SptgStmt

Supporting Statement for Paperwork Reduction Act Submission

AGENCY:

Pension Benefit Guaranty Corporation

TITLE:

Procedures for Election of Multiemployer Plan Status

STATUS:

Request for OMB approval of new collection of information

CONTACT: Constance Markakis (326-4223, ext. 6779) or Catherine B. Klion (326 4223, ext.
3041)

1. Need for collection. Pension Benefit Guaranty Corporation (PBGC) administers the
multiemployer plan insurance program under Title IV of the Employee Retirement Income
Security Act of 1974 (ERISA). Section 1106 of the Pension Protection Act of 2006, Pub.L.
109-280 (“PPA 2006”) amends the definition of a “multiemployer plan” in section 3(37)(G) of
ERISA and section 414(f)(6) of the Internal Revenue Code of 1986 to allow certain singleemployer plans to elect to be multiemployer plans, no later than August 17, 2007, pursuant to
procedures prescribed by PBGC. Generally, these are plans sponsored by tax-exempt
organizations (mostly union staff plans) to which more than one employer is required to
contribute and that are maintained pursuant to collective bargaining agreements. To implement
this provision, PBGC intends to publish a notice of election procedures that includes specific
information that plans must submit to PBGC to show that they meet the statutory eligibility
requirements, the process for issuing a PBGC decision, and the effect of such a decision on a
plan’s request for approval.
On April 13, 2007 (72 FR 18692), PBGC published a notice informing the public that it
intended to request OMB approval of the procedures and soliciting public comment prior to the
OMB submission. On May 25, 2007, supplemental spending legislation (Pub. L. 110-028) that

contained an amendment modifying the PPA 2006 provision for multiemployer elections
(“Amendment”) was signed into law. PBGC received four comment letters on the draft
procedures that were the subject of the April 13, 2007, notice (“April draft procedures”). Three
of the comment letters focused largely on needed changes to the April draft procedures to
conform to the Amendment in Pub. L. 110-028. PBGC has revised the April draft procedures to
reflect the statutory changes in the Amendment and to take into account the public comments.
The most significant difference between the April draft procedures and the revised
procedures submitted to OMB relates to the definition of a plan “maintained pursuant to
collective bargaining agreements.” Prior to the Amendment, section 3(37)(G) of ERISA
referenced the existing criterion of a multiemployer plan “maintained pursuant to collective
bargaining agreements,” which is generally a plan that was created or established as a result of
collective bargaining and that is maintained or controlled through collective bargaining. The
Amendment eased this criterion for an election under PPA 2006 by providing that a plan shall be
treated as “maintained pursuant to a collective bargaining agreement” if a collective bargaining
agreement “provides for or permits employer contributions to the plan by one or more employers
. . . or participation in the plan by one or more employees . . . regardless of whether the plan was
created, established, or maintained for such employees by virtue of another document that is not
a collective bargaining agreement.”
To apply the original definition, the April draft procedures provided a safe harbor (or
“automatic pass”) for plans that could certify that, in three prior plan years, at least 50 percent of
active participants were covered under the plan pursuant to collective bargaining agreements,
and at least 50 percent of contributions arose under collective bargaining agreements. For
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substantiation, plans were required to submit collective bargaining agreements for all
contributing employers and indicate the number of participants and contributions made to the
plan under these collective bargaining agreements (in relation to the total participants and
contributions to the plan).
Three of the public comment letters received by PBGC were written on behalf of plans
(and a union-employer sponsor) that intend to make a multiemployer election under PPA 2006.
These letters stated that the Amendment made by P.L. 110-028 negates the extensive factgathering data requested by PBGC under the April draft procedures, rendering many of the
required items of information unnecessary, but particularly the submission of collective
bargaining agreements by all employers and information about the numbers of participants and
contributions to the plan under collective bargaining agreements.
Consistent with these public comments and the Amendment, the revised procedures
submitted to OMB substantially scale back the required information and documentation. They
eliminate the requirement for submitting collective bargaining agreements from all contributing
employers and strike any requirement for information on the numbers of participants or
contributions under collective bargaining agreements maintaining the plan. They also eliminate
the 50 percent safe harbor for a plan maintained pursuant to collective bargaining, as the
Amendment precludes any threshold for such a demonstration. Section 3 of the revised
procedures now requires only the submission of identifying information on the employers
required to contribute to the plan, and whether any of these employers are under common
control. This section also requires copies of collective bargaining agreements from the three
largest signatory employers (in terms of contributions) to the plan.
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In addition, the following additional changes were made to the April draft procedures
pursuant to the Amendment and three of the public comment letters representing plans intending
to make an election under PPA 2006:
•

A filing is now considered timely if it is “substantially” complete. In addition, the
revised procedures permit a filing to be supplemented after the election deadline if
an omission is minor and the plan sponsor reasonably believed the submission
was complete, or the sponsor can show good cause for the omission.

•

To comply with the statutory changes in the Amendment, the definition of a
collective bargaining agreement is now revised.

•

The revised procedures require a listing of only those trades or businesses
required to contribute to the plan that are under common control, as opposed to all
the trades or businesses of a contributing employer.

•

In response to comment letters, an 85 percent safe harbor is added for a showing
that “substantially all” employer contributions are made by tax-exempt
organizations; evidence of an employer’s status is not required once the 85
percent threshold is met.

•

Evidence of an employer’s tax-exempt status is now limited to the first page of
the DOL Form LM-2, or the first and last pages of IRS Form 990, as opposed to
the entire document.

•

A summary checklist of required information and documents is provided.

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•

Pursuant to the Amendment, which made elections retroactive (any plan year
beginning on or after January 1, 1999 and ending before January 1, 2008, as
specified by the plan), the test years for meeting multiemployer criteria are the
three plan years ending before the effective date. The revised procedures also add
an exemption from the current year requirement if there was a reduction to fewer
than two employers between the test years and the current year.

•

Because plans may now make elections retroactively, the revised procedures
eliminate the requirement for evidence of withdrawal liability rules for plans that
changed their filing status before the enactment of PPA 2006.

•

For evidence of a plan’s existence before September 2, 1974, if contemporaneous
evidence is unavailable, the plan may submit documentation from a later date that
provides substantial evidence of its existence before September 2, 1974.

The procedures were not changed with respect to the request in three of the comment
letters to make explicit that an election is effective for all purposes under ERISA and the Code,
as provided under section 3(37)(G) of ERISA, and to require concurrence by the Department of
Labor (DOL) and IRS with an election approved by PBGC. Although DOL and IRS have told
PBGC that they agree to follow the 85 percent safe harbor for establishing that “substantially all”
employer contributions are made by tax-exempt employers, the procedures provide that PBGC
approval has no effect on the authority of other Federal agencies. It would not be reasonable to
bind the ERISA agencies to PBGC’s approval of a multiemployer election, as these agencies
must be allowed to exercise their enforcement authority. For example, a plan may represent in
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its submission that certain employers are not under common control, but IRS (and only IRS)
would have the authority to audit the plan to ensure that it has properly applied the common
control rules.
The procedures also were not changed to reflect the view in three of the comment letters
that an election is effectively self-executing and may be made regardless of PBGC approval.
This concern appears to relate to the bulk of the data and information previously required to
establish that a plan is “maintained pursuant to collective bargaining agreements,” and should no
longer be a significant concern under the simplified eligibility requirements of the Amendment.
In any case, PBGC interprets the statutory provision that a plan “may, pursuant to procedures
prescribed by the PBGC, elect to be a multiemployer plan” as requiring a written notice of
election to PBGC that conforms with the requirements of PBGC’s procedures, including the
requirement for approval.
Finally, the procedures were not changed with respect to a comment letter sent on behalf
of two unions representing active employees and retirees of affiliated employers of a nonprofit
membership organization. This comment letter expressed concern with the safe harbor under the
April draft procedures that permitted a plan sponsor to certify that the plan was maintained
pursuant to collective bargaining agreements by more than one unrelated employer, stating that
affiliated employers do not maintain or control the plan. The Amendment eliminated the
requirement that a multiemployer plan be maintained pursuant to collective bargaining
agreements by “more than one employer,” and replaced it with a requirement that the plan be
maintained pursuant to collective bargaining agreements by “one or more employers.” The
procedures conform to this provision in the Amendment.
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The procedures will be posted on PBGC’s website, www.pbgc.gov, and published in the
Federal Register after OMB approval.
The PBGC is requesting that OMB approve this collection of information for three years.
(Although plans must make an election by August 17, 2007, PBGC may request additional
information necessary to review the election after that date.)
2. Use of information. PBGC will use the information submitted by plans to evaluate
whether the eligibility requirements in section 3(37)(G) of ERISA have been met and whether a
plan’s request for election should be approved. The information and representations made in the
submission will be retained and used for audit purposes.
3. Information technology. PBGC has not developed information technology
applications to deal with multiemployer elections. The volume of filings is not expected to be
high enough to justify development of an electronic filing method.
4. Duplicate or similar information. Most of the information required by the procedures
is not routinely filed with, and available from, any other Federal Government agency, and there
is no similar information that can be used “as is” instead. Although the revised procedures call
for submission of copies of IRS Forms 990 or 990-EZ, or DOL Forms LM-2 or LM-3, the
information in these forms relates to a key statutory requirement for making an election (i.e., that
substantially all employer contributions to the plan come from entities exempt from tax under
Code section 501). Further, the revised procedures require only the first page (or first and last
pages) of these forms for the statutorily-designated test years.
5. Reducing the burden on small entities. The information requirement for making an
election will not affect a substantial number of entities of any size.
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6. Consequence of reduced collection. PBGC is required by statute to prescribe
procedures for implementing the multiemployer election provisions under PPA 2006. This is a
one-time submission. The information requirements in the revised procedures relate directly to
the eligibility requirements for making an election. In addition, the information collected is
essential to the proper administration of PBGC’s multiemployer insurance program, and failure
to collect would seriously impair PBGC’s program operations. For example, plan and employer
information requirements, including copies of collective bargaining agreements for the three
largest contributing employers, assist PBGC in assessing the financial health of the plan and in
tracking those employers whose withdrawal from the plan would most adversely affect the plan’s
contribution base.
7. Special circumstances. Under section 1106 of PPA 2006, all elections under the
procedures must be made by August 17, 2007. Depending on when the procedures are cleared
by OMB, respondents may have less than 30 days to comply with the information requirements.
However, draft procedures that reflect the statutory provision have been publicly available since
June 15, 2007, which is more than two months before elections are due.
8. Outside input. PBGC published Federal Register notices soliciting public comment
on this collection of information on April 13, 2006, at 72 FR 18692, and on June 15, 2007, at 72
FR 33260. Four public comments were received in response to the April draft procedures (the
comments are discussed in item 1 above). The comment period for the June 2007 notice expires
July 16, 2007.
9. Payment to respondents. PBGC provides no payments or gifts to respondents in
connection with this collection of information.
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10. Confidentiality. Confidentiality of information is that afforded by the Freedom of
Information Act and the Privacy Act. PBGC’s rules that provide and restrict access to its records
are set forth in 29 CFR Part 4901.
11. Personal questions. The collection of information does not call for submission of
information of a sensitive or private nature.
12. Hour burden on the public. Based on its experience, PBGC anticipates that
approximately 35 single-employer plans, covering some 58,000 participants, may elect
multiemployer status under the PPA 2006 provisions. PBGC estimates that plan filings will be
largely prepared in-house. Most of the filing burden will be associated with assembling current
and historical plan documents, as well as identifying information on contributing employers and
information from employers evidencing their tax-exempt status. Plans will also have to
determine the portion of total contributions received for each of three prior plan years from taxexempt employers. PBGC estimates that the average hour burden to respondents will be 2.5
hours and that the cost to respondents for these burden hours will be $687.00 per plan, or
$24,062 for 35 plans (based on an average hourly rate of $275).
13. Cost burden on the public. PBGC estimates the cost burden on the public for the
average of five hours of professional services expected to be contracted out to attorneys and
other professionals for purposes of ensuring compliance with the required procedures will be
$1,875 per plan, or $65,625 for 35 plans (based on an average hourly rate of $375).
14. Costs to the Federal government. PBGC estimates that the cost to the Federal
Government of processing this collection of information will be $22,000.
15. Change in burden. This is a new collection.
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16. Publication plans. PBGC does not plan to publish the results of this collection of
information.
17. Display of expiration date. PBGC is not requesting approval to omit from the
procedures the date OMB’s paperwork approval expires.
18. Exceptions to certification statement. There are no exceptions to the certification
statement for this submission.

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