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pT)BGC Pension Benefit Guaranty Corporation A 

P~~~~~~~~ arnensa.~ psnnon. 1200 K Street, N.W., Washington, D C. 20005-4026 

Subject: Refractory Handling, Inc. Defined Benefit Plan 

PBGC Case No.: 19320400 

EIN/PN: 381642295/001 

Date of Plan Termination: July 15, 1999 

Date of Trusteeship: May 18, 2001 

Dear 1 1 

I. INTRODUCTION 

By letter dated May 21, 2002, the Pension Benefit Guaranty 

Corporation ("PBGC") determined that Steamatic Cleans Carpets, Inc. 

("Steamatic") and the commercial rental property located at 308 

Antoine Street, Wyandotte, Michigan 48192 ("Antoine Street 

business"), were under common control with Refractory Handling, 

Inc . ("Refractory" ) , sponsor of the Refractory Handling, Inc . Defined Benefit Plan (the "Plan") , as of the date of the -Plan's 

termination ("DoPT"; July 15, 1999). Additionally, PBGC determined 

that (1) those entities were liable to PBGC under 29 United States 

Code ('U.S.C.") 5 1362(b) for the Plan's unfunded benefit 

liabilities, and (2) the amount of the liability was $60,330.75 as 

of DoPT, plus interest in the amount of $15,336.87 for the period 

between July 15, 1999 and May 31, 2002.' 

On July 2, 2002, you filed a 

determination letter on behalf of your client, 

the reasons stated in this decision, the 

appeal. Accordingly, the Board sustained PBGC's determinations 

that, under Title IV of the Employee Retirement Income Security Act 

of 1974, as amended ("ERISA"), Steamatic and the Antoine Street 

business were under common control with Refractory as of DoPT, and 

that all three businesses are liable to the PBGC for the above 

amount, plus the additional interest that has accrued since May 31, 

2002. 

PBGC's regulation at 29 Code of Federal Regulations ("C.F.R.") 5 4062.7, 

which incorporates section 6601 of the Internal Revenue Code ("I.R.C.") by 

reference, establishes the applicable interest rate. 
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11. BACKGROUND 

Refractory, a Michigan corporation, was the Plan' s sponsor. 

Until July 15, 1999, Refractory operated as a general commodity 

warehousing and distribution center in the state of Michigan. On 

July 15, 1999, Refractory ceased business operations and terminated 

its employees. 

On April 17, 2001, PBGC issued a Notice of Determination that 

the Plan should be terminated based in part on Refractory's failure 

to meet the minimum funding standards under I .R. C. § 412. PBGC and 

acting on behalf of Refractory, entered into an 

agreement for the termination of the Plan and the appointment of 

PBGC as trustee. This agreement also established July 15, 1999, as 

DoPT under 29 U.S.C. 1 1348. PBGC became trustee of the Plan on 

May 18, 2001. 

Based on an audit of various corporate records and income tax 

returns provided by Refractory's accountant, Robert Bovitz, PBGC 

was leased to Refractory and sold afterDOPT. 

0 Federal Income Tax return filed jointly by 

shows, on the Schedule E form, the amounts w o income 

expenses claimed for tax purposes with respect to the Antoine 

Street business. The 1999 tax return also indicates (on Form 4797, 

'Sale of Business Property") that the commercial property was sold 

on October 6, 1999. The Form 4797 further shows a depreciation 

deduction for the property. 

In your July 2, 2002 appeal, you asserted that the following 

grounds exist for changing PBGC's determinations: 

1. PBGC incorrectly determined that Refractory, Steamatic, and 

the Antoine Street business were under common control as 

defined under 26 U.S.C. 5 414(c); and 

2. PBGC erred in its determination of the amount of unfunded 

benefit liabilities of the Plan because it failed to consider 

the death of a participant who died on 

October 22, 2000, and is no longer entitled to any payments 

under the Plan. 

You demonstrated that when Refractory was incorporated, 1 1 
33 113% of the stock, and that his brothers, 

owned the remaining 67 2/3%. With your appeal, you 

the June 4, 1961 articles of incorporation 

("Articlesn) . The Articles show that-1 

each initially owned one-third of Refractory. 

You also acknowledged later owned 100% of 

Refractory. You provided the September 2, 1977 minutes of a 

meeting of shareholders, which stated that 

resigned fromRefractoryls Board of Directdrs and that they 

Refractorv's annual 

intended to assign their 

corDorate c 

shares 

tax 

in 

returns 

Refractory to 

(Form 11205. 

71 

Schedule K1) for the years 1997, 1998, and 1999 show1 1 was the 

100% owner of Refractory, indicating that1 

had in fact assigned their shares of Refractory to him. Thus, the 

Appeals Board found that owned 100% of Refractory on 

the Plan's termination date. 

You stated the following facts about Steamatic: (1) it was a 

franchise of a larger company, Franchiser Steamatic, Inc., located 

in Fort Worth, Texas; (2) it never owned any equipment, 

ceased operations in May 2000. You also said that although and (3w I spouse, was an officer of Steamatic, it 

was a separate company, and she was not an officer of Refractory. 

You also stated that the commercial real estate located at 308 

Antoine Street was 

argued that since 

Refractory, 

businesses were not a controlled group as defined by 29 U.S.C. 5 

1301 (a) (14) . You further requested that PBGC "make a determination 

that is not a control group member. " 

111. DISCUSSION 

A. Control Group Liabilitv 

ERISA § 4062 provides that liability for an underfunded 

single-employer pension plan upon its termination is incurred by 

any "person" who is, on the termination date, a contributing 

sponsor of the pension plan or a member of the sponsor's controlled 

group. That section further states that the liability of all such 

persons is "joint and several." A "controlled group" means, with 

respect to any person, "a group consisting of such person and all 

other persons under common control with such person."2 ERISA 

further provides that the determination of whether two or more 

See 29 U.S.C. § 1301(a) (14) (A) ; 29 C.F.R. § 4001.2 (definition of "controlled 

group" . 
persons are under common control is made under PBGC regulations. 3 

PBGC's regulations state that persons are under common control if 

they are members of a "controlled group of corporations" or if they 

are "two or more trades or businesses under common contr01."~ 

These terms are defined by Treasury Regulations under sections 

414(b) and 414(c) of the Internal Revenue Code.' 

The applicable regulation for determining "common control" 

under the definition of a brother-sister group of trades or 

businesses is Treas. Reg. § 1.414(c) -2(c). It states that two or 

more trades or businesses must meet both a 50% test and an 80% 

test. The 50% test is met if the same five or fewer persons own a 

total of more than 50% of each of the trades or businesses in 

question, taking into account the ownership of each such person 

only to the extent such ownership is identical with respect to each 

such trade or business. The 80% test is met if the same five or 

fewer persons own a total of at least 80% of the trades or 

businesses. 

The Appeals Board concluded that a was the 100% 

owner of Refractory as of DoPT. This conc usion is based on the 

1997, 1998, and 1999 tax returns showing that was 

the 100% owner of Refractory, as well as the other information 

discussed above which indicates thathad 

assigned their shares in Refractory to before DoPT. 

In a November 7, 2001 letter to PBGC, stated that 

he was the 100% owner of Steamatic until it was liquidated on 

June 30, 2000. 

Treas. Reg. § 1.414 (c) -4 (b) (5) provides for attribution of 

ownership interest between spouses. As a general rule, an 

individual is considered to own an interest in a trade or business 

that is owned directly or indirectly by or for his spouse. Thus, 

pursuant to the constructive ownership rules of Treas. Reg. 

§ 1.414 (c) -4 (b) (5) , owned 100% of the Antoine Street 

business. 

Based on the foregoing facts and authorities, PBGC correctly 

determined that Steamatic and the Antoine Street business were 

under common control with Refractory as of DoPT (July 15, 1999) 

based on ownership interests in these business and 

the constructive ownership rules of Treas. Reg. § 1.414(c)-4(b) (5). 

Accordingly, all of the above commonly controlled entities ("the 

' See 29 U.S.C. 5 1301(a) (14) (B) . 

' See 29 C.F.R. 5 4001.3(b) (2). 

See 29 C.F.R. 5 4001.3(b) (2) 
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Refractory Group" ) are jointly and 

liability imposed by § 4062 of ERISA, 

termination of the Plan. 

Vwr request that PBGC "make a 

severally liable for the 

29 U.S.C. § 1362, upon the 

1 1 is not a control group member" 

I determination 

appears to be 

that 

relate dd 

your assertions that Steamatic and the unincorporated Antoine 

Street business were not under common control with Refactory. 

Thus, you seem to be suggesting that is insulated from 

liability for this reason. As discussed above, the Appeals Board 

rejected the assertions upon which your request is based. We 

further observe that courts have held that the owners of 

unincorporated business entities may incur personal liability under 

ERISA if the unincorporated business is a controlled group member. 

See Board of Trustees of Western Conference of Teamsters Pension 

Trust Fund v. H.F. Johnson, Inc., 830 ~.2d 1009, 1015 (9th Cir. 

1987) ; Central States, Southeast and Southwest Areas Pension Fund 

v. Skyland Leasing Co., 691 F.Supp. 6 (W.D. Mich. 1987), aff'd. 892 

F.2d 1043, 1990 WL 231 (6th Cir. 1990) (unpublished disposition) ; 

PBGC v. Don's Trucking Co., 309 F.Supp. 2d 827 (E.D. Va. 2004), 

aff'd sub nom. PBGC v. Beverley, 404 F.3d 243 (4th Cir. 2005) .6 

Accordingly, the Appeals Board is unable to make the determination 

you seek with respect to liability, to the extent 

that liability is based upon his ownership of the unincorporated 

Antoine Street Business. 

B. Amount of Liability 

In its May 21, 2002 initial determination that was addressed 

to PBGC states that the amount of the Refractory 

Grbup's liability is $60,330.75 as of DoPT. You contended that 

PBGC erred in its determination of the amount of the Plan's 

unfunded benefit liabilities. You stated that PBGC's oriqinal 

claims should be less than $60,330.75 because1 

a participant in the Plan, died on October 22, 2000. 

6 The facts in PBGC v. Beverley were very similar to those in this appeal. 

Don Beverley and his wife Martha were the joint owners of Don's Trucking CO., 

which was the sponsor of an underfunded pension plan that was terminated by PBGC. 

The Beverleys also co-owned an unincorporated business that leased real property 

to Don's Trucking. The Sixth Circuit held that both Donald and Martha Beverley 

were personally liable to PBGC based upon their ownership of the leasing 

business, which was under common control with Don's ~rucking. 404 F.3d at 250- 

53. 

We also note that the District Court in that case found that the 

unincorporated leasing activity owned by the Beverleys qualified as a "trade or 

business" for purposes of employer liability (see 309 F. supp. 2d at 831) , and the 

Sixth Circuit affirmed that holding. 
liability to PBGC upon plan termination 'shall be the total amount 

of the unfunded benefit liabilities (as of the termination date) to 

all participants and beneficiaries under the plan, together with 

interest (at a reasonable rate) calculated from the termination 

date in accordance with regulations prescribed by [PBGC]." 

Because ERISA § 4062 (b) (1) provides that the amount of the 

Refractory Group's liability is determined as of DoPT (July 15, 

1999) the death of 1 on October 22, 2000 (after 

DoPT) has no bearing on the assessed amount. The Board further 

notes that the Plan's DoPT was established by a formal agreement 

between PBGC and Refractory that was effective May 18, 2001, and 

was in conformity with the requirements of ERISA § 4048, 29 U.S.C 

§ 1348. The Appeals Board, therefore, is bound to apply July 15, 

1999, as the date of Plan termination for purposes of determining 

the amount of liability under ERISA § 4062. The Board, therefore, 

decided that you have presented no grounds for changing the amount 

of liability determined by PBGC. 

C. Request for Hearinq 

PBGC's Rules for Administrative Review of Agency Decision [29 

C.F.R. § 4003.551 provide that the opportunity to appear before the 

Appeals Board "will be permitted at the Board's discretion." In 

general, the Appeals Board will permit an opportunity for a hearing 

before the Board if the Board determines that there is a dispute as 

to a material fact. Because there is no dispute as to the material 

facts in this case, the Appeals Board denied your request for an 

oral hearing. 

IV. DECISION 

The Appeals Board concluded that, under Title IV of ERISA, 

Steamatic and the Antoine Street business were under common control 

with Refractory as of the date the Plan terminated and that all 

three businesses are jointly and severally liable for the full 

amount PBGC determined, plus applicable interest. 

Pursuant to 29 C.F.R. S4003.59, your client has exhausted his 

administrative remedies and may seek judicial review of this 

decision. If you have any questions, please call PBGC's Customer 

Contact Center at 1-800-400-7242. 

Sincerely, 

Michel Louis, 

Appeals Board Member