| 95-2 |
| August 18, 1995 |
| REFERENCE: |
| 4203(b) Complete Withdrawal. Building & Construction Industry Exemption |
| 4205(a)(1) Partial Withdrawals. Contribution Decline |
| 4205(a)(2) Partial Withdrawals. Partial Cessation |
| >4205(b)(2)(A)> |
| >4208(d)(1)> |
| OPINION: |
| This is in response to your letter requesting the opinion of the Pension Benefit Guaranty Corporation ("PBGC") regarding |
| the interpretation of the special rule for partial withdrawals for certain employers and plans in the building and construction |
| industry under section 4208(d)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the |
| Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1388(d)(1) (1988). |
| A partial withdrawal occurs when an employer has a 70-percent contribution decline in each of three consecutive plan |
| years. ERISA § 4205(a)(1), 29 U.S.C. § 1385. A partial withdrawal also will occur if an employer permanently ceases to |
| have an obligation to contribute to a plan under one or more but fewer than all of the employer's collective bargaining |
| agreements, but continues to perform covered work within the jurisdiction of the collective bargaining agreement, or |
| transfers such work to another location. ERISA § § 4205(a)(2) and 4205(b)(2)(A)(i), 29 U.S.C § § 1385(a)(2), |
| 1385(b)(2)(A)(i). Further, a partial withdrawal occurs if the employer permanently ceases to have an obligation to contribute |
| to a plan for work performed at one or more but fewer than all of its facilities, and continues to perform that covered work |
| at the facility. ERISA § 4205(b)(2)(A)(ii), 29 U.S.C. § 1385 (b)(2)(A)(ii). |
| For employers and plans in the building and construction industry (as defined in ERISA § 4203(b), 29 U.S.C. § 1383(b)), |
| section 4208(d)(1) makes an employer liable for a partial withdrawal only if the employer's obligation to contribute to the |
| plan is continued for "no more than an insubstantial portion of its work in the craft and area jurisdiction of the collective |
| bargaining agreement of the type for which contributions are required." |
| In your hypothetical, one member of the controlled group ceases to have an obligation to contribute to the plan, but |
| continues performing work of the type for which contributions had previously been required within the craft and area |
| jurisdiction of the bargaining agreement. n1 You ask whether certain contribution thresholds constitute an "insubstantial |
| portion" within the meaning of section 4208(d)(1). Specifically, you ask whether there is liability for a partial withdrawal |
| where there is a 45-percent or 60-percent decline in contribution base units of a controlled group of trades or businesses |
| within the building and construction industry. |
| n1 For purposes of Title IV of ERISA, all trades or businesses under common control constitute a single employer. ERISA |
| § 4001(b)(1), 29 U.S.C. § 1301(b)(1). |
| Your letter does not indicate whether both members of the controlled group operate in the craft and area jurisdiction of the |
| same collective bargaining agreement. If they do not, the employer would incur liability for a partial withdrawal. This occurs |
| because the controlled group member continues to work in the craft and area jurisdiction of the collective bargaining |
| agreement for which contributions were previously required but has no obligation to contribute for such work. Thus, the |
| employer's contribution obligation is necessarily for an "insubstantial portion" of that work. |
| In contrast, further analysis is necessary to determine whether a partial withdrawal occurs where the two controlled group |
| members operate within the same craft and area jurisdiction and only one member ceases to have an obligation to |
| contribute to the plan. In such cases, a determination must be made as to whether the obligation to contribute is for more |
| than an "insubstantial portion" of the employer's work. |
|
PBGC offers no opinion as to whether any given percentage of work constitutes an "insubstantial portion." Many provisions |
|
of ERISA contain specific numerical thresholds and tests governing withdrawal liability determinations. See, e.g., ERISA § |
|
4209(a), 29 U.S.C. § 1389(a) (allowing in certain multiemployer plans a reduction of unfunded vested benefits allocable |
|
to a particular employer by the lesser of 3/4 of 1-percent of the unfunded vested obligations or $ 50,000); ERISA § |
|
4208(a)(1), 29 U.S.C. § 1308(a)(1) (reducing partial withdrawal liability for an employer who has been obligated to |
|
contribute at least 90-percent of the total contribution base units for the high base year for two consecutive plan years |
|
following partial withdrawal); ERISA § 4208(b), 29 U.S.C. § 1308(b) (reducing partial withdrawal liability for an employer |
|
who has been obligated for two consecutive plan years following partial withdrawal to contribute at least 30-percent of the |
|
total contribution base units for the high base year, where the total obligations to contribute for those two plan years are at |
|
least 90-percent of the contribution base units for the high base year). Congress did not specify a comparable numerical |
|
test in section 4208(d)(1). Accordingly, such fact-specific determinations are the responsibility of the plan sponsor. ERISA |
|
§ 4202, 29 U.S.C. § 1382. Any dispute between the plan sponsor and the employer over the validity of that |
|
determination are to be resolved first through arbitration and then by district court review. ERISA § 4221, 29 U.S.C. § |
|
1401. |
|
As this office has consistently noted, PBGC will not interject itself into these procedures by issuing opinions on the |
|
application of the law to particular facts. PBGC Opinion Letter 94-3, 2 (1994); PBGC Opinion Letter 89-2, 2 (1989); PBGC |
|
Opinion Letter 88-8, 2 (1988); PBGC Opinion Letter 82-9, 1 (1982). We will, however, continue our practice of answering |
|
questions of general interpretation under Title IV of ERISA. |
|
I hope that this has been of assistance to you. If you have any further questions, please contact Stanley M. Hecht at |
|
(202) 326-4125. |
|
James J. Keightley |
|
General Counsel |