Defined Benefit Plan Annual Funding Notice
OMB Number 1210-0126
April 2009
SUPPORTING STATEMENT FOR PAPERWORK REDUCTION ACT 1995 SUBMISSIONS
Explain the circumstances that make the collection of information necessary. Identify any legal or administrative requirements that necessitate the collection. Attach a copy of the appropriate section of each statute and regulation mandating or authorizing the collection of information
Section 103(a) of the Pension Funding Equity Act of 2004, Pub. L. 108-218 (PFEA ’04), which was enacted on April 10, 2004, added section 101(f) to the Employee Retirement ERISA. Section 101(f) of ERISA generally requires multiemployer defined benefit plans to furnish a plan funding notice annually to each participant and beneficiary, to each labor organization representing such participants or beneficiaries, to each employer that has an obligation to contribute under the plan, and to the Pension Benefit Guaranty Corporation (PBGC). On January 11, 2006, the Department of Labor (Department) published a final regulation implementing the requirements of section 101(f) of ERISA as amended by PFEA ‘04. See 29 CFR 2520.101-4.
Subsequently, on August 17, 2006, section 501 of the Pension Protection Act of 2006, Pub. L. 109-280 (PPA), amended section 101(f) of ERISA to provide that the administrator of a defined benefit plan to which title IV of ERISA applies shall for each plan year provide a plan funding notice to the PBGC, to each plan participant and beneficiary, to each labor organization representing such participants or beneficiaries, and, in the case of a multiemployer plan, to each employer that has an obligation to contribute to the plan. Thus, the PPA amendments to section 101(f) extend to single-employer defined benefit plans the current requirement to furnish an annual funding notice. Pursuant to section 501(d) of the PPA, the amendments to section 101(f) apply to plan years beginning after December 31, 2007.
The defined benefit plan funding notice provision were enacted amid concerns about persisting low interest rates and declines in equity values, each of which has an increasing effect on contribution requirements and a decreasing effect on the funding levels of defined benefit plans. More complete and timelier disclosures were considered an important element of measures enacted in PPA and PFEA ’04 to strengthen the long-term health of the defined benefit pension system. Increasing the transparency of information about the funding status of defined benefit plans for participants and beneficiaries, the labor organizations representing them, contributing employers, and PBGC will afford all parties interested in the financial viability of these plans greater opportunity to monitor their funding status.
Recently, concerns have been expressed about the imminent compliance date of the new annual funding notice requirements, the absence of regulatory guidance from the Department, and the cost and burdens attendant to annual funding notice compliance efforts prior to the adoption of annual funding notice regulations and the issuance of model annual funding notices by the Department. In recognition of the foregoing, on February 10, 2009, the Department issued a Field Assistance Bulletin 2009-1 (the FAB) concerning the disclosure requirements mandated by the PPA, which provides model notices. The FAB addresses the need for interim guidance pending the adoption of regulations or other guidance under section 101(f) of ERISA by providing that pending further guidance, the Department will, as a matter of enforcement policy, treat a plan administrator as satisfying the requirements of section 101(f), if the administrator complies with the guidance contained in the FAB (and appropriately uses a completed model notice) and has acted in accordance with a good faith, reasonable interpretation of those requirements with respect to matters not specifically addressed in the FAB.
The Department is revising its information collection under OMB Control Number 1210-0126 to reflect the issuance of the FAB at this time.
2. Indicate how, by whom, and for what purpose the information is to be used. Except for a new collection, indicate the actual use the agency has made of the information received from the current collection.
The FAB provides technical assistance in the form of questions and answers and model annual funding notices for single and multiemployer defined benefit plans. The guidance provided in the FAB (and the included model notices) will be used by the administrators of defined benefit pension plans to furnish annually a notice of the plan’s funded status to the plan’s participants and beneficiaries and other specified interested parties (each labor organization representing such participants or beneficiaries, each employer that has an obligation to contribute under the plan, and the PBGC). As stated above, the FAB provides that pending further guidance, the Department will, as a matter of enforcement policy, treat a plan administrator as satisfying the requirements of section 101(f), if the administrator complies with the guidance contained in the FAB (and appropriately uses a completed model notice) and has acted in accordance with a good faith, reasonable interpretation of those requirements with respect to matters not specifically addressed in the FAB.
It is assumed that the availability of a model notices in the appendices will lessen the time otherwise required by a plan administrator to draft a required notice.
3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses, and the basis for the decision for adopting this means of collection. Also describe any consideration for using information technology to reduce burden.
Under 29 C.F.R. § 2520.104b-1(b) of ERISA, “where certain material, including reports, statements, and documents, is required under Part I of the Act and this part to be furnished either by direct operation of law or an individual request, the plan administrator shall use measures reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries.” Section 2520.104b-1(c) establishes the manner in which disclosures under Title I of ERISA made through electronic media will be deemed to satisfy the requirement of § 2520.104b-1(b). The interim final rule assumes that 38 percent of the notices will be sent electronically.
Section 2520-107-1 establishes standards concerning the use of electronic media for maintenance and retention of records. Under these rules, all pension and welfare plans covered under Title I of ERISA may use electronic media to satisfy disclosure and recordkeeping obligations, subject to specific safeguards.
The Government Paperwork Elimination Act (GPEA) requires agencies to allow customers the option to submit information or transact with the government electronically, when practicable. Where feasible, and subject to resource availability and resolution of legal issues, EBSA has implemented the electronic acceptance of information submitted by customers to the federal government.
4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.
Much of the information required to be furnished in the notice is maintained in the normal business records of pension plans. In addition, much of the information required to be included in the notice is provided on the Form 5500 Annual Return/Report and associated schedules, and the Summary Plan Description.
5. If the collection of information impacts small businesses or other small entities (Item 5 of OMB Form 83-I), describe any methods used to minimize burden.
The Department does not expect that the plans potentially impacted by this proposal will be small entities.
6. Describe the consequence to Federal program or policy activities if the collection is not conducted or is conducted less frequently, as well as any technical or legal obstacles to reducing burden.
This information collection does not involve reporting to the Federal government, and as such, does not affect Federal programs.
7. Explain any special circumstances that would cause an information collection to be conducted in a manner:
• requiring respondents to report information to the agency more often than quarterly;
• requiring respondents to prepare a written response to a collection of information in fewer than 30 days after receipt of it;
• requiring respondents to submit more than an original and two copies of any document;
• requiring respondents to retain records, other than health, medical, government contract, grant-in-aid, or tax records for more than three years;
• in connection with a statistical survey, that is not designed to produce valid and reliable results that can be generalized to the universe of study;
• requiring the use of a statistical data classification that has not been reviewed and approved by OMB;
• that includes a pledge of confidentiality that is not supported by authority established in statute or regulation, that is not supported by disclosure and data security policies that are consistent with the pledge, or which unnecessarily impedes sharing of data with other agencies for compatible confidential use; or
• requiring respondents to submit proprietary trade secret, or other confidential information unless the agency can demonstrate that it has instituted procedures to protect the information's confidentiality to the extent permitted by law.
None.
8. If applicable, provide a copy and identify the date and page number of publication in the Federal Register of the agency's notice, required by 5 CFR 1320.8(d), soliciting comments on the information collection prior to submission to OMB. Summarize public comments received in response to that notice and describe actions taken by the agency in response to these comments. Specifically address comments received on cost and hour burden.
Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.
Consultation with representatives of those from whom information is to be obtained or those who must compile records should occur at least once every 3 years -- even if the collection of information activity is the same as in prior periods. There may be circumstances that may preclude consultation in a specific situation. These circumstances should be explained.
The Department’s published the notice required by 5 CFR 1320.8(d) soliciting comments on the information collection in the Federal Register on November 21, 2008 (73 FR 70676). The public was provided with 60 days to comment on the submission, and no comments were received. At the request of OMB, the November 21 Federal Register notice was amended by a notice published by the Department on February 17, 2009 (74 FR 7489), which provided the public with an additional 30 days to comment on the ICR as revised by the FAB. One comment was received in response to the amended notice; however, the comment addressed the substantive provisions of the FAB but did not address the associated cost and hour burden.
9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.
Not applicable.
10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulation, or agency policy.
No assurance of confidentiality has been provided.
11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private. This justification should include the reasons why the agency considers the questions necessary, the specific uses to be made of the information, the explanation to be given to persons from whom the information is requested, and any steps to be taken to obtain their consent.
Not applicable.
12. Provide estimates of the hour burden of the collection of information. The statement should:
• Indicate the number of respondents, frequency of response, annual hour burden, and an explanation of how the burden was estimated. Unless directed to do so, agencies should not conduct special surveys to obtain information on which to base hour burden estimates. Consultation with a sample (fewer than 10) of potential respondents is desirable. If the hour burden on respondents is expected to vary widely because of differences in activity, size, or complexity, show the range of estimated hour burden, and explain the reasons for the variance. Generally, estimates should not include burden hours for customary and usual business practices.
• If this request for approval covers more than one form, provide separate hour burden estimates for each form and aggregate the hour burdens in Item 13 of OMB Form 83-I.
• Provide estimates of annualized cost to respondents for the hour burdens for collections of information, identifying and using appropriate wage rate categories. The cost of contracting out or paying outside parties for information collection activities should not be included here. Instead, this cost should be included in Item 14.
In order to estimate the potential costs of the notice provisions of section 101(f) of ERISA and the FAB, the Department estimated the number of single and multiemployer defined benefit plans, and the numbers of participants, beneficiaries receiving benefits, labor organizations representing participants, and employers with an obligation to contribute to these plans.
The PBGC Pension Insurance Data Book 2007 indicates that as of September 30, 2006, there were about 1,500 multiemployer defined benefit plans with approximately 10 million participants and beneficiaries receiving benefits. It also reports that there were close to 29,000 single-employer defined benefit plans with approximately 39 million participants. These estimates are based on premium filings with the PBGC for fiscal year 2007.
The Department used estimates from the form 5500 data1 to estimate the number of labor organizations that represent participants and beneficiaries of defined benefit plans and that would receive notice under section 101(f). The Department estimates that there are approximately 4,900 labor organizations representing multiemployer plans and 2,600 representing single employer plans for a total of 7,500 labor organizations that will receive notices.
The Department also is unaware of a source of information for the current number of employers obligated to contribute to multiemployer defined benefit plans. PBGC assisted with development of an estimate of this number by providing the Department with a tabulation on their 1987 premium filings of the number of employers contributing to multiemployer defined benefit plans at that time. This was the last year this data element was required to be reported on the Form 5500. The Department has attempted to validate that 1987 figure by dividing the number of participants in multiemployer defined benefit plans in the industries in which these plans are most concentrated, such as construction, trucking, and retail food sales,2 by the average number of employees per firm in those industries based on data published by the Office of Advocacy, U.S. Small Business Administration for 2001. This computation resulted in a figure that was similar in magnitude, but somewhat higher than the 277,600 employers reported in the 1987 PBGC premium filing data. As a result, the Department has used 300,000 for its conservative estimate of the number of contributing employers to whom the required notice will be sent.
For purposes of its estimates of regulatory impact, the Department has assumed that each plan will develop a notice, and that each year notices will be prepared and sent by about 1,500 multiemployer defined benefit plans to approximately 10 million participants and beneficiaries, by close to 29,000 single-employer defined benefit plans to approximately 39 million participants and beneficiaries, and to close to 7,500 labor organizations, 300,000 contributing employers, and about 30,000 to PBGC, for a total of approximately 49.2 million notices.
Estimates of notice preparations are based on the assumption that plan service providers, actuaries, lawyers, and financial professionals will produce the notices. It is assumed that the availability of a model notice will lessen the time otherwise required by a plan administrator to draft a required notice. As the requirement for single employer plans to provide the notice is new they will require additional time in the first year compared to the multiemployer plans. The Department has made the following estimate regarding preparation of the notice: actuaries will spend two hours in the first year for single employer plans and one hour for multiemployer plans and one hour per plan in each subsequent year making specific calculations for information that must be provided in the notice; legal professionals will spend in the first year one hour for single employer plans and 0.5 hours for multiemployer plans year reviewing the notice and 0.5 hours per plan in subsequent years; financial professionals will spend 0.5 hours per year drafting the notice. The final preparation and sending of the notice will be done by a clerical professional using an estimated two minutes per notice mailed.
Assuming 49.2 million notices are sent out, the burden hours for that initial year of implementation are 59,000 actuarial hours, 17,000 financial professional hours, and 29,000 legal professional hours. Total clerical professional hours are calculated based on the total number of notices mailed and the preparation time of 2 minutes per notice resulting in 1,016,000 hours. The total hour burden for the year of implementation is 1,122,000 hours. Each subsequent year requires 30,000 actuary hours, 1,016,000 clerical hours, 17,000 financial professional hours, and 15,000 legal professional hours for a total of 1,079,000 hours.3
Hourly wage rates were calculated using the rates based on the Bureau of Labor Statistics, National Occupational Employment Survey (May 2007) and the Bureau of Labor Statistics, Employment Cost Index (June 2008). To obtain 2009 hourly labor cost estimates a growth rate of 3 percent was assumed. Calculations of the 2009 hourly labor costs were $26 for a clerical professional, $62 for a financial professional, $88 for an actuary,and $116 for plan legal counsel.
The total equivalent costs are therefore, approximately $5,537,000 for actuarial services, $26,452,000 for clerical services, $1,034,000 for financial professional services, and $3,432,000 for legal professional services. The total equivalent cost sum to approximately $36,455,000 in the initial year.
The total equivalent cost in each subsequent year is $2,840,000 for actuarial services, $26,452,000 for clerical services, $1,034,000 for financial professional services, and $1,760,000 for legal professional services. The total equivalent cost sum to approximately $32,086,000 in each subsequent year.
Provide an estimate of the total annual cost burden to respondents or recordkeepers resulting from the collection of information. (Do not include the cost of any hour burden shown in Items 12 or 14).
The cost of mailing the notices was based on the assumption that each notice would be six pages for single-employer plans and five pages for multiemployer plans, with printing costs of 5 cents per page and postage of 42 cents resulting in a 72 cent cost per paper notice for single-employer plans and a 67 cent cost per paper notice for multiemployer plans. It was further assumed that 38 percent of notices would be sent electronically. The Department has not estimated any additional burden for preparation or distribution of notices via electronic means because the Department assumes that plans will utilize pre-existing electronic communications systems and e-mail lists for these purposes and the process of preparation and distribution involves only a de minimis additional effort, e.g., a few computer key strokes or the equivalent. This assumption will result in a total of approximately 18.7 million notices being sent electronically by multiemployer and single-employer plans. Single-employer plans will mail out approximately 24.1 million paper notices and multiemployer plans will mail out approximately 6.4 million paper notices. Total annual paper mailing costs are estimated to be approximately $21.6 million.
14. Provide estimates of annualized cost to the Federal government. Also, provide a description of the method used to estimate cost, which should include quantification of hours, operational expenses (such as equipment, overhead, printing, and support staff), and any other expense that would not have been incurred without this collection of information. Agencies also may aggregate cost estimates from Items 12, 13, and 14 in a single table.
None
15. Explain the reasons for any program changes or adjustments reporting in Items 13 or 14 of the OMB Form 83-I.
Estimates of the hour burden for the PRA have increased as single employer plans must now provide a disclosure, and not just multiemployer plans; however, as the collection has been previously implemented for multiemployer plans the hour burden for them has been reduced in the first year as start up costs are not needed. In addition in the previous PRA some of the burden of notice preparation was considered cost burden, but now all the costs of notice preparation are counted as hour burden. This has lead to an increase in the hour burden by 1 million hours.
Cost burden has also increased due to the increase in the number of notices. The number has increased from 9.7 million notices to 49.2 million notices annually. Also, this analysis assumes the notices will be sent out as a separate mailing and not bundled with other notice requires, thus increasing the cost burden. In addition wage and other cost estimates have been increased to account for price increases over time. The cost burden has increased from less than one million to $21.6 million annually.
16. For collections of information whose results will be published, outline plans for tabulation, and publication. Address any complex analytical techniques that will be used. Provide the time schedule for the entire project, including beginning and ending dates of the collection of information, completion of report, publication dates, and other actions.
There are no plans to publish the results of this collection of information.
17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.
The OMB expiration date will be published in the Federal Register following OMB approval.
18. Explain each exception to the certification statement identified in Item 19, "Certification for Paperwork Reduction Act Submission," of OMB 83-I.
Not applicable; no exceptions to the certification statement.
B. Collections of Information Employing Statistical Methods
Not applicable. The use of statistical methods is not relevant to this collection of information.
1 The Department used estimates from the 1998 Form 5500 as this was the last year the data was available.
2 See GAO-04-423 Private Pensions. Multiemployer Plans Face Short and Long-Term Challenges. U.S. General Accounting Office, March 2004. General Accounting Office name changed to Government Accountability Office effective July 7, 2004.
3 The average Total Annual Burden Hours over the first three years is 994,000.
| File Type | application/msword |
| File Title | SUPPORTING STATEMENT FOR PAPERWORK REDUCTION ACT 1995 SUBMISSIONS |
| Author | kellyc |
| Last Modified By | OTIS |
| File Modified | 2009-04-07 |
| File Created | 2009-04-07 |