[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53463-53464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26181]


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PENSION BENEFIT GUARANTY CORPORATION


Exemption From the Bond/Escrow Requirement Relating to the Sale 
of Assets by an Employer That Contributes to a Multiemployer Plan; St. 
Louis Cardinals, L.P.

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of exemption.

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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request 
from the St. Louis Cardinals, L.P. 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. A notice of the request for 
exemption from the requirement was published on July 24, 1996 (61 FR 
38480). The effect of this notice is to advise the public of the 
decision on the exemption request.

ADDRESSES: The non-confidential 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, 1200 K Street, NW., Washington, DC 20005-4026, 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, 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 a withdrawal if three conditions are met.

[[Page 53464]]

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).
    Under the PBGC's regulation on variances for sales of assets (29 
CFR Part 4204, available at 61 FR 34002, 34084 (July 1, 1996)), a 
request for a variance or waiver of the bond/escrow requirement under 
any of the tests established in the regulation (sections 4204.12-
4204.13) 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 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 5 U.S.C. 552(b)(4) (the Freedom of Information 
Act).
    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, 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 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 the request for 
exemption.

The Decision

    On July 24, 1996 (61 FR 38480), the PBGC published a notice of the 
pendency of a request by 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''). 
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 the professional major league 
baseball teams (the ``Clubs'') and the Major League Baseball Players 
Association (the ``Players Association'').
    According to the Buyer's representations, the Seller was obligated 
to contribute to the Plan for certain employees of the sold operations. 
Effective March 21, 1996, the Buyer and Seller entered into an 
agreement under which the Buyer agreed to purchase substantially all of 
the assets and assume substantially all of the liabilities of the 
Seller relating to the business of employing employees under the Plan. 
The Buyer agreed to contribute to the Plan for substantially the same 
number of contribution base units as the Seller. The Seller 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. The amount of the 
bond/escrow required under section 4204(a)(1)(B) of ERISA is 
approximately $873,000. 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. 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's financial statements showed 
that its net tangible assets exceed the unfunded vested benefits 
allocable to the Seller with respect to the purchased operations. The 
Buyer requested confidential treatment of its financial statements on 
the ground that they are confidential within the meaning of 5 U.S.C. 
552.
    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. Moreover, the PBGC has determined that the 
Buyer satisfies the net tangible assets test contained in section 
4204.13(a)(2) of the regulation, and would be entitled to a variance of 
the bond/escrow requirement from the Plan under section 4204.11 of the 
regulation.
    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, DC, on this 7th day of October, 1996.
Martin Slate,
Executive Director.
[FR Doc. 96-26181 Filed 10-10-96; 8:45 am]
BILLING CODE 7708-01-P