Supporting Statement 2010 Final

SUPPORTING STATEMENT
REQUEST FOR EXTENSION OF A CURRENTLY APPROVED COLLECTION
AGENCY:

Pension Benefit Guaranty Corporation

TITLE:

Termination of Single Employer Plans; Missing Participants; 29 CFR Parts 4041
and 4050; PBGC Forms 500-501, 600-602, Schedule MP and attachments

STATUS:

Request for Extension of a Currently Approved Collection with Modifications
(OMB control No. 1212-0036; expires September 30, 2010)

CONTACT: Catherine B. Klion (326-4223, ext. 3041) or Jo Amato Burns (326-4223, ext.
3072)
1. Need for collection. Under section 4041 of the Employee Retirement Income Security
Act of 1974, as amended, a single-employer pension plan may terminate voluntarily only if it
satisfies the requirements for either a standard or a distress termination. Pursuant to ERISA
section 4041(b), for standard terminations, and section 4041(c), for distress terminations, and
PBGC=s termination regulation (29 CFR Part 4041), a plan administrator wishing to terminate a
plan is required to submit specified information to PBGC in support of the proposed termination
and to provide specified information regarding the proposed termination to third parties
(participants, beneficiaries, alternate payees, and employee organizations). In the case of a plan
with participants or beneficiaries who cannot be located when their benefits are to be distributed
(Amissing participants@), the plan administrator is subject to the requirements of Section 4050 of
ERISA and PBGC=s missing participants regulation (29 CFR Part 4050).
OMB approval of the existing information requirements expires September 30, 2010.
PBGC is requesting that OMB extend its approval of this information collection, with
modifications, for three years.

1

PBGC has made updating, clarifying, simplifying, and editorial changes to the existing
forms and instructions, including adding information on recent changes to ERISA and the
Internal Revenue Code:
•

Statutory hybrid plans. The Pension Protection Act of 2006 (PPA 2006) added sections
411(a)(13) and 411(b)(5) to the Code, and sections 204(b)(5) and 204(f)(1) to ERISA, for
statutory hybrid plans, such as cash balance plans. These statutory changes affect how
plan administrators determine benefits when statutory hybrid plans terminate.

•

Disclosure of termination information. Under a PPA 2006 provision, plan administrators
of plans terminating in a distress termination must provide certain third parties upon
request with any information provided to PBGC in connection with the proposed
termination. This provision is applicable to any distress termination for which the notice
of intent to terminate is filed after August 17, 2006.

•

Benefit restrictions. For plan years beginning in 2008, plan administrators must comply
with the requirements of Code § 436, which places restrictions on certain benefit
accruals, plan amendments and payments, based on the plan's adjusted funding target
attainment percentage (AFTAP). Final regulations under Code § 436 were published in
the Federal Register on October 15, 2009, 74 Fed. Reg. 53004; see Treas. Reg. §1.436-1.
For distress terminations, PBGC has added information requirements related to the Code

§ 436 benefit restrictions, including the submission of copies of Adjusted Funding Target
Attainment Percentage (AFTAP) certifications and an explanation of any time periods in which
any of the restrictions applied or, in some cases, did not apply.

2

PBGC has also added a statement that terminating plans must comply with the
requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994
(USERRA) and, in calculating estimated benefit amounts while administering a plan during the
distress termination process, with PBGC’s final rule on USERRA Benefits Under Title IV of
ERISA, 74 Fed. Reg. 59093 (Nov. 17, 2009) (29 CFR § 4022.11).
2. Use of information.
a. Information required. Certain information must be provided to PBGC and to third
parties (e.g., participants and beneficiaries) for all types of terminations. For both standard and
distress terminations, the plan administrator is required to submit to PBGC certain identifying
information, confirmation that the required notices have been properly issued to plan participants
and beneficiaries, and the level of funding of the plan. The plan administrator must also provide
certain information to third parties, including a notice of intent to terminate.
Standard terminations and sufficient distress terminations. In the case of a standard
termination (i.e., the plan is sufficient for all benefits) or a “sufficient” distress termination (i.e.,
the plan is sufficient for at least all guaranteed benefits and that closes out in a private sector
distribution in the same manner as a standard termination), the plan administrator must provide
PBGC and third parties with certain additional information relating to the distribution of plan
assets. In particular, the plan administrator must provide PBGC summary information relating to
the benefits distributed and, for a standard termination, certain information regarding residual
assets. The plan administrator is also required to provide certain additional information to third
parties, including: (1) a notice of plan benefits (for standard terminations) or of benefit
distribution (for distress terminations); (2) annuity information, including information on identity

3

of insurers and on state guaranty association coverage of annuities; and (3) if applicable, an
annuity contract or certificate.
Distress terminations. For distress terminations, the plan administrator must also provide
PBGC with information demonstrating that each contributing sponsor, and each member of each
contributing sponsor’s controlled group, meets one of the statutory distress tests (see section
4041(c)(2)(B) of ERISA and 29 CFR ' 4041.41(c)). In addition, for insufficient distress
terminations, the plan administrator must submit certain participant and beneficiary information
to enable PBGC to pay benefits as required under Title IV of ERISA. PBGC needs the new
information related to the Code § 436 benefit restrictions to determine whether benefits were
correctly determined, and to determine the benefits to pay if the plan is trusteed.
Missing participants. If an annuity is purchased for some or all missing participants, the
plan administrator must file identifying information about the insurer, the total number of
annuities purchased, the amount transferred to the insurer, and each missing participant's annuity
certificate number and monthly benefit. The plan administrator must file Schedule MP and
Attachment A as attachments to either Form 501 (if the termination is a standard termination) or
Form 602 (if the termination is a sufficient distress termination).
If an annuity is not purchased for a missing participant, the plan administrator must
transfer an amount (the "designated benefit") to PBGC for the participant. The plan
administrator must file Schedule MP and, for each missing participant for whom a designated
benefit is transferred, a separate Attachment B. Attachment B provides identifying information
about the missing participant, describes the type and form of the missing participant's benefit,
and reports the amounts being transferred to PBGC. As with the Attachment A, the Schedule
MP and Attachments B are filed as attachments to either the Form 501 or Form 602.
4

In either case, the plan administrator must have conducted a diligent search (as defined in
PBGC regulations) and been unable to locate the participant before the individual may be treated
as a missing participant.
The plan administrator must also file a Schedule MP (with applicable attachments) to
report payment to PBGC or the purchase of an annuity for a missing participant who is owed
residual assets. In addition, the plan administrator may be required to file a Schedule MP (with
applicable attachments) pursuant to a PBGC audit of a plan termination.
b. PBGC and third party need for information. PBGC needs, and has routinely used, the
information required to be submitted to it to: (1) determine whether the statutory and regulatory
requirements for a standard or distress termination have been met; (2) in a standard termination,
determine whether the reversion of any plan assets to the employer meets the requirements of
Title IV of ERISA; (3) in a distress termination, determine whether the plan should be trusteed
by PBGC or permitted to close out in a private-sector distribution; (4) in a distress termination,
estimate the amount of employer liability to PBGC under section 4062 of ERISA and 29 CFR
Part 4068; and (5) locate and pay missing participants or, where annuities were purchased for
missing participants, refer them to the insurer who issued the annuities to be paid. PBGC refers
to the Department of Labor the identity-of-insurer information submitted as part of the postdistribution certification, and may audit insurer selections for compliance with the fiduciary
standards of Title I of ERISA.
Participants need the information required to be disclosed to them so that they will be
informed about the status of the proposed termination of their plan and about their benefits upon
termination.

5

The information on state guaranty association coverage helps participants and
beneficiaries understand the importance of the plan administrator’s selection of an insurer and
enables them to make a better informed choice about whether to elect a lump sum or an annuity.
In the case of a missing participant for whom an annuity is purchased from an insurance
company, PBGC uses the retirement benefit information to respond to inquiries and to target its
search efforts.
3. Reducing the burden and information technology. In certain circumstances, the
regulations allow electronic filing with PBGC and electronic issuance of notices to third parties.
The Missing Participants Filing Package provides instructions for those who want to use wire
transfers for payments for missing participants.
In addition, PBGC is continuing to work to make all of the termination and missing
participants forms available on its Web site as fillable and savable PDF documents. PBGC
expects that fillable and savable PDF versions of the forms will reduce the amount of time
required of respondents to correct and complete the forms. It also will enhance the forms'
accuracy, thereby saving PBGC time as well.
4. Identifying duplication. A limited amount of the information required to be submitted
to PBGC in response to this collection of information may already be in the possession of the
government. However, there is no timely and reliable way to locate the required documents,
particularly since the reporting entity may have changed its name or tax identifying number, or
submitted to the government some, but not all, of the documents required under this regulation.
In most cases, it would take a respondent more time to assist PBGC in tracking down and
verifying documents in agencies' files than to simply submit the information to PBGC.

6

Participants and beneficiaries may find information similar to some of the information
required to be disclosed under the termination regulation (e.g., a description of PBGC's
guarantee) in other documents provided at various times to them or to other Federal agencies.
However, such information is scattered throughout a number of documents, and it is presented
and organized to accomplish other purposes. One purpose of the termination regulation is to
ensure that affected parties receive meaningful, timely, and useful information. Requiring
participants and beneficiaries to retrieve bits of information that have been provided to them or
to the government at other times, for other purposes, would be inconsistent with this purpose.
5. Reducing the burden on small entities. Inapplicable.
6. Consequences of less frequent reporting. Since this collection of information occurs
only with respect to a proposed plan termination and, therefore, normally occurs only once in the
life of a pension plan, the collection cannot be conducted less frequently unless the information
were not collected at all. If this information were not collected at all, PBGC would not be able to
fulfill its statutory mandate to oversee the termination of plans covered by PBGC’s insurance
program, and participants and beneficiaries would not receive meaningful, timely, and useful
information about the status of their plan's proposed termination or about their benefits upon
termination.
7. Special circumstances. Upon review of a standard termination notice, PBGC may, but
very rarely does, require the plan administrator to submit additional information relevant to the
termination proceeding. The additional information normally is due within 30 days after PBGC
makes a written request. PBGC may in its discretion shorten the time period for responding to a
written request for additional information, but only where it determines that the interests of
PBGC or participants may be prejudiced by a delay in the receipt of the information. To monitor
7

and facilitate compliance, the time period runs from the date of the request rather than the date of
receipt.
In a distress termination proceeding, information in addition to the notice of intent to
terminate or the distress termination notice may be due in a shorter time period, so that PBGC
may take prompt action (e.g., institution of involuntary termination or trusteeship proceedings) to
protect participants or premium payers.
Respondents are required to retain certain records for six years. PBGC notes that most or
all of the records required to be retained under the termination regulation already must be
retained for six years for other purposes under section 107 of Title I of ERISA. Retention of
records for six years is necessary because PBGC has at least six years following a termination to
bring a civil action to enforce the provisions of Title IV of ERISA with respect to that
termination (see section 4003(e)(6) of ERISA).
8. Outside input. The PBGC published a 60-day notice on May 26, 2010, 75 Fed. Reg.
29589. No public comments were received in response to the 60-day notice. PBGC published a
30-day notice on August 30, 2010, 75 Fed. Reg. 53000.
9. Payments and gifts. There are no payments or gifts made 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 Parts 4901 and 4902, respectively.
11. Sensitive questions. This collection of information does not call for submission of
information of a sensitive or private nature.

8

12. Burden on the public. PBGC based its estimates in items 12 and 13 on its
experience. For purposes of this submission, a termination constitutes a “response.”
PBGC's burden estimates assume that much of the plan termination work will be done for
Internal Revenue Service purposes (e.g., Forms 5310 and 6088). In addition, much of the
termination work will be done in the normal course of closing out a plan.
Standard terminations.
PBGC estimates that it will process 1,366 standard terminations annually over the next
three years. PBGC anticipates that 1,216 of the plans terminating in a standard termination will
be small plans (100 or fewer participants) and 150 of the plans will be mid-sized or large plans
(more than 100 participants). Very large plans rarely terminate as standard terminations.
PBGC estimates that, for a standard termination, it will take an average of 5 hours and 10
minutes for each small plan and 10 hours and 40 minutes for each mid-sized or large plan to
prepare and file the required information with PBGC and to prepare and distribute the third-party
notices to affected parties. The total number of burden hours is 7,887 hours: (1,216 small plans x
5 1/6 hours per plan = 6,287 hours) + (150 medium and large plans x 10 2/3 hours per plan =
1,600 hours).
In addition, PBGC estimates that about 179 of the 1,366 plans terminating in a standard
termination will have missing participants. The estimates are high enough to include the few, if
any, distress terminations that are sufficient (i.e., those that distribute in accordance with
standard termination rules).
PBGC estimates that each year about 37 plans with missing participants will purchase
annuities for these missing participants, 136 plans will transfer these missing participants'
benefits to PBGC, and 7 will do both. PBGC estimates that the average time required for a plan
9

to comply with the collection of information requirements relating to missing participants will be
one hour for a plan that purchases annuities for its missing participants and 2.5 hours for a plan
transferring benefits of missing participants to PBGC. The total annual burden hours associated
with missing participants is 402 hours: (37 plans purchasing annuities x 1 hour = 37 hours) +
(136 plans transferring benefits x 2.5 hours = 340 hours) + (7 plans doing both x 3.5 hours = 25
hours, rounded). The burden of associated recordkeeping requirements is too small to require
independent estimation and is included in the foregoing figures.
The total annual burden for standard terminations will be 8,289 hours (7,887 hours for
standard terminations + 402 hours for missing participants). PBGC assumes that 20 percent of
the work will be performed by the respondent and that 80 percent will be contracted to third
parties. Thus, the total average annual burden for respondents will be 1,658 hours (.20 x 8,289
hours). The average annual burden per respondent will be 1.21 hours (1,658 hours/1,366 plans).
Distress terminations. PBGC estimates 13 terminations will be concluded as distress
terminations annually. PBGC expects that five of the plans terminating in a distress termination
will be small plans and that 8 of the plans will be mid-sized or large plans. PBGC anticipates
that four of the plans terminating in a distress termination will terminate under distress criteria 1
or 2 (liquidation or reorganization in bankruptcy or insolvency proceedings), and that nine will
terminate under distress criteria 3 or 4 (termination required to enable payment of debts or to
avoid unreasonable pension costs). Any burden associated with missing participants in sufficient
distress terminations is accounted for in the burden estimates for missing participants in standard
terminations.
PBGC estimates that it will take an average of 31.4 hours for a small plan and 278.5
hours for a mid-sized or large plan to prepare and file the required information with PBGC and
10

to prepare and distribute the third-party notices to affected parties. In addition, all plans that
terminate under distress criteria 3 or 4 will incur an additional burden of 14.4 hours per plan.
The total annual burden for distress terminations is estimated to be 2,515 hours: (31.4 hours x 5
= 157 hours) + (278.5 hours x 8 = 2,228 hours) + (14.4 hours x 9 = 130 hours, rounded). PBGC
estimates that the respondents will perform 20 percent of the work, 503hours, and contractors
will perform 80 percent, 2,012 hours. The hourly burden on respondents averages 38.69 hours
per plan (503/13) and breaks down to an average burden per plan of:
Plans with 100 or fewer participants -Bankruptcy or insolvency ......................................................................... 6.3 hours
Other distress criteria ................................................................................. 9.2 hours
Plans with more than 100 participants -Bankruptcy or insolvency ........................................................................ 55.7 hours
Other distress criteria ............................................................................... 58.6 hours
Total hourly burden on respondents. The annual burden of complying with this
collection of information for both standard and distress terminations over the next three years
will average 2,161 hours for respondents (1,658 hours for standard terminations (including
missing participant time) + 503 hours for distress terminations).
13. Cost.
Standard terminations. As stated in Item 12, the total annual burden for standard
terminations is estimated to be 8,289 hours. PBGC estimates that the respondents will perform
20 percent of the work and contractors will perform 80 percent (6,631 hours). Assuming an
average rate of $350 per hour for contracted services (including professional time, support
assistance, overhead, and other costs, but excluding postage), PBGC estimates that the annual
cost to plans for contracted services will be $2,320,850 (6,631 hours x $350 per hour). The
average cost per plan for contracted services will be $1,699 ($2,320,850/1,366 plans).
11

Distress terminations. As stated in Item 12, the total annual burden for distress
terminations is estimated to be 2,515 hours. PBGC estimates that the respondents will perform
20 percent of the work, 503 hours, and contractors will perform 80 percent (2,012 hours).
Assuming an average rate of $350 per hour for contracted services, PBGC estimates that the
annual cost to plans for contracted services will be $704,200 (2,012 hours x $350 per hour). The
average cost per plan for contracted services will be $54,169 ($704,200/13 plans).
Total cost to plans. The above cost estimates do not include postage, which PBGC
estimates to be no more than $73,391 annually. PBGC estimates the annual combined cost to
plans for standard and distress terminations will be $3,098,441 ($ 2,320,850 contracted costs for
standard + $704,200 contracted costs for distress + $73,391 postage).
14. Cost to federal government.
Standard terminations. PBGC estimates that PBGC staff time required to process
standard termination filings will average 1.6 hours per plan, before taking missing participants
into account. For plans with missing participants, an estimated additional 27.33 hours will be
required to process a plan, whether the plan purchases annuities for missing participants or
transfers missing participants' benefits to PBGC. In addition, annual search and postage costs
over the projected period that searches will continue for missing participants taken in each year
are estimated at $125 for each plan with missing participants.
At a blended rate of $44 per hour for staff time, PBGC estimates its annual cost for
standard terminations (including costs of plans with missing participants) will be $333,807: $44
per hour times 7,078 hours = $311,432, plus $22,375 (179 missing participant plans x $125).
The 7,078 hours derives from 2,186 hours for standard terminations (1,366 plans x 1.6 hours per

12

plan), and 4,892 hours for plans with missing participants (179 missing participant plans x 27.33
hour per plan).
Distress terminations. PBGC estimates that PBGC staff time required to process distress
terminations will be 140.25 hours for a filing under criteria 1 and 2 (liquidation or reorganization
in bankruptcy or insolvency proceedings), and 220.25 hours for a filing under criteria 3 and 4
(termination required to enable payment of debts or to avoid unreasonable pension costs). At a
blended rate of $86 per hour for staff time, PBGC estimates its annual cost for distress
terminations will be $218,698: $86 per hour x 2,543 hours. The 2,543 hours derives from 561
hours for plans terminating under criteria 1 or 2 (4 plans x 140.25 hours) and 1,982 hours for
plans terminating under criteria 3 or 4 (9 plans x 220.25 hours).
Total PBGC costs. PBGC estimates its annual combined cost for standard (including
costs of plans with missing participants) and distress terminations will be $552,505 ($333,807
standard + $218,698 distress).
15. Change in burden. The change in the estimated annual burden of this collection of
information (from 2,081 hours in the current OMB inventory to 2,161 hours requested) is
primarily attributable to an upward revision in PBGC's estimate of the number of terminations
per year. The expected increase is for reasons unrelated to program changes.
For standard terminations, PBGC has (1) increased its estimate of the number of
terminating plans that will be large plans by over 50% (from 92 to 150), (2) increased its
estimate of the number of plans with missing participants (from 152 to 179), and (3) increased its
estimate of the number of plans transferring missing participants’ benefits to PBGC (from 122 to
136). The net effect of these revised estimates, which are unrelated to program changes, is a

13

very slight increase, from 1.19 to 1.21 hours, in the estimated amount of time per response for
standard terminations.
For distress terminations, PBGC has (1) slightly increased its estimate of the total number
of terminating plans (from 12 to 13), (2) increased its estimate of the number of plans
terminating under distress criteria 3 or 4 (from one to nine), and (3) increased its estimate of the
proportion of terminated plans that will be small plans from 8% (one of 12 distress terminations
in 2007) to 38% (5 of 13). The net effect of these revised estimates, which are unrelated to
program changes, is a decrease, from 51.67 hours to 38.69 hours, in the estimated amount of
time per response for distress terminations. This change is primarily due to the greater proportion
of small plans terminating in distress terminations. With their lower associated hourly burden –
31.4 hours vs. 278.5 hours – the greater proportion of small plans brought down the average for
all plans.
Coupled with the increase in the average hourly rate paid to outside contractors (from
$325 to $350), the estimated annual cost burden of this collection, including postage has
increased from $2,766,679 in the current OMB inventory to the $3,098,441 reported in this
submission.
16. Publication. There are no plans for tabulation or publication.
17. Display of expiration dates. PBGC is not seeking approval to not display the
expiration date for OMB approval of the information collection.
18. Exception to certification statement. There are no exceptions to the certification
statement.

14