[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: 94-17641]
[[Page Unknown]]
[Federal Register: July 20, 1994]
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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; San
Francisco Baseball Associates, 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 San Francisco Baseball Associates, 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 of
exemption from the requirement was published on April 14, 1994 (59 FR
17803). 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, public comments, 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:
D. Bruce Campbell, Office of the General Counsel, Pension Benefit
Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026;
telephone 202-326-4125 (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. 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 2643), a request for a variance or waiver of the bond/escrow
requirement under any of the tests established in the regulation
(Secs. 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. 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 section 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 PBGC received one comment on the request for
exemption.
The Decision
On April 14, 1994 (59 FR 17803), the PBGC published a notice of the
pendency of a request by the San Francisco Baseball Associates, 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 San Francisco
Giants (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'').
The 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 pension
liability 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, including revenues from
foreign broadcasts, of regular and exhibition games. During the 1992
Plan year, approximately $34.1 million was paid into the Plan on behalf
of all major league clubs. In that year revenues to the Central Fund
exceeded expenses, including contribution to the Plan, by approximately
$354 million.
Effective November 20, 1992, the Buyer and Seller entered into an
Asset Sale and Contribution 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 contract of sale provides that the Buyer
agrees ``to contribute to the Plan substantially the same number of
contribution base units which the Seller had an obligation to
contribute to the Plan.'' The contract of sale further provides that
``[i]f the Buyer thereafter, but prior to the end of the fifth plan
year commencing after the closing, partially or completely withdraws
from the Plan, the Seller will be secondarily liable for any withdrawal
liability it would have had to the Plan * * *.'' the final closing of
the transaction occurred on January 14, 1993. The amount of the bond/
escrow that would be required under section 4204 (a)(1)(B) of ERISA is
$1,412,077. The estimated amount of the withdrawal liability that the
Seller would incur if not for Section 4204 is $4,796,483.
The Comment received by the PBGC suggested that the request for
exemption be denied based on the possibility that revenues payable to
the Central Fund may not be sufficient to provide contributions to the
Plan in the future. In support, the commenter cited an expected
decrease in revenues under the terms of a new network television
contract, the primary source of revenue for the Central Fund; the
possibility of a work stoppage during negotiations to implement a
salary cap as part of a new collective bargaining agreement; and
diminished fan loyalty and attendance due to high player salaries,
inflated ticket prices, poor management, and other factors.
The PBGC notes that the bond/escrow requirement is intended to
assure the payment of the Buyer's withdrawal liability if the Buyer
withdraws from the Plan in the five plan years following the sale of
assets, and the Buyer is unable to pay withdrawal liability that would
otherwise have been paid by the Seller had section 4204 not applied to
the transaction. The factors cited by the commenter do not
substantially affect the Plan's ability to collect withdrawal liability
from the Buyer, as compared with the Plan's ability to collect
withdrawal liability from the Seller had section 4204 not applied to
the transaction. We also note that the Seller remains secondarily
liable under section 4204(a)(2) for withdrawal liability, regardless of
whether the Buyer receives an exemption from the bond/escrow
requirement.
In addition, the Plan's public filings indicate that the Plan is
financially sound. The Plan's most recent annual return/report (Form
5500) states that the Plan had approximately $708 million in assets as
of the close of the plan year on March 31, 1993. While the plan
incurred approximately $63 million in expenses for that plan year, the
Plan's investment earnings were nearly $100 million.
Accordingly, 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, DC, on this 14th day of July, 1994.
Martin Slate,
Executive Director.
[FR Doc. 94-17641 Filed 7-19-94; 8:45 am]
BILLING CODE 7708-01-M
