department 
understands that multiemployer welfare benefit plans may need this 
additional time to be able to present plan year 1999 and plan year 2000 
comparative financial statements for Form 5500 filings made for the 
2000 plan year. Multiemployer welfare benefit plan administrators who 
rely on the interim reporting relief must comply with the AICPA's pre-
SOP 92-6 requirements in their financial statement treatment of the 
matters now covered by SOP 92-6. Annual reports of multiemployer 
welfare benefit plans filed for plan years commencing on or after 
January 1, 2000, however, will be subject to rejection if there is any 
material qualification in the accountant's opinion accompanying the 
annual report due to a failure to comply with the requirements of SOP 
92-6.

    Signed at Washington DC, this 18th day of November 1998.
Meredith Miller,
Deputy Assistant Secretary for Policy, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 98-31524 Filed 11-24-98; 8:45 am]
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