[Federal Register: October 24, 2003 (Volume 68, Number 206)]
[Notices]
[Page 61022-61023]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24oc03-133]
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PENSION BENEFIT GUARANTY CORPORATION
Exemption From the Bond/Escrow Requirement Relating to the Sale
of Assets by an Employer Who Contributes to a Multiemployer Plan;
Florida Marlins, 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 Florida Marlins, 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 Pension Plan. A notice of the request for exemption
from the requirement was published on July 9, 2003 (68 FR 41025). 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 may be obtained by
writing PBGC's Communications and Public Affairs Department (``CPAD'')
at Suite 240, 1200 K Street, NW., Washington, DC 20005-4026, or by
visiting or calling CPAD (202-326-4040) during normal business hours.
FOR FURTHER INFORMATION CONTACT: Jason E. Wolf, Office of the General
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,
Washington, DC 20005-4026; telephone 202-326-4020. (For TTY/TDD users,
call the Federal Relay Service toll-free at 1-800-877-8339 and ask to
be connected to 202-326-4020).
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 4204), a request for a variance or waiver
[[Page 61023]]
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) of 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.
Decision
On July 9, 2003, the PBGC published a notice of the pendency of a
request by the Florida Marlins, L.P. (formerly known as Montreal Expos,
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 Florida
Marlins Baseball Team from the F.M. B.C. II, L.L.C. (the ``Seller'')
(68 FR 41025). According to the request, the Major League Baseball
Players Pension 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 February 15, 2002, 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
$1,254,904. The estimated amount of the unfunded vested benefits
allocable to the Seller with respect to the operations subject to the
sale could be as high as $11,200,000. 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. While the separate major
league clubs are the nominal contributing employers to the Plan, the
Major League Central Fund, under the Officer of the Commissioner,
receives the revenues and makes the payments for certain common
expenses including each club's contribution to the Plan. In support of
the waiver request, the requester asserts that: ``The Plan is funded
directly from Revenues which are paid from the Central Fund directly to
the Plan without passing through the hands of any of the clubs.
Therefore, the Plan enjoys a substantial degree of security with
respect to contributions on behalf of the clubs. A change in ownership
of a club does not affect the obligation of the Central Fund to fund
the Plan out of the Revenue. As such, approval of this exemption
request would not significantly increase the risk of financial loss to
the Plan.''
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 20th day of October 2003.
Steven A. Kandarian,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 03-26910 Filed 10-23-03; 8:45 am]
BILLING CODE 7708-01-P