[Federal Register Volume 62, Number 110 (Monday, June 9, 1997)]
[Notices]
[Pages 31465-31467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14942]


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PENSION BENEFIT GUARANTY CORPORATION


Pendency of Request for Determination of Substantial Damage With 
Respect to the Cessation of the Obligation to Contribute by Kane 
Transfer Company to the Freight Drivers and Helpers Local Union No. 557 
Pension Fund

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of Pendency.

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SUMMARY: This notice advises interested persons that the Pension 
Benefit

[[Page 31466]]

Guaranty Corporation (``PBGC'') has received a request from the Freight 
Drivers and Helpers Local Union No. 557 Pension Fund for a 
determination of substantial damage under section 4203(d)(4) of the 
Employee Retirement Income Security Act, as amended (``ERISA''), with 
respect to the cessation of the obligation to contribute under the plan 
by Kane Transfer Company. Section 4203(d) provides a special withdrawal 
rule for cessations of the obligation to contribute involving plans and 
employers in the trucking industry (as defined in that section). Under 
that special rule, an employer that ceases to have an obligation to 
contribute to a plan is not considered to have withdrawn from the plan 
if certain conditions are met. One of these conditions is that the 
employer post a bond or deposit money in escrow. After the bond/escrow 
requirement has been satisfied, the PBGC may make a finding under 
section 4203(d)(4) that the cessation has caused substantial damage to 
the plan's contribution base, in which case the employer will be 
treated as having withdrawn from the plan and the bond/escrow will be 
paid to the plan. Any such finding must take into consideration any 
cessations of the obligation to contribute by other employers. Thus, a 
finding in any one case may have a bearing on other cases involving the 
same plan. The purpose of this notice is to advise interested persons 
of this request for such a finding and to solicit their views on it.

DATES: Comments must be submitted on or before July 24, 1997 to be 
assured of consideration.

ADDRESSES: All written comments should be addressed to: Pension Benefit 
Guaranty Corporation, Office of the General Counsel, 1200 K Street, 
NW., Washington, DC 20005-4026. The request for a finding of 
substantial damage 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: Thomas T. Kim, Office of the General 
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW., 
Washington, DC 20005-4026; telephone 202-326-4020 ext. 3581 (202-326-
4179 for TTY and TDD). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

Background

    Section 4203(d) of ERISA provides a special withdrawal rule for the 
trucking industry. That industry, for purposes of this rule, is 
considered to include the long and short haul trucking industry, the 
household goods moving industry, and the public warehousing industry. 
The rule is limited to trucking plans, i.e., plans under which 
substantially all of the contributions required are made by employers 
primarily engaged in the trucking industry. The rule is also limited to 
trucking employers, i.e., those employers that have an obligation to 
contribute under a trucking plan primarily for work in the trucking 
industry.
    Under section 4203(d), a trucking employer will not be considered 
to have withdrawn from a trucking industry plan merely because the 
employer permanently ceases to have an obligation to contribute under 
the plan or permanently ceases all covered operations under the plan, 
if certain conditions are met. One condition is that the employer must 
not continue to perform work within the jurisdiction of the plan. 
Another condition is that the employer must furnish a bond or establish 
an escrow account in an amount equal to 50 percent of its withdrawal 
liability.
    After the bond is posted or the escrow established, the PBGC may, 
within 60 months after the cessation of the employer's covered 
operations or obligation to contribute, make a determination about the 
effect of the cessation (considered together with any cessations by 
other employers) on the plan's contribution base. If the PBGC makes a 
finding under section 4203(d)(4) that the contribution base has 
suffered substantial damage, the employer will be treated as having 
withdrawn from the plan on the date when the obligation to contribute 
or covered operations ceased. In that event, the bond or escrow will be 
paid to the plan, and the employer will be liable for the remainder of 
the withdrawal liability. If the PBGC makes a finding under section 
4203(d)(5) that no substantial damage has occurred, or if it does not 
make a finding of substantial damage under section 4203(d)(4) within 
the 60-month period referred to above, then the bond will be canceled 
or the escrow refunded, and the employer will have no further liability 
with respect to the cessation.
    As noted above, each cessation must be considered within the 
context of other cessations under the same plan in determining its 
effect on the plan's contribution base. Thus, the treatment afforded 
one employer's cessation of the obligation to contribute may have a 
bearing on the treatment given a cessation by another employer. 
Accordingly, not only the plan and employer involved in a particular 
case, but other present and former contributing employers, and 
participants and beneficiaries, may have an interest in the outcome of 
a request for a finding of substantial damage or no substantial damage.

The Request

    The PBGC has received a request from the Freight Drivers and 
Helpers Local Union No. 557 Pension Fund (the ``Fund'') for a finding 
that the cessation of the obligation to contribute by Kane Transfer 
Company (``Kane''), together with cessations by other employers, has 
resulted in substantial damage to the Fund's contribution base. In the 
request, the Fund represents among other things that:
    1. The Fund is a trucking industry plan within the meaning of 
section 4203(d)(2), with over 90 percent of its contributing employers 
engaged in the trucking industry. Kane was a trucking industry employer 
that operated for approximately 75 years in the Baltimore, Maryland 
area.
    2. Kane ceased its trucking operations for which it was obligated 
to contribute to the Fund on December 23, 1993. The Fund assessed 
withdrawal liability against Kane in the amount of $211,405. In lieu of 
paying the withdrawal liability, Kane placed in escrow an amount equal 
to 50 percent of its withdrawal liability.
    3. Over the 1980-1993 period, the contribution base of the Fund has 
declined drastically, the number of active employees has shrunk, and 
the number of retirees has risen to the point where they outnumber 
active employees. The number of hours for which contributions are 
required to be made (i.e., the contribution base units) fell by more 
than half in the 1980-1993 period, from 5,541,200 in 1980 to 3,778,800 
in 1989, and to 2,476,400 in 1993. The number of active employees 
declined from 3,496 in 1980 to 2,699 in 1982, and to 1,446 in 1993, a 
decline of approximately 60 percent. As of December 31, 1994, there 
were 2,137 pensioners and 191 beneficiaries receiving payments from the 
Fund.
    4. The contribution rate increased markedly since 1980. In 1994, 
the highest required contribution rate was $2.725 per hour; in 1980, 
the comparable rate was $1.125 per hour.
    5. Over the past 10 years, there has been a widening gulf between 
net contributions received and benefits paid. Net contributions and 
benefit payments were relatively equal from 1985 through 1989, but from 
1990 through 1994, benefit payments

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exceeded contributions in all but one year. The Fund's request, 
however, points out that the deficit in contributions has been more 
than offset by investment income, and that the Fund ``has not yet faced 
a year when benefit payments exceeded the combined contributions and 
investment income.''
    6. The Fund's unfunded vested benefits in 1992, the year prior to 
Kane's withdrawal, was $12 million, while in 1993, the figure rose to 
$18 million, an increase of 43 percent. In contrast, in 1994, the 
unfunded vested benefits fell to $5.8 million. The request asserts that 
the decline in 1994 ``occurred as a result of changes in the PBGC 
interest rates.'' In 1980, the Fund's unfunded vested benefits was 
approximately $51 million.

Comments

    All interested persons are invited to submit written comments on 
the pending request to the PBGC at the above address. All comments will 
be made part of the record. Comments received, as well as the relevant 
information submitted in support of the request, will be available for 
public inspection at the above address.

    Issued at Washington, D.C., on this 2nd day of June, 1997.
John Seal,
Acting Executive Director.
[FR Doc. 97-14942 Filed 6-6-97; 8:45 am]
BILLING CODE 7708-01-P