PBGC Analysis of the Form 5500 Data
PBGC Analysis of the Form 5500 Data10
In 2002, a new frozen plan question was added to the Form 5500, the report pension plans are required to file annually with the IRS, the Department of Labor, and the PBGC.11 This new question requires defined benefit pension plans to indicate whether "as of the last day of the plan year, the plan provides that no participant will get any new benefit accrual (whether because of service or compensation)." In short, it asks if the plan is frozen under a "hard freeze" definition. However, processing problems for this question on the 2002 Form 5500s limited the usefulness of the frozen plan data for this year.
The value of the Form 5500 frozen-plan question is somewhat limited in the current context because not all plan freezes are hard freezes. A plan closed to new entrants that allows those already in the plan to continue to accrue benefits does not meet this definition. Neither does a plan that freezes benefit accruals for some participants but not all (a "partial freeze"). A plan that freezes service accruals for all active participants but allows benefits to increase with the growth in participants' wages (a "soft freeze") also fails to conform to the hard freeze definition. News reports on plans that are being closed to new entrants or frozen for only certain classes of workers suggest that these other types of freezes are relatively common. However, at the moment, there are no data available that can be used to determine how common they actually are.
It generally takes about two years from the beginning of a plan year for the Form 5500 data to become available to federal agencies. As a result, 2003 is the latest year for which complete Form 5500 data are available. At the moment, completed 2003 Form 5500 filings are available for more than 95 percent of the PBGC-insured single-employer plans. The data presented in the following section are based on the available 2003 data.
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10 In 2005, the PBGC began receiving information about plan freezes implemented during the reporting year from the reports that plan sponsors file with the agency under section 4010 of ERISA. However, not all plan sponsors are required to file such reports—in 2004, for example, only 1,108 plans out of roughly 30,000 filed with the PBGC. In addition, the plans that file do not represent a random sample of the defined benefit pension universe; therefore, the results regarding plan freezes cannot be extrapolated to the system as a whole. With that said, the section 4010 filings received by the PBGC for 2004 indicated that sponsors of about 8 percent of the reporting plans had either frozen benefit accruals to some degree or closed the plan to new entrants during the reporting period.
11 The data on the number of plans and participants presented in the following pages will differ slightly from the 2003 numbers in PBGC's "Pension Insurance Data Book." The source of the "Data Book" plan and participant numbers is PBGC's premium filings, not the Form 5500s. Differences in filing due dates, processing times, and definitions of participants are the primary sources of these slight disparities.