| | 80-6 |
| | May 19, 1980 |
| | REFERENCE: |
| | 4043(b)(8) Reportable Events. Mergers, Consolidations & other Transfers of Plan Assets |
| | 4045 Recapture of Certain Payments |
| | 4062(b) Liability of Employer in Single Employer Plans. Amount of Employer Liability |
| | OPINION: |
| | This is in response to your questions regarding the applicability of several provisions of Title IV of the Employee |
| | Retirement Income Security Act of 1974 ("ERISA") to the * * * Corporation (the "Company") in connection with a proposed |
| | sale of its * * * division. |
| | The facts, as we understand them, are as follows. The Company and certain of its subsidiaries sponsor and maintain the * |
| | * * Employees' Retirement Plan (the "PVH Plan"). We assume that the PVH Plan is a tax-qualified, defined benefit |
| | pension plan subject to Title IV of ERISA. |
| | The Company plans to sell substantially all of the assets of its * * * division to '* * *", a newly-organized corporation that is |
| | not affiliated with the Company. If the proposed sale is consummated, * * * intends to continue operating the * * * stores. |
| | You have indicated that * * * will establish, effective as of the date of sale, a qualified pension plan (the "* * * Plan"), for |
| | the benefit of the * * * employees formerly included in the PVH Plan. The benefits under the * * * Plan will be |
| | substantially the same as those under the PVH Plan. Further, the participants transferred from the PVH Plan will be given |
| | credit under the * * * Plan for all service accrued under the PVH Plan. Finally, * * * will assume liability for the pension |
| | benefits accrued under the PVH Plan with respect to former * * * employees transferred to * * * and retired and terminated |
| | employees of * * *, and all assets of the PVH Plan attributable to these * * * participants will be transferred to the * * * |
| | Plan. We assume, for purposes of this letter only, that this transaction will comply with Section 414(1) of the Internal |
| | Initially, please note that the proposed transfer of assets is a reportable event described in Section 4043(b)(8) of ERISA. |
| | You have asked whether the Company would have any liability to the PBGC under Title IV of ERISA if the * * * Plan |
| | terminates after the sale of the * * * division to * * *. |
| | The Company will have no continuing liability with respect to the * * * Plan under Title IV of ERISA after the sale of the * * |
| | * division to * * * if: |
| | (1) As of the closing date of the sale, the PVH Plan has sufficient assets to satisfy all benefits which are guaranteed by |
| | the PBGC under Title IV or |
| | (2) If the assets of the PVH Plan are not sufficient to satisfy guaranteed benefits on such date, 30 percent of the |
| | statutory net worth of * * * (including its ownership of the assets of the * * * division) immediately after the closing is |
| | greater than the amount by which the assets of the * * * Plan are insufficient to satisfy guaranteed benefits. |
| | You should be aware of the PBGC's view that net worth, as used in Section 4062(b) of ERISA, refers to an employer's fair |
| | market value, which in many cases may differ significantly from an employer's balance sheet or appraised values. |
| | You have asked us for a determination of the extent of the liability which the Company would incur if the * * * Plan |
| | terminates after the date of sale when neither of the above-stated circumstances obtain on the date of sale. PBGC's |
| | action in the event of Plan termination will be determined by the facts and circumstances at the time of termination as well |
| | as the circumstances surrounding the sale. The amount of plan insufficiency and the financial conditions of the seller and |
| | buyer are not determinable until a plan actually terminates. Thus, PBGC cannot now make the determination that you |
| | You have also asked whether the PVH Plan, or the PVH trust, would be subject to liability on account of the termination of |
| | the * * * Plan. Under your description of the facts, neither the PVH Plan nor the PVH Trust appears to be subject to |
| | contingent employer liability under Title IV of ERISA. |
| | Finally, you have asked whether, in the event the * * * Plan terminates within three years after the sale of the * * * |
| | division, any payments made from the PVH Plan would be subject to recovery under Section 4045 of ERISA. In general, |
| | Section 4045(a) authorizes the PBGC, as trustee of a terminated pension plan, to recover certain payments (described in |
| | Section 4045(b)) made by the plan to a participant within a three year period immediately preceding the date the plan |
| | terminated. Under the circumstances you have described, payments made from either the PVH or the * * * plans to * * * |
| | participants or former PVH employees who transferred to the * * * Plan would be subject to recapture upon termination of |
| | the * * * Plan. However, in the absence of a termination of the PVH Plan, payments made from the PVH Plan to those |
| | participants who remained in the PVH Plan would not be subject to recapture solely by reason of the termination of the * * |
| | I hope this has been of assistance. |
| |
Henry Rose |
| |
General Counsel |