Approval of Special Withdrawal Liability Rules; International Longshoremen's and Warehousemen's Union-Pacific Maritime Association Pension Plan

PENSION BENEFIT GUARANTY CORPORATION

Approval of Special Withdrawal Liability Rules; International

Longshoremen's and Warehousemen's Union-Pacific Maritime Association

Pension Plan

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of approval.

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SUMMARY: The Pension Benefit Guaranty Corporation (``PBGC''), pursuant

to section 4203(f) of the Employee Retirement Income Security Act of

1974, as amended, has granted a request on behalf of the International

Longshoremen's and Warehousemen's Union-Pacific Maritime Association

Pension Plan for approval of a plan amendment modifying special

withdrawal liability rules, which rules were approved by PBGC on

January 30, 1984 (See Approval of Special Withdrawal Liability Rules

(``Notice of Approval''), 49 FR 6043 (February 16, 1984)). A Notice of

Pendency of the Request for Approval was published on February 3, 1998

(63 FR 5573) (``Notice of Pendency''). The effect of this notice is to

advise the public of the decision on the request.

ADDRESSES: The request for approval and PBGC's response to the request

are available for public inspection between the hours of 9 a.m. and 4

p.m., Monday through Friday, at PBGC's Communications and Public

Affairs Department, Suite 240, 1200 K Street, NW., Washington, DC

20005-4026.

FOR FURTHER INFORMATION CONTACT: Gennice D. Brickhouse, Attorney,

Office of the General Counsel (22500), Pension Benefit Guaranty

Corporation, 1200 K Street, NW., Washington, DC 20005-4026; Telephone

202-326-4020 (For TTY and TDD, call the Federal relay service at 1-800-

877-8339 and ask to be connected to 202-326-4020).

SUPPLEMENTARY INFORMATION:

Background

Under section 4203(f) of the Employee Retirement Income Security

Act of 1974 (``ERISA'') as amended, PBGC may prescribe regulations

under which plans in industries other than the construction or

entertainment industries may be amended to provide for special

withdrawal liability rules similar to the

[[Page 27775]]

rules prescribed in section 4203 (b) and (c) of ERISA for the

construction and entertainment industries. 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 in each instance,

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 a plan may

by amendment adopt special partial withdrawal liability rules upon a

finding by PBGC that the adoption of such rules are consistent with the

purposes of Title IV of ERISA.

PBGC's regulation, Extension of Special Withdrawal Liability Rules

(29 CFR part 4203), prescribes procedures whereby a multiemployer plan

may, pursuant to sections 4203(f) and 4208(e)(3) of ERISA, request PBGC

to approve a plan amendment that establishes special complete or

partial withdrawal liability rules. Under 29 CFR 4203.3(a), a complete

withdrawal rule adopted pursuant to part 4203 must be similar to the

rules for the construction and entertainment industries described in

section 4203 (b) and (c) of ERISA. A partial withdrawal liability rule

adopted pursuant to part 4203 must be consistent with the complete

withdrawal rule adopted by the plan. Pursuant to 29 CFR 4203.3(b), a

plan amendment adopted pursuant to part 4203 may cover an entire

industry or industries, or may be limited to a segment of an industry,

and may apply to cessations of the obligation to contribute that

occurred prior to the adoption of the amendment.

Each request for approval of a plan amendment establishing special

withdrawal liability rules must contain the information specified in 29

CFR 4203.4(d). In acting on such a request, 29 CFR 4203.5(a) provides

that PBGC shall approve a plan amendment establishing special

withdrawal liability rules if PBGC determines that the plan amendment--

(1) Will apply only to an industry that has characteristics that

would make use of the special withdrawal rules appropriate; and

(2) Will not pose a significant risk to the insurance system.

In making these determinations, PBGC will conduct a comprehensive

analysis of the request, the actuarial data submitted and other

relevant information relating to the industry and the plan. 29 CFR

4203.4. Under 29 CFR 4203.4(d)(7), the plan must provide information on

the effects of withdrawals on the plan's contribution base, as well as

information sufficient to demonstrate the existence of industry

characteristics that would indicate that withdrawals in the industry do

not typically have an adverse effect on the plan's contribution base.

Finally, 29 CFR 4203.5(b) requires PBGC to publish a notice of the

pendency of a request for approval of a plan amendment containing all

the information required under 29 CFR 4203.4(d) in the Federal

Register, and to provide interested parties with an opportunity to

comment on the request.

Request

On February 3, 1998 (63 FR 5573), PBGC published a notice

soliciting public comment on a request on behalf of the International

Longshoremen's and Warehousemen's Union-Pacific Maritime Association

Pension Plan (``Plan'') for approval of a modification to a plan

amendment providing for special withdrawal liability rules, which rules

were approved by PBGC on January 30, 1984 (Notice of Approval, 49 FR

6043 (1984)), pursuant to section 4203(f) of ERISA and 29 CFR part

4203. The comment period ended on March 20, 1998. One comment was

received in opposition to the request. After the close of the comment

period, PBGC received a response to the comment and additional

information supporting the response.

The Plan is a multiemployer plan, with 114 employers contributing

in 1996, maintained pursuant to collective bargaining agreements

between the International Longshoremen's & Warehousemen's Union

(``ILWU'') and the Pacific Maritime Association (``PMA''). The Plan,

which is located in San Francisco, covers the loading and unloading of

all dry cargo for ocean-going vessels arriving at or departing from

ports along the Pacific coast of the United States, including all ports

in the states of California, Oregon and Washington. The only cargoes

not covered by the Plan are petroleum products and other liquid cargoes

and certain cargoes handled by inland boatmen.

The PMA is an employer association whose principal business is to

negotiate and administer maritime labor agreements with ILWU. The PMA

is composed of stevedore companies and terminal operators as well as

American and foreign flag vessel carriers who regularly operate from

Pacific coast ports.

As of June 30, 1996, the Plan covered 8,185 active workers, was

paying benefits to 9,049 pensioners and survivors, and had 87 inactive

participants (or survivors) with vested entitlements. For the Plan Year

ending June 30, 1996, the Plan received $99.7 million in contributions,

and paid $95 million in benefits and $1.9 million in operating

expenses. As of June 30, 1996, Plan assets were more than 13 times

total Plan disbursements during the July 1, 1995-June 30, 1996 Plan

Year. As of June 30, 1997, the market value of Plan assets was

approximately $1.631 billion and the present value of vested

liabilities was approximately $1.640 billion.

Plan benefit levels are set in negotiations between the PMA and the

ILWU. Contribution rates to the Plan, which are on the basis of either

hours worked, shipping tonnage or a combination of the two, are

determined annually, solely by the PMA. Since December 24, 1983, the

hours worked contribution rate has provided 100 percent of the

contributions to the Plan.

The total number of contributing employers has remained relatively

stable since 1971. There were 110 contributors in 1972, 107 in 1979,

and 114 in 1996. Forty-two percent of the 1996 contributors were not

contributors in 1979, and nearly 40 percent of the 1979 contributors

were no longer contributing by 1996.

According to the request, over the past four decades the west coast

shipping industry has grown steadily, and it looks forward to increased

growth in the future. Total dry cargo at all covered ports amounted to

29 million tons in calendar year 1960, 114 million tons in 1980, 182

millions tons in 1990 and 216 million tons in 1996. Because of dramatic

productivity gains, this increased shipping activity did not result in

increased hours worked. For a time, the industry did not require new

workers to replace those retiring from the work force. This accounts

for the current high ratio of retirees to active employees covered by

the Plan. However, the gains in productivity and the consequent drop in

unit labor costs did make it possible to increase wages, contribution

rates and total contributions during a period in which the utilization

of labor decreased.

It now appears that productively gains alone can no longer keep

pace with the increase in shipping activity. Covered hours worked have

remained relatively consistent with prior periods from less than 16

million in 1975 to more than 18 million in 1980. However, with the

recent growth in trade, covered hours worked have increased from fewer

than

[[Page 27776]]

15.6 million in 1993 to over 18 million in 1996.

As part of the request, copies of six of the Plan's most recent

actuarial valuation reports were submitted. Plan costs for funding

purposes are determined on the entry age normal, level dollar method.

Benefits are subject to collective bargaining, and contributions are

allocated among contributing employers on the basis of the ERISA

minimum funding requirements.

The reports show that during the 6-year period spanned by the

reports (7/1/91-6/30/97), the Plan population was relatively

stable. During that period, the number of retirees decreased 1.8

percent, while the number of active participants decreased 3.4 percent.

However, during this same period, tonnage handled increased nearly 20

percent. And, as of the end of the June 30, 1996 Plan Year, annual

contributions had increased from $71.1 million to $99.7 million, and

Plan assets had risen from $747 million to $1.329 billion.

There were three benefit increases under the Plan during the period

covered by the reports. The first, effective July 1, 1992, increased

the unfunded actuarial accrued liability by $49 million. The second

increase, effective July 1, 1993, increased the unfunded actuarial

accrued liability by $501 million. Finally, the third increase,

effective July 1, 1996, increased the unfunded actuarial accrued

liability by $52 million to approximately $534 million. The Plan's

monthly accrual rate for each year of service went from $37 to $70.

PBGC notes that the Plan's benefit level exceeds the maximum benefit

guaranteed by PBGC under section 4022A(c) of ERISA, which is $16.25 per

month per year of service. The monthly maximum benefit payable under

the Plan increased from $1,295 to $2,450.

From 1991-1995, contributions increased at a faster rate than

benefit payouts. In 1991, benefit payouts were 97% of contributions,

and in 1995, they were 95% of contributions.

A summary of the six actuarial valuations is set forth below.

Summary of Actuarial Valuation Results \1\

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Valuation date

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7/1/96 7/1/95 7/1/94 7/1/93 7/1/92 7/1/91

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Number of active participants........................... 8,185 7,856 7,682 8,141 8,339 8,469

Number of retired participants.......................... 9,049 9,236 9,244 8,979 9,132 9,214

Monthly benefit accrual rate............................ 70 69 69 69 39 37

Maximum monthly benefit................................. 2,450 2,415 2,415 2,415 1,365 1,295

Contributions (000)..................................... N/A 99,696 99,023 87,316 74,139 71,074

Benefits (000).......................................... N/A 94,963 92,437 85,293 71,321 68,848

Market value assets (000)............................... 1,329,082 1,143,335 957,661 950,030 835,063 746,993

Net minimum funding charges w/o credit balance (000).... 79,154 85,787 81,247 80,034 47,307 43,987

Normal cost, including operating expenses (000)......... 20,527 19,180 17,831 18,529 12,821 12,334

Unfunded accrued liability (assets at market value)

(000).................................................. 534,416 637,646 710,802 664,096 341,037 360,009

Unfunded liability--vested benefits (assets at market

value) (000)........................................... 354,821 462,132 530,092 476,168 N/A N/A

Valuation interest rate................................. 6.5 6.5 6.5 6.5 6.5 6.5

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\1\ Taken from actuarial reports submitted with request.

Approved Special Rules

The complete text of the relevant provisions of the Plan document,

the ILWU-PMA Pension Agreement (``Pension Agreement''), containing the

approved special withdrawal liability rules is set forth in the Notice

of Approval, 49 FR 6043 (1984). Interested persons may obtain a copy of

that notice by contacting PBGC. Following is a summary of the special

withdrawal liability rules in effect and the text of the approved

modification to those rules.

Under the special rules, a complete withdrawal occurs if an

employer who makes contributions to the Plan for longshore work

permanently ceases to have an obligation to make contributions to the

Plan, and: (1) Continues to perform work of the type for which

contributions to the Plan are currently or were previously required at

any Pacific Coast port in the United States, (2) resumes such work at

any time during the Plan Year in which the contribution obligation

ceased through the end of the fifth succeeding Plan Year without

renewing the contribution obligation, (3) sells or otherwise transfers

a substantial portion of its business or assets to another person that

performs longshore work without having an obligation to make

contributions to the Plan under the collective bargaining agreements

under which the Plan is maintained, or (4) ceases to have an obligation

to contribute in connection with the withdrawal of every employer from

the Plan or substantially all of the employers within the meaning of

section 4219(c)(1)(D) of ERISA. A partial withdrawal occurs if an

employer incurs a partial withdrawal within the meaning of section 4205

of ERISA and, in addition, at any time from the date of the partial

withdrawal through the succeeding five Plan Years: (1) Performs work of

the type for which contributions to the Plan are currently or were

previously required at any Pacific Coast port in the United States

without having an obligation to contribute to the Plan for such work,

or (2) sells or otherwise transfers a substantial portion of its

business or assets to another person that performs longshore work

without having an obligation to make contributions to the Plan under

the collective bargaining agreements under which the Plan is

maintained.

The amendment adopting the special withdrawal liability rules also

added funding requirements to the Agreement. Paragraph 4.042(c) of the

Pension Agreement requires a ``Special Contribution Amount'' and

specifies the funding goals that the Plan must meet for Plan Years

beginning July 1, 1984:

``(i) The `Special Contribution Amount' shall be the level

annual amount which, on the basis of a Certified Actuarial

Projection, the Plan Actuary certifies will, when added to the

amounts otherwise required by law (determined without regard to any

credit

[[Page 27777]]

balance in the funding standard account) * * *, be sufficient to

make the Funding Percentage as of the Applicable Funding Goal Date

at least equal to the Applicable Funding Goal.''

``(ii) The term `Funding Percentage' shall mean for any Plan

Year, the percentage derived by dividing the market value of the

assets of the Pension Fund by the present value of the

nonforfeitable benefits within the meaning of ERISA section

4213(c)(A), both values to be as determined in the Certified

Actuarial Projection as of the end of such Plan Year.''

``(iii) For the first through the fifth Plan Years commencing on

or after July 1, 1984, the term `Applicable Funding Goal' for each

such Plan Year shall mean 50 percent (50%), and the ``Applicable

Funding Goal Date'' for each such Plan Year shall mean the last day

of the tenth such Plan Year; for each succeeding Plan Year, the term

`Applicable Funding Goal' shall mean the percentage set forth in the

Accelerated Funding Schedule for the Plan Year commencing four years

after the end of the Plan Year in question, and the ``Applicable

Funding Goal Date'' for each such Plan Year shall mean the last day

of the Plan Year commencing four years after the end of the Plan

Year in question.''

``(iv) The `Accelerated Funding Schedule' shall be the following

schedule:

------------------------------------------------------------------------

Plan year Percent

------------------------------------------------------------------------

10......................................................... 50

11......................................................... 53

12......................................................... 56

13......................................................... 59

14......................................................... 62

15......................................................... 65

16......................................................... 68

17......................................................... 71

18......................................................... 74

19......................................................... 77

20 and over................................................ 80

------------------------------------------------------------------------

``(v) The `Certified Actuarial Projection' shall be a

projection, which is prepared as of each actuarial valuation date so

as to derive the Funding Percentage on the Applicable Funding Goal

Date, by using the actuarial assumptions and methods utilized in the

December 31, 1982 Actuarial Valuation of the Plan and the then

current assets and census data, which projection shall be certified

to in each Plan Year by the Plan actuary. This projection shall be

on the basis of (1) the benefit levels in effect during the Plan

Year for which the projection is made and (2) the Contributions

required for such Plan Year * * * together with any Special

Contribution Amounts. When the Applicable Funding Goal is met for

the twentieth or subsequent Plan Year, the Special Contribution

Amount may be limited to the amount necessary to maintain such

Applicable Funding Goal for each subsequent Plan Year.''

Notice of Approval, 49 FR 6043, 6046 (1984).

An additional funding requirement is contained in paragraph 4.011

of the Pension Agreement. That provision requires that:

``Notwithstanding any other provision of this Plan, the Contributions

for each Plan Year shall be not less than the total administrative

costs and benefits to be paid by the Trustee during the Plan Year.''

Notice of Approval, 49 FR 6043, 6045 (1984).

Modification to Special Rules

On July 21, 1997, the bargaining parties (ILWU and PMA) adopted an

amendment to the approved special withdrawal liability rules, which

amendment eliminates the requirement under paragraph 4.011 of the

Pension Agreement that contributions for each Plan Year shall be at

least equal to benefits and administrative costs paid in the year. In

lieu of that requirement, the parties signed a Letter of Understanding

on July 21, 1997, whereby the parties agree that:

[S]hould the Funding Percentage for the ILWU-PMA Pension Plan

(as defined in paragraph 4.042(c)(ii) of the Plan) fall below

eighty-five percent (85%) as of the beginning of a particular Plan

Year, the Contributions in the following Plan Year shall not be less

than the lesser of (a) the total administrative costs and benefits

to be paid by the Trustees during said following Plan Year or (b)

the amount required to increase the Funding Percentage for said

following Plan Year to eighty-five percent (85%).

Because the requirement that contributions be no less than

administrative costs and benefits paid in a given year is no longer

specifically set out in the Pension Agreement, PBGC indicated in the

February 3, 1998 Notice of Pendency that if PBGC should approve the

amendment modifying the Plan's special withdrawal liability rules such

approval would be under the following condition:

The Plan's special withdrawal liability rules will be void as of

the first day of the Plan Year following a Plan Year for which the

Plan is not at least eighty-five percent (85%) funded, and during

said following Plan Year the Contributions are less than the least

of (a) total administrative cost and benefits for said following

Plan Year or (b) the amount required to increase the Funding

Percentage to eighty-five percent (85%) for said following Plan Year

or (c) the maximum tax-deductible contribution to the Plan.

The Plan agreed that it would certify to this condition annually.

No other changes were proposed to the Plan's special withdrawal

liability rules.

Decision

To approve a request for an amendment modifying special withdrawal

liability rules, PBGC must make two independent determinations, as

provided in section 4203(f) of ERISA and 29 CFR 4203.4(a). First, on

the basis of a clear 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.

a. Appropriateness

The basic consideration in determining the appropriateness of

special withdrawal liability rules is the effect of cessations of

contributions by employers on the plan's contribution base. Various

characteristics may be indicative of an industry in which cessations

typically do not weaken the contribution base. In determining whether

an industry has the characteristics that would make an amendment to

special rules appropriate, an important line of inquiry is the extent

to which the particular industry possesses those characteristics that

led Congress to adopt special rules for the construction and

entertainment industries. An industry that is similar in terms of those

characteristics is generally appropriate for rules similar to the

construction and entertainment rules.

The appropriate characteristics include, but are not necessarily

limited to, the mobility of the employees, the intermittent nature of

the employment, the project-by-project nature of the work, extreme

fluctuations in the level of an employer's covered work under the plan,

the existence of a consistent pattern of entry and withdrawal by

employers, and the local nature of the work performed.

In approving the Plan's request for an amendment providing for

special withdrawal liability rules on February 16, 1984, PBGC

determined that the industry covered by the Plan clearly evidenced

characteristics similar to those of the construction industry, the most

important of which was the local nature of the work. The

characteristics of the west coast longshore industry that supported

approval of special withdrawal liability rules in 1984 continue to

apply to the industry today. Specifically, work covered under the Plan

is dependent on the comings and goings of ocean-going vessels at west

coast ports. Workers are employed by a covered stevedoring company,

generally on a daily basis through a dispatch hall system, to work

pursuant to contracts with vessel operators. The work must be performed

at the port of embarkation or debarkation. Thus, so long as west coast

shipping continues, the work performed will continue to be covered by

the Plan.

[[Page 27778]]

In addition, an employer in this industry cannot withdraw from the

Plan while continuing to perform longshore work at Pacific ports,

because longshore work along the entire west coast for all ocean-going

dry cargo work is covered under collective bargaining agreements that

require contributions to the Plan. Because the entire coast is one

bargaining unit, and all ports through which ocean-going dry cargo is

shipped are completely organized by the ILWU, it is not possible for

such cargo to be loaded or unloaded at any point on the coast without

contributions being paid to the Plan. Thus, as a practical matter, it

is not realistic to expect noncontributory, covered work. Nonetheless,

if a former contributing employer were to compete against the Plan's

other employers in this way, thereby diminishing the Plan's

contribution base, withdrawal liability would be imposed.

Because of the local nature of the work and the requirement that

contributions be made to the Plan for all longshore work done on the

Pacific coast, the comings and goings of employers do not have an

adverse effect on the Plan's contribution base, which is dependent upon

the vitality of the west coast shipping industry as a whole, and not

upon the continued existence of any particular employers. For these

reasons, the covered industry evidences characteristics that indicate

that cessations by employers typically do not have a weakening effect

on the Plan's contribution base. Thus, PBGC has concluded that the

Pacific coast longshore industry continues to evidence characteristics

that make the use of special withdrawal liability rules appropriate.

The only comment received in response to the notice questioned the

validity of the Plan amendment that is the subject of the request

(``Amendment''). Specifically, since the Amendment was not executed and

submitted by the Plan's Board of Trustees, the comment questioned

whether the Amendment was properly executed and submitted to PBGC. The

response to the comment asserts that the process of adopting the

Amendment is a settlor function left to the collective bargaining

parties, ILWU and PMA. Section 7.02 of the Pension Agreement provides

that ``[t]he (ILWU) and (PMA) by their mutual agreement in writing may

at any time amend, modify, or delete any provisions of the [ILWU-PMA

Pension] Agreement.'' Nothing in the Pension Agreement or the

collective bargaining agreement between ILWU and PMA indicates that the

Plan's Board of Trustees has the authority to amend the Pension

Agreement. The document effecting the Amendment clearly shows that

representatives of ILWU and PMA executed it. Thus, based on the Pension

Agreement and the executed Amendment, PBGC agrees that the Amendment

was properly executed by the appropriate parties, ILWU and PMA.

The comment also questioned whether the Plan's request for approval

of the Amendment was properly submitted to PBGC pursuant to PBGC

regulation. Pursuant to 29 CFR 4203.4(b), a request for PBGC's approval

of a plan amendment must be submitted by the plan sponsor or a duly

authorized representative acting on behalf of the plan sponsor. The

comment asserts that any request should have been submitted by the Plan

sponsor, the Board of Trustees, not PMA or a representative of PMA.

Further, the comment asserts that the current Board of Trustees did not

approve the request or give PMA the authority to engage a

representative to act on behalf of the Board of Trustees in preparing

and submitting the request to PBGC. The response to the comment asserts

that the Plan's previous Board of Trustees authorized PMA to engage a

representative to submit the request on behalf of the Plan. Also, a

Plan fiduciary submitted information in support of the position that

PMA had the previous Board of Trustees' authorization to proceed with

the submission of the request. No information was provided supporting

the position that the Plan's previous Board of Trustees failed to

authorize PMA to prepare and submit the request. Consequently, PBGC

disagrees with the comment and believes that the request was properly

submitted for approval by a duly authorized representative of the Plan

sponsor.

b. Risk to the Insurance System

In addition to determining that the special withdrawal liability

rules are appropriate to this case, PBGC must find that their use will

not pose a significant risk to the insurance program.

Copies of the Plan's actuarial reports for the 6-year period (7/1/

91-6/30/97) were submitted with the request. The most recent of those

reports indicates an unfunded actuarial accrued liability of $534

million, an unfunded liability for vested benefits of $355 million, and

assets of $1.329 billion. In the 6-year period, the Plan's unfunded

accrued liability increased from $360 million to $534 million, and the

monthly accrual rate went from $37 to $70 per month per year of

service. These changes increased the monthly maximum benefit from

$1,295 to $2,450. The $70 monthly accrual rate exceeds the maximum

monthly accrual rate guaranteed by PBGC under section 4022A of ERISA,

which is $16.25, or 23.2 percent of the Plan's accrual rate. On the

other hand, from 1991-1995, contributions increased at a faster rate

than benefit payouts. In 1991, benefit payouts were 97% of

contributions, and in 1995, they were 95% of contributions.

In addition to the information already mentioned, the actuarial

reports show a stable Plan population, an increase in annual

contributions ($71.1 million to $99.7 million), and an increase in Plan

assets ($747 million to $1.329 billion). Plan income has also

consistently exceeded benefit payouts. The Plan and the covered

industry have unique characteristics that suggest that the Plan's

contribution base is likely to remain stable. Contributions to the Plan

are made with respect to all west coast dry cargo. The industry has had

significant growth over the past decades and that growth is expected to

continue. The Plan's continuation is dependent only on the continued

activity in the west coast shipping industry as a whole. Consequently,

the Plan's contribution base is secure and the departure of one

employer from the Plan is not likely to have an adverse effect on the

contribution base so long as the level of shipping does not decline.

The request states that the main reason that the Plan requests an

amendment modifying its special withdrawal liability rules is that the

Plan is approaching the point where contributions would no longer be

deductible due to ERISA's full funding limit. This has occurred because

the Plan's funded status has significantly improved since approval of

the amendment establishing special withdrawal liability rules in 1984.

The 1984 amendment required that the Plan meet specific funding

objectives that were designed to improve the Plan's financial

condition. In order for the special rules to apply, the Plan had to

meet the objectives each year. At the time that PBGC approved the 1984

amendment establishing the rules, PBGC believed that ``meeting these

objectives (would) place the Plan on a sound long-term financial

basis.'' The 1984 amendment established a funding objective of fifty

percent (50%) in 1984, increasing to eighty percent (80%) in 2004.

Every year since the 1984 amendment, the Plan has more than met the

funding objectives. Under the proposed Amendment, the Plan's funding

goal objective is increased from a projected eighty percent (80%) in

2004 to eighty-five percent (85%) henceforth. If the Amendment is

approved, the Plan has agreed that in any Plan Year in

[[Page 27779]]

which the Plan's modified funding objectives are not met, the special

withdrawal liability rules will be void.

The comment raised concerns relating to the potential for increased

risk to the insurance system if the proposed Amendment is approved.

According to the comment, ``[b]y eliminating the requirement that

contributions for each Plan Year be at least equal to benefits and

administrative costs, the proposed Plan Amendment would slow the Plan's

progress towards a fully funded status while increasing the insurance

risk on the (PBGC).'' The comment states that the Plan's actuarial

projections show that the Plan's full funding limit will not be reached

for at least another two years and possibly longer, and that the

projections show a gradual decline in contributions, not a sudden drop.

In addressing the comment PBGC has considered the actuarial

information provided with the request and the response to the comment.

The evidence indicates that the west coast shipping industry covered by

the Plan has shown steady growth over the past decades, and the growth

is projected to continue. The evidence also indicates that as a result

of the steady growth in the industry, the Plan's contribution base has

been stable and secure. Due to the nature of the industry, departures

of individual employers would not pose a risk to the Plan or the PBGC

insurance system. In approving the Plan's special withdrawal liability

rules in 1984, PBGC found that meeting the associated funding

objectives would place the Plan on a ``sound long-term financial

basis.'' Those objectives have been met earlier than projected. The

proposed modification to the Plan's special withdrawal liability rules

is conditioned on the Plan meeting at least the same funding

objectives. Therefore, PBGC has concluded that the proposed

modification will not pose a significant risk to the insurance system.

Based on the facts of this case and the representations and

statements made in connection with the request for approval, PBGC has

determined that the Plan Amendment modifying 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 modifying special withdrawal liability

rules, as set forth herein. PBGC grants approval under the condition

that such approval will expire, and the Plan's special withdrawal

liability rules will be void as of the first day of the Plan Year

following a Plan Year for which the Plan is not at least eighty-five

percent (85%) funded, and during said following Plan Year the

Contributions are less than the least of (a) total administrative cost

and benefits for said following Plan Year or (b) the amount required to

increase the Funding Percentage to eighty-five percent (85%) for said

following Plan Year or (c) the maximum tax-deductible contribution to

the Plan. The Plan has agreed to certify to these conditions annually.

Should the Plan wish to again amend these rules at any time, PBGC

approval of the amendment will be required.

Issued at Washington, DC, on this 14th day of May 1998.

David Strauss,

Executive Director.

[FR Doc. 98-13435 Filed 5-19-98; 8:45 am]

BILLING CODE 7708-01-P