Pendency of Request for Determination of Substantial Damage With Respect to the Cessation of the Obligation to Contribute by Kane Transfer Company to the Freight Drivers and Helpers Local Union No. 557 Pension Fund

PENSION BENEFIT GUARANTY CORPORATION

Pendency of Request for Determination of Substantial Damage With

Respect to the Cessation of the Obligation to Contribute by Kane

Transfer Company to the Freight Drivers and Helpers Local Union No. 557

Pension Fund

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of Pendency.

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SUMMARY: This notice advises interested persons that the Pension

Benefit

[[Page 31466]]

Guaranty Corporation (``PBGC'') has received a request from the Freight

Drivers and Helpers Local Union No. 557 Pension Fund for a

determination of substantial damage under section 4203(d)(4) of the

Employee Retirement Income Security Act, as amended (``ERISA''), with

respect to the cessation of the obligation to contribute under the plan

by Kane Transfer Company. Section 4203(d) provides a special withdrawal

rule for cessations of the obligation to contribute involving plans and

employers in the trucking industry (as defined in that section). Under

that special rule, an employer that ceases to have an obligation to

contribute to a plan is not considered to have withdrawn from the plan

if certain conditions are met. One of these conditions is that the

employer post a bond or deposit money in escrow. After the bond/escrow

requirement has been satisfied, the PBGC may make a finding under

section 4203(d)(4) that the cessation has caused substantial damage to

the plan's contribution base, in which case the employer will be

treated as having withdrawn from the plan and the bond/escrow will be

paid to the plan. Any such finding must take into consideration any

cessations of the obligation to contribute by other employers. Thus, a

finding in any one case may have a bearing on other cases involving the

same plan. The purpose of this notice is to advise interested persons

of this request for such a finding and to solicit their views on it.

DATES: Comments must be submitted on or before July 24, 1997 to be

assured of consideration.

ADDRESSES: All written comments should be addressed to: Pension Benefit

Guaranty Corporation, Office of the General Counsel, 1200 K Street,

NW., Washington, DC 20005-4026. The request for a finding of

substantial damage 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 9:00

a.m. and 4:00 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Thomas T. Kim, Office of the General

Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,

Washington, DC 20005-4026; telephone 202-326-4020 ext. 3581 (202-326-

4179 for TTY and TDD). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

Background

Section 4203(d) of ERISA provides a special withdrawal rule for the

trucking industry. That industry, for purposes of this rule, is

considered to include the long and short haul trucking industry, the

household goods moving industry, and the public warehousing industry.

The rule is limited to trucking plans, i.e., plans under which

substantially all of the contributions required are made by employers

primarily engaged in the trucking industry. The rule is also limited to

trucking employers, i.e., those employers that have an obligation to

contribute under a trucking plan primarily for work in the trucking

industry.

Under section 4203(d), a trucking employer will not be considered

to have withdrawn from a trucking industry plan merely because the

employer permanently ceases to have an obligation to contribute under

the plan or permanently ceases all covered operations under the plan,

if certain conditions are met. One condition is that the employer must

not continue to perform work within the jurisdiction of the plan.

Another condition is that the employer must furnish a bond or establish

an escrow account in an amount equal to 50 percent of its withdrawal

liability.

After the bond is posted or the escrow established, the PBGC may,

within 60 months after the cessation of the employer's covered

operations or obligation to contribute, make a determination about the

effect of the cessation (considered together with any cessations by

other employers) on the plan's contribution base. If the PBGC makes a

finding under section 4203(d)(4) that the contribution base has

suffered substantial damage, the employer will be treated as having

withdrawn from the plan on the date when the obligation to contribute

or covered operations ceased. In that event, the bond or escrow will be

paid to the plan, and the employer will be liable for the remainder of

the withdrawal liability. If the PBGC makes a finding under section

4203(d)(5) that no substantial damage has occurred, or if it does not

make a finding of substantial damage under section 4203(d)(4) within

the 60-month period referred to above, then the bond will be canceled

or the escrow refunded, and the employer will have no further liability

with respect to the cessation.

As noted above, each cessation must be considered within the

context of other cessations under the same plan in determining its

effect on the plan's contribution base. Thus, the treatment afforded

one employer's cessation of the obligation to contribute may have a

bearing on the treatment given a cessation by another employer.

Accordingly, not only the plan and employer involved in a particular

case, but other present and former contributing employers, and

participants and beneficiaries, may have an interest in the outcome of

a request for a finding of substantial damage or no substantial damage.

The Request

The PBGC has received a request from the Freight Drivers and

Helpers Local Union No. 557 Pension Fund (the ``Fund'') for a finding

that the cessation of the obligation to contribute by Kane Transfer

Company (``Kane''), together with cessations by other employers, has

resulted in substantial damage to the Fund's contribution base. In the

request, the Fund represents among other things that:

1. The Fund is a trucking industry plan within the meaning of

section 4203(d)(2), with over 90 percent of its contributing employers

engaged in the trucking industry. Kane was a trucking industry employer

that operated for approximately 75 years in the Baltimore, Maryland

area.

2. Kane ceased its trucking operations for which it was obligated

to contribute to the Fund on December 23, 1993. The Fund assessed

withdrawal liability against Kane in the amount of $211,405. In lieu of

paying the withdrawal liability, Kane placed in escrow an amount equal

to 50 percent of its withdrawal liability.

3. Over the 1980-1993 period, the contribution base of the Fund has

declined drastically, the number of active employees has shrunk, and

the number of retirees has risen to the point where they outnumber

active employees. The number of hours for which contributions are

required to be made (i.e., the contribution base units) fell by more

than half in the 1980-1993 period, from 5,541,200 in 1980 to 3,778,800

in 1989, and to 2,476,400 in 1993. The number of active employees

declined from 3,496 in 1980 to 2,699 in 1982, and to 1,446 in 1993, a

decline of approximately 60 percent. As of December 31, 1994, there

were 2,137 pensioners and 191 beneficiaries receiving payments from the

Fund.

4. The contribution rate increased markedly since 1980. In 1994,

the highest required contribution rate was $2.725 per hour; in 1980,

the comparable rate was $1.125 per hour.

5. Over the past 10 years, there has been a widening gulf between

net contributions received and benefits paid. Net contributions and

benefit payments were relatively equal from 1985 through 1989, but from

1990 through 1994, benefit payments

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exceeded contributions in all but one year. The Fund's request,

however, points out that the deficit in contributions has been more

than offset by investment income, and that the Fund ``has not yet faced

a year when benefit payments exceeded the combined contributions and

investment income.''

6. The Fund's unfunded vested benefits in 1992, the year prior to

Kane's withdrawal, was $12 million, while in 1993, the figure rose to

$18 million, an increase of 43 percent. In contrast, in 1994, the

unfunded vested benefits fell to $5.8 million. The request asserts that

the decline in 1994 ``occurred as a result of changes in the PBGC

interest rates.'' In 1980, the Fund's unfunded vested benefits was

approximately $51 million.

Comments

All interested persons are invited to submit written comments on

the pending request to the PBGC at the above address. All comments will

be made part of the record. Comments received, as well as the relevant

information submitted in support of the request, will be available for

public inspection at the above address.

Issued at Washington, D.C., on this 2nd day of June, 1997.

John Seal,

Acting Executive Director.

[FR Doc. 97-14942 Filed 6-6-97; 8:45 am]

BILLING CODE 7708-01-P