Supporting Statement_Premium Filings_to OMB July 2010

Supporting Statement for Paperwork Reduction Act Submission

AGENCY:

Pension Benefit Guaranty Corporation

TITLE:

Payment of Premiums (29 CFR Part 4007); PBGC premium payment forms and
instructions (PBGC paper Comprehensive Premium Filing form (Form 1-C) and
Estimated Flat-Rate Premium form (Form 1-ES), corresponding electronic
premium filing forms, and related instructions)

STATUS:

Request for approval of revision of currently approved collection (OMB control
number 1212-0009; expires February 28, 2011)

CONTACT: Catherine B. Klion (326-4223, ext. 3041) or James J. Bloch (326-4223, ext. 3530)

1. Need for collection. Section 4007 of Title IV of the Employee Retirement Income
Security Act of 1974 (“ERISA”) requires the Pension Benefit Guaranty Corporation (“PBGC”)
to collect premiums from pension plans covered under Title IV pension insurance programs.
Pursuant to section 4007, PBGC has issued its regulation on Payment of Premiums (29 CFR
Part 4007). Under § 4007.3 of the premium payment regulation, plan administrators are required
to file premium payments and information prescribed by PBGC. Premium information must be
filed electronically using “My Plan Administration Account” (“My PAA”) through PBGC’s Web
site except to the extent PBGC grants an exemption for good cause in appropriate circumstances,
in which case the information must be filed using an approved PBGC form. The plan
administrator of each pension plan covered by Title IV of ERISA is required to submit one or
more premium filings for each premium payment year. Under § 4007.10 of the premium
payment regulation, plan administrators are required to retain records about premiums and
information submitted in premium filings.
All plans covered by Title IV of ERISA pay a flat-rate per-participant premium. Flat-rate
premiums are adjusted for inflation pursuant to the Deficit Reduction Act of 2005 (DRA 2005).

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An underfunded single-employer plan also pays a variable-rate premium based on the value of
the plan’s unfunded vested benefits.
Large-plan filers (i.e., plans that were required to pay premiums for 500 or more
participants for the prior plan year) are required to pay PBGC’s flat-rate premium early in the
premium payment year (the last day of February for calendar-year plans). Because the
participant count often is not available until late in the premium payment year, PBGC permits
filers to make an “Estimated flat-rate premium filing.”
All plans are required to make a “Comprehensive premium filing.” Comprehensive
filings are used to report (i) the flat-rate premium and related data (all plans), (ii) the variablerate premium and related data (single-employer plans), and (iii) additional data such as
identifying information and miscellaneous plan-related or filing-related data (all plans). For
large plans, the Comprehensive filing also serves to reconcile an estimated flat-rate premium
paid earlier in the year.
Revisions to Filing Instructions
PBGC intends to revise the 2011 filing instructions to:
•

Remove references to a transition rule in section 430 of the Internal Revenue Code
that no longer applies.

•

Remove instructions about the credit card payment option for premium payments,
which is being eliminated because of low usage.

•

Clarify that if a plan has been frozen more than once, a filer should report the most
recent date that the plan became closed to new entrants. These instructions parallel
the benefit-accrual-freeze instructions.

•

Make minor editorial changes.

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PBGC intends to revise the 2012 filing instructions to require plans using the alternative
premium funding target to report the “effective interest rate” (defined in section 430(h) of the
Internal Revenue Code). PBGC will use this information to update its annual contingency list
and financial statements more timely and accurately. PBGC is not making this change until 2012
to provide time to modify its premium accounting system to handle the new data element.
2. Use of information. PBGC uses information from premium filings to identify the
plans for which premiums are paid, to verify whether the amounts paid are correct, to help PBGC
determine the magnitude of its exposure in the event of plan termination, to help track the
creation of new plans and transfer of participants and plan assets and liabilities among plans,
and to keep PBGC’s insured-plan inventory up to date. That information and the retained
records are used for audit purposes.
3. Information technology. PBGC provides for premium filing through the “My PAA”
electronic facility on PBGC’s Web site. In addition, PBGC has two programs under which filers
can use private-sector premium-filing-preparation software compatible with My PAA: (1) a filer
can draft a premium filing and then import it into My PAA’s data entry and editing screens for
review, certification, and submission to PBGC; and (2) a filer can create a premium filing and
then upload it directly to PBGC via the My PAA application. Filers can pay premiums and
receive premium refunds by electronic funds transfer.
Although electronic filing is required under PBGC’s regulations, PBGC may grant
exemptions from the electronic filing requirement for good cause in appropriate circumstances.
PBGC therefore receives some paper premium forms. PBGC uses intelligent character
recognition (“ICR”) technology to process paper filings.

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4. Duplicate or similar information.
General
In general, the information required in premium filings 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 of the information reported in premium filings.
Variable-rate premium (VRP) Data
Plans may or may not base VRP calculations on asset and/or liability figures that are also
reported on Schedule SB to Form 5500, the annual report form filed with the Internal Revenue
Service, Department of Labor, and PBGC. Since the premium numbers may not be the same as
the Schedule SB numbers, PBGC needs to know what the premium numbers are, even if they
happen to coincide with the Schedule SB numbers.
Frozen plan data
In recent years, many defined benefit plan sponsors have implemented some sort of plan
freeze, which results in cessation or partial cessation of future benefit accruals. There are many
ways in which a plan can be frozen. For example, in some cases existing participants continue to
accrue benefits, but new employees are excluded from the plan (a “participation freeze”). In
other cases, all benefit accruals cease, or accruals based on salary increases continue but future
service is disregarded when determining benefits. In addition, there are many situations where a
plan freeze applies to some, but not all, participants. To be able to predict and address the
impact of plan freezes on PBGC’s future premium revenues and net financial position, PBGC
needs to know which of the plans that PBGC covers have been frozen and the exact nature of the
freeze.
PBGC currently collects plan freeze information on ERISA section 4010 filings, but 4010
filers are a small percentage of covered plans. PBGC needs the information sooner for the small

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group of 4010 filers. PBGC has considered exempting 4010 filers from reporting this
information again in the premium filing, but concluded that it would be a control problem if the
agency’s premium database was not internally consistent.
Form 5500 collects general information on whether a plan has been frozen, but it does not
collect specific information as to the nature of the freeze (Form 5500, Item 8.a. – Plan
Characteristic code – 1I: Frozen plan). Furthermore, the Form 5500 “plan freeze” question
pertains only to the most severe type of freeze (when all accruals cease for all participants). The
Form 5500 data are not sufficient for PBGC to adequately monitor the agency’s potential
exposure and to project future premium income.
Plan transfer data
PBGC’s plan transfer questions ask about transfers to and from other plans, as well as
transfer types, e.g., merger, consolidation, or spin-off. The Form 5500 (item 5b of Schedule H)
only asks for information concerning assets and/or liabilities transferred from a plan to another
plan (or plans) during the plan year, and does not get data on transfer types. Plans are required to
submit information to the Internal Revenue Service about transfers to and from other plans on
Form 5310-A Notice of Plan Merger or Consolidation, Spinoff, or Transfer of Plan Assets or
Liabilities, but the Form 5310-A exempts filers from filing this notice if the transaction is de
minimis, and PBGC needs this information regardless of transaction size. In addition, PBGC
would not be able to receive Form 5310-A information in a timely manner.
Final filing data
Form 5500 collects general information on whether a plan was terminated in a standard
or distress termination, or whether PBGC became trustee of a plan (Form 5500, Item 8.a. – Plan
Characteristic code - 1H: plan covered by PBGC that was closed out and terminated for PBGC
purposes). Form 5500 also collects data on whether a plan is covered by PBGC (Plan

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Characteristic code - 1G: plan covered by PBGC). However, the data collected on Form 5500
often are not sufficient for PBGC to adequately know why filings have ceased in cases where
plans merge out of existence. For example, a plan may file its final premium filing under an
Employer Identification Number (EIN) and Plan Number (PN) different from that on the Form
5500. In addition, terminated or merged plans often do not submit a final Form 5500, especially
when the final plan year is short.
5. Reducing the burden on small entities. The VRP due date for small plans is
6½ months later than for large and mid-size plans to accommodate the later UVB valuation dates
used by many small plans.
The VRP is capped for certain plans of small employers (those with 25 or fewer
employees). Plans that qualify for the VRP cap and pay the full amount of the cap do not need to
determine or report UVBs.
6. Consequence of reduced collection. Since the information collected is essential to
proper administration of PBGC’s insurance programs, including auditing of premium filings,
failure to collect it would seriously impair PBGC’s program operations. Further, the premium
payable to PBGC is an annual premium. Therefore, premium filings cannot be made less often
than annually, and for most plans, filings are made just once per year. To ensure that PBGC
receives a substantial portion of its premium revenue early in the year for which insurance
coverage is provided, large plans (those with 500 or more participants, about 20 percent of all
filers) are required to pay their flat-rate premiums much earlier in the year than small plans
(those with fewer than 100 participants) and mid-size plans (those with 100 or more but fewer
than 500 participants) (see the 1983 recommendations of the Grace Commission (the President’s
Private Sector Survey on Cost Control)). While large plans are not required to file twice a year,
as a practical matter most of them make a flat-rate “reconciliation” filing, after more accurate

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data become available, later in the year (by the same filing deadline that applies to mid-size
plans). Elimination of a “double flat-rate filing” for large plans would require that PBGC either
extend large plans’ early filing date beyond that called for by the Grace Commission or force
those plans to make final premium filings before most of them had all the necessary data.
PBGC allows mid-size and large plans to make estimated VRP filings and then reconcile
the estimated premium at a later date without a late premium payment penalty. PBGC makes
this accommodation because unusual circumstances could make an accurate VRP filing by the
due date difficult or impossible, which, under PBGC’s current regulatory scheme, would mean
that the plan would be subject to a late payment penalty. In some cases, large plans may end up
making three filings a year, rather than two (e.g., a large plan could make an estimated flat-rate
filing, a final flat-rate and estimated VRP filing, and a VRP reconciliation filing); and mid-size
plans may make two filings, rather than one. If PBGC did not allow these VRP reconciliation
filings, some plans would not be able to make an accurate VRP filing by the due date and would
be subject to late payment penalty charges. Giving these plans the option to make a VRP
reconciliation filing enables them to avoid being subject to the late payment penalty charge.
7. Special circumstances. PBGC requires plan administrators to retain information
necessary to support premium filings for six years. This is necessary to ensure that records are
available during the period within which PBGC may bring an action to collect premiums (ERISA
section 4003(e)(6)). The six-year period also corresponds to the record retention requirement of
Title I of ERISA (ERISA section 107).
In unusual circumstances, PBGC may require submission of information in less than
30 days (see 29 CFR § 4007.10). This would accommodate a situation where PBGC determines
that its interests may be prejudiced by a delay in the receipt of the information, e.g., where

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collection of unpaid premiums (or any associated interest or penalties) would otherwise be
jeopardized.
In other respects, this collection of information is not conducted in a manner inconsistent
with 5 CFR § 1320.5(d)(2).
8. Outside input. On May 20, 2010, PBGC published a notice (75 FR 28304) of intent to
request an extension of this collection of information with revisions, inviting public comment by
July 19, 2010. No comments were received.
9. Payment to respondents. PBGC provides no payments or gifts to respondents in
connection with this collection of information.
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. PBGC expects to receive an average of approximately
34,300 premium filings each year from approximately 28,500 respondents. Most respondents
need only file annually. However, plan administrators of plans with 500 or more participants (of
which there are approximately 5,700) also typically make an estimated flat-rate filing. (Note that
PBGC projects that about 130 plan administrators of mid-size and large plans will make both a
comprehensive filing and an amended comprehensive filing to reconcile an estimated variablerate premium filing, which is included in the 34,300 premium filings, above.)
Of these 34,300 premium filings, approximately 5 percent will be prepared in-house.
(Preparation of the other 95 percent will be contracted out.) PBGC estimates that the hour
burden of this collection of information associated with the 5 percent of premium filings that are

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prepared in-house is about 9,000 hours. The annualized cost to respondents for these burden
hours is $3,155,000 (based on an average hourly rate of $350). These estimates were determined
as follows (“VRP” means “variable-rate premium”):
Number of
Responses
Estimated flat-rate filing
Comprehensive filing (single-employer plans)
Plans exempt from VRP
Plans paying maximum (capped) VRP
Plans reporting unfunded vested benefits
Estimated VRP filing and VRP reconciliation filing
(Mid-size and Large Plans only)
Standard premium funding target
Alternative premium funding target
Final VRP filing (no VRP reconciliation needed)
Standard premium funding target
Alternative premium funding target
Multiemployer Plans
Totals

Average
Time

Total
Hours

Total
Cost

287

1.5

431

$150,675

146
144

3.1
5.0

453
720

158,410
252,000

2
5

10.0
7.0

20
35

7,000
12,250

613
448

8.0
5.0

4,904
2,240

1,716,400
784,000

71

3.0

213

74,550

9,015

$3,155,285

1,716

The recordkeeping requirement in 29 CFR § 4007.10 is not expected to impose
any significant burden on plan administrators, since most of the records covered by this
requirement must already be retained under ERISA section 107. Since this
recordkeeping burden is nominal, it is included in the estimated reporting burden, and no
separate estimate of burden is made for recordkeeping under the regulation.
13. Cost burden on the public. PBGC estimates the cost burden on the public for
operation, maintenance, and purchase of services associated with the 95 percent of premium
filings that are contracted out to be $59,960,000. The costs are based on an hourly rate of $350
and are determined as follows:

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Number of
Responses
Estimated flat-rate filing

5,452

Comprehensive filing (single-employer plans)
Plans exempt from VRP
2,783
Plans paying maximum (capped) VRP
2,734
Plans reporting unfunded vested benefits
Estimated VRP filing and VRP reconciliation filing
(Mid-size and Large Plans only)
Standard premium funding target
42
Alternative premium funding target
86
Final VRP filing (no VRP reconciliation needed)
Standard premium funding target
11,654
Alternative premium funding target
8,505
Multiemployer Plans
Totals

1,352
32,608

Average
Time

Total
Hours

Total
Cost

1.5

8,178

$ 2,862,300

3.1
5.0

8,627
13,670

3,019,555
4,784,500

10.0
7.0

420
602

147,000
210,700

8.0
5.0

92,232
42,525

32,631,200
14,883,750

3.0

4,056

1,419,600

171,310

$59,958,605

14. Costs to the Federal government. Based on its operational costs, personnel salaries,
and overhead, PBGC estimates that the annual cost to the Federal Government of processing this
collection of information is about $12.5 million.
15. Change in burden. The change in the estimated annual cost burden of this collection
of information from $47,036,605 (in the current OMB inventory) to about $59,960,000
(requested) is attributable to an increase in PBGC’s estimate of the hourly rates charged by
contractors, e.g., actuaries, from $275 to $350. There is no change in the hour burden associated
with the 5 percent of premium filings that are prepared in-house, approximately 9,000 hours.
16. Publication plans. PBGC does not plan to publish the results of this collection of
information.

- 11 17. Display of expiration date. OMB has previously granted approval to omit the
expiration date from the premium forms and instructions.
18. Exceptions to certification statement. There are no exceptions to the certification
statement for this submission.

I:\regulatory\RM\Paperwork\1212-0009 Part 4007\2011 rollover\Supporting Statement_Premium Filings_to OMB July 2010.doc