2023 PBGC Supporting Statement v.5 (2.27.23)

Supporting Statement for Paperwork Reduction Act Submission

AGENCY: Pension Benefit Guaranty Corporation

TITLE: Annual Return/Report of Employee Benefit Plan (Form 5500)

STATUS: Request for extension of a previously approved collection of information, with modifications, under the Paperwork Reduction Act (OMB Control number 1212-0057, expires June 30, 2025)

CONTACT: Karen B. Levin (202-229-3559) (levin.karen@pbgc.gov)

1. Need for collection. The Employee Retirement Income Security Act of 1974 (ERISA) contains three separate sets of provisions – in Title I (Labor provisions), Title II (Internal Revenue Code (Code) provisions), and Title IV (PBGC provisions) – requiring administrators of most employee pension and welfare benefit plans (collectively referred to as employee benefit plans) to file returns or reports annually with the federal government. The Pension Benefit Guaranty Corporation (PBGC), the Department of the Treasury (Treasury Department), the Internal Revenue Service (IRS), and the Department of Labor (DOL) (collectively the Agencies) have jointly promulgated the Form 5500 Series, which includes the Form 5500 Annual Return/Report of Employee Benefit Plan and the Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. The regulated public uses the Form 5500 Series to satisfy the combined annual reporting/filing requirements.

The Agencies published a notice of proposed forms revisions (NPFR) on September 15, 2021 (86 FR 51488) to amend the Form 5500 Series, primarily to implement annual reporting changes related to legislative provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). The NPFR also set forth additional proposed changes intended to improve reporting on multiemployer and single-employer defined benefit pension plans

On May 23, 2022, at 87 FR 31133, the Agencies published a final forms revisions rulemaking effective for plan years beginning on or after January 1, 2022, which generally implemented PBGC’s annual reporting changes for defined benefit plans on Schedule MB (Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information), Schedule SB (Single-Employer Defined Benefit Plan Actuarial Information), and Schedule R (Retirement Plan Information).¹ The Agencies stated in the notice that the remaining proposed changes from the September 2021 proposal to the Form 5500 Annual Return/Report would be addressed in a further final forms revisions notice.

On August 29, 2022 (87 FR 52821), PBGC published a notice required by 5 CFR 1320.8(d) to solicit comments on proposed modifications to the 2023 Schedule and to the 2023 Schedule SB, and to their related instructions. The modifications to the Schedule R affect all defined benefit plans (except DFEs) that have 1,000 or more participants at the beginning of the plan year while those modifications to the Schedule SB affect single employer defined benefit plans covered by Title IV of ERISA. The public was provided with 60 days to comment on the submission in response to the solicitation and PBGC received one comment in support of the collection of information. No changes were made to the 2023 Form 5500 in response to this comment. PBGC published a second notice related to these proposed changes on November 4, 2022 (87 FR 66762) and the information collection with PBGC’s proposed changes was approved on December 29, 2022.

PBGC is submitting this supporting statement in connection with the publication of the final forms revisions notice that is being published at 88 FR 11984 (February 24, 2023). The forms and instructions revisions primarily relate to legislative changes enacted as part of the SECURE Act. In addition, the final forms revisions notice includes the 2023 Schedules R and SB changes previously approved, which are described below.

Changes to Schedule R and instructions

Line 19 of the 2023 Schedule R and its instructions were modified to require all defined benefit plans (except DFEs) that have 1,000 or more participants at the beginning of the plan year to provide a breakdown of plan assets in line 19a by reporting the percentage of asset allocations held in seven categories of investments as shown below:

2022 Schedule R	2023 Schedule R
Asset Categories
Stock Investment-Grade Debt High-Yield Debt Real Estate Other	Public Equity Private Equity Investment-Grade Debt and Interest Rate Hedging Assets High-Yield Debt Real Assets Cash or Cash Equivalents Other

Also under the modifications, plans will report the percentage of asset allocations as of the end of the plan year, instead of as of the beginning of the plan year. They will therefore, report more recent information. Because the Form 5500 isn’t due until several months after the end of the plan year, this change should not create any timing issues for filers.

The modifications to the instructions also clarify how to categorize certain atypical investments in the reconfigured categories. With these categories of investments, plans will report more detailed information to PBGC and will enable PBGC to better model important characteristics of plan portfolios.

In addition, PBGC’s modifications to line 19b (average duration) and its instructions require applicable filers to check a box to indicate the average duration of the plan’s combined Investment-Grade Debt and Interest Rate Hedging Assets portfolio, thereby replacing the current requirement to check the box that shows the average duration of the plan’s combined Investment-Grade and High Yield Debt portfolio. The average duration ranges were also adjusted from multiple 3-year periods to multiple 5-year periods, with the last choice being a period of 15 or more years.

Finally, PBGC’s modification eliminates line 19c which, in prior years, was used to report the duration measure used to calculate line 19b. Because the alternative duration measures do not provide meaningfully different results, its elimination will not hinder PBGC’s modeling results.

Changes to Schedule SB and instructions

PBGC’s Schedule SB modifications to line 6 (Target Normal Cost) and its instructions, address a possible, albeit unlikely, situation in which line 6c (Target Normal Cost) reported on Schedule SB would not be consistent with IRS regulation and statute if lines 6a and 6b were determined in accordance with the current line 6 instructions. This situation would arise only if (1) a plan requires mandatory employee contributions and (2) the mandatory employee contributions for the plan year exceeded the present value of benefits accruing during the plan year.

PBGC’s modifications to lines 6a and 6c of the instructions, and to line 6c of the Form, rectify this situation by clarifying that the amount to be reported in line 6a is the present value of expected accruals and by detailing that line 6c requires the sum of lines 6a and 6b, “reduced (but not below zero) by any mandatory employee contributions expected to be made during the plan year.” The wording for line 6c of the Form has been changed to “Target Normal Cost”.

In addition, for a plan that has 1,000 or more participants as of the valuation date, PBGC modified the instructions for the line 26b attachment (Schedule of Projection of Expected Benefit Payments), to provide that in situations where a plan assumes some, or all, benefits are paid in a lump sum but uses the annuity substitution rule (26 CFR 1.430(d)-1(f)(4)(iii)(B)) to determine the funding target, the attachment may show projected benefits payable in the annuity form instead of in the form assumed for valuation purposes, as indicated in the current instructions. This modification will be useful for plans as the prior instructions for this attachment (which was first added for the 2022 plan year), had suggested that for such plans, the benefit projections were to be based on a different form of payment than what was used to determine the funding target.

In addition, a modification to the instructions for line 26a provides that a plan reporting 1,000 or more active participants on line 3d, column (1), must also provide average compensation data. PBGC corrected this instruction to instead reference line 3c, column (1).

2. Use of information. The Form 5500 Series is the principal source of information and data available to the Agencies concerning the operations of employee benefit plans. For this reason, the Form 5500 Series is an integral part of the Agencies’ enforcement, research, and policy formulation. Regarding enforcement, the Form 5500 Series provides a means by which the Agencies can effectively and efficiently identify actual and potential violations of ERISA, thereby minimizing the Agencies’ investigatory contacts with the vast majority of plans and enabling the Agencies to make the best use of their limited resources. The Form 5500 Series also provides a fundamental tool for investigators in reviewing the operations and activities of employee benefit plans. Furthermore, public disclosure of the Form 5500 Series is intended to serve as a deterrent to non-compliance with the statutory duties imposed on plan fiduciaries.

Regarding research and policy formulation, the Form 5500 Series represents the primary source of data available to the Agencies, Congress, and the private sector for assessing employee benefits, taxes, and economic trends and for development and implementation of national pension policies.

In addition to providing the Agencies with important enforcement, research, and policy information, the Form 5500 Series represents the only source of detailed financial information available to plan participants and beneficiaries who, upon written request, must be furnished a copy of the plan’s latest annual report by the plan administrator (ERISA section 104(b)(1)(B)(4)). Moreover, the annual report serves as the basis for the summary annual report, which administrators are generally required to furnish to each participant and beneficiary annually, except those covered by defined benefit plans.

A pproximately 839,000 pension and welfare benefit plans must file the Form 5500 Series under Titles I and IV of ERISA and the Code. These plans cover an estimated 152 million workers, retirees, and dependents of private sector pension and welfare plans with estimated assets of $12 trillion. The Form 5500 Series is therefore an important tool for protecting the benefits of American workers. (Note PBGC’s portion of the information collection applies to only a small subset of the approximately 839,000 pension and welfare benefit plans because PBGC’s insurance program does not apply to welfare plans or defined contribution plans. There are approximately 25,000 defined benefit plans that are required to file and covered by PBGC’s insurance program.)

3. Information technology. The Agencies currently use an automated processing system, the ERISA Filing Acceptance System 2, or EFAST2, to process the Form 5500 Series filings. The combined effect of the transition to electronic filing, the implementation of the EFAST2 processing system, and the revised Form 5500 return/reports has reduced the paperwork burden imposed by the reporting requirements that are the basis for this information collection.

4. Duplicate or similar information. The Agencies have developed and use a consolidated annual report that allows filers to satisfy the information collection requirements of all three agencies through a single filing, without duplication of effort or information collection. This eliminates the duplicative reporting that would otherwise result from application of the statutory provisions as written. In addition, while certain information concerning assets (including employee benefit plan assets) held by banks, insurance companies and other investment entities may be separately reported to state and federal regulatory authorities, those reports are not structured to provide meaningful information about assets specifically attributable to any employee benefit plan. Therefore, there is no similar information gathered or maintained by any state or federal agency or other source that the Agencies would consider adequate for effectively monitoring the activities of employee benefit plans.

5. Reducing the burden on small entities. Not applicable. PBGC’s portion of the information collection will not have a significant impact on a substantial number of small entities.

6. Consequences of reduced collection. ERISA and the Code specifically require the filing of reports or returns by employee benefit plans on an annual basis. A less frequent information collection could contravene statutory requirements and would impair and inhibit the administration and enforcement of the statute by the Agencies.

7. Consistency with guidelines. This collection of information is conducted in a manner consistent with 5 CFR 1320.5(d)(2).

8. Outside input. On September 15, 2021, the Agencies published a NPFR at 86 FR 51488, and DOL published a notice of proposed rulemaking (NPRM) at 85 FR 51284, requesting written comments on or before 45 days after publication. The notice and comment period satisfies the notice required by 5 CFR 1320.8(d).

The Agencies received 114 comments on the NPFR and NPRM. The comments generally were focused on the proposed changes for the 2022 plan year forms and on future rulemakings. After consideration of the comments, the Agencies published a final forms revisions rulemaking on May 23, 2022, at 87 FR 31133. It included relatively minor revisions for 2022 including changes to Schedules MB, SB, and R, and to the respective instructions.

OMB Approval of 2023 Changes to Schedules R and SB

On August 29, 2022, PBGC published a notice (87 FR 52821) required by 5 CFR 1320.8(d) soliciting comments on the 2023 changes to the Schedules R and SB. The public was provided with 60 days to comment on the submission in response to the solicitation. PBGC received one comment in support of the collection of information. The comment is included with this submission and is posted on: www.pbgc.gov/prac/pg/other/guidance/paperwork-notices and www.regulations.gov. No changes were made to the 2023 Form 5500 in response to this comment. PBGC published a second notice on November 4, 2022 (87 FR 66762) and the information collection with PBGC’s proposed changes was approved on December 29, 2022.

The Agencies have included in the final forms revisions documents, at 88 FR 11984 and 88 FR 11793, responses to the 114 comments received in response to the September 14, 2021, NPRM.

9. Payments 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. Personal questions. This collection of information does not call for submission of information of a sensitive or private nature.

12. Hour burden on the public. Because the Form 5500 Series combines the information collection requests of three federal agencies (DOL, IRS, and PBGC) into a single return/report, each of the Agencies submits its own ICR and maintains its own OMB approval for the portion of the paperwork burden arising out of the Form 5500 Series that pertains to its own information collections.  However, since 1999, the Agencies have adopted a unified approach and methodology for estimating paperwork burden, which is conducted by DOL with input from PBGC and IRS.  This request is for approval of only the portion of the total paperwork burden of the Form 5500 Series that is attributed to PBGC, although it includes some information on the other portions of the total paperwork burden.  The items below describe the unified methodology underlying the Agencies’ estimates of the aggregate burden imposed by the Form 5500 Series as a whole, but requests approval only of PBGC’s portion of that burden.

Based on the most recent available data, approximately 839,000 respondents will file annual reports using the Form 5500 Series.  As noted above, PBGC’s portion of the information collection applies only to a small subset of these 839,000 respondents, i.e., approximately 25,000 defined benefit plans covered under Title IV of ERISA.

The paperwork burden allocated to PBGC includes a portion of the Form 5500 Series instructions, and plan information.  PBGC’s portion of the annual aggregate hour burden generated by the Form 5500 Series is estimated at 15,089 hours for the filings during the period covered by this ICR extension request with the equivalent cost burden of approximately $1.636 million for the filings during the period covered by this ICR extension request (assuming a compensation rate of $108.40 per hour for services of a financial professional).

13. Cost burden on the public. As noted above in item 12, the Agencies have adopted a unified approach and methodology for estimating paperwork burden, which is conducted by DOL with input from PBGC and IRS. To reflect OMB’s guidance that costs incurred by service providers be reported as an hour burden instead of incorporated into the cost burden, burden that has historically been included as cost burden has been included in item 12 as hour burden. Therefore, the annual cost burden is zero for filings during the period covered by this ICR extension request.

14. Costs to the Federal government. The total annual cost for all Form 5500 Series filings is estimated to average $14.2 million (including oversight). These costs are allocated among the agencies (DOL, PBGC, and IRS) according to the EFAST2 Cost Allocation Model, which was approved by the agencies at the beginning of EFAST2 operations in 2015 as the methodology that would be used for identifying agencies’ shares of EFAST2 costs. Under the model, the agencies pay for their relative share of the total filing volume. Therefore, PBGC’s share of the total cost for the 2023 Form 5500 is approximately $800,000.

15. Explanation of burden changes. There is no change in the hour burden, however, PBGC estimates an increase in the equivalent cost burden for the filings during the period covered by this ICR extension request from approximately $1.519 million to approximately $1.636 million (assuming a compensation rate that increased from $100.64 to $108.40 per hour for services of a financial professional).

16. Publication plans. PBGC does not intend to publish the results of this collection of information.

17. Display of expiration date. OMB previously granted approval to omit the expiration date from the Form 5500. PBGC requests continued approval to omit the expiration date.

18. Exceptions to certification statement. The information collection is consistent with 5 CFR 1320.9.

1 The May 2022 final rulemaking also finalized certain plan characteristic codes applicable to multiple-employer pension plans (MEPs) that were proposed in the NPFR by DOL and IRS/Treasury.