[Federal Register Volume 60, Number 135 (Friday, July 14, 1995)]
[Notices]
[Pages 36316-36318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17310]



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PENSION BENEFIT GUARANTY CORPORATION


Pendency of Request for Exemption From the Bond/Escrow 
Requirement Relating to the Sale of Assets by an Employer who 
Contributes to a Multiemployer Plan; Associated Wholesale Grocers, Inc.

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of pendency of request.

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SUMMARY: This notice advises interested persons that the Pension 
Benefit Guaranty Corporation has received a request from Associated 
Wholesale Grocers, Inc. 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 Central States 
Southeast and Southwest Areas Pension Plan. Section 4204(a)(1) provides 
that the sale of assets by an employer that contributes to a 
multiemployer pension plan will not result in a complete or partial 
withdrawal from the plan if certain conditions are met. One of these 
conditions is that the purchaser post a bond or deposit money in escrow 
for the five-plan-year period beginning after the sale. The PBGC is 
authorized to grant individual and class exemptions from this 
requirement. Before granting an exemption the PBGC is required to give 
interested persons an opportunity to 

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comment on the exemption request. The purpose of this notice is to 
advise interested persons of the exemption request and solicit their 
views on it.

DATES: Comments must be submitted on or before August 28, 1995.

ADDRESSES: All written comments (at least three copies) should be 
addressed to: Pension Benefit Guaranty Corporation, Office of the 
General Counsel, 1200 K Street, N.W., Washington, D.C. 20005-4026, or 
hand-delivered to Suite 340 at the above address between 9 a.m. and 4 
p.m., Monday though Friday. The non-confidential portions of the 
request for an exemption and the comments received will be available 
for public inspection at the PBGC Communications and Public Affairs 
Department, Suite 240, at the above address, between the hours of 9 
a.m. and 4 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT:
Gennice D. Brickhouse, Office of the General Counsel, Pension Benefit 
Guaranty Corporation, 1200 K Street, N.W., Washington, D.C. 20005-4025; 
telephone 202-326-4029 (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 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 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 transactions 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. Sections 1382, 1399, 1401.
    Under the PBGC's regulation on variances for sales of assets (29 
C.F.R. part 2643), a request for a variance or waiver of the bond/
escrow requirement under any of the tests established in the regulation 
(29 C.F.R. 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 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 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 Request

    The PBGC has received a request from Associated Wholesale Grocers, 
Inc. (the ``Buyer''), for an exemption from the bond/escrow requirement 
of section 4204(a)(1)(B) with respect to its purchase of certain assets 
of Homeland Stores, Inc. (the ``Seller''), on April 21, 1995. In 
support of the request, the Buyer represents among other things that:
    1. On February 6, 1995, the Buyer and the Seller entered into an 
Asset Purchase Agreement for the Buyer to purchase, among other things, 
assets of the Seller in the form of a distribution center located in 
Oklahoma City and a number of retail stores located in Oklahoma. The 
final closing of the transaction occurred on April 21, 1995.
    2. Pursuant to a collective bargaining agreement, the Seller 
contributes to the Central States Southeast and Southwest Areas Pension 
Fund (the ``Plan'') for employees at operations subject to the sale.
    3. The Buyer is a privately owned cooperative with 300 to 400 
members whose principal business is the operation of independent 
distribution centers. Pursuant to collective bargaining agreements, the 
Buyer is also a contributing employer under the Plan.
    4. On or about April 21, 1995, Buyer and Seller also entered into a 
Supply Agreement under which the Buyer will supply grocery and other 
items to the Seller for use in the retail grocery stores that are being 
retained by the Seller. In addition, the Seller will become a member of 
the Buyer's cooperative after the sale.
    5. It is anticipated that the Buyer will enter into a collective 
bargaining agreement whereby the Buyer will be required to contribute 
to the Plan for substantially the same number of contributions base 
units with respect to employees of the Seller who work at operations 
subject to the sale.
    6. The Supplemental Agreement further provides that the Seller 
agrees to be secondarily liable for any withdrawal 

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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 withdrawal 
liability.

    7. The estimated amount of the unfunded vested benefits allocated 
to the Seller with respect to the operations subject to the sale is 
$4,282,764.37, and the estimated amount of the unfunded vested benefits 
allocable to the Buyer with respect to its operations covered under the 
Plan is $14,230,560.30.

    8. The amount of the bond/escrow that would be required under 
section 4204(a)(1)(B) of ERISA is approximately $1,000,000.

    9. The Buyer submitted financial statements that show that it meets 
the net income test described in 29 C.F.R. section 2643.14(a)(1), and 
the net tangible asset test described in 29 C.F.R. section 
2643.14(a)(2)(ii), with respect to the amount of unfunded vested 
benefits allocable to the operations subject to the sale and its pre-
sale operations. The Buyer has requested confidential treatment of 
these statements on the ground that they are confidential within the 
meaning of 5 U.S.C. section 552.

    10. The Buyer has sent by certified mail, return receipt requested, 
a complete copy of the request, excluding the agreements between the 
Seller and Buyer, certain exhibits, financial statements of the Buyer, 
and certain financial data recited in the request, to the Plan and the 
collective bargaining representative of the Seller.

Comments

    All interested persons are invited to submit written comments on 
the pending exemption request to the above address.

    All comments will be made a part of the record. Comments received, 
as well as the relevant non-confidential information submitted in 
support of the request, will be available for public inspection at the 
address set forth above.

    Issued at Washington, D.C., on this 10th day of July, 1995.

Martin Slate,

Executive Director.

[FR Doc. 95-17310 Filed 7-13-95; 8:45 am]

BILLING CODE 7708-01-M