[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17640]


[[Page Unknown]]

[Federal Register: July 20, 1994]


=======================================================================
-----------------------------------------------------------------------

PENSION BENEFIT GUARANTY CORPORATION

 

Exemption From Bond/Escrow Requirement Relating to Sale of Assets 
by an Employer Who Contributes to a Multiemployer Plan; Home Team 
Limited Partnership

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of Exemption.

-----------------------------------------------------------------------

SUMMARY: The Pension Benefit Guaranty Corporation has granted a request 
from the Home Team Limited Partnership of an exemption from the bond/
escrow requirement of section 4204(a)(1)(B) of the Employee Retirement 
Income Security Act of 1974, as amended. A notice of the request for 
exemption from the requirement was published on April 26, 1994 (59 FR 
21791). The effect of this notice is to advise the public of the 
decision on the exemption request.

ADDRESSES: The nonconfidential portions of the request for an exemption 
and the PBGC response to the request are available for public 
inspection at the PBGC Communications and Public Affairs Department, 
Suite 240, at the address below, between the hours of 9:00 a.m. and 
4:00 p.m.

FOR FURTHER INFORMATION CONTACT:
Karen L. Morris, Attorney, Office of General Counsel, Pension Benefit 
Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026; 
telephone 202-326-4127 (202-326-4179 for TTY and TDD). These are not 
toll-free numbers.

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 to result in 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 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) 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 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 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). Such questions are to be decided by the plan sponsor in the 
first instance, and any disputes are to be resolved in arbitration. 29 
U.S.C. 1382, 1399, 1401.
    Under the PBGC's regulation on variances for sales of assets (29 
CFR Part 2643), a request for a variance or waiver of the bond/escrow 
requirement under any of the tests established in the regulation (29 
CFR 2643.12-2643.14) 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 four 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. section 552(b)(4) (the 
Freedom of Information Act).
    Under section 2643.3 of the regulation, the PBGC shall approve a 
request for a variance 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 the ERISA and Sec. 2643.3(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 Decision

    On April 26, 1994 (59 FR 21791), the PBGC published a request from 
The Home Team Limited Partnership (``the Buyer'') for an exemption from 
the bond/escrow requirement of section 4204(a)(1)(B) with respect to 
its October 4, 1993 purchase of The Orioles, Inc. (``the Seller''). No 
comments were received in response to the notice.
    According to the request, the Major League Baseball Players Benefit 
Plan (the ``Plan'') was established and is maintained pursuant to a 
collective bargaining agreement between professional major league 
baseball teams and the Major League Baseball Players Association. The 
major league clubs have established the Major Leagues Central Fund (the 
``Central Fund'') pursuant to the ``Major League Agreement in re Major 
Leagues Central Fund.'' Under this agreement, contributions to the Plan 
for all participating employers are paid by the Office of the 
Commissioner of Baseball from the Central Fund on behalf of each 
participating employer in satisfaction of the employer's contribution 
obligation arising under the Plan's funding agreement. The monies in 
the Central Fund are derived directly from (i) gate receipts from All-
Star games, (ii) radio and television revenues from World Series, 
League Championships, intradivision play-offs and All-Star games, and 
(iii) certain other radio and television revenues from regular and 
exhibition games, including those from foreign broadcasts.
    The Buyer and the Seller entered into an Asset Purchase Agreement 
for the Buyer to purchase substantially all of the assets and assume 
substantially all of the liabilities of the Seller relating to the 
business employing the employees covered by the Plan. The final closing 
of the transaction occurred on October 4, 1993. Under the Asset 
Purchase Agreement, the Buyer assumed the obligation to contribute to 
the Plan for substantially the same number of contribution base units 
as the Seller was obligated to contribute to the Plan. The Seller has 
agreed to be secondarily liable for any withdrawal liability should the 
Buyer withdraw from the Plan within five years of the sale.
    The amount of the bond/escrow that would be required under section 
4204(a)(1)(B) of ERISA beginning as of April 1, 1994, is $1,401,449 
(the annual contribution the Seller made for the Plan year preceding 
the Plan year in which the sale of assets occurred). The estimated 
amount of the withdrawal liability that the Seller would incur if not 
for Section 4204 is $7,672,235.
    In support of the waiver request the Buyer stated that:

    The Plan is funded directly from the Revenues which are paid 
from the Central Fund directly to the [Plan's] Trust without first 
passing through the hands of any of the Employers. Therefore, the 
Plan enjoys a substantial degree of security * * * A change in 
ownership of an Employer does not affect the obligation * * * to 
fund the Plan * * *. Nor does a change in ownership in any way 
create the possibility that there will be difficulty in collecting 
Plan contributions due from any new Employer.

    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, D.C., on this 14th day of July 1994.
Martin Slate,
Executive Director.
[FR Doc. 94-17640 Filed 7-19-94; 8:45 am]
BILLING CODE 7708-01-M