[Federal Register: March 3, 2008 (Volume 73, Number 42)]
[Notices]
[Page 11450-11451]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr08-99]
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PENSION BENEFIT GUARANTY CORPORATION
Approval of Variance From the Bond/Escrow Requirement Relating to
the Sale of Assets by an Employer Who Contributes to a Multiemployer
Plan: P&O Ports Florida, Inc.
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Notice of approval.
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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request
from the P&O Ports Florida, Inc., (``P&O Ports'') for a variance 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
Tampa Maritime Association-International Longshoremen's Association
Pension Plan. A notice of the request for a variance from the
requirement was published on August 3, 2007 (72 FR 43297). The effect
of this notice is to advise the public of the decision on the request.
ADDRESSES: The non-confidential portions of the request for a variance
and any PBGC response to the request may be obtained by writing PBGC's
Communications and Public Affairs Department (CPAD) at Suite 1200, 1200
K Street, NW., Washington, DC 20005-4026, or by visiting or calling
CPAD during normal business hours (202-326-4040).
FOR FURTHER INFORMATION CONTACT: Eric Field, Attorney, Office of the
Chief 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
Under 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''), a complete or partial withdrawal of an
employer from a multiemployer plan does not occur solely because, as a
result of a bona fide arm's-length sale of assets to an unrelated
party, the seller ceases covered operations or ceases to have an
obligation to contribute for such operations, if the following
conditions under section 4204(a)(1)(A)-(C) of ERISA are met:
(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 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, under section 4204(b)(1), 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 asset 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 a variance or an exemption from
the bond/escrow requirement under section 4204(a)(1)(B) 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 or exemptions from the
requirements of section 4204(a)(1)(B) and (C) with respect to sales of
assets (29 CFR Part 4204), a request for a
[[Page 11451]]
variance of the bond/escrow requirement under any of the tests
established in the regulation (sections 4204.12 & 4204.13) is made to
the plan in question. The PBGC will consider variance or exemption
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 section 552(b)(4) of the Freedom of Information
Act, 5 U.S.C. 552.
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, based on the following reasons:
(1) The approval of a variance or exemption would more effectively
or equitably carry out the purposes of Title IV of ERISA; and
(2) The approval of a variance or exemption 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 P&O Ports'
request for a variance.
Decision
On August 3, 2007, the PBGC published a notice of the pendency of a
request by P&O Ports (the ``Purchaser'') for a variance or exemption
(``variance'') from the bond/escrow requirement of section
4204(a)(1)(B) regarding its purchase of SSA Gulf, Inc., d/b/a
Harborside Refrigeration and Garrison (the ``Seller'') (72 FR 4538).
According to the request, the Seller was obligated to contribute to
Tampa Maritime Association-International Longshoremen's Association
Pension Plan (the ``Plan''), a multiemployer defined benefit pension
plan, pursuant to a collective bargaining agreement with Local 1402 of
the International Longshoremen's Association.
According to the Purchaser's representations, the Purchaser
acquired, under an asset sale agreement effective May 26, 2006, the
business assets of the Seller's stevedoring and related businesses in
the Port of Tampa. The parties structured the transaction to comply
with section 4204 of ERISA, and the Purchaser represents the following:
(1) The purchase agreement expressly obligates the Purchaser to
contribute to the Plan for substantially the same contribution base
units for which the Seller was obligated,
(2) The Seller agrees to be secondarily liable for any withdrawal
liability it would have had with respect to the sold operations, but
for section 4204, should the Purchaser withdraw from the Plan within
the five plan years following the sale and fail to pay its withdrawal
liability, and,
(3) The Purchaser agrees to post a bond, establish an escrow, or
seek a variance from the bond/escrow requirement.
The amount of the bond/escrow required under section 4204(a)(1)(B)
of ERISA is $421,864. On April 9, 2007, the Purchaser established on
behalf of the Plan an escrow account through Bank of America in that
amount. The estimated amount of the withdrawal liability of the Seller
with respect to the operations subject to the sale is $1,191,462. The
Purchaser asserts that certain financial information to support its
request for a variance from the bond/escrow requirement is privileged
and confidential. Consequently, as permitted by the PBGC regulation in
these circumstances, the request is directed to the PBGC, rather than
the Plan. Accordingly, the Purchaser submitted to the PBGC financial
statements showing that the amount of the net tangible assets of the
Purchaser's controlled group significantly exceed the Seller's
estimated withdrawal liability of $1,191,462.
Based on the facts of this case and the representations and
statements made in connection with the request for an exemption, PBGC
has determined that a variance 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 a variance from the bond/escrow requirement.
The granting of a variance or an exemption 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 21st day of February, 2008.
Charles E. F. Millard,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. E8-3990 Filed 2-29-08; 8:45 am]
BILLING CODE 7708-01-P