Pension Benefit Guaranty Corporation 

76-9 

January 14, 1976 

REFERENCE: 

 [*1] 4001(b) Definitions. Employer and Controlled Group 

OPINION: 

 This is in response to your letter of September 23, 1975, concerning the application of Title IV of the Employee

Retirement Income Security Act of 1974 ("ERISA") to plans established by parent corporations in concert with wholly

owned subsidiaries. 

Specifically, you sought advice regarding the effect of ERISA $4001(b), which states that businesses under

"common control" are to be treated as a single employer for purposes of Title IV, on the determination of whether a plan

termination has occurred under the hypothetical situation presented in your letter. In the hypothetical you presented, a

corporation and its nine wholly owned subsidiaries established a common plan subject to Title IV. The 1000 employees

covered by the plan are equally divided among the corporations, such that, upon the liquidation of one subsidiary, only

100 of the 1000 employee-participants are separated from employment. You suggest that under ERISA $4001(b), this

apparently should not be considered a plan termination. Confirmation of this opinion is sought, as well as clarification

of the effect Pension Benefit Guaranty Corporation regulations, issued pursuant [*2] to $4001(b) authorization, will have

on this matter. 

The hypothetical correctly concludes that corporation and its wholly owned subsidiaries would be treated as a single

employer under $4001(b). Although PBGC has not yet adopted regulations under that section, it currently appears that

such regulations when adopted would treat your hypothetical as describing a single employer. 

Yet, the treatment of a parent-subsidiary corporate group as a single employer does not resolve the question of

whether your hypothetical presents a Title IV plan termination. As you are no doubt aware, an employer may maintain

a number of separate pension plans although assets from each are managed in a single fund. Thus, in a corporate scheme

such as you describe, the PBGC must determine whether the pension vehicle is actually a single plan, or merely a single

fund through which the separate plans of the parent and each subsidiary are managed. In the latter case, the liquidation

of a subsidiary may well effect a pension plan termination. 

A determination whether the common plan described in your hypothetical is one plan or a combination of a number

of plans would be made by PBGC based on the facts and [*3] circumstances of each case. Some of the significant

considerations would include portability of pension credits between members of the corporate group and, in the event

the subsidiary is liquidated, the availability of plan assets to satisfy plan liabilities -- whether all plan assets are available

to satisfy the liabilities of the plan to the liquidated corporation's employees, or, in contrast, whether only that portion

of the plan assets attributable to the subsidiary's contributions are available. 

 I trust this explanation will prove helpful to you. Should you wish further information, you may telephone * * *

of this office at 

Henry Rose 

General Counsel