[Federal Register Volume 83, Number 188 (Thursday, September 27, 2018)]
[Notices]
[Pages 48875-48877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21040]
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PENSION BENEFIT GUARANTY CORPORATION
Approval of Special Withdrawal Liability Rules: Alaska Electrical
Pension Plan of the Alaska Electrical Pension Fund
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Notice of approval.
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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) received a
request from the Alaska Electrical Pension Plan of the Alaska
Electrical Pension Fund for approval of a plan amendment providing for
special withdrawal liability rules. PBGC published a Notice of Pendency
of the Request for Approval of the amendment. PBGC is now advising the
public that the agency has approved the requested amendment.
FOR FURTHER INFORMATION CONTACT: Jon Chatalian, ext. 6757, Acting
Assistant General Counsel ([email protected]), 202-326-4020, ext.
6757, Office of the General Counsel, Suite 340, 1200 K Street NW,
Washington, DC 20005-4026; (TTY users may 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 4203(a) of the Employee Retirement Income Security Act of
1974, as amended by the Multiemployer Pension Plan Amendments Act of
1980 (ERISA), provides that a complete withdrawal from a multiemployer
plan generally occurs when an employer permanently ceases to have an
obligation to contribute under the plan or permanently ceases all
covered operations under the plan. Under section 4205 of ERISA, a
partial withdrawal generally occurs when an employer: (1) Reduces its
contribution base units by seventy percent in each of three consecutive
years; or (2) permanently ceases to have an obligation under one or
more but fewer than all collective bargaining agreements under which
the employer has been obligated to contribute under the plan, while
continuing to perform work in the jurisdiction of the collective
bargaining agreement of the type for which contributions were
previously required or transfers such work to another location or to an
entity or entities owned or controlled by the employer; or (3)
permanently ceases to have an obligation to contribute under the plan
for work performed at one or more but fewer than all of its facilities,
while continuing to perform work at the facility of the type for which
the obligation to contribute ceased.
Although the general rules on complete and partial withdrawal
identify events that normally result in a diminution of the plan's
contribution base, Congress recognized that, in certain industries and
under certain circumstances, a complete or partial cessation of the
obligation to contribute normally does not weaken the plan's
contribution base. For that reason, Congress established special
withdrawal rules for the construction and entertainment industries.
For construction industry plans and employers, section 4203(b)(2)
of ERISA provides that a complete withdrawal occurs only if an employer
ceases to have an obligation to contribute under a plan and the
employer either continues to perform previously covered work in the
jurisdiction of the collective bargaining agreement, or resumes such
work within 5 years without renewing the obligation to contribute at
the time of resumption. In the case of a plan terminated by mass
withdrawal (within the meaning of section 4041(A)(2) of ERISA), section
4203(b)(3) provides that the 5-year restriction on an employer's
resuming covered work is reduced to 3 years. Section 4203(c)(1) of
ERISA applies the same special definition of complete withdrawal to the
entertainment industry, except that the pertinent jurisdiction is the
jurisdiction of the plan rather than the jurisdiction of the collective
bargaining agreement. In contrast, the general definition of complete
withdrawal in section 4203(a) of ERISA includes the permanent cessation
of the obligation to contribute regardless of the continued activities
of the withdrawn employer.
Congress also established special partial withdrawal liability
rules for the construction and entertainment industries. Under section
4208(d)(1) of ERISA, ``[a]n employer to whom section 4203(b) (relating
to the building and construction industry) applies is liable for a
partial withdrawal only if the employer's obligation to contribute
under the plan is continued for no more than an insubstantial portion
of its work in the craft and area jurisdiction of the collective
bargaining agreement of the type for which contributions are
required.'' Under section 4208(d)(2) of ERISA, ``[a]n employer to whom
section 4203(c) (relating to the entertainment industry) applies shall
have no liability for a partial withdrawal except under the conditions
and to the extent prescribed by the [PBGC] by regulation.''
Section 4203(f)(1) of ERISA provides that PBGC may prescribe
regulations under which plans in other industries may be amended to
provide for special withdrawal liability rules similar to the rules
prescribed in section 4203(b) and (c) of ERISA. Section 4203(f)(2) of
ERISA provides that such regulations shall permit the use of special
withdrawal liability rules only in industries (or portions thereof) in
which PBGC determines that the characteristics that would make use of
such rules appropriate are clearly shown, and that the use of such
rules will not pose a significant risk to the insurance system under
Title IV of ERISA. Section 4208(e)(3) of ERISA provides that PBGC shall
prescribe by regulation a procedure by which plans may be amended to
adopt special partial withdrawal liability rules upon a finding by PBGC
that the adoption of such rules is consistent with the purposes of
Title IV of ERISA.
PBGC's regulations on Extension of Special Withdrawal Liability
Rules (29 CFR part 4203) prescribe procedures for a multiemployer plan
to ask PBGC to approve a plan amendment that establishes special
complete or partial withdrawal liability rules. Section 4203.5(b) of
the regulation requires PBGC to publish a notice of the pendency of a
request for approval of special withdrawal liability rules in the
Federal Register, and to provide interested parties with an opportunity
to comment on the request.
The Request
PBGC received a request from the Alaska Electrical Pension Plan of
the Alaska Electrical Pension Fund (the ``Plan''), for approval of a
plan amendment providing for special withdrawal liability rules. The
Plan subsequently provided supplemental information in response to a
request from PBGC. PBGC published a Notice of Pendency of the Request
for Approval of the amendment on June 5, 2018. PBGC's summary of the
actuarial reports provided by the Plan may be accessed on PBGC's
website (https://www.pbgc.gov/prac/pg/other/guidance/multiemployer-notices.html). PBGC did not receive any comments from interested
parties.
In summary, the Plan is a multiemployer pension plan maintained
[[Page 48876]]
pursuant to a collective bargaining agreement between the Alaska
Chapter National Electrical Contractors and the I.B.E.W. 1547
(``Union''), collective bargaining agreements between individual
employers and the Union, and ``special agreements'' between various
employers and the Board to provide for participation by certain non-
bargained employees. The Plan covers unionized employees who
predominantly work in the electrical industry in Alaska. Approximately
one-third of the participants are employed in the building and
construction industry and the remaining two-thirds are employed in the
utilities and telecommunications industry.
The Plan's proposed amendment would be effective for withdrawals
occurring on or after January 1, 2017, and would create special
withdrawal liability rules for employers contributing to the Plan whose
employees work under a contract or subcontract with federal government
agencies governed by the Service Contract Act (``SCA''), 41 U.S.C. 351
et seq.; provided that substantially all of the employees for whom the
employer is required to make a contribution work under a service
contract (``SCA Employers''). The Plan's submission represents that the
industry for which the rule is requested has characteristics similar to
those of the construction industry. According to the Plan, the
principal similarity is that when a contributing SCA Employer loses a
contract, the applicable federal government agency typically contracts
with a new SCA Employer to contribute at the same or substantially the
same rate, because the SCA provides that employees must not be paid
less than the minimum monetary wages and fringe benefits found
prevailing in a particular locality in accordance with the applicable
collective bargaining agreement.
Under the following circumstances relating to SCA Employers, the
Plan's proposed amendment defines a complete withdrawal as follows:
(1) If an SCA Employer ceases to have an obligation to contribute
to the Plan because it loses all its Service Contracts and the
successor SCA Employer has an obligation to contribute to the Plan for
work performed under the Service Contract at the same or a higher
contribution rate and for at least 85% as many contribution base units
as such SCA Employer had during the plan year ending before such SCA
Employer lost the contract, a complete withdrawal occurs only if the
SCA Employer:
(A) Continues to perform work in the jurisdiction of the collective
bargaining agreement of the type for which contributions were
previously required; or
(B) Within 5 years after the date on which the SCA Employer loses
the Service Contract(s),
(i) Such SCA Employer resumes such work and does not renew the
obligation at the time of resumption; or
(ii) The federal government decides to close the facility, have the
work performed by government employees, or transfer the work covered by
the Service Contract to another location that is not covered by a
collective bargaining unit; or
(iii) The successor SCA Employer ceases contributions to the Plan
for work performed pursuant to the Service Contract.
Under the following circumstances relating to SCA Employers, the
Plan's proposed amendment defines a partial withdrawal as follows:
(1) If an SCA Employer loses a contract to a successor SCA
Employer, and if the successor has an obligation to contribute to the
Plan for work performed under the Service Contract at the same or a
higher contribution rate and for at least 85% as many contribution base
units as such SCA Employer had during the plan year ending before such
SCA Employer lost the contract, a partial withdrawal occurs only if the
SCA Employer has an obligation to contribute for no more than an
insubstantial portion of its work in the jurisdiction of a collective
bargaining agreement for which contributions are or were required to
the Plan, and either,
(A) The SCA Employer continues to perform work in the jurisdiction
of a collective bargaining agreement of the type for which
contributions were previously required; or
(B) Within 5 years after the date on which the SCA Employer loses
the Service Contract,
(i) The federal government decides to close the facility, have the
work performed by government employees, or transfer the work covered by
the service contract to another location that is not covered by a
collective bargaining unit; or
(ii) The successor SCA Employer ceases contributions to the Plan
for work performed under the Service Contract.
In the case of termination by mass withdrawal (within the meaning
of section 4041A(a)(2) of ERISA), the proposed amendment provides that
section 4203(b)(3) of ERISA, the provision that allows a construction
employer to resume covered work after 3 years of withdrawal, rather
than the standard 5-year restriction, is not applicable. Therefore, in
the event of a mass withdrawal, there is still a 5-year restriction on
resuming covered work in the jurisdiction of the Plan. The Plan's
request includes the actuarial data on which the Plan relies to support
its contention that the amendment will not pose a significant risk to
the insurance system under Title IV of ERISA.
Decision on the Proposed Amendment
The statute and the implementing regulation state that PBGC must
make two factual determinations before it approves a request for an
amendment that adopts a special withdrawal liability rule. ERISA
section 4203(f); 29 CFR 4203.5(a). First, based on a showing by the
plan, PBGC must determine that the amendment will apply to an industry
that has characteristics that would make use of the special rules
appropriate. Second, PBGC must determine that the plan amendment will
not pose a significant risk to the insurance system. PBGC's discussion
on each of those issues follows. After review of the record submitted
by the Plan, and having received no public comments, PBGC has made the
following determinations.
1. What is the nature of the industry?
In determining whether an industry has the characteristics that
would make an amendment to special rules appropriate, an important
inquiry is the extent to which the Plan's contribution base resembles
that found in the construction industry. This threshold question
requires consideration of the effect of SCA Employer withdrawals on the
Plan's contribution base. Similar to construction industry employers,
when an SCA Employer loses its contract, the applicable federal
government agency contracts with a new SCA Employer to contribute at
the same or substantially the same rate. This is because the SCA
provides that employees must not be paid less than the wages and fringe
benefits set by the collective bargaining agreement. The Plan presented
historical data that demonstrates over the past 15 years, cessation of
contributions by any individual SCA employer has not had an adverse
impact on the Plan's contribution base. Most SCA employers that have
ceased to contribute have been replaced by another employer who begins
contributing for the same work. Therefore, PBGC has concluded that the
amendment will apply to an industry that has characteristics that would
make the use of special withdrawal liability rules appropriate.
[[Page 48877]]
2. What is the exposure and risk of loss to PBGC?
Exposure. The Plan is in a strong funded position. For each Plan
year since the adoption of PPA, the Plan's actuary certified that it
was not endangered, critical, or critical and declining status, and as
of January 1, 2017, the Plan's funded percentage was 94.4%. The Plan is
a Green zone plan with steady contributions and a solid base of active
participants.
Risk of loss. The record shows that the proposed amendment presents
a low risk of loss to PBGC's multiemployer insurance program. SCA
employers constitute a small part of the total number of employers
obligated to contribute to the Plan. Eight of the Plan's approximately
130 contributing employers are SCA employers and 3% of the Plan's
active participants are employed by SCA Employers. In addition, the
industry covered by the amendment has unique characteristics that
suggest the SCA Employers' contribution base is likely to remain
stable, and the historical data provided by the Plan demonstrates that
if the proposed amendment had always been in effect, the Plan's
withdrawal liability payments would have been reduced by only .03% of
the Plan's $1.8 billion assets. Accordingly, the data substantiates the
Plan's assertions that the SCA Employer contribution base is secure and
the amendment will not pose a significant risk to the insurance system.
Conclusion
Based on the Plan's submissions and the representations and
statements made in connection with the request for approval, PBGC has
determined that the plan amendment adopting the special withdrawal
liability rules (1) will apply only to an industry that has
characteristics that would make the use of special withdrawal liability
rules appropriate, and (2) will not pose a significant risk to the
insurance system. Therefore, PBGC hereby grants the Plan's request for
approval of a plan amendment providing special withdrawal liability
rules, as set forth herein. Should the Plan wish to amend these rules
at any time, PBGC approval of the amendment will be required.
Issued in Washington, DC.
William Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2018-21040 Filed 9-26-18; 8:45 am]
BILLING CODE 7709-02-P