[Federal Register Volume 83, Number 244 (Thursday, December 20, 2018)]
[Notices]
[Pages 65369-65371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27502]


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PENSION BENEFIT GUARANTY CORPORATION


Approval of Special Withdrawal Liability Rules: The United Food 
and Commercial Workers International Union--Industry 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 United Food and Commercial Workers International 
Union--Industry 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: Bruce Perlin ([email protected]), 
202-326-4020, ext. 6818 or Elizabeth Coleman 
([email protected]), ext. 3661, 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

[[Page 65370]]

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 
[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. The regulation may be 
accessed on PBGC's website (http://www.pbgc.gov). 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 United Food and Commercial Workers 
International Union--Industry Pension Fund (the ``Plan'') for approval 
of a plan amendment providing for special withdrawal liability rules. 
The Plan provided supplemental information in response to a request 
from PBGC. PBGC published a Notice of Pendency of the Request for 
Approval of the amendment October 9, 2018. PBGC's summary of the 
actuarial reports provided by the Plan may be accessed on PBGC's 
website (http://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 jointly 
maintained by Local Unions affiliated with the United Food and 
Commercial Workers International Union (``UFCW'') and employers 
signatory to collective bargaining agreements with the UFCW. The Plan 
covers unionized employees who work predominantly in the retail food 
industry. The Plan's proposed amendment would be effective for 
withdrawals occurring under ERISA section 4205(a)(1) during the three-
year testing period ending June 30, 2014, or any subsequent plan year 
and for any withdrawals occurring under sections 4203 and 4205(a)(2) of 
ERISA on or after July 1, 2013. Thus, the proposed amendment is 
intended to apply to cessations of the obligation to contribute that 
have already occurred. Plans may adopt this retroactive relief as a 
discretionary provision under section 4203.3(b)(2) of ERISA. There are 
two employers that may be eligible for relief from withdrawal liability 
under the proposed amendment if it is approved.
    The proposed amendment would create special withdrawal liability 
rules for employers contributing to the Plan for work performed under a 
contract or subcontract for services to federal government agencies 
(``Employer''). 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 an Employer loses a government contract, or subcontract, 
it usually does so through the competitive bidding process, and the 
applicable federal government agency typically contracts with a 
successor Employer that is obligated to contribute to the Plan at the 
same or substantially the same rate for the same employees. The Plan 
believes the proposed amendment may induce potential new employers to 
bid on work at a government facility and agree to continue making 
contributions to the Plan when they otherwise may avoid seeking a 
contribution obligation to the Plan to avoid potential withdrawal 
liability.
    Under the proposed amendment, the special withdrawal liability 
rules would apply to an Employer that ceases to have a contribution 
obligation to the Plan because it loses a governmental contract to a 
successor Employer (``Successor Employer''), if all the following 
conditions are met for the 5 plan years immediately following the year 
the Employer lost the contract.
    A complete withdrawal will not occur if an Employer loses all its 
governmental contracts to a Successor Employer, so long as: (1) 
Substantially all the employees for which the Employer was obligated to 
contribute to the Plan continue to perform covered work with a 
Successor Employer; (2) for each of the next 5 plan years the Successor 
Employer has an obligation to contribute at the same or a higher 
contribution rate to the Plan; (3) for each of the next 5 plan years 
the Successor Employer contributes substantially the same contribution 
base units as did the initial Employer in the plan year immediately 
before the year it lost the contract; and (4) the Employer posts a bond 
or establishes an escrow account equal to the lesser of the present 
value of its withdrawal liability or 5 years of installment payments of 
its withdrawal liability. The Employer will have experienced a complete 
withdrawal if within the 5 plan years following the year the Employer 
lost the contract, the Successor Employer's contract terminates, and no 
subsequent Successor Employer assumes the contribution obligations and 
conditions, or if the Successor Employer fails to meet the contribution 
conditions.
    A partial withdrawal will not occur if an Employer loses one or 
more, but less than all, of its governmental contracts to a Successor 
Employer, or if it loses all its governmental contracts but continues 
to have a contribution obligation to the Plan under a collective 
bargaining agreement, so long as: (1) For each of the next 5 plan years 
the Successor Employer has an obligation to contribute at the same or a 
higher contribution rate to the Plan; (2) for each of the next 5 plan 
years the Successor Employer contributes substantially the same 
contribution base units as did the initial Employer in the plan year 
immediately before the year it lost the contract; and (3) the Employer 
posts a bond or establishes an escrow account equal to the lesser of 
the present value of its partial withdrawal liability or 5 years of 
installment payments of its withdrawal liability. The Employer will 
have experienced a partial withdrawal if within the 5 plan years 
following the year the Employer lost the contract, the Successor 
Employer's contract terminates, and no subsequent Successor Employer 
assumes the contribution obligations and conditions, or if the 
Successor Employer fails to meet the contribution conditions.
    Alternatively, the proposed amendment provides that an Employer 
that loses a governmental contract to a

[[Page 65371]]

Successor Employer will not experience a complete or partial withdrawal 
if the Successor Employer assumes the Employer's contribution history 
under the affected contract(s) for the plan year in which the contract 
is lost and the 5 immediately preceding plan years. Lastly, the Plan's 
trustees may waive or reduce the bond or escrow requirement if the 
Employer demonstrates that doing so would not significantly increase 
the risk of financial loss to 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 discussions 
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 adoption of special withdrawal liability rules appropriate, 
an important consideration 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 
Employer withdrawals on the Plan's contribution base. The Plan asserts 
that historically when governmental contracts have changed hands, the 
Plan has not experienced reduced contributions. Similar to construction 
industry employers, most Employers that have ceased to contribute have 
been replaced by a Successor Employer that begins contributing for the 
same work. Therefore, we conclude the proposed amendment will apply 
only to an industry that has characteristics that would make use of the 
special withdrawal rules appropriate.

2. What is the exposure and risk of loss to PBGC?

    Exposure. The Plan is in a strong funded position. The Plan is a 
Green zone plan with steady contributions and a solid base of active 
participants and as of July 1, 2016, was 104.5% funded.
    Risk of loss. The record shows that the proposed amendment presents 
a low risk of loss to PBGC's multiemployer insurance program. The 
industry covered by the amendment has unique characteristics that 
indicate the contribution base is likely to remain stable because the 
withdrawal of an Employer typically does not have an adverse effect on 
the plan's contribution base. In addition, the Employers constitute a 
very small part of the total number of employers obligated to 
contribute to the Plan, accounting for only 640 of the Plan's over 
87,593 active participants (0.73% of the Plan's total active 
participants). Accordingly, the data substantiates the Plan's assertion 
that the Employers' 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 the special rule 
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 the amend these rules at any 
time, PBGC's approval of the amendment will be required.

    Issued in Washington, DC by,
William Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2018-27502 Filed 12-19-18; 8:45 am]
 BILLING CODE 7709-02-P