[Federal Register: March 3, 2008 (Volume 73, Number 42)]
[Notices]               
[Page 11450-11451]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr08-99]                         

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PENSION BENEFIT GUARANTY CORPORATION

 
Approval of Variance From the Bond/Escrow Requirement Relating to 
the Sale of Assets by an Employer Who Contributes to a Multiemployer 
Plan: P&O Ports Florida, Inc.

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of approval.

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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request 
from the P&O Ports Florida, Inc., (``P&O Ports'') for a variance 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 
Tampa Maritime Association-International Longshoremen's Association 
Pension Plan. A notice of the request for a variance from the 
requirement was published on August 3, 2007 (72 FR 43297). The effect 
of this notice is to advise the public of the decision on the request.

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

FOR FURTHER INFORMATION CONTACT: Eric Field, Attorney, Office of the 
Chief 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

    Under 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''), a complete or partial withdrawal of an 
employer from a multiemployer plan does not occur solely because, as a 
result of a bona fide arm's-length sale of assets to an unrelated 
party, the seller ceases covered operations or ceases to have an 
obligation to contribute for such operations, if the following 
conditions under section 4204(a)(1)(A)-(C) of ERISA are met:
    (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 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 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, under section 4204(b)(1), 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) of ERISA 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 asset sale 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 a variance or an exemption from 
the bond/escrow requirement under section 4204(a)(1)(B) 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 or exemptions from the 
requirements of section 4204(a)(1)(B) and (C) with respect to sales of 
assets (29 CFR Part 4204), a request for a

[[Page 11451]]

variance of the bond/escrow requirement under any of the tests 
established in the regulation (sections 4204.12 & 4204.13) is made to 
the plan in question. The PBGC will consider variance or exemption 
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 section 552(b)(4) of the Freedom of Information 
Act, 5 U.S.C. 552.
    Under section 4204.22 of the regulation, the PBGC shall approve a 
request for a variance or exemption if it determines that approval of 
the request is warranted, based on the following reasons:
    (1) The approval of a variance or exemption would more effectively 
or equitably carry out the purposes of Title IV of ERISA; and
    (2) The approval of a variance or exemption 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 P&O Ports' 
request for a variance.

Decision

    On August 3, 2007, the PBGC published a notice of the pendency of a 
request by P&O Ports (the ``Purchaser'') for a variance or exemption 
(``variance'') from the bond/escrow requirement of section 
4204(a)(1)(B) regarding its purchase of SSA Gulf, Inc., d/b/a 
Harborside Refrigeration and Garrison (the ``Seller'') (72 FR 4538). 
According to the request, the Seller was obligated to contribute to 
Tampa Maritime Association-International Longshoremen's Association 
Pension Plan (the ``Plan''), a multiemployer defined benefit pension 
plan, pursuant to a collective bargaining agreement with Local 1402 of 
the International Longshoremen's Association.
    According to the Purchaser's representations, the Purchaser 
acquired, under an asset sale agreement effective May 26, 2006, the 
business assets of the Seller's stevedoring and related businesses in 
the Port of Tampa. The parties structured the transaction to comply 
with section 4204 of ERISA, and the Purchaser represents the following:
    (1) The purchase agreement expressly obligates the Purchaser to 
contribute to the Plan for substantially the same contribution base 
units for which the Seller was obligated,
    (2) The Seller agrees to be secondarily liable for any withdrawal 
liability it would have had with respect to the sold operations, but 
for section 4204, should the Purchaser withdraw from the Plan within 
the five plan years following the sale and fail to pay its withdrawal 
liability, and,
    (3) The Purchaser agrees to post a bond, establish an escrow, or 
seek a variance from the bond/escrow requirement.
    The amount of the bond/escrow required under section 4204(a)(1)(B) 
of ERISA is $421,864. On April 9, 2007, the Purchaser established on 
behalf of the Plan an escrow account through Bank of America in that 
amount. The estimated amount of the withdrawal liability of the Seller 
with respect to the operations subject to the sale is $1,191,462. The 
Purchaser asserts that certain financial information to support its 
request for a variance from the bond/escrow requirement is privileged 
and confidential. Consequently, as permitted by the PBGC regulation in 
these circumstances, the request is directed to the PBGC, rather than 
the Plan. Accordingly, the Purchaser submitted to the PBGC financial 
statements showing that the amount of the net tangible assets of the 
Purchaser's controlled group significantly exceed the Seller's 
estimated withdrawal liability of $1,191,462.
    Based on the facts of this case and the representations and 
statements made in connection with the request for an exemption, PBGC 
has determined that a variance 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 a variance from the bond/escrow requirement.
    The granting of a variance or an exemption 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 21st day of February, 2008.
Charles E. F. Millard,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. E8-3990 Filed 2-29-08; 8:45 am]

BILLING CODE 7708-01-P