Supporting Statement for Paperwork Reduction Act Submission
AGENCY: Pension Benefit Guaranty Corporation
TITLE: Termination of Single Employer Plans; 29 CFR part 4041; PBGC Forms 500-501, 600-602, Schedule MP and attachments
STATUS: Request for modification of a currently-approved collection of information (OMB control No. 1212‑0036; expires March 31, 2023)
CONTACT: Melissa Rifkin, 202-229-6563
1. Need for collection. Under section 4041 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), a single-employer pension plan may terminate voluntarily only if it satisfies the requirements for either a standard or a distress termination. Pursuant to section 4041(b) of ERISA, 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 this renewal, PBGC is modifying the Standard Termination Filing Instructions. It is clarifying that certain documents, if applicable to the filing, must be included with the submission to PBGC. Those documents are: the Notice of Plan Benefits (referenced on page 13), the commitment by a contributing sponsor or controlled group member (referenced on page 27), and the majority owner waiver (referenced on page 29). To the Form 501 instructions, PBGC is adding a requirement to include an explanation of the individuals who received no distribution and adding a requirement to include in line 9(c)(2) the value of other amounts due for missing participants (in addition to the benefit transfer amount), such as late payment interest and administrative fees reported on the Form MP-100. PBGC is making other clarifying edits as well.
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., a plan that is sufficient for all benefits) or a “sufficient” distress termination (i.e., a plan that is sufficient for at least all guaranteed benefits but not for all benefits and will close out in the private sector), 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. See PBGC Forms 500 and 501. 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 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 criteria. See section 4041(c)(2)(B) of ERISA and 29 CFR 4041.41(c), and PBGC Forms 600 and 601.
Missing participants of plans that terminated on or before December 31, 2017. 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. The Schedule MP and Attachments B are filed with either the Form 501 or Form 602.
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 or voluntary employee contributions. 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.
The Schedule MP is applicable only to plans that terminated on or before December 31, 2017. There is a new control number for the collection of information under the expanded missing participants program, effective on January 22, 2018, and applicable to plans that terminated on or after January 1, 2018 (OMB Control No.1212-0069; expires 1/31/2024). The expanded program includes not only missing participants from single-employer plans covered by title IV, but also defined contribution and other plans not covered by title IV and multiemployer plans covered by title IV.
b. PBGC and third party need for information. PBGC needs, and has routinely used, the information required to be submitted to it: (1) to determine whether the statutory and regulatory requirements for a standard or distress termination have been met; (2) in a standard termination, to determine whether the reversion of any plan assets to the employer meets the requirements of title IV of ERISA; (3) in a distress termination, to determine whether the plan should be trusteed by PBGC or permitted to close out in a private-sector distribution; (4) in a distress termination, to estimate the amount of employer liability to PBGC under section 4062 of ERISA and 29 CFR part 4068; and (5) to attempt to locate and pay missing participants or, where annuities were purchased for missing participants, attempt to locate and refer them to the insurer who issued the annuities to be paid.
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. 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.
3. Information technology. PBGC allows submissions under this information collection to PBGC to be filed electronically, via email. In certain circumstances, PBGC allow for issuance of required notices to third parties electronically as well.
4. Duplicate or similar information. 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 information collection. 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.
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 to accomplish other purposes. However, one purpose of the termination regulation is to ensure that affected parties receive meaningful information about their plan’s termination in a timely manner. 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. The third-party notices covered under this information collection are sent to a plan’s participants and beneficiaries. The plan sponsor of a small plan will have a reduced burden in complying in these requirements.
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 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 and facilitate compliance, the time period runs from the date of the request by PBGC rather than the date of receipt of the request by the plan administrator.
In a distress termination proceeding, information in addition to that required by Form 600 and Form 601 may be due in a short time period to permit PBGC to 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. On November 15, 2022, PBGC published in the Federal Register (87 FR 68524), a notice of its intent to request that OMB approve this collection of information and solicited public comment. No comments were received.
9. Payments and gifts. No payments or gifts were made 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 parts 4901 and 4902, respectively.
11. Personal questions. This collection of information does not call for submission of information of a sensitive nature.
12. Hour burden on the public. For purposes of this information collection, a termination filing constitutes a “response.”
Standard terminations.
Based on its experience, PBGC anticipates that it will process an average of 1,647 standard terminations annually. PBGC estimates that the hourly burden for standard termination filings is 25 hours. The total annual hourly burden for standard termination filings is estimated to be 41,175 hours (25 hours x 1647 plans = 41,175 hours).
Distress terminations.
Based on its experience, PBGC estimates 7 terminations will be concluded as distress terminations annually. PBGC estimates that the hourly burden for distress termination filings is 80 hours. The total annual hourly burden for all distress termination filings is estimated to be 560 hours (80 hours x 7 plans = 560 hours).
Total annual hourly burden (standard and distress terminations).
The annual burden of complying with this collection of information for standard and distress terminations is estimated to average 41,735 hours (41,175 hours for standard terminations + 560 hours for distress terminations).
13. Cost.
Standard terminations.
Based on experience, PBGC estimates that the average cost burden for each standard termination filing is $5,100, for an estimated aggregate cost burden of $8,399,700 (1,647 plans x $5,100).
Distress terminations.
Based on experience, PBGC estimates that the cost burden for each distress termination filing is $15,720, for an aggregate annual cost burden of $110,040 ($15,720 x 7 plans).
Total annual cost burden (standard and distress terminations).
The annual cost burden of complying with this collection of information for both standard and distress terminations is estimated to be $8,509,740 ($8,399,700 for standard termination filings + $110,040 for distress termination filings).
14. Cost to federal government. Because all the work of processing filings will be performed by PBGC existing staff as part of their regular duties, the annual cost to the government is estimated to be $0.
15. Change in burden. The increase in the estimated annual hour burden and cost burden of this collection of information is due primarily to an increase in PBGC’s estimate of the number of standard termination filings that it expects to receive annually. In addition, based on plan and PBGC experience, PBGC has increased the number of hours and the cost required to complete standard termination filings. The increases are primarily due to these revised estimates and not due to the few changes in the instructions, which add negligible burden.
16. Publication. There are no plans for tabulation or publication.
17. Display of expiration dates. PBGC will display the expiration date.
18. Exception to certification statement. There are no exceptions to the certification statement.
| File Type | application/vnd.openxmlformats-officedocument.wordprocessingml.document |
| Author | Jo Amato Burns |
| File Modified | 0000-00-00 |
| File Created | 2023-10-23 |