FlatRate SptgStmt.d3

Supporting Statement for Paperwork Reduction Act Submission

AGENCY:

Pension Benefit Guaranty Corporation

TITLE:

Payment of Premiums (29 CFR Part 4007) and PBGC forms and instructions
thereunder

STATUS:

Request for approval of revision of currently approved collection (OMB control
number 1212-0009; expires October 31, 2015)

CONTACT: Catherine B Klion (326-4400, ext. 3041) or Deborah C Murphy (326-4400, ext. 3451)
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-related data and
information about plan identity, status, and events).
Premium information is filed electronically using “My Plan Administration Account”
(“My PAA”) through PBGC’s web site. Premium filings must be made annually. Under
§ 4007.10 of the premium payment regulation, plan administrators are required to retain records
about premiums and information submitted in premium filings.
Section 4006 of ERISA, implemented by PBGC’s regulation on Premium Rates (29 CFR
Part 4006), sets premium rates. All plans covered by Title IV of ERISA pay a flat-rate perparticipant premium. An underfunded single-employer plan also pays a variable-rate premium
(VRP) based on the plan’s unfunded vested benefits (UVBs). The VRP is subject to a cap added

by the Moving Ahead for Progress in the 21st Century Act (MAP-21). Premium rates and the
level of the cap are adjusted for inflation pursuant to MAP-21.
On July 23, 2013, PBGC published (at 78 FR 44056) a proposal to amend its premium
regulations in ways that would affect premium filings. PBGC’s proposed rule describes the
changes and the reasons and effects associated with them.
Premium due dates heretofore have depended on plan size. Large plans have been
required to pay the flat-rate premium early in the premium payment year and the VRP later in the
year. Mid-size plans have been required to pay both the flat- and variable-rate premiums by that
same later due date. Small plans have been required to pay the flat- and variable-rate premiums
in the following year. PBGC proposed to simplify the due-date rules by providing that all annual
premiums for plans of all sizes would be due on the same day in the premium payment year —
the VRP due date (October 15 for calendar-year plans) that applied to all premium filers before
PBGC amended its regulations, effective 2008, to accommodate statutory changes under the
Pension Protection Act of 2006. The proposal also included elimination of the elaborate system
of penalty safe harbors associated with the early flat-rate premium due date for large plans, as
well as other changes.
PBGC is now finalizing just the part of the proposal that eliminates the early flat-rate
premium due date for large plans (and the related penalty safe harbor rules) so that large plans
can rely on it in delaying their flat-rate premium payments. PBGC expects to finalize the rest of
the proposal in time to provide guidance for all plans to file by October 15, 2014.
In connection with the latter rulemaking action, PBGC will seek Office of Management
and Budget approval of 2014 premium filing forms and instructions that reflect all of the

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changes. Until then, PBGC is simply modifying its existing premium forms and instructions to
provide for a notification to premium filers that early flat-rate premium filings have been
discontinued for the 2014 plan year, and requesting OMB approval of the existing premium
forms and instructions as so modified.
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. Electronic filing is required under PBGC’s premium
regulations. PBGC provides for premium filing through the “My PAA” electronic facility on
PBGC’s Web site. In addition, PBGC offers two electronic filing options that allow filers to 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 opt to pay premiums
and receive premium refunds by paper check or electronic funds transfer.
4. Duplicate or similar information. 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.

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VRP Data
In some cases, asset and/or liability figures on which the VRP is based may also be
reported on Schedule SB to Form 5500, the annual report form filed with the Internal Revenue
Service, Department of Labor, and PBGC. But 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
Plans can be “frozen” in several different ways (for example, by ceasing accrual of
benefits or admission of new participants). 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 because
it needs the information as early as possible for the small group of 4010 filers, and the
information is reported in section 4010 filings before it is reported in premium filings. PBGC
has considered exempting 4010 filers from reporting this information again in the premium
filing, but concluded that there would be a control problem if the agency’s premium database
were not internally consistent.
Form 5500 collects general information on whether a plan has been frozen, but only for
the most severe type of freeze (when all accruals cease for all participants) and only for the year
before the current year. The Form 5500 data are thus too little and too late for PBGC’s purposes.

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Plan transfer data
PBGC’s plan transfer questions ask about transfers to and from other plans, as well as
transfer types (merger, consolidation, or spin-off), to save PBGC (and filers) the administrative
burden of determining why plans have failed to file when expected or have filed information
inexplicably different from the previous year. Form 5500 collects information about assets
and/or liabilities transferred from a plan to another plan (or plans) during the plan year, but not
data on transfer types. Plans must submit information to the Internal Revenue Service about
transfers to and from other plans on Form 5310-A, but only for non-de minimis transactions;
PBGC needs this information regardless of transaction size. Furthermore, Form 5310-A
information is not available to PBGC as promptly as PBGC needs it.
Final filing data
Form 5500 collects general information on whether a plan was terminated in a standard
or distress termination; whether PBGC became trustee of a plan; and whether a plan is covered
by PBGC. However, the Form 5500 data often do not adequately explain why filings have
ceased in cases where plans merge out of existence. In addition, terminated or merged plans
often do not submit a final Form 5500, especially when the final plan year is short. Thus, these
sources of information on plan disappearances do not adequately satisfy PBGC’s need to know
why plans have stopped filing.
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 some small plans. (The treatment of small plans will change when PBGC finalizes other
provisions of its proposed rule.)

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The VRP is capped for certain plans of small employers (those with 25 or fewer
employees). (This cap is generally lower than the MAP-21 VRP cap that applies to all VRP
filers.) Plans that qualify for the small-employer 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.
PBGC allows 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 inconvenient. In some cases, therefore, plans may make two filings a year, rather than one.
7. Special circumstances. PBGC requires plan administrators to retain information
necessary to support premium filings for six years. The six-year period corresponds to the record
retention requirement of Title I of ERISA and is needed to ensure that records are available
during the statutory limitations period within which PBGC may bring an action to collect
premiums.
In unusual circumstances, PBGC may require submission of information in less than
30 days in connection with an audit. This would accommodate a situation where PBGC
determines that its interests may be prejudiced by a delay in the receipt of the information, such

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as where 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. PBGC’s proposed rule to amend the premium regulations as described
above informed the public of PBGC’s plan to eliminate the early large-plan flat-rate premium
due date. PBGC’s final rule eliminating the early large-plan flat-rate premium due date informs
the public that PBGC will give notice that the early filings are discontinued for 2014. (PBGC’s
proposal also informed the public of a request for OMB review and approval of complete new
2014 forms and instructions reflecting all the provisions of the proposed rule.)
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. Sensitive questions. This collection of information does not call for submission of
information of a personal nature.
12. Hour burden on the public. PBGC first re-estimated the burden of the unamended
regulation, then estimated the effect of the amendment.
Re-estimated Burden of the Unamended Regulation
PBGC has re-estimated the burden of the unamended premium payment regulation (that
is, including the early-filing requirement for large plans) as follows:

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Hours to Complete Premium Filing — Unamended Regulation
Type of Plan
Number of participants

< 25
----

Single-employer
Plans
25-99 100-499
-------

≥ 500
4,530
2.5
11,325

Multiemployer
Plans
< 500
≥ 500
-1,127
-2.5
-2,818

All
Plans
-5,657
-14,143

296
3.5
1,036

3,236
-11,903

# of plans
Hours per plan
Early Flat-rate Filing
Total hours
Comprehensive Premium Filing
# of plans
• Plans that are exempt
Hours per plan
from VRP
Total hours

1,559
3.5
5,457

173
3.5
606

56
3.5
196

25
4.0
100

• Plans paying capped
VRP & not reporting
UVBs

# of plans
Hours per plan
Total hours

2,447
3.5
8,565

20
3.5
70

----

----

----

----

2,467
-8,635

• Plans reporting UVBs

# of plans
6,903
Hours per plan
9.0
Total hours
62,127

4,223
8.0
33,784

4,398
7.0
30,786

4,505
7.5
33,788

----

----

20,029
-160,485

76,149

34,460

30,982

45,213

1,036

7,326

195,166

Total Hours

1,127
4.0
4,508

Based on inquiries made to pension practitioners and filing data available as of October
2012, PBGC now estimates that, in the absence of the amendment eliminating the early flat-rate
due date for large plans, about 25,700 respondents would make about 31,400 filings requiring
about 195,200 hours to prepare. The proportion of that time contracted out varies widely, with
smaller plans generally contracting out virtually all of it and some large plans performing all the
work in-house. Since most filers are smaller plans, PBGC makes a simplifying assumption that
95 percent of the time is contracted out. Thus PBGC now estimates that the hour burden of the
unamended regulation would be about 9,800 hours. The dollar equivalent of this hour burden,
based on an assumed average hourly rate of $350 for actuarial services, would be $3,400,000.
Estimated Burden of the Amended Regulation
Under the premium regulations as amended to eliminate the early large-plan flat-rate
premium due date, however, the burden for large plans will be less, not only because they will no
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longer have to do the early flat-rate filing, but also because they will no longer have to reconcile
that earlier filing when they do their comprehensive premium filing. PBGC estimates that the
burden for large plans (those with 500 or more participants) will decrease by about three hours
per plan or about 17,000 hours in total (including both multiemployer and single-employer
plans). Thus the estimated total burden for all plans is reduced from about 195,200 hours to
about 178,200 hours, as follows:
Hours to Complete Premium Filing — Amended Regulation
Type of Plan
< 25

Single-employer
Plans
25-99 100-499

≥ 500

Multiemployer
Plans
< 500
≥ 500

All
Plans
--

296
3.5
1,036

3,236
-11,328

Number of participants
Comprehensive Premium Filing
# of plans
• Plans that are exempt
Hours per plan
from VRP
Total hours

1,559
3.5
5,457

173
3.5
606

56
3.5
196

25
3.5
88

• Plans paying capped
VRP & not reporting
UVBs

# of plans
Hours per plan
Total hours

2,447
3.5
8,565

20
3.5
70

----

----

----

----

2,467
-8,635

• Plans reporting UVBs

# of plans
6,903
Hours per plan
9.0
Total hours
62,127

4,223
8.0
33,784

4,398
7.0
30,786

4,505
7.0
31,535

----

----

20,029
-158,232

76,149

34,460

30,982

31,623

1,036

3,945

178,195

Total Hours

1,127
3.5
3,945

PBGC therefore estimates that the hour burden of the amended regulation will be about
8,900 hours (5 percent of 178,200). The dollar equivalent of this hour burden is $3,100,000.
The recordkeeping requirement for premium information is not expected to impose any
significant burden, 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.

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13. Cost burden on the public. If 169,300 hours of filing preparation work (about 95
percent of an estimated 178,200 hours) is contracted out, then at an assumed hourly rate of $350
for actuarial services, the estimated hour burden on the public is approximately $59,300,000
(169,300 hours at $350 per hour). (Without the elimination of the early large-plan flat-rate
premium filing, the estimated hours contracted out would be about 185,400 (95 percent of
195,200) and the estimated dollar burden would be about $64,900,000.)
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 burden of this collection of
information from about 8,200 hours and about $54,387,000 (the currently approved burden) to
about 8,900 hours and about $59,300,000 (the burden for which approval is requested) is
attributable to an upward adjustment of about 1,550 hours and about $10,600,000 due to reestimation and a downward change of about 850 hours and about $5,700,000 resulting from the
elimination of the early large-plan flat-rate filing.
The upward adjustment and downward change both reflect remarks made by practicing
actuaries when the topic of premium due dates and their impact on the burden of filing was
raised during a session on PBGC premiums at an actuaries’ meeting. Heretofore, PBGC has
relied on burden estimates by PBGC staff actuaries familiar with the work required to prepare
premium filings. PBGC believes that the views of actuaries currently in private practice are an
appropriate “real-world” source to draw from in estimating the burden of this information
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. 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.

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