This technical appendix describes the logic and data underlying the burden model used for estimating the impact of proposed Plan Year 2008 revisions of Form 5500 and associated schedules.(1) After a general description of the process, detailed material is presented associated with the impact model input data, and the basic calculations and outputs, associated with the version of the model contained in the spreadsheet “Burden Model 20050901 r1.xls”.
The burden model builds on work done by Mathematica Policy Research (MPR) in support of ERISA Form 5500 regulatory revisions from 1995 through 2004. During that period, MPR developed detailed estimates of the time required by sponsors and providers for performing Form 5500 related tasks based on extensive interviews with filers and their consultants. The processes and results are described in MPR’s report to the Department of Labor’s Office of Policy and Research of the Employee Benefits Security Administration, “Estimates of the Burden for Filing Form 5500: The Change in Burden from the 1997 to the 1999 Forms,” May 25, 1999.
The first step in modeling the impact of the proposed revisions to the Form 5500 and associated schedules was to produce a “Current Rule” summary of hours by type of filer, consistent with the MPR analyses. Aggregate baseline burden was then estimated, consistent with those hours and total filings (also consistent with historical MPR estimates).
The second step in the impact modeling was to examine which schedules would be modified, which sets of respondents would no longer have to file particular schedules, and which sets of respondents would face new filing obligations. Where changes were proposed in the information to be collected, the hours required per respondent were adjusted, consistent with the underlying assumptions of the previous MPR model.
The final step in the impact modeling was to calculate aggregate estimates of total burdens under the revised system by multiplying the new filing counts by the revised burden hours, and converting to dollars by multiplying by wage rates per burden hour. The calculations were performed by size and type of filer.
Summary tables from the spreadsheet implementation of the model are in Table TA_1, Table TA_2, Table TA_3, Table TA_4, Table TA_5 and Table TA_6. TA_1 and TA_2 show the full current rules and future rules matrices. Total counts of filings are shown in the top block of each table, broken by schedule by filer type. The current estimate of hours per schedule for each type of filer is shown in the second block. The third block gives the total burden hours, which is the product of the entries in the first and second blocks. Tables TA_3 and TA_4 give the burdens under the current rules and the future rules, converted to dollars. They also show the relative burden incurred directly by sponsors and indirectly through service providers. Approximately 85% of the burden dollars are associated with costs which pass through service providers. Table TA_5 gives the burden associated with small plans, allocated across the revisions. Table TA_6 gives the burden for all plans, also allocated across the revisions.
Inputs To Burden Model
Burden Hours Per Schedule
The first step in developing the model inputs was to divide the total Form 5500 burden hours from “[Final Burden Model Dec 2004.xls]74. Composite Report” by plan volumes from “Final to OPR Burden Hours Summary-2”, to get hours per 5500 for large and small plans. Similarly, the aggregate hours per schedule were divided by corresponding schedule volumes to get hours per schedule for large and small plans.
The next step was to partition the hours per schedule (including 5500s) by plan type (defined benefit, defined contribution, and welfare). The starting point was the matrix of aggregate hours by schedule for detailed plan types from MPR. For large plans, there are 30 plan types, and there are 8 for small plans. Aggregate hours by plan type were collapsed for each schedule and size to get total hours for each schedule by the 3 plan types. Plan volumes (5500 filers) were also collapsed for plan types that may have filled out a particular schedule. (Model pages have sections shaded in black for schedule/ plan type combinations that MPR considered not possible.) Dividing aggregate hours by plan volumes resulted in hours per plan for each schedule by DC, DB, and welfare. This allowed the calculation of ratios of these hours per plan by schedule for a particular plan type to overall hours per plan by schedule. These ratios were multiplied by hours per schedule to get estimates of average burden hours per schedule for DB, DC, and welfare plans separately. These average hours per schedule by plan type were used as inputs to the burden model.
2002 Fractions of Burden Per Agency By Schedule
The 2002 fractions of burden per agency for each schedule do not appear in the spreadsheets, although they were calculated in supporting sheets of the full burden model. They were calculated by dividing each schedule’s burden for a given agency by that schedule’s total burden hours. Fractions of burden per agency for each schedule were calculated separately for large and small plans. Data was from “Final to OPR Burden Hours Summary-2.”
2002 Service Provider/Sponsor Fraction of Burden By Schedule
The 2002 fractions of burden for service providers and sponsors by schedule were based on inputs to “[Final Burden Model Dec 2004.xls]69. Report Work Grid.” Service provider hours were those from service providers when service providers file and from accountants and actuaries when service providers or sponsors file. Sponsor hours were sponsor hours when service providers or sponsors file. Aggregate service provider hours for each schedule were divided by aggregate hours for that schedule to get the fraction of hours for a schedule that was incurred by service providers. The 2002 fractions of burden for service providers and sponsors by schedule were calculated separately for large and small plans.
Controlling Schedule Counts to MPR
For each schedule (including 5500s) current estimates of 2002 large plan schedule counts were multiplied by the ratio of MPR’s 2001 large plan schedule count to current estimates of the 2001 large plan schedule count. This was done to maintain consistency with the underlying MPR data. (Newer counts of filings suggest the original model may somewhat overstate total volumes of schedules, in which case the resulting estimates are conservative). The same procedure was used to estimate schedule counts for small plans.
Burden Hours per Schedule After Revisions
The change in burden associated with the revised filing requirements was estimated based on the number of items added to or deleted from a schedule, and the underlying estimated burden associated with the original form. This was done either as a factor applied to the current burden for the schedule, or as an add-on number of hours. For revisions where the change was adding items to a schedule, the impact on hours per schedule was calculated by multiplying the current estimated hours for the schedule by the ratio of the number of items on the schedule after the change to the number of items on the schedule currently. For revisions where parts of another schedule were moved to a different schedule, or items were added to a schedule which were similar to items on another schedule, the burden associated with the revision was estimated by adding the associated hours for the new parts to the current hours for the schedule.
The burden hour estimate for the new short form required both transfers of items from existing schedules and development of estimates for new items. The final estimate of the proposed Short Form 5500’s average burden per filer is 2 hours, 5 minutes. This is an average of burden hours per small filer for the Form 5500, Schedule I, Schedule R, and Schedule A, weighted by the proportion of elements from each of these sources that were “donated” to the Short Form. It also includes an estimate of burden attributable to several new data elements on the Short Form. Average burden hours per small filer for each source were taken from Mathematica’s Burden Model Composite Burden Hours (‘Final Burden Model Dec 2004.xls’, tab ’74. Composite Report’). Using a mock-up of the proposed Short Form, data elements were identified and located on the current Form5500 and Schedules. To obtain the weights, the number of Short Form elements from each source was divided by the total number of elements from that source. Three items on the proposed Short Form were not found on current schedules. These items are included in the “Compliance Questions” portion of the Short Form, a section that is otherwise taken from Schedule I. Therefore, it was assumed that these three new elements would have the same burden as an average Schedule I element. The Schedule I burden of 2.84 hours was divided by the number of Schedule I elements (58), and multiplied by 3 to obtain a burden of 0.147 hours for the three new elements. Adding this burden to the 1.925 figure results in a total burden estimate for the Short Form of 2 hours and 5 minutes (rounded up to the next whole minute), or 2.08 hours.
Burden Model Aggregates
A macro was written to sum, for each agency, entity (sponsor, service provider), and proposed revision, the number of affected filers, the number of hours spent by those filers pre-revision, and the number of hours post-revision. For each revision, the change in hours was then calculated by subtracting the pre-revision hours from the post-revision hours. In order to calculate the change in cost in dollar terms, a labor rate of $84/hour was applied to the service provider change in hours, and a rate of $59/hour was applied to the sponsor hours. The service provider labor cost is consistent with the rate used in the underlying MPR model ($75 in June, 2001 updates for 1999 levels), projected to 2002 at 4% per year (consistent with MPR update estimates from October 12, 2004). The sponsor hours costs are derived from wage and compensation data from the BLS, projected to 2002 and loaded for overhead. The resulting changes in cost for both service providers and sponsors were summed to obtain the total change in cost. The output applicable to the Executive Order and Regulatory Flexibility is displayed on tabs ‘ExecOrder’ and ‘RegFlex’, respectively, from ‘Burden Model 20050901 r1.xls’. Summaries are shown in Tables TA_5 and TA_6.
The tabulations for the proposed revisions were carried out sequentially. The following list explains the details and underlying assumptions for each tabulation.
Removal of IRS Schedules
The change in burden due to the removal of IRS schedules was tabulated in isolation, as if none of the other proposed revisions had taken place.
Number of Affected Filers – The number of filers affected by the removal of schedules E, P, and SSA is estimated using the sum of 1) the number of pension plans (including both Short Form-eligible and ineligible) and 2) the number of Schedules P filed by large welfare plans and small welfare plans.
While the number of schedules filed by plan type constitutes a major component of the Burden Model, counts of filers that file a particular schedule were not explicitly retained in the Model. In general, the counts of filers and counts of schedules should be the same for all schedules except schedules A, P, and R. In the case of pension plans, the implicit assumption is that all pension plans file at least one of the Schedules E, P, or SSA. Welfare plans can file Schedule P but neither E nor SSA, so the number of Schedules P filed by welfare plans was used as an approximation for the number of affected welfare filers.
Change in Burden Hours – The decrease in burden hours resulting from the removal of schedules E, P, and SSA is calculated by summing the hours required to complete each schedule for all pension and welfare plans.
Short Form 5500/Small 403(b) Plans
The change in burden resulting from the introduction of the Short Form 5500 for eligible small plans was calculated with the proposed elimination of the IRS schedules in place. This avoids double-counting of the burden hours associated with the IRS schedules. Additionally, the Short Form revision includes a provision from the 403(b) plan revision, in that all small 403(b) plans were counted as Short Form-eligible.
Number of Affected Filers – The number of filers affected by the proposed introduction of a Short Form 5500 is estimated at 90% of all small 5500 filers (both pension and welfare plans).
Change in Burden Hours – In order to estimate the change in burden hours, the total number of hours required by eligible plans to complete the Form 5500 and all schedules was subtracted from the total number of hours required to complete the Short Form 5500.
Schedule B: Asset Allocation Questions
Number of Affected Filers – The number of filers affected by the proposed new asset allocation questions on Schedule B is the number of defined benefit plans with more than 1,000 participants.
Change in Burden Hours – The change in burden hours is calculated by subtracting the total number of hours spent on Schedule B for the affected plans in 2002 (“pre-revision”) from the total number of Schedule B hours for affected plans in 2008 (“post-revision”).
Schedule C: Additional Questions for Fiduciaries and certain other Service Providers
Number of Affected Filers – The number of filers affected by the proposed additional questions on Schedule C is estimated by taking the number of Schedules C filed by large pension and welfare plans. The number of schedules filed is considered a reasonable proxy for the number of filers because only one Schedule C is to be filed per plan.
Change in Burden Hours – The change in burden hours is calculated by subtracting the total number of hours spent on Schedule C for the affected plans in 2002 (“pre-revision”) from the total number of Schedule C hours for affected plans in 2008 (“post-revision”).
Questions for Multiemployer Plans on Form 5500 and Schedule R
Number of Affected Filers – The number of filers affected by the introduction of new questions for multiemployer plans is estimated using the number of large multiemployer pension and welfare plans. The Burden Model does not track counts of small multiemployer plans.
Change in Burden Hours – The change in burden hours is calculated by subtracting the total number of hours spent by large multiemployer plans on the Form 5500, pre-revision, from the total number of hours post-revision. To this, the difference in hours needed to complete the Schedule R for large defined benefit multiemployer plans is then added.
Several questions are proposed to be added to the 2008 Form 5500, Schedule A, Schedule H, Schedule I, and Schedule R.
Number of Affected Filers – The number of filers affected by the miscellaneous revisions is all large pension and welfare plans and all small, Short Form-ineligible pension and welfare plans.
Change in Burden Hours – The change in burden hours is calculated as the difference between hours required, pre-revision and post-revision, to complete the Form 5500 and Schedules A, H, I, and R.
Elimination of Special Treatment for Large 403(b) Plans
Estimates of the impact of elimination of special treatment for 403(b) plans were calculated with all previously discussed revisions in place. This means that small 403(b)s were modeled as if they all filed the Short Form 5500; only large 403(b) plans figure into the 403(b) revision burden estimate.
Number of Affected Filers – The number of affected filers is the number of large 403(b) plans. Due to limited reporting requirements, 403(b) plans do not have to report participant data; therefore, the large/small split of 403(b) plans was estimated using outside data.
Change in Burden Hours – The change in burden hours is calculated as the number of hours required for large 403(b) plans to complete the Form 5500 only, subtracted from the number of hours required for large 403(b) plans to fully complete the Form 5500 and all relevant Schedules (including the applicable revisions discussed above).
Technical Documentation of Form 5500 Revision BurdenModel.mod30May1400.v3
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