[Federal Register Volume 60, Number 212 (Thursday, November 2, 1995)]
[Notices]
[Pages 55744-55746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27200]
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PENSION BENEFIT GUARANTY CORPORATION
Exemption From Bond/Escrow Requirement Relating to Sale of Assets
by an Employer Who Contributes to a Multiemployer Plan; Associated
Wholesale Grocers, Inc.
Agency: Pension Benefit Guaranty Corporation.
Action: Notice of exemption.
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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request
from Associated Wholesale Grocers, Inc. 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. A notice of the request for
exemption from the requirement was published on July 14, 1995 (60 FR
36316). The effect of this notice is to advise the public of the
decision on the exemption request.
ADDRESSES: The nonconfidential portions of the request for an exemption
[[Page 55745]]
and the PBGC response to the request are available for public
inspection at the PBGC Communications and Public Affairs Department,
Suite 240, at the address below, between the hours of 9:00 a.m. and
4:00 p.m.
FOR FURTHER INFORMATION CONTACT: Gennice D. Brickhouse, Attorney,
Office of General Counsel (22550), Pension Benefit Guaranty
Corporation, 1200 K Street NW., Washington, D.C. 20005; telephone 202-
326-4029 (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 to result in a withdrawal if three conditions
are met. 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). Such questions are to be decided by the plan
sponsor in the first instance, and any disputes are to be resolved in
arbitration. 29 U.S.C. 1382, 1399, 1401.
Under the PBGC's regulation on variances for sales of assets (29
CFR Part 2643), a request for a variance or waiver of the bond/escrow
requirement under any of the tests established in the regulation (29
CFR 2643.12-2643.14) 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 four 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. section 552(b)(4) (the
Freedom of Information Act).
Under Sec. 2643.3 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 Sec. 2643.3(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 Decision
On July 14, 1995 (60 FR 36316), the PBGC published a request from
Associated Wholesale Grocers, Inc. (the ``Buyer'') for an exemption
from the bond/escrow requirement of section 4204(a)(1)(B) with respect
to its April 21, 1995, purchase of certain assets of Homeland Stores,
Inc. (the ``Seller''). No comments were received in response to the
notice.
According to the request, the Buyer and Seller entered into an
Asset Purchase Agreement for the Buyer to purchase, among other things,
assets of the Seller in the form of a distribution center located in
Oklahoma City and a number of retail stores located in Oklahoma. The
final closing of the transaction occurred on April 21, 1995.
Pursuant to a collective bargaining agreement, the Seller
contributes to the Central States Southwest and Southeast Areas Pension
Fund (the ``Plan'') for employees at operations subject to the sale.
Pursuant to collective bargaining agreements, the Buyer is also a
contributing sponsor under the Plan.
It is anticipated that the Buyer will enter into a collective
bargaining agreement whereby the Buyer will be required to contribute
to the Plan for substantially the same number of contribution base
units with respect to employees of the Seller who work at operations
subject to the sale. Under a Supplemental Agreement, the Seller has
agreed to be secondarily liable for any withdrawal liability it would
have had with respect to sold operations (if not for section 4204))
should the Buyer withdraw from the Plan within five years of the sale.
The amount of the bond/escrow that would be required under section
4204 (a)(1)(B) of ERISA is $1,000,000.
Based on 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.
Therefore, the PBGC hereby grants the request for an exemption from 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.
[[Page 55746]]
Issued at Washington, D.C., on this 24th day of October, 1995.
Martin Slate,
Executive Director.
[FR Doc. 95-27200 Filed 11-1-95; 8:45 am]
BILLING CODE 7708-01-P
