Pendency of Request for Exemption From the Bond/Escrow Requirement Relating to the Sale of Assets by an Employer who Contributes to a Multiemployer Plan; Associated Wholesale Grocers, Inc.

PENSION BENEFIT GUARANTY CORPORATION

Pendency of Request for Exemption From the Bond/Escrow

Requirement Relating to the Sale of Assets by an Employer who

Contributes to a Multiemployer Plan; Associated Wholesale Grocers, Inc.

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of pendency of request.

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SUMMARY: This notice advises interested persons that the Pension

Benefit Guaranty Corporation has received a request from Associated

Wholesale Grocers, Inc. 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 Central States

Southeast and Southwest Areas Pension Plan. Section 4204(a)(1) provides

that the sale of assets by an employer that contributes to a

multiemployer pension plan will not result in a complete or partial

withdrawal from the plan if certain conditions are met. One of these

conditions is that the purchaser post a bond or deposit money in escrow

for the five-plan-year period beginning after the sale. The PBGC is

authorized to grant individual and class exemptions from this

requirement. Before granting an exemption the PBGC is required to give

interested persons an opportunity to

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comment on the exemption request. The purpose of this notice is to

advise interested persons of the exemption request and solicit their

views on it.

DATES: Comments must be submitted on or before August 28, 1995.

ADDRESSES: All written comments (at least three copies) should be

addressed to: Pension Benefit Guaranty Corporation, Office of the

General Counsel, 1200 K Street, N.W., Washington, D.C. 20005-4026, or

hand-delivered to Suite 340 at the above address between 9 a.m. and 4

p.m., Monday though Friday. The non-confidential portions of the

request for an exemption 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

a.m. and 4 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT:

Gennice D. Brickhouse, Office of the General Counsel, Pension Benefit

Guaranty Corporation, 1200 K Street, N.W., Washington, D.C. 20005-4025;

telephone 202-326-4029 (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 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 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 transactions 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. Sections 1382, 1399, 1401.

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

C.F.R. part 2643), a request for a variance or waiver of the bond/

escrow requirement under any of the tests established in the regulation

(29 C.F.R. 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 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 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 Request

The PBGC has received a request from Associated Wholesale Grocers,

Inc. (the ``Buyer''), for an exemption from the bond/escrow requirement

of section 4204(a)(1)(B) with respect to its purchase of certain assets

of Homeland Stores, Inc. (the ``Seller''), on April 21, 1995. In

support of the request, the Buyer represents among other things that:

1. On February 6, 1995, the Buyer and the Seller entered into an

Asset Purchase Agreement for the Buyer to purchase, among other things,

assets of the Seller in the form of a distribution center located in

Oklahoma City and a number of retail stores located in Oklahoma. The

final closing of the transaction occurred on April 21, 1995.

2. Pursuant to a collective bargaining agreement, the Seller

contributes to the Central States Southeast and Southwest Areas Pension

Fund (the ``Plan'') for employees at operations subject to the sale.

3. The Buyer is a privately owned cooperative with 300 to 400

members whose principal business is the operation of independent

distribution centers. Pursuant to collective bargaining agreements, the

Buyer is also a contributing employer under the Plan.

4. On or about April 21, 1995, Buyer and Seller also entered into a

Supply Agreement under which the Buyer will supply grocery and other

items to the Seller for use in the retail grocery stores that are being

retained by the Seller. In addition, the Seller will become a member of

the Buyer's cooperative after the sale.

5. It is anticipated that the Buyer will enter into a collective

bargaining agreement whereby the Buyer will be required to contribute

to the Plan for substantially the same number of contributions base

units with respect to employees of the Seller who work at operations

subject to the sale.

6. The Supplemental Agreement further provides that the Seller

agrees to be secondarily liable for any withdrawal

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liability it would have had with respect to the sold operations (if not

for section 4204) should the Buyer withdraw from the Plan within the

five plan years following the sale and fail to pay withdrawal

liability.

7. The estimated amount of the unfunded vested benefits allocated

to the Seller with respect to the operations subject to the sale is

$4,282,764.37, and the estimated amount of the unfunded vested benefits

allocable to the Buyer with respect to its operations covered under the

Plan is $14,230,560.30.

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

section 4204(a)(1)(B) of ERISA is approximately $1,000,000.

9. The Buyer submitted financial statements that show that it meets

the net income test described in 29 C.F.R. section 2643.14(a)(1), and

the net tangible asset test described in 29 C.F.R. section

2643.14(a)(2)(ii), with respect to the amount of unfunded vested

benefits allocable to the operations subject to the sale and its pre-

sale operations. The Buyer has requested confidential treatment of

these statements on the ground that they are confidential within the

meaning of 5 U.S.C. section 552.

10. The Buyer has sent by certified mail, return receipt requested,

a complete copy of the request, excluding the agreements between the

Seller and Buyer, certain exhibits, financial statements of the Buyer,

and certain financial data recited in the request, to the Plan and the

collective bargaining representative of the Seller.

Comments

All interested persons are invited to submit written comments on

the pending exemption request to the above address.

All comments will be made a part of the record. Comments received,

as well as the relevant non-confidential information submitted in

support of the request, will be available for public inspection at the

address set forth above.

Issued at Washington, D.C., on this 10th day of July, 1995.

Martin Slate,

Executive Director.

[FR Doc. 95-17310 Filed 7-13-95; 8:45 am]

BILLING CODE 7708-01-M