DOL Drops Schedule E Filing Requirement for Form 5500

The Department of Labor has eliminated the need for ESOP companies to include a copy of Schedule E, filed with the IRS, to be included in 5500 filings (72 Fed. Reg. 64,710 and 64,731, 11/16/07). Three questions on that schedule, however, will be added to Schedule R. The change is effective for plan years in 2009 and later. The three questions are:

1. Whether any unallocated employer securities or proceeds from the sale of unallocated securities were used to repay any exempt loan;
2. Whether the ESOP holds any preferred stock, and if so, whether the ESOP has an exempt loan with the employer as lender that is part of a "back-to-back" loan (the repayment terms of the employer loan to the ESOP are substantially similar to the repayment terms of a loan to the employer from a commercial lender); and
3. Whether the ESOP holds any stock that is not readily tradable on an established securities market.

Schedule E covers a variety of ESOP plan qualification issues, questions about loans, and questions about dividends.