2013 Form T sptgstmt.d3

Supporting Statement for Paperwork Reduction Act Submission

AGENCY:

Pension Benefit Guaranty Corporation

TITLE:

Termination Premium

STATUS:

Currently approved collection (modified)

1. Need for collection. The Pension Benefit Guaranty Corporation (PBGC) administers
the pension plan termination insurance program under title IV of the Employee Retirement
Income Security Act of 1974 (ERISA). Section 4006(a)(7) of ERISA provides for a “termination
premium” (in addition to the flat-rate and variable-rate premiums under section 4006(a)(3)(A)
and (E) of ERISA) that is payable for three years following certain distress and involuntary plan
terminations. PBGC’s regulations on Premium Rates (29 CFR part 4006) and Payment of
Premiums (29 CFR part 4007) implement the termination premium. Sections 4007.3 and
4007.13(b) of the premium payment regulation require the filing of termination premium
information and payments with PBGC. PBGC has promulgated Form T and instructions for
paying the termination premium.
In general, the termination premium applies where a single-employer plan terminates in a
distress termination under ERISA section 4041(c) (unless contributing sponsors and controlled
group members meet the bankruptcy liquidation requirements of ERISA section
4041(c)(2)(B)(i)) or in an involuntary termination under ERISA section 4042, and the
termination date under section 4048 of ERISA is after 2005. The termination premium does not
apply in certain cases where termination occurs during a bankruptcy proceeding filed before
October 18, 2005.

-2The termination premium is payable for three years. The same amount is payable each
year. The amount of each payment is based on the number of participants in the plan as of the
day before the termination date. In general, the amount of each payment is equal to $1,250 times
the number of participants. However, the rate is increased from $1,250 to $2,500 in certain cases
involving commercial airline or airline catering service plans. The termination premium is due
on the 30th day of each of three consecutive 12-month periods. The first 12-month period
generally begins shortly after the termination date or after the conclusion of bankruptcy
proceedings in certain cases.
The termination premium and related information must be filed by a person liable for the
termination premium. The persons liable for the termination premium are contributing sponsors
and members of their controlled groups, determined on the day before the plan termination date.
Interest on late termination premiums is charged at the rate imposed under section 6601(a) of the
Internal Revenue Code, compounded daily, from the due date to the payment date. Penalties
based on facts and circumstances may be assessed both for failure to timely pay the termination
premium and for failure to timely file required related information and may be waived in
appropriate circumstances. A penalty for late payment will not exceed the amount of termination
premium paid late. Section 4007.10 of the premium payment regulation requires the retention of
records supporting or validating the computation of premiums paid and requires that the records
be made available to PBGC.
In connection with this request for extension of OMB approval, PBGC proposes to
eliminate from Form T and instructions the requirement to report the method of payment, which
helps PBGC match up a form and payment that are filed separately. PBGC has learned that this

-3reporting requirement may discourage submission of Form T where the required payment is not
being made (for example, where the plan sponsor is bankrupt). PBGC is also making minor
editorial changes to the form and instructions.
2. Use of information. The information in Form T identifies the plan for which a
termination premium is paid to PBGC and the persons liable for the premium and provides a
basis for verifying the amount of the premium. That information and the retained records may be
used for audit purposes.
3. Information technology. PBGC has not developed information technology
applications to deal with termination premiums. The volume of filings is not high enough to
justify development of an electronic filing method. Termination premium filings are exempt
from mandatory premium e-filing under the premium payment regulation. Form T is designed to
be filled out on a computer screen, but it must be printed out for signature and submission.
4. Duplicate or similar information. The information required in termination premium
filings is not available from any other source. Although a plan’s participant count and the
identity of members of its sponsor group may be reported as of other dates for other purposes,
this information is subject to change over time, and only Form T requests the information as of
the day before the plan’s termination date.
5. Reducing the burden on small entities. No special methods are used to reduce burden
on small entities. The termination premium does not affect a substantial number of entities of
any size.
6. Consequence of reduced collection. By statute, termination premiums are payable
once a year for three years. Form T filings are required on the same schedule. Collecting the

-4information on a different schedule would impair the proper administration of the pension plan
termination insurance program.
7. Special circumstances. The premium payment regulation requires “designated
recordkeepers” to retain information necessary to support termination 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 under ERISA section 4003(e)(6). The six-year
period also corresponds to the record retention requirement under title I (section 107) of ERISA.
In unusual circumstances, ' 4007.10 of the premium payment regulation may require
submission of information in less than 30 days. This provision would accommodate a situation
where PBGC determined that the payment of the termination premium (or any associated interest
or penalty) would otherwise be jeopardized, e.g., because a statutory limitations period was about
to expire.
In other respects, this collection of information is conducted in a manner consistent with
5 CFR ' 1320.5(d)(2).
8. Outside input. On September 9, 2013 (at 78 FR 55120), PBGC published a notice
soliciting public comment on this collection of information pursuant to 5 CFR § 1320.8(d). No
public comments were received in response to the notice.
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.

-5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. Three years ago, when PBGC last requested extension of
OMB approval of this information collection, it was receiving essentially no filings on Form T
and assumed for purposes of its request for OMB approval of the Form T that it would receive
only one first-year, one second-year, and one third-year termination premium filing annually.
Sponsors of terminating plans subject to the termination premium have begun using Form T, and
in 2012 PBGC received 11 first-year filings, 5 second-year filings, and 2 third-year filings. For
2013, PBGC estimates that it will receive 15 first-year filings, 11 second-year filings, and 5 thirdyear filings.
For purposes of estimating burden, PBGC assumes continuation of the recent trend —
about five more first-year filings each year than the year before. In other words, PBGC assumes
that the number of first-, second-, and third-year filings will be: for 2014, 20, 15, and 11; for
2015, 25, 20, and 15; and for 2016, 30, 25, and 20. Over the next three years, then, PBGC
expects to receive on average 25 first-year, 20 second-year, and 15 third-year filings each year
from a total of 60 respondents.
Three years ago, PBGC estimated that it would take about 30 hours to prepare a first-year
filing and about 10 hours for a second- or third-year filing, including recordkeeping. PBGC
assumed that 95 percent of the work would be contracted out and thus estimated the annual hour
burden as two-and-a-half hours.
For this submission, PBGC contacted a filer and a pension professional who has prepared
several Form T filings. Both people have prepared second- and third-year filings as well as first-

-6year filings. Both people estimated the hour burden for all three filings as about 10 minutes.
Both said that all the records they consulted to fill out Form T were maintained for other
purposes.
For the 60 filings that PBGC estimates it will receive each year, therefore, the estimated
hour burden is 10 hours. The dollar equivalent of 10 hours at $350 an hour is $3,500.
13. Cost burden on the public. The filer that PBGC contacted had no controlled group
information to report and incurred no dollar burden. The pension professional that PBGC
contacted had clients with controlled group information to report and estimated billings of $240
for a first-year filing and $80 for a second- or third-year filing. To be conservative, PBGC
assumes that all filers incur expenses of this magnitude. PBGC thus estimates the annual cost
burden of Form T is $6,000 (25 filings at $240 apiece) for first-year filings and $2,800 (35 filings
at $80 apiece) for second- and third-year filings, a total of $8,800.
14. Costs to the Federal government. PBGC estimates that the annual cost to the Federal
Government of processing this collection of information is about $5,400 (about $90 per filing).
15. Change in burden. Estimated hour and cost burden on the public have gone up from
two-and-a-half hours to ten hours and down from $16,625 to $8,800 since this collection of
information was submitted for OMB approval three years ago. The change reflects a higher
estimate of the number of filings, based on PBGC’s experience, and a lower estimate of per-plan
burden, based on information from persons actually involved in filing Form T.
16. Publication plans. PBGC does not plan to publish the results of this collection of
information.

-717. Display of expiration date. PBGC is not requesting approval to omit from Form T
the date OMB=s paperwork approval expires.
18. Exceptions to certification statement. There are no exceptions to the certification
statement for this submission.