[Federal Register Volume 89, Number 203 (Monday, October 21, 2024)]
[Notices]
[Pages 84209-84211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24212]


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PENSION BENEFIT GUARANTY CORPORATION


Approval of Special Withdrawal Liability Rules: Motion Picture 
Laboratory Technicians and Film Editors Local 780 Pension Fund

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of approval.

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SUMMARY: The Pension Benefit Guaranty Corporation (``PBGC'') received a 
request from the Motion Picture Laboratory Technicians and Film Editors 
Local 780 Pension Fund for approval of a plan amendment providing 
special withdrawal liability rules. PBGC published a Notice of Pendency 
of the Request for Approval of this amendment. PBGC is now advising the 
public of PBGC's approval of the amendment.

FOR FURTHER INFORMATION CONTACT: John Ginsberg, Assistant General 
Counsel, Multiemployer Law Division (<a href="/cdn-cgi/l/email-protection#55323c3b26373027327b3f3a3d3b15253732367b323a23"><span class="__cf_email__" data-cfemail="b6d1dfd8c5d4d3c4d198dcd9ded8f6c6d4d1d598d1d9c0">[email protected]</span></a>; 202-229-
3714), Benjamin Kelly, Deputy Assistant General Counsel, Multiemployer 
Law Division (<a href="/cdn-cgi/l/email-protection#c3a8a6afafbaeda1a6ada9a2aeaaad83b3a1a4a0eda4acb5"><span class="__cf_email__" data-cfemail="83e8e6efeffaade1e6ede9e2eeeaedc3f3e1e4e0ade4ecf5">[email protected]</span></a>; 202-229-4097), Office of the 
General Counsel, 445 12th Street SW, Washington, DC 20024-2101. If you 
are deaf or hard of hearing, or have a speech disability, please dial 
7-1-1 to access telecommunications relay services.

SUPPLEMENTARY INFORMATION:

Background

    The Employee Retirement Income Security Act of 1974, as amended 
(``ERISA''), provides, in section 4203(a), that a complete withdrawal 
from a multiemployer plan generally occurs when an employer permanently 
ceases to have an obligation to contribute under the plan or 
permanently ceases all covered operations under the plan. Under section 
4205 of ERISA, a partial withdrawal generally occurs when an employer: 
(1) has a 70% decline in its contribution base units (``CBUs''); (2) 
permanently ceases to have an obligation under one or more but fewer 
than all collective bargaining agreements (``CBAs'') under which it has 
been obligated to contribute to the plan, while continuing to perform 
work in the jurisdiction of the CBA of the type for which contributions 
were previously required, or transfers such work to another location; 
or (3) permanently ceases to have an obligation to contribute for work 
performed at one or more but fewer than all of its facilities, while 
continuing to perform work at such facility of the type for which its 
obligation to contribute ceased.
    ERISA provides contingent exemptions from withdrawal liability for 
the building and construction industry and the entertainment industry. 
In plans to which the building and construction industry exemption 
under section 4203(b) of ERISA applies, a building and construction 
industry employer completely withdraws only if it ceases to have an 
obligation to contribute and continues to perform previously covered 
work in the jurisdiction of the CBA or resumes such work within 5 years 
without renewing the obligation to contribute at the time of 
resumption. (In the case of a plan terminated by mass withdrawal, 
section 4203(b)(3) provides that the 5-year period is reduced to 3 
years.) Section 4203(c)(1) of ERISA provides a substantially similar 
exemption from complete withdrawal to an employer contributing to an 
entertainment-industry plan on a temporary or project-by-project basis, 
except that the pertinent jurisdiction is the jurisdiction of the plan 
rather than the jurisdiction of the CBA.
    ERISA also provides a contingent exception to partial withdrawal 
liability for these industries. Under section 4208(d)(1) of ERISA, an 
employer to which the building and construction industry exemption 
under section 4203(b) applies is liable for a partial withdrawal ``only 
if the employer's obligation to contribute under the plan is continued 
for no more than an insubstantial portion of its work in the craft and 
area jurisdiction of the collective bargaining agreement of the type 
for which contributions are required.'' Under section 4208(d)(2) of 
ERISA, ``[a]n employer to whom section 4203(c) (relating to the 
entertainment industry) applies shall have no liability for a partial 
withdrawal except under the conditions and to the extent prescribed by 
[PBGC] by regulation.''
    Sections 4203(f)(1) and 4208(e)(3) of ERISA authorize PBGC to 
prescribe regulations under which plans in other industries may be 
amended to adopt special withdrawal liability rules similar to those 
for the building and construction industry and the entertainment 
industry. PBGC's regulations on Extension of Special Withdrawal 
Liability Rules (29 CFR part 4203) prescribe procedures for a 
multiemployer plan to request PBGC approval of a special withdrawal 
liability rule.
    Under 29 CFR 4203.5(b), PBGC must publish notice of the pendency of 
a request for approval of special withdrawal liability rules in the 
Federal Register and provide interested parties an opportunity to 
comment on the request. Under 29 CFR 4203.5, PBGC will approve a 
special withdrawal liability rule if it determines the rule (1) will 
apply only to an industry that has characteristics that would make use 
of the special withdrawal rule appropriate, and (2) will not pose a 
significant risk to the insurance system.

The Request

    The Motion Picture Laboratory Technicians and Film Editors Local 
780 Pension Fund (the ``Plan'') is a multiemployer pension plan jointly 
maintained by Local Union No. 780 of the International Alliance of 
Theatrical Stage Employees (the ``Union'') and employers that have CBAs 
with the Union. The Plan covers approximately 2,000 participants. 
According to the Plan, most of the employers that contribute to the 
Plan have contracts or subcontracts to provide non-military support 
services at military bases and other federal facilities--mainly 
commissary services.
    On October 14, 2021, the Plan adopted an amendment to its plan 
document providing a special withdrawal liability rule (as revised by 
further amendment executed on June 6, 2024, the ``Special Rule''). The 
effectiveness of the Special Rule is, by its terms and under 29 CFR 
4203.3(a),

[[Page 84210]]

subject to PBGC approval. On December 1, 2021, PBGC received the Plan's 
request for approval of the Special Rule. A copy of the Plan's 
submission, including the Special Rule, can be requested from the PBGC 
Disclosure Division via email to <a href="/cdn-cgi/l/email-protection#8de9e4feeee1e2fef8ffe8cdfdefeaeea3eae2fb"><span class="__cf_email__" data-cfemail="b8dcd1cbdbd4d7cbcdcaddf8c8dadfdb96dfd7ce">[email protected]</span></a>, via physical mail 
to PBGC Disclosure Division, Office of the General Counsel, Pension 
Benefit Guaranty Corporation, 445 12th Street SW, Washington, DC 20024, 
or by calling 202-229-4040 during normal business hours. If you are 
deaf or hard of hearing, or have a speech disability, please dial 7-1-1 
to access telecommunications relay services.
    The Plan asserts that, in the Plan-specific industry covered by the 
Special Rule, employees and a facility generally remain the same when a 
contractor is replaced. The employers:

use the same ``pool'' of workers at the facility regardless of which 
Employer currently is awarded the contract. Contributions supporting 
future benefit accruals and satisfying any unfunded past liabilities 
are made on behalf of the same pool of employees and the same number 
of [CBUs]. Consequently, the change in the signatory Employer under 
a new contract has little or no effect on the funded position of the 
Pension Fund.

    The Plan asserts that the Special Rule may induce new employers to 
bid on covered work, and that this, in turn, will promote the health of 
the Plan and reduce risk to the insurance system.
    The Plan submitted all information required under 29 CFR 4203.4(d) 
and supplemental information that PBGC required under 29 CFR 4203.4(e).

Notice and Comment

    On January 18, 2023, PBGC published notice of pendency of the 
Plan's request in the Federal Register.\1\ Comments were due on March 
6, 2023. PBGC received no comments.
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    \1\ See 88 FR 2974.
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Summary of the Special Rule

    The Special Rule would apply: (1) only to each employer obligated 
to contribute to the Plan for work performed under a contract or 
subcontract to provide services to a federal government agency (an 
``Original Employer''); (2) only when an Original Employer loses one or 
more such contracts (``Federal Contracts'') to an unrelated ``Successor 
Employer'' that has an obligation to contribute to the Plan meeting 
certain requirements designed to ensure a stable contribution base, as 
described below.

Complete Withdrawals

    A complete withdrawal will not occur if an Original Employer ceases 
to have an obligation to contribute to the Plan because it loses all 
Federal Contracts under which it performed work for which contributions 
were required, and is performing no other work for which contributions 
are required, if:
    (1) Substantially all the employees for whom the Original Employer 
was obligated to contribute continue to perform work under one or more 
Federal Contracts with a Successor Employer (which may include a 
Successor Employer subsequent to the initial Successor Employer); and
    (2) For the 5 plan years following that in which the Original 
Employer lost all its Federal Contracts, the Successor Employer has an 
obligation to contribute to the Plan for the work that had been 
performed under the Original Employer's Federal Contract(s):
    (a) At the same or a higher contribution rate as the highest 
contribution rate of the Original Employer; and
    (b) For substantially the same number of CBUs as those for which 
the Original Employer had an obligation to contribute in the final plan 
year preceding that in which it lost all its Federal Contracts.
    Notwithstanding these rules, the Original Employer does completely 
withdrawal as of the date it ceased to have an obligation to contribute 
to the Plan or ceased all covered operations under the Plan if, within 
the 5 plan years following that in which the Original Employer lost all 
its Federal Contracts, either:
    (i) The Federal Contract of the Successor Employer is terminated, 
and no subsequent Successor Employer is obligated to contribute to the 
Plan under the conditions described in paragraphs 2(a) and (b); or
    (ii) The Successor Employer ceases contributions to the Plan for 
the work performed under the Federal Contract, or fails to meet the 
contribution conditions described in paragraphs 2(a) and (b).

Partial Withdrawals

    If an Original Employer loses one or more but not all its Federal 
Contracts to a Successor Employer, or loses all its Federal Contracts 
to a Successor Employer but continues to have an obligation under a CBA 
to contribute to the Plan for other operations, the following rules 
apply.
    The CBUs attributable to the work performed under the Federal 
Contract are excluded in determining whether the Original Employer has 
experienced a partial withdrawal under section 4205(a)(1) of ERISA, and 
the loss of the Federal Contract is not considered a facility closing, 
if:
    (1) For the 5 plan years following that in which the Original 
Employer lost a Federal Contract to a Successor Employer, the Successor 
Employer has an obligation to contribute to the Plan for work formerly 
performed under the Original Employer's Federal Contract:
    (a) At the same or a higher contribution rate as the highest 
contribution rate of the Original Employer; and
    (b) For substantially the same number of CBUs as those for which 
the Original Employer had an obligation to contribute in the final plan 
year preceding the plan year in which the Original Employer lost the 
Federal Contract.
    Notwithstanding these rules, the Original Employer will experience 
a partial withdrawal if:
    (i) Within the 5 plan years following that in which the Original 
Employer lost one or more but not all its Federal Contracts, the 
Successor Employer's Federal Contract is terminated and no subsequent 
Successor Employer is obligated to contribute to the Plan under the 
conditions described in paragraphs 1(a) and (b);
    (ii) Within the 5 plan years following that in which the Original 
Employer lost one or more but less than all its Federal Contracts, the 
Successor Employer ceases contributions to the Plan or does not 
contribute to the Plan under the conditions described in paragraphs 
1(a) and (b); or
    (iii) The Original Employer either loses a Federal Contract to a 
Successor Employer or bargains out of a Federal Contract and there is 
no Successor Employer with an obligation to contribute to the Plan 
under the conditions described in paragraphs 1(a) and (b).

Bona Fide Sale of Assets

    As originally adopted on October 14, 2021, the Special Rule 
provided that, if an Original Employer engages in a bona fide, arm's-
length sale of assets to an unrelated purchaser (``Buyer''), the Buyer 
would be treated as a Successor Employer. That provision was 
inconsistent with applicable law under section 4204 of ERISA. On June 
6, 2024, the Plan adopted an amendment removing this provision of the 
Special Rule.

Effective Date

    The Special Rule would be effective for (i) complete withdrawals 
under

[[Page 84211]]

section 4203(a) of ERISA on or after January 1, 2021; (ii) partial 
withdrawals under section 4205(a)(1) of ERISA during any three-year 
testing period beginning on or after January 1, 2019; and (iii) partial 
withdrawals under section 4205(a)(2) of ERISA on or after January 1, 
2021. Under 29 CFR 4203.3(a), a special withdrawal liability may not be 
put into effect until it is approved by PBGC.

Determinations Regarding the Special Rule

    Under section 4203(f) of ERISA and 29 CFR 4203.5(a), PBGC must make 
two determinations before approving a plan amendment that provides a 
special withdrawal liability rule. First, based on a showing by the 
plan, PBGC must determine that the special withdrawal liability rule 
will apply only to an industry with characteristics that would make it 
appropriate to exempt employers from withdrawal liability under the 
rule. Second, PBGC must determine that the special withdrawal liability 
rule will not pose a significant risk to the insurance system. After 
review of the information submitted by the Plan, and having received no 
public comments, PBGC has made the determinations required to approve 
the Special Rule.
    The Special Rule would apply only to a narrow, Plan-specific 
industry consisting of Original Employers obligated to contribute to 
the Plan for work performed under a Federal Contract, and only when an 
Original Employer loses its contract to a Successor Employer that signs 
an agreement with the Union requiring contributions to the Plan. PBGC 
determined that the characteristics of this narrowly defined industry 
make it appropriate to exempt employers from withdrawal liability under 
the terms of the Special Rule.
    Those terms limit the risk of loss to PBGC. The Special Rule only 
applies if a Successor Employer contributes at the same or a higher 
contribution rate as the highest contribution rate, and for a 
comparable number of CBUs, as the Original Employer. The Plan has 
demonstrated a history of stable or increasing aggregate contributions 
notwithstanding employer withdrawals, which is consistent with the 
amount of covered work being undiminished when one federal contractor 
providing commissary services at a federal facility is replaced by 
another obligated to contribute to the Plan at the same rate for the 
same work at the facility.
    The Plan is a green-zone plan. Its annual reports for plan years 
2011 through 2022 show increasing active participants and 
contributions, despite at least a dozen employer withdrawals over that 
period. The Plan reports that it was 103 percent funded on an actuarial 
basis as of January 1, 2022.

Conclusion

    Based on the Plan's submissions and representations in connection 
with the request for approval, PBGC has determined that the Special 
Rule: (1) will apply only to an industry that has characteristics that 
would make the use of the Special Rule appropriate; and (2) will not 
pose a significant risk to the insurance system. Therefore, under 29 
CFR 4203.5, PBGC approves the plan amendment describing the Special 
Rule. PBGC's approval is specific to the Plan and to the plan amendment 
submitted for PBGC's approval. Any plan amendment revising the the 
Special Rule, other than to eliminate it entirely, must be submitted 
for PBGC's approval.

    Issued in Washington, DC.
Ann Y. Orr,
Acting Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2024-24212 Filed 10-18-24; 8:45 am]
BILLING CODE 7709-02-P


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