Pension Benefit Guaranty Corporation 

84-7 

December 20, 1984 

REFERENCE: 

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

4203 Complete Withdrawal

4212(c) Obligation to Contribute - Liability 

OPINION: 

We have your letter raising several issues arising under the provisions of the Multiemployer Pension Plan

Amendments Act of 1980 (the "Act"). 

Your first question concerns whether a withdrawal from a multiemployer pension plan will occur when corporation

X organizes a wholly-owned subsidiary corporation Y and transfers to it all of the assets of one of its divisions. Section

4203 of ERISA provides that a withdrawal from a multiemployer plan has occurred when an employer permanently

ceases to have an obligation to contribute under the plan, or permanently ceases all covered operations under the plan.

(Section references herein are to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001

et seq., as amended by the Act). Section 4001(b) defines an "employer" to include all trades or businesses under

common control, and the PBGC's regulation on trades or businesses under common control, 29 C.F.R. Part 2612,

provides that "trades or businesses which are under common control" has the same meaning as in Section 414(c) of the

Internal [*2] Revenue Code (" IRC") and the regulations issued thereunder. Accordingly, if certain entities, such as X

and Y, are under common control as defined in Section 414(c) of the IRC, they constitute the "employer" for purposes

of Section 4203 of ERISA and no withdrawal will have occurred as a result of a transfer of assets from X to Y. 

Your second question concerns the sale by X of all of the stock in its subsidiary corporation Y to your client A, an

unrelated corporation which continues contributions to the plan on behalf of Y. You advise that neither X nor A has

made any other contributions to the plan., nor does either intend to make other contributions to the plan. You ask

whether, as a result of the stock sale, X and Y would incur withdrawal liability under ERISA. 

It is clear that Congress intended that no withdrawal occur solely because a parent employer sells the stock of a

subsidiary, so long as the subsidiary continues to make its contributions to the plan. The legislative history to the Act

contains the following analysis: 

A group of trades or businesses under common control is treated as a single employer. For example, if P

Corporation owns 100 percent of the stock of [*3] S Corporation, a subsidiary that has an obligation to contribute to

a multiemployer plan on behalf of its employees, the controlled group consisting of P and S would be considered an

employer with an obligation to contribute to the plan. If P sells all of its interest in S to an unrelated party, the controlled

group consisting of P and S would cease to exist. However, if S continues to have an obligation to contribute to the plan,

no withdrawal would be considered to have taken place merely because of the change in ownership of S. 126 Cong. Rec.

S10,115 (daily ed. July 29, 1980) and H.R. Rep. No. 96-869, Part II, 96th Cong., 2nd Sess. 162 (1980), reprinted in

[1980] U.S. CODE CONG. & AD NEWS 3005-6. 

Therefore, the sale of stock of Y to A does not effect a withdrawal, as long as Y continues to make its contributions

to the plan. 

Finally, with regard to the transaction you describe, we note that under Section 4212(c), if a principal purpose of

any transaction is to evade or avoid liability under Part 1 of Subtitle E of Title IV of ERISA, that part shall be applied

(and liability shall be determined and collected) without regard to such transaction. 

Henry Rose 

General Counsel