[Federal Register: October 24, 2003 (Volume 68, Number 206)]
[Notices]               
[Page 61023-61024]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24oc03-134]                         

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PENSION BENEFIT GUARANTY CORPORATION

 
Exemption From the Bond/Escrow Requirement Relating to the Sale 
of Assets by an Employer Who Contributes to a Multiemployer Plan; 
Baseball Expos, L.P.

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of exemption.

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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request 
from the Baseball Expos, L.P. for an exemption 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 Major League 
Baseball Players Pension Plan. A notice of the request for exemption 
from the requirement was published on July 9, 2003 (68 FR 41024). The 
effect of this notice is to advise the public of the decision on the 
exemption request.

ADDRESSES: The non-confidential portions of the request for an 
exemption and the PBGC response to the request may be obtained by 
writing PBGC's Communications and Public Affairs Department (``CPAD'') 
at Suite 240, 1200 K Street, NW., Washington, DC 20005-4026, or by 
visiting or calling CPAD (202-326-4040) during normal business hours.

FOR FURTHER INFORMATION CONTACT: Jason E. Wolf, Office of the General 
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

    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''), provides that a bona fide arm's-length 
sale of assets of a contributing employer to an unrelated party will 
not be considered a withdrawal if three conditions are met. These 
conditions, enumerated in section 4204(a)(1)(A)-(C), are that:
    (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

[[Page 61024]]

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 (the seller) 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, section 4204(b)(1) provides that 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) 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 sales 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 an exemption or variance from the 
bond/escrow requirement 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 for sales of assets (29 
CFR 4204), a request for a variance or waiver of the bond/escrow 
requirement under any of the tests established in the regulation 
(sections 4204.12 and 4204.13) is to be made to the plan in question. 
The PBGC will consider waiver 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 5 U.S.C. 
552(b)(4) of the Freedom of Information Act.
    Under section 4204.22, the PBGC shall approve a request for a 
variance or exemption if it determines that approval of the request is 
warranted, in that it--
    (1) Would more effectively or equitably carry out the purposes of 
Title IV of the Act; and
    (2) 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 the request for 
exemption.

Decision

    On July 9, 2003, the PBGC published a notice of the pendency of a 
request by the Baseball Expos, L.P. (the ``Buyer'') for an exemption 
from the bond/escrow requirement of section 4204(a)(1)(B) with respect 
to its purchase of the Montreal Expos Baseball Team from the Florida 
Marlins, L.P. (formerly known as Montreal Expos, L.P.) (the ``Seller'') 
(68 FR 41024). According to the request, the Major League Baseball 
Players Pension Plan (the ``Plan'') was established and is maintained 
pursuant to a collective bargaining agreement between the professional 
major league baseball teams (the ``Clubs'') and the Major League 
Baseball Players Association (the ``Players Association'').
    According to the Buyer's representations, the Seller was obligated 
to contribute to the Plan for certain employees of the sold operations. 
Effective February 15, 2002, the Buyer and seller entered into an 
agreement under which the Buyer agreed to purchase substantially all of 
the assets and assume substantially all of the liabilities of the 
Seller relating to the business of employing employees under the Plan. 
The Buyer agreed to contribute to the Plan for substantially the same 
number of contribution base units as the Seller. The Seller agreed to 
be secondarily liable for any withdrawal liability it would have had 
with respect to the sold operations (if not for section 4204) should 
the Buyer withdraw from the Plan within the five plan years following 
the sale and fail to pay its withdrawal liability. The amount of the 
bond/escrow required under section 4204(a)(1)(B) of ERISA is 
$1,254,904. The estimated amount of the unfunded vested benefits 
allocable to the Seller with respect to the operations subject to the 
sale could be as high as $11,200,000. The transaction had to be 
approved by Major League Baseball, which required that the debt-equity 
ratio of the Buyer be no more than 60 percent. While the separate major 
league clubs are the nominal contributing employers to the Plan, the 
Major League Central Fund, under the Officer of the Commissioner, 
receives the revenues and makes the payments for certain common 
expenses including each club's contribution to the Plan. In support of 
the waiver request, the requester asserts that: ``The Plan is funded 
directly from Revenues which are paid from the Central Fund directly to 
the Plan without passing through the hands of any of the clubs. 
Therefore, the Plan enjoys a substantial degree of security with 
respect to contributions on behalf of the clubs. A change in ownership 
of a club does not affect the obligation of the Central Fund to fund 
the Plan out of the Revenue. As such, approval of this exemption 
request would not significantly increase the risk of financial loss to 
the Plan.''
    Based on the facts of this case and the representations and 
statements made in connection with the request for an exemption, the 
PBGC has determined that an exemption 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 an exemption for the bond/escrow requirement. The granting 
of an exemption or variance 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 20th day of October 2003.
Steven A. Kandarian,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 03-26911 Filed 10-23-03; 8:45 am]

BILLING CODE 7708-01-P