85-31

December 30, 1985

REFERENCE:

29 CFR 2643  Variances or Exceptions from Bond Requirements

4204(a)(1)(B) Sale of Assets. Withdrawal - Posting of Security

4204(a)(1)(C)  Sale of Assets.  Secondary Liability of Seller

OPINION:

This is in response to your recent letter describing a sale of assets transaction and requesting the opinion of the Pension

Benefit Guaranty Corporation ("PBGC") as to whether subpart B of the PBGC's regulation on Variances for Sales of Assets

(29 CFR Part 2643) -- specifically § 2643.11 -- requires a multiemployer pension plan to waive the bond/escrow and

contract language requirements of section 4204(a)(1)(B) and (C) of the Employee Retirement Income Security Act of 1974

("ERISA") under the circumstances you describe.

Under section 4204(a)(1) of ERISA, a sale of assets by an employer that contributes to a multiemployer pension plan will

not constitute a withdrawal from the plan if certain conditions are met. Your letter represents that the transaction in issue

fulfills all but two of these conditions. The two conditions not met are that the purchaser furnish a bond or escrow for the

five-plan-year period beginning with the first plan year after the sale, as required by section 4204(a)(1)(B), and that the

sale contract provide for secondary liability on the part of the seller if the buyer withdraws within the five-year period and

does not satisfy its liability to the plan, as required by section 4204(a)(1)(C).

In the situation you describe, a legally enforceable contract containing all of the terms and conditions of the sale was

signed by the parties in * * * 1980; the sales was closed in * * * 1981; the plan demanded withdrawal liability from the seller

in * * * 1983 * * * and revised the amount of its demand in 1983; and the seller first raised the issue of section 4204 with

the plan in * * * 1983, more than two years after the sale. You indicate that the plan has brought an action to collect the

withdrawal liability it claims from the seller.

Section 4204 of ERISA contemplates in general that a bond or escrow will be furnished at the beginning of the five-year

period described in section 4204(a)(1)(B), and maintained throughout that period, unless and until it is waived. This principle

is alluded to in PBGC Opinion Letter 83-8 of March 25, 1983, which states that "if at any time during the five year period

the plan does not have [the required] security, then the arrangement does not comply with the requirements of § 4204 of

ERISA." The transaction you describe thus does not fall within the ambit of section 4204.

Accordingly, subpart B of the PBGC's regulation on Variances for Sales of Assets has no bearing on the situation you

describe. Not only does the regulation apply only to transactions under section 4204, but subpart B was not in effect until

May 1984. Furthermore, the regulation contains nothing to alter the result that follows from the statute. Indeed, the

preamble to the amendment that added subpart B to the regulation reaffirmed (at 49 FR 22639) the operative principle

here: "if at any time during the five full plan years beginning after the sale, the purchaser either does not post the

bond/escrow or obtain a variance from the requirement, then the transaction will not be in compliance with section 4204."

Your letter does not raise the question whether the parties to a sale of assets that occurs just at the end of a plan year

should be held to a less exacting deadline for providing the bond or escrow, and we express no opinion on that question.

If you have any further questions about this matter, you may call * * * of the PBGC's Corporate Policy and Regulations

Department at 202-956-5050.

Edward R. Mackiewicz

General Counsel