[Federal Register Volume 60, Number 212 (Thursday, November 2, 1995)]
[Notices]
[Pages 55744-55746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27200]



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PENSION BENEFIT GUARANTY CORPORATION


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

Agency: Pension Benefit Guaranty Corporation.

Action: Notice of exemption.

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SUMMARY: The Pension Benefit Guaranty Corporation has granted 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. A notice of the request for 
exemption from the requirement was published on July 14, 1995 (60 FR 
36316). 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 


[[Page 55745]]
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: Gennice D. Brickhouse, Attorney, 
Office of General Counsel (22550), Pension Benefit Guaranty 
Corporation, 1200 K Street NW., Washington, D.C. 20005; 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 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 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). 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 Sec. 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 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 July 14, 1995 (60 FR 36316), the PBGC published 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 April 21, 1995, purchase of certain assets of Homeland Stores, 
Inc. (the ``Seller''). No comments were received in response to the 
notice.
    According to the request, the Buyer and 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.
    Pursuant to a collective bargaining agreement, the Seller 
contributes to the Central States Southwest and Southeast Areas Pension 
Fund (the ``Plan'') for employees at operations subject to the sale. 
Pursuant to collective bargaining agreements, the Buyer is also a 
contributing sponsor under the Plan.
    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 contribution base 
units with respect to employees of the Seller who work at operations 
subject to the sale. Under a Supplemental Agreement, the Seller has 
agreed to be secondarily liable for any withdrawal liability it would 
have had with respect to sold operations (if not for section 4204)) 
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 is $1,000,000.
    Based on 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 from 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.

 
[[Page 55746]]

    Issued at Washington, D.C., on this 24th day of October, 1995.
Martin Slate,
Executive Director.
[FR Doc. 95-27200 Filed 11-1-95; 8:45 am]
BILLING CODE 7708-01-P