[Federal Register Volume 61, Number 143 (Wednesday, July 24, 1996)]
[Notices]
[Pages 38480-38481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18652]


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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; St. Louis Cardinals, L.P.

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 The St. Louis 
Cardinals, L.P., a Missouri limited partnership, 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 Benefit 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 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 September 9, 1996.

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 9:00 a.m. and 
4:00 p.m., Monday through 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 9:00 
a.m. and 4:00 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Ralph L. Landy, Office of the General 
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, N.W., 
Washington, D.C. 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 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. Sections 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 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 the St. Louis Cardinals, 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 St. Louis 
Cardinals Baseball Team from the St. Louis Baseball Club, Inc. (``the 
Seller'') on

[[Page 38481]]

March 21, 1996. In the request, the Buyer represents among other things 
that:
    1. The Seller was obligated to contribute to the Major League 
Baseball Players Benefit Plan (the ``Plan'') for certain employees of 
the sold operations.
    2. The Buyer is a Missouri limited partnership.
    3. The Buyer has agreed to assume the obligation to contribute to 
the Plan for substantially the same number of contribution base units 
as the seller.
    4. The Seller has 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.
    5. The estimated amount of the unfunded vested benefits allocable 
to the Seller with respect to the operations subject to the sale is 
$7,340,095.
    6. The amount of the bond/escrow required under section 
4204(a)(1)(B) is approximately $873,000.
    7. 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. The Buyer submitted a financial statement that shows that 
its net tangible assets exceed the unfunded vested benefits allocable 
to the Seller with respect to the purchased operations. The Buyer has 
requested confidential treatment of its financial statements on the 
ground that they are confidential within the meaning of 5 U.S.C. 
section 552.
    8. A copy of the request, excluding the financial statement of the 
Buyer, was sent to the Fund and to the collective bargaining 
representative of the Seller's employees.

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 16th day of July, 1996.
Martin Slate,
Executive Director.
[FR Doc. 96-18652 Filed 7-23-96; 8:45 am]
BILLING CODE 7708-01-P