Pension Benefit Guaranty Corporation 

78-27 

November 2, 1978 

REFERENCE: 

1015(l). (IRC § 414) Definitions and Special Rules. Mergers, Consolidations and Other Transfers of Plan Assets 

OPINION: 

 On October 12, 1978, I informed you that I had reevaluated my decision concerning the effect of the * * *

Company's * * * cessation of contributions to the * * * (the "Fund") and was tentatively of the view that the result should

be changed. The central issued under consideration is whether the Fund was a "single plan" or an aggregate of "plans"

as of May 31, 1975. As I stated in my October 12 letter, the Pension Benefit Guaranty Corporation ("PBGC") is seeking

to present an approach that is in conformity with that of the Internal Revenue Service ("IRS") in its application of the

definition of a "single plan" contained in proposed Treasury Reg. § 1.414(1)-1(b)(1), as evidenced in the letter ruling

(with identifying information deleted) which I enclosed in my October 12 letter to you. 

My reevaluation has been made in light of this recent IRS ruling converning the cessation of contributions to a plan

which has many features in common with the * * * Plan. As I further stated in the letter, the IRS ruling has cast a new

light on the basic issues in [*2] this case. Since the IRS ruling emphasized certain factors not addressed in my June 2

decision, I have concluded that it is appropriate for me to re-study my decision. As a result of this study, I have

concluded that the Fund should be considered an aggregate of "plans" rather than a "single plan". 

 On August 9, 1961, * * * entered into a collective bargaining agreement with Local * * * ("Local * * *"). Pursuant

to this agreement, * * * and Local * * * entered into a Trust Agreement which established a pension plan effective August

9, 1961, known as the * * * ("* * * Plan"). On October 21, 1968, Local * * * and * * * entered into a new collective

bargaining agreement. The name of the plan was changed to * * * (the "Fund"), effective July 31, 1969. Since 1968,

approximately 35 employers have agreed to participate in the Fund. 

In 1968, * * * entered the Fund as a participating employer, pursuant to a collective bargaining agreement between

and Local * * *. This agreement was applicable to eligible * * * employees in the * * * area. Then in 1971, pursuant

to a collective bargaining agreement between * * * and Local * * * agreed to have its employees in the * * * area covered

[*3] by the Fund. Documentation concerning the operation of the Fund has been submitted by * * * and the Trustees

of the Fund. 

The definition of a "single plan" was introduced in the proposed Income Tax Regulations under sections 401(a)(12)

and 414(1) of the Internal Revenue Code of 1954 published on July 1, 1977. Specifically, section 1.414(1)-1(b)(1)

states: "A plan is a 'single plan' if and only if all plan assets are available to pay benefits to employees who are covered

by the plan. For purposes of the preceding sentence, all the assets of the plan will not fail to be available because the

plan is funded in part or in whole with allocated insurance instruments. A plan will not fail to be a single plan merely

because of the following: 

(i) the plan has several distinct benefit structures which apply either to the same or different participants, 

(ii) the plan has several plan documents, 

(iii) several employers, whether or not affiliated contribute to the plan, 

(iv) the assets of the plan are invested in several trusts or annuity contracts, or 

 (v) separate accounting is maintained for purposes of cost allocation but not for purposes of providing benefits

under the plan. 

However, [*4] more than one plan will exist if a portion of the plan assets is not available to pay some of the

benefits. This will be so even if each plan has the same benefit structure or plan document, or if all or part of the assets

are invested in one trust with separate accounting with respect to each plan." 
Applying the foregoing analysis in the instant case, I find that there is a single plan document, pursuant to which a

number of employers contribute to the Fund; the level of benefit for a group of employees depends on the contribution

rate of their contributing employer and the characteristics of the employee group; the assets of the Fund are invested

pursuant to a common investment policy; and that separate accounting was not maintained, but information which would

have been necessary to maintain separate accounts for each employer group has been maintained (see infra, page 5). 

In order to determine if any restrictions were imposed on the availability of assets to pay benefits, I turn to the

documents under which the Fund was administered, and I find the following: 

(1) there is no express requirement that in all circumstances benefits for a particular employee group be paid [*5]

from fund assets attributable only to the employer of that group; 

(2) upon withdrawal of an employer the benefits of his employees are provided to the extent that they are covered

by his allocable share of assets (Article II, Section 6 of the Plan); 

(3) if an employer is in arrears in contributions, his allocable share of assets is similarly used to pay benefits to his

employees (Article V, Section 4 of the Trust Agreement and Article II, Section 6 of the Plan); 

(4) upon termination of the plan, the assets are distributed according to stated priorities without first allocating the

assets among the participating employers (Article VI, Section 3 of the Plan). 

The IRS, in analyzing four similar provisions (IRS letter ruling at page 3) concluded that such provisions left it

unclear whether the entity was a "single plan" or an aggregate of single "plans". Having found this ambiguity, the IRS

sought to establish whether it was the intent of the parties to restrict availability of assets of the plan and thereby to

resolve the "single plan"/aggregate of single "plans" issue. 

In light of my express goal to analyze this issue in accord with the IRS's approach and in recognition of the [*6]

recent IRS letter ruling, I conclude that the aforementioned provisions create an ambiguity sufficient to require an

examination of the intent of the parties as to the issue of restriction of assets of the Fund. If the intent to restrict assets

could be established, then I would consider the Fund an aggregate of single "plans." Weighing all the evidence before

me -- that same evidentiary base described in my letter to you of June 2--and considering your views in response to my

letter of October 12, I find that it has been the intent of the Fund to operate with asset restrictions. My conclusion is

supported by the following facts, among others: 

(1) at the outset, * * * was the only employer participating in the plan and, clearly, by the terms of the plan, its assets

were available to provide benefits only for its own employees; 

(2) on July 31, 1968, the Fund consultant proposed amendments to the plan document to allow new employer groups

to be admitted. The trustees adopted an amendment to Plan Article III, Section 3, changing language which conditions

the admittance of a new employer group from "will not adversely affectthe actuarial soundness of the fund" to "will be

supported [*7] by contributions to be made for the group"; 

(3) on September 17, 1971, it was proposed that the employee booklets be "tailor-made" for each employer group.

Additionally, the employee booklets state that plan costs will be borne "by your employer's contributions"; 

(4) on April 27, 1973, and September 20, 1974, the trustees, in considering the withdrawal of several employers,

recognized the necessity for segregating the assets of those employers; 

(5) in March 1974, in a letter to the * * * Fund Board, the Fund attorney asserted that an employer withdrawal was

a plan termination, with benefits payable to such participants, under the Fund discontinuance provision, i.e., to the extent

of that employer's assets in the Fund; 

(6) on April 23, 1975, the trustees recognized that * * * closing might constitute a plan termination under Title IV

of ERISA. This recognition occurred prior to any consultation with the PBGC; 

(7) actuarial "worksheets", asserted to have been retained for each plan year (see "Affidavit of * * *," September

30, 1977 at page 2), provide, on an employer by employer basis, an asset balance and an unfunded past service liability;

(8) the representative of * * [*8] * who participated in the negotiations which resulted in the establishment of the

Fund as a successor to the * * * Plan, and various parties involved with the on-going operations of the Fund -- including

an actuary associated with the Fund since its inception -- have submitted affidavits to the PBGC attesting to the intent
of all parties that the Fund operate as a group of single plans. 

Based on all the evidence, I conclude that the Fund is an aggregate of single employer plans. 

Matthew M. Lind 

Executive Director