85-22

September 11, 1985

REFERENCE:

4243  Reorganization Funding

OPINION:

This is in response to your request for an opinion of the Pension Benefit Guaranty Corporation (the "PBGC") as to whether

the * * * Reciprocal Agreement * * * operates so as to impose on certain employers and defined contribution pension plans

the minimum contribution requirements of Section 4243 of the Employee Retirement Income Security Act of 1974

("ERISA") or the withdrawal liability provisions of Section 4201 of ERISA.

As we understand the facts, the Reciprocity Agreement is entered into by the union and employer trustees of pension

plans, both defined benefit and defined contribution, whose participanats are represented by the * * *. The Reciprocity

Agreement provides for the transfer to the "home plan" of an employee of contributions made on behalf of that employee

by his employer when he is employed outside the jurisdiction of the * * * local union to which he belongs. The transfer

must be pursuant to a written authorization by the employee. Under the Reciprocity Agreement, the plan under which work

is performed is liable to the "home plan" only to the extent of contributions made and collected.

Your inquiry deals with the situation in which contributions are made by an employer to a defined contribution plan and are

in turn transferred from the defined contribution plan to a defined benefit plan. The employers contributing to the defined

contribution plan are not parties to the Reciprocity Agreement. The applicable collective bargaining agreement, entered into

by the * * * local and a local chapter of the * * *, does not make reference to the Reciprocity Agreement, nor does the

pension plan document.

You specifically asked whether, in view of the Reciprocity Agreement, if the defined benefit plan is in reorganization, the

minimum contribution requirement or other requirements of ERISA impose any obligation on the defined contribution plan

(other than the transfer of contributions) or on its contributing employers (beyond that of making contractually required

contributions to the defined contribution plan). You also asked whether, in view of the Reciprocity Agreement, if the

defined benefit plan is terminated at a time when it is underfunded, and all participating employers withdraw subject to

withdrawal liability, the employers contributing to the defined contribution plan are subject to withdrawal liability and whether

the defined contribution plan is subject to withdrawal liability or other liability under ERISA.

As * * * of my staff indicated in his * * *, letter to you, it is the general position of the PBGC that it is the plan sponsor's

responsibility in the first instance to determine whether a withdrawal has occurred and to determine the identity of the liable

employer. Disputes arising over such withdrawal liability determinations must be resolved under the dispute resolution

procedures of Sections 4219 and 4221 of ERISA.

With this caveat, we can provide some general guidance. With respect to employers, we note that Section 4203 of ERISA

defines a withdrawal by an employer, inter alia, as a permanent cessation "of an obligation to contribute under the plan."

Section 4212(a) of ERISA defines "obligation to contribute" as

an obligation to contribute arising --

(1) under one or more collective bargaining (or related) agreements, or

(2) as a result of a duty under applicable labormanagement relations law, but

does not include an obligation to pay withdrawal liability under this section or to pay delinquent contributions.

The legislative history of ERISA indicates that an employer has an "obligation to contribute" to a plan if the employer has

agreed to make contributions to the plan on behalf of workers for work performed. In the words of Senator Williams:

The committees intend that the term obligation to contribute under a collective bargaining, or related, agreement apply to

any situation in which an employer has directly or indirectly agreed to make contributions to a plan. This includes cases in

which the employer signs a collective bargaining agreement or a related agreement such as a participation agreement or

memorandum of understanding, and cases in which the employer agreed to be bound by an association agreement.

126 Cong. Rec. 11672 (1980).

Thus, it appears that withdrawal liability was intended to apply only to employers, as employers are the entities that

generate contributions to multiemployer plans.

While Title IV does not define "employer" (other than in Section 4001(b)) we think it clear that a multiemployer pension plan

is not an "employer" within the meaning of Title IV with respect to its participants who are employees of its contributing

employers (while such a plan presumably would be the "employer" of its own employees, this situation is clearly

distinguishable from that posited by you). Accordingly, defined contribution plans would not be liable for withdrawal liability

for a transfer of assets from a multiemployer plan to another plan under the facts presented in your letter. Section 4234

of ERISA pertains to such transfers and notes that transfers may occur pursuant to written reciprocity agreements. Thus,

with respect to defined contribution plans the existence of a reciprocity agreement would not impose any minimum

contribution requirement under the facts presented in your letter.

Section 4243 of ERISA does not by its own operation impose any obligation to contribute to a plan on any person. While

its application by a plan in reorganization may affect the specific amount owed by a contributing employer to such a plan,

that employer's responsibility to contribute to that plan is determined by the pertinent collective bargaining agreements and

by applicable law generally, including such regulations as may be promulgated by the Secretary of Labor and by the

Secretary of the Treasury under Sections 418B and 418C of the Internal Revenue Code. You may therefore wish to

contact the Assistant Secretary of Labor for Pension and Welfare Benefit Programs and the Assistant Internal Revenue

Commissioner for Employee Plans and Exempt Organizations for additional guidance.

I hope I have been of assistance. If you have any questions please contact the attorney assigned to this matter, * * *, at

(202) 254-4895.

Edward R. Mackiewicz

General Counsel