Pension Benefit Guaranty Corporation 

76-108 

September 7, 1976 

REFERENCE: 

 [*1] 4004(f)(4) Temporary Authority. Waiver of Employer Liability

4064 Liability of Employers in Multiple Employer & M ultiemployer Plans

4082(c). Effective Date; Special Rules. Applicability of Title IV to Multiemployer Plan Terminations 

OPINION: 

 This is in response to your letter on behalf of * * * wherein you discussed how employer liability under the

Employee Retirement Income Security Act of 1974 (the "Act") might be imposed if the Pension Benefit Guaranty

Corporation (the "PBGC") exercises its discretion under § 4082(c) of the Act to insure benefits provided under the *

* * (the "Fund" ). 

In your letter, you state that since most of the remaining participating employers have established separate pension

plans covering active employees and have given full past service credit, it would not be necessary for the PBGC to pay

benefits to active employees with vested benefits under the Fund. You go on to propose that in this case, instead of

asserting employer liability based on the formula contained in § 4064 of the Act, the PBGC should assess liability

against each employer based on the amount of the Fund's insufficiency attributable to each employer's own retirees. You

suggest that this could [*2] be accomplished if the PBGC grants a waiver under § 4004(f) of the Act or exercises its

authority under the last sentence of § 4064(b) of the Act to "determine the liability of each such employer on any other

equitable basis prescribed by the [PBGC] in regulations." 

As you know, in connection with the Fund's application the PBGC is seeking to clarify, among other things, how

the establishment of now defined benefit plans by employers that contributed to the Fund would affect the payment terms

for employer liability if the PBGC exercised its discretion under § 4082(c) of the Act. Generally, under § § 4022 and

4061 of the Act, the PBGC insures the payment of those benefits that are guaranteed under Title IV. 

 Thus, although you state that it would not be necessary for the PBGC to pay benefits to active employees with

vested benefits under the Fund, if the PBGC exercised its discretion under § 4082(c) of the Act, absent other

arrangements or conditions it would appear that the PBGC would be undertaking to pay such benefits, assuming they

are guaranteed. Thus, we think this area must be considered further, in consultation with the employers that have

established new plans, to clarify [*3] how a PBGC guarantee of benefits provided under the Fund would be implemented

in view of the new plans. 

With respect to your proposed alternative method of asserting liability, the PBGC understands and shares your

concern about the affect imposition of employer liability will have on employers. We are willing to discuss methods for

payment of such liability to avoid unnecessary hardship, including deferred payment terms as authorized by § 4067 of

the Act. 

Section 4004(f) of the Act, which grants the PBGC authority to waive or reduce employer liability if necessary to

avoid unreasonable hardship, by its terms limits that authority to cases where a plan terminates within the first 270 days

after enactment of the Act. Since the date of termination of the Fund has not yet been established under § 4068 of the

Act, the PBGC has never foreclosed the possibility that a waiver under § 4004(f) of the Act could be granted. There

continues to be uncertainty as to the date of the Fund's termination in view of the pending claim for contributions by the

Receiver. However, from the facts that have been adduced as of this date, it does not appear that the Fund terminated

within the statutory [*4] 270 day period. If this proves to be the case, the PBGC would not have authority to waive

imposition of employer liability under § 4004(f). 

It would also be inconsistent with the language and intent of the Act if the PBGC asserted liability against the

employers only for the amount of the PBGC's liability attributable to each employer's retirees. The legislative history

of the Act clearly indicates that Congress recognized the effect employer liability could have on an employer. See, e.g.,

H.R. Rep. No. 93-533, 93d Cong. 1st Sess., 16 (1973); S. Rep. No. 93-383, 93d Cong. 1st Sess., 87 (1973). After
considering a number of methods to mitigate its possible burdensome effect, Congress decided to limit the liability to

30 percent of the net worth of the employer, as determined by the PBGC on whatever basis best reflects the current status

of the employer's operations and prespects. 

 Subject to that limitation, § § 4062 and 4064 of the Act provide for reimbursement to the PBGC of the amount of

liability it incurs as of the date of a plan's termination. In the case of a multiemployer plan, liability based on the

obligation to contribute reflects the fact that such plans continue [*5] to have an obligation to retirees of withdrawn

employers, and employers that agree to contribute to such a plan are obligating themselves to fund the benefits of other

employers' retirees. There is no authority to waive all or a portion of the employer liability imposed by the Act. The

fact that limited authority was specifically provided in § 4004(f) indicates that, in the absence of the application of that

provision, the PBGC does not have the power to waive employer liability. 

This is not to imply that the PBGC will not consider settlement proposals for payment of employer liability that do

not result in the exact allocation of liability among the employers obtained from application of the formula in § 4064

of the Act. We will consider such proposals, which may incorporate suggestions regarding the integration of a PBGC

quarantee with the benefits provided under the new plans, as referred to above. 

As you know, representatives of the PBGC have discussed this matter with counsel for a number of employers that

contributed to the Fund. In response to our request counsel for some employers have provided the PBGC with financial

information with respect to their clients, which [*6] is needed to evaluate the amount of the PBGC's claim. We

understand more such information and a proposed arrangement for payment of employer liability is forthcoming. We

hope that with continued cooperation this matter can be resolved in the near future. 

Charles E. Skopic 

Acting Executive Director