[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53463-53464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26181]
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PENSION BENEFIT GUARANTY CORPORATION
Exemption From the Bond/Escrow Requirement Relating to the Sale
of Assets by an Employer That Contributes to a Multiemployer Plan; St.
Louis Cardinals, L.P.
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Notice of exemption.
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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request
from the St. Louis Cardinals, L.P. for an exemption from the bond/
escrow requirement of section 4204(a)(1)(B) of the Employee Retirement
Income Security Act of 1974, as amended, with respect to the Major
League Baseball Players Benefit Plan. A notice of the request for
exemption from the requirement was published on July 24, 1996 (61 FR
38480). The effect of this notice is to advise the public of the
decision on the exemption request.
ADDRESSES: The non-confidential portions of the request for an
exemption and the PBGC response to the request are available for public
inspection at the PBGC Communications and Public Affairs Department,
Suite 240, 1200 K Street, NW., Washington, DC 20005-4026, between the
hours of 9:00 a.m. and 4:00 p.m., Monday through Friday.
FOR FURTHER INFORMATION CONTACT: Ralph L. Landy, Office of the General
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,
Washington, DC 20005-4026; telephone 202-326-4127 (202-326-4179 for TTY
and TDD). These are not toll-free numbers.
SUPPLEMENTARY INFORMATION:
Background
Section 4204 of the Employee Retirement Income Security Act of
1974, as amended by the Multiemployer Pension Plan Amendments Act of
1980 (``ERISA'' or ``the Act''), provides that a bona fide arm's-length
sale of assets of a contributing employer to an unrelated party will
not be considered a withdrawal if three conditions are met.
[[Page 53464]]
These conditions, enumerated in section 4204(a)(1)(A)-(C), are that--
(A) The purchaser has an obligation to contribute to the plan with
respect to the operations for substantially the same number of
contribution base units for which the seller was obligated to
contribute;
(B) The purchaser obtains a bond or places an amount in escrow, for
a period of five plan years after the sale, in an amount equal to the
greater of the seller's average required annual contribution to the
plan for the three plan years preceding the year in which the sale
occurred or the seller's required annual contribution for the plan year
preceding the year in which the sale occurred (the amount of the bond
or escrow is doubled if the plan is in reorganization in the year in
which the sale occurred); and
(C) The contract of sale provides that if the purchaser withdraws
from the plan within the first five plan years beginning after the sale
and fails to pay any of its liability to the plan, the seller shall be
secondarily liable for the liability it (the seller) would have had but
for section 4204.
The bond or escrow described above would be paid to the plan if the
purchaser withdraws from the plan or fails to make any required
contributions to the plan within the first five plan years beginning
after the sale.
Additionally, section 4204(b)(1) provides that if a sale of assets
is covered by section 4204, the purchaser assumes by operation of law
the contribution record of the seller for the plan year in which the
sale occurred and the preceding four plan years.
Section 4204(c) of ERISA authorizes the Pension Benefit Guaranty
Corporation (``PBGC'') to grant individual or class variances or
exemptions from the purchaser's bond/escrow requirement of section
4204(a)(1)(B) when warranted. The legislative history of section 4204
indicates a Congressional intent that the sales rules be administered
in a manner that assures protection of the plan with the least
practicable intrusion into normal business transactions. Senate
Committee on Labor and Human Resources, 96th Cong., 2nd Sess., S. 1076,
The Multiemployer Pension Plan Amendments Act of 1980: Summary and
Analysis of Considerations 16 (Comm. Print, April 1980); 128 Cong. Rec.
S10117 (July 29, 1980). The granting of an exemption or variance from
the bond/escrow requirement does not constitute a finding by the PBGC
that a particular transaction satisfies the other requirements of
section 4204(a)(1).
Under the PBGC's regulation on variances for sales of assets (29
CFR Part 4204, available at 61 FR 34002, 34084 (July 1, 1996)), a
request for a variance or waiver of the bond/escrow requirement under
any of the tests established in the regulation (sections 4204.12-
4204.13) is to be made to the plan in question. The PBGC will consider
waiver requests only when the request is not based on satisfaction of
one of the three regulatory tests or when the parties assert that the
financial information necessary to show satisfaction of one of the
regulatory tests is privileged or confidential financial information
within the meaning of 5 U.S.C. 552(b)(4) (the Freedom of Information
Act).
Under section 4204.22 of the regulation, the PBGC shall approve a
request for a variance or exemption if it determines that approval of
the request is warranted, in that it--
(1) Would more effectively or equitably carry out the purposes of
Title IV of the Act; and
(2) Would not significantly increase the risk of financial loss to
the plan.
Section 4204(c) of ERISA and section 4204.22(b) of the regulation
require the PBGC to publish a notice of the pendency of a request for a
variance or exemption in the Federal Register, and to provide
interested parties with an opportunity to comment on the proposed
variance or exemption. The PBGC received no comments on the request for
exemption.
The Decision
On July 24, 1996 (61 FR 38480), the PBGC published a notice of the
pendency of a request by the St. Louis Cardinals, L.P. (the ``Buyer'')
for an exemption from the bond/escrow requirement of section
4204(a)(1)(B) with respect to its purchase of the St. Louis Cardinals
Baseball Team from the St. Louis Baseball Club, Inc. (the ``Seller'').
According to the request, the Major League Baseball Players Benefit
Plan (the ``Plan'') was established and is maintained pursuant to a
collective bargaining agreement between the professional major league
baseball teams (the ``Clubs'') and the Major League Baseball Players
Association (the ``Players Association'').
According to the Buyer's representations, the Seller was obligated
to contribute to the Plan for certain employees of the sold operations.
Effective March 21, 1996, the Buyer and Seller entered into an
agreement under which the Buyer agreed to purchase substantially all of
the assets and assume substantially all of the liabilities of the
Seller relating to the business of employing employees under the Plan.
The Buyer agreed to contribute to the Plan for substantially the same
number of contribution base units as the Seller. The Seller agreed to
be secondarily liable for any withdrawal liability it would have had
with respect to the sold operations (if not for section 4204) should
the Buyer withdraw from the Plan within the five plan years following
the sale and fail to pay its withdrawal liability. The amount of the
bond/escrow required under section 4204(a)(1)(B) of ERISA is
approximately $873,000. The estimated amount of the unfunded vested
benefits allocable to the Seller with respect to the operations subject
to the sale is $7,340,095. The transaction had to be approved by Major
League Baseball, which required that the debt-equity ratio of the Buyer
be no more than 60 percent. The Buyer's financial statements showed
that its net tangible assets exceed the unfunded vested benefits
allocable to the Seller with respect to the purchased operations. The
Buyer requested confidential treatment of its financial statements on
the ground that they are confidential within the meaning of 5 U.S.C.
552.
Based on the facts of this case and the representations and
statements made in connection with the request for an exemption, the
PBGC has determined that an exemption from the bond/escrow requirement
is warranted, in that it would more effectively carry out the purposes
of title IV of ERISA and would not significantly increase the risk of
financial loss to the Plan. Moreover, the PBGC has determined that the
Buyer satisfies the net tangible assets test contained in section
4204.13(a)(2) of the regulation, and would be entitled to a variance of
the bond/escrow requirement from the Plan under section 4204.11 of the
regulation.
Therefore, the PBGC hereby grants the request for an exemption for
the bond/escrow requirement. The granting of an exemption or variance
from the bond/escrow requirement of section 4204(a)(1)(B) does not
constitute a finding by the PBGC that the transaction satisfies the
other requirements of section 4204(a)(1). The determination of whether
the transaction satisfies such other requirements is a determination to
be made by the Plan sponsor.
Issued at Washington, DC, on this 7th day of October, 1996.
Martin Slate,
Executive Director.
[FR Doc. 96-26181 Filed 10-10-96; 8:45 am]
BILLING CODE 7708-01-P
