[Federal Register Volume 71, Number 10 (Tuesday, January 17, 2006)]
[Notices]
[Pages 2600-2601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-383]


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PENSION BENEFIT GUARANTY CORPORATION


Exemption From the Bond/Escrow Requirement Relating to the Sale 
of Assets by an Employer Who Contributes to a Multiemployer Plan; LA 
Team Co. LLC

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 LA Team Co. LLC 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 Pension Plan. A notice of the request for exemption 
from the requirement was published on July 7, 2005 (70 FR 39349). 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 may be obtained by 
writing PBGC's Communications and Public Affairs Department (``CPAD'') 
at Suite 1200, 1200 K Street, NW., Washington, DC 20005-4026, or by 
visiting or calling CPAD (202-326-4040) during normal business hours.

FOR FURTHER INFORMATION CONTACT: Gennice D. Brickhouse, Office of the 
Chief Counsel, Suite 340, 1200 K Street, NW., Washington, DC 20005-
4026; telephone 202-326-4020. (For TTY/TDD users, call the Federal 
Relay Service toll-free at 1-800-877-8339 and ask to be connected to 
202-326-4020).

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

[[Page 2601]]

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), 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) of 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.

Decision

    On July 7, 2005, the PBGC published a notice of the pendency of a 
request by the LA Team Co. LLC (the ``Buyer'') for an exemption from 
the bond/escrow requirement of section 4204(a)(1)(B) with respect to 
its purchase of the Los Angeles Baseball Team from the Los Angeles 
Dodgers, Inc. (the ``Seller'') (70 FR 39349). According to the request, 
the Major League Baseball Players Pension Plan (the ``Fund'') 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 Fund for certain employees of the sold operations. 
Effective February 13, 2004, 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 Fund. 
The Buyer agreed to contribute to the Fund 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 Fund 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 
$2,466,666.67. The estimated amount of the unfunded vested benefits 
allocable to the Seller with respect to the operations subject to the 
sale could be as high as $32,300,000. 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. While the separate major 
league clubs are the nominal contributing employers to the Fund, the 
Major League Central Fund, under the Officer of the Commissioner, 
receives the revenues and makes the payments for certain common 
expenses including each club's contribution to the Fund. In support of 
the waiver request, the requester asserts that ``[t]he Fund is * * * 
funded directly from revenues which are paid from the Central Fund 
directly to the Fund without passing through the hands of any of the 
Clubs. The revenues of the Central Fund are * * * not exclusively or 
even largely dependent on the financial viability of any one Club. [A] 
change in ownership of a Club does not affect the obligation of the 
Central Fund to fund the Fund out of the Revenue. Accordingly, the Fund 
enjoys a substantial degree of security with respect to contributions 
on behalf of the Clubs, and as such, approval of this exemption request 
would not significantly increase the risk of financial loss to the 
Fund.''
    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 Fund. 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 Fund sponsor.

    Issued at Washington, DC, on this 9th day of January 2006.
Bradley D. Belt,
Executive Director.
[FR Doc. E6-383 Filed 1-13-06; 8:45 am]
BILLING CODE 7708-01-P