[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17640]
[[Page Unknown]]
[Federal Register: July 20, 1994]
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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; Home Team
Limited Partnership
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 Home Team Limited Partnership of 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 April 26, 1994 (59 FR
21791). 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
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:
Karen L. Morris, Attorney, Office of 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 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 sale 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 section 2643.3 of the regulation, the PBGC shall approve a
request for a variance 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 the 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 April 26, 1994 (59 FR 21791), the PBGC published a request from
The Home Team Limited Partnership (``the Buyer'') for an exemption from
the bond/escrow requirement of section 4204(a)(1)(B) with respect to
its October 4, 1993 purchase of The Orioles, Inc. (``the Seller''). No
comments were received in response to the notice.
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 professional major league
baseball teams and the Major League Baseball Players Association. The
major league clubs have established the Major Leagues Central Fund (the
``Central Fund'') pursuant to the ``Major League Agreement in re Major
Leagues Central Fund.'' Under this agreement, contributions to the Plan
for all participating employers are paid by the Office of the
Commissioner of Baseball from the Central Fund on behalf of each
participating employer in satisfaction of the employer's contribution
obligation arising under the Plan's funding agreement. The monies in
the Central Fund are derived directly from (i) gate receipts from All-
Star games, (ii) radio and television revenues from World Series,
League Championships, intradivision play-offs and All-Star games, and
(iii) certain other radio and television revenues from regular and
exhibition games, including those from foreign broadcasts.
The Buyer and the Seller entered into an Asset Purchase Agreement
for the Buyer to purchase substantially all of the assets and assume
substantially all of the liabilities of the Seller relating to the
business employing the employees covered by the Plan. The final closing
of the transaction occurred on October 4, 1993. Under the Asset
Purchase Agreement, the Buyer assumed the obligation to contribute to
the Plan for substantially the same number of contribution base units
as the Seller was obligated to contribute to the Plan. The Seller has
agreed to be secondarily liable for any withdrawal liability 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 beginning as of April 1, 1994, is $1,401,449
(the annual contribution the Seller made for the Plan year preceding
the Plan year in which the sale of assets occurred). The estimated
amount of the withdrawal liability that the Seller would incur if not
for Section 4204 is $7,672,235.
In support of the waiver request the Buyer stated that:
The Plan is funded directly from the Revenues which are paid
from the Central Fund directly to the [Plan's] Trust without first
passing through the hands of any of the Employers. Therefore, the
Plan enjoys a substantial degree of security * * * A change in
ownership of an Employer does not affect the obligation * * * to
fund the Plan * * *. Nor does a change in ownership in any way
create the possibility that there will be difficulty in collecting
Plan contributions due from any new Employer.
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. 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, D.C., on this 14th day of July 1994.
Martin Slate,
Executive Director.
[FR Doc. 94-17640 Filed 7-19-94; 8:45 am]
BILLING CODE 7708-01-M
