Exemption From Bond/Escrow Requirement Relating to Sale of Assets by an Employer Who Contributes to a Multiemployer Plan; Home Team Limited Partnership

PENSION BENEFIT GUARANTY CORPORATION

Exemption From Bond/Escrow Requirement Relating to Sale of Assets

by an Employer Who Contributes to a Multiemployer Plan; Home Team

Limited Partnership

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 Home Team Limited Partnership of an exemption from the bond/

escrow requirement of section 4204(a)(1)(B) of the Employee Retirement

Income Security Act of 1974, as amended. A notice of the request for

exemption from the requirement was published on April 26, 1994 (59 FR

21791). The effect of this notice is to advise the public of the

decision on the exemption request.

ADDRESSES: The nonconfidential 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, at the address below, between the hours of 9:00 a.m. and

4:00 p.m.

FOR FURTHER INFORMATION CONTACT:

Karen L. Morris, Attorney, Office of 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 to result in 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 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 sale 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). Such questions are to be decided by the plan sponsor in the

first instance, and any disputes are to be resolved in arbitration. 29

U.S.C. 1382, 1399, 1401.

Under the PBGC's regulation on variances for sales of assets (29

CFR Part 2643), a request for a variance or waiver of the bond/escrow

requirement under any of the tests established in the regulation (29

CFR 2643.12-2643.14) 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 four 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. section 552(b)(4) (the

Freedom of Information Act).

Under section 2643.3 of the regulation, the PBGC shall approve a

request for a variance 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 the ERISA and Sec. 2643.3(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 Decision

On April 26, 1994 (59 FR 21791), the PBGC published a request from

The Home Team Limited Partnership (``the Buyer'') for an exemption from

the bond/escrow requirement of section 4204(a)(1)(B) with respect to

its October 4, 1993 purchase of The Orioles, Inc. (``the Seller''). No

comments were received in response to the notice.

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 professional major league

baseball teams and the Major League Baseball Players Association. The

major league clubs have established the Major Leagues Central Fund (the

``Central Fund'') pursuant to the ``Major League Agreement in re Major

Leagues Central Fund.'' Under this agreement, contributions to the Plan

for all participating employers are paid by the Office of the

Commissioner of Baseball from the Central Fund on behalf of each

participating employer in satisfaction of the employer's contribution

obligation arising under the Plan's funding agreement. The monies in

the Central Fund are derived directly from (i) gate receipts from All-

Star games, (ii) radio and television revenues from World Series,

League Championships, intradivision play-offs and All-Star games, and

(iii) certain other radio and television revenues from regular and

exhibition games, including those from foreign broadcasts.

The Buyer and the Seller entered into an Asset Purchase Agreement

for the Buyer to purchase substantially all of the assets and assume

substantially all of the liabilities of the Seller relating to the

business employing the employees covered by the Plan. The final closing

of the transaction occurred on October 4, 1993. Under the Asset

Purchase Agreement, the Buyer assumed the obligation to contribute to

the Plan for substantially the same number of contribution base units

as the Seller was obligated to contribute to the Plan. The Seller has

agreed to be secondarily liable for any withdrawal liability should the

Buyer withdraw from the Plan within five years of the sale.

The amount of the bond/escrow that would be required under section

4204(a)(1)(B) of ERISA beginning as of April 1, 1994, is $1,401,449

(the annual contribution the Seller made for the Plan year preceding

the Plan year in which the sale of assets occurred). The estimated

amount of the withdrawal liability that the Seller would incur if not

for Section 4204 is $7,672,235.

In support of the waiver request the Buyer stated that:

The Plan is funded directly from the Revenues which are paid

from the Central Fund directly to the [Plan's] Trust without first

passing through the hands of any of the Employers. Therefore, the

Plan enjoys a substantial degree of security * * * A change in

ownership of an Employer does not affect the obligation * * * to

fund the Plan * * *. Nor does a change in ownership in any way

create the possibility that there will be difficulty in collecting

Plan contributions due from any new Employer.

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. 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, D.C., on this 14th day of July 1994.

Martin Slate,

Executive Director.

[FR Doc. 94-17640 Filed 7-19-94; 8:45 am]

BILLING CODE 7708-01-M