27774 Federal Register / Vol. 63, No. 97 /Wednesday, May 20, 1998 / Notices

ATTACHMENT D.—STATUS OF FY 1998 DEFERRALS—AS OF MAY 1, 1998

[Amounts in thousands of dollars]

Agency/bureau/account

Amounts transmitted

Date of

message

Releases (¥)

Congressional actionCumulative adjustmentsAmount deferred as of

5–1–98 Deferral

No.

Original request

Subsequent

change

(+)

Cumulative

OMB/agency

Congressionally

required

FUNDS APPROPRIATED

TO THE PRESIDENT

International Security Assistance:

Economic support

fund and International Fund for

Ireland.

D98–1 2,330,098 ................ 2–3–98 1,317,684 ................ ................ 328 1,012,742

International military

education and

training.

D98–2 43,300 ................ 2–3–98 41,900 ................ ................ ................ 1,400

Foreign military financing program.D98–3 1,483,903 ................ 2–3–98 160,253 ................ ................ ................ 1,323,650

Foreign military financing loan program.D98–4 60,000 ................ 2–3–98 .................... ................ ................ ................ 60,000

Foreign military financing direct loan

financing account.

D98–5 657,000 ................ 2–3–98 .................... ................ ................ ................ 657,000

Agency for International

Development:

International disaster

assistance, Executive.

D98–6 135,697 ................ 2–3–98 20,250 ................ ................ ................ 115,447

DEPARTMENT OF

STATE

Other:

United States emergency refugee and

migration assistance fund.

D98–7 115,640 ................ 2–3–98 .................... ................ ................ ................ 115,640

SOCIAL SECURITY

ADMINISTRATION

Limitation on administrative expenses.D98–8 7,369 ................ 2–3–98 .................... ................ ................ ................ 7,369

Total, Deferrals ......... 4,833,007 0 ................ 1,540,087 ................ ................ 328 3,293,248

[FR Doc. 98–13339 Filed 5–19–98; 8:45 am]

BILLING CODE 3110–01–M

PENSION BENEFIT GUARANTY

CORPORATION

Approval of Special Withdrawal

Liability Rules; International

Longshoremen’s and Warehousemen’s

Union-Pacific Maritime Association

Pension Plan

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Notice of approval.

SUMMARY: The Pension Benefit Guaranty

Corporation (‘‘PBGC’’), pursuant to

section 4203(f) of the Employee

Retirement Income Security Act of 1974,

as amended, has granted a request on

behalf of the International

Longshoremen’s and Warehousemen’s

Union-Pacific Maritime Association

Pension Plan for approval of a plan

amendment modifying special

withdrawal liability rules, which rules

were approved by PBGC on January 30,

1984 (See Approval of Special

Withdrawal Liability Rules (‘‘Notice of

Approval’’), 49 FR 6043 (February 16,

1984)). A Notice of Pendency of the

Request for Approval was published on

February 3, 1998 (63 FR 5573) (‘‘Notice

of Pendency’’). The effect of this notice

is to advise the public of the decision on

the request.

ADDRESSES: The request for approval

and PBGC’s response to the request are

available for public inspection between

the hours of 9 a.m. and 4 p.m., Monday

through Friday, at PBGC’s

Communications and Public Affairs

Department, Suite 240, 1200 K Street,

NW., Washington, DC 20005–4026.

FOR FURTHER INFORMATION CONTACT:

Gennice D. Brickhouse, Attorney, Office

of the General Counsel (22500), Pension

Benefit Guaranty Corporation, 1200 K

Street, NW., Washington, DC 20005–

4026; Telephone 202–326–4020 (For

TTY and TDD, call the Federal relay

service at 1–800–877–8339 and ask to be

connected to 202–326–4020).

SUPPLEMENTARY INFORMATION:

Background

Under section 4203(f) of the Employee

Retirement Income Security Act of 1974

(‘‘ERISA’’) as amended, PBGC may

prescribe regulations under which plans

in industries other than the construction

or entertainment industries may be

amended to provide for special

withdrawal liability rules similar to the
Federal Register / Vol. 63, No. 97 /Wednesday, May 20, 1998 / Notices 27775

rules prescribed in section 4203 (b) and

(c) of ERISA for the construction and

entertainment industries. Section

4203(f)(2) of ERISA provides that such

regulations shall permit the use of

special withdrawal liability rules only

in industries (or portions thereof) in

which PBGC determines that the

characteristics that would make use of

such rules appropriate are clearly

shown, and that in each instance, the

use of such rules will not pose a

significant risk to the insurance system

under Title IV of ERISA. Section

4208(e)(3) of ERISA provides that PBGC

shall prescribe by regulation a

procedure by which a plan may by

amendment adopt special partial

withdrawal liability rules upon a

finding by PBGC that the adoption of

such rules are consistent with the

purposes of Title IV of ERISA.

PBGC’s regulation, Extension of

Special Withdrawal Liability Rules (29

CFR part 4203), prescribes procedures

whereby a multiemployer plan may,

pursuant to sections 4203(f) and

4208(e)(3) of ERISA, request PBGC to

approve a plan amendment that

establishes special complete or partial

withdrawal liability rules. Under 29

CFR 4203.3(a), a complete withdrawal

rule adopted pursuant to part 4203 must

be similar to the rules for the

construction and entertainment

industries described in section 4203 (b)

and (c) of ERISA. A partial withdrawal

liability rule adopted pursuant to part

4203 must be consistent with the

complete withdrawal rule adopted by

the plan. Pursuant to 29 CFR 4203.3(b),

a plan amendment adopted pursuant to

part 4203 may cover an entire industry

or industries, or may be limited to a

segment of an industry, and may apply

to cessations of the obligation to

contribute that occurred prior to the

adoption of the amendment.

Each request for approval of a plan

amendment establishing special

withdrawal liability rules must contain

the information specified in 29 CFR

4203.4(d). In acting on such a request,

29 CFR 4203.5(a) provides that PBGC

shall approve a plan amendment

establishing special withdrawal liability

rules if PBGC determines that the plan

amendment—

(1) Will apply only to an industry that

has characteristics that would make use

of the special withdrawal rules

appropriate; and

(2) Will not pose a significant risk to

the insurance system.

In making these determinations,

PBGC will conduct a comprehensive

analysis of the request, the actuarial

data submitted and other relevant

information relating to the industry and

the plan. 29 CFR 4203.4. Under 29 CFR

4203.4(d)(7), the plan must provide

information on the effects of

withdrawals on the plan’s contribution

base, as well as information sufficient to

demonstrate the existence of industry

characteristics that would indicate that

withdrawals in the industry do not

typically have an adverse effect on the

plan’s contribution base.

Finally, 29 CFR 4203.5(b) requires

PBGC to publish a notice of the

pendency of a request for approval of a

plan amendment containing all the

information required under 29 CFR

4203.4(d) in the Federal Register, and to

provide interested parties with an

opportunity to comment on the request.

Request

On February 3, 1998 (63 FR 5573),

PBGC published a notice soliciting

public comment on a request on behalf

of the International Longshoremen’s and

Warehousemen’s Union-Pacific

Maritime Association Pension Plan

(‘‘Plan’’) for approval of a modification

to a plan amendment providing for

special withdrawal liability rules, which

rules were approved by PBGC on

January 30, 1984 (Notice of Approval,

49 FR 6043 (1984)), pursuant to section

4203(f) of ERISA and 29 CFR part 4203.

The comment period ended on March

20, 1998. One comment was received in

opposition to the request. After the close

of the comment period, PBGC received

a response to the comment and

additional information supporting the

response.

The Plan is a multiemployer plan,

with 114 employers contributing in

1996, maintained pursuant to collective

bargaining agreements between the

International Longshoremen’s &

Warehousemen’s Union (‘‘ILWU’’) and

the Pacific Maritime Association

(‘‘PMA’’). The Plan, which is located in

San Francisco, covers the loading and

unloading of all dry cargo for oceangoing vessels arriving at or departing

from ports along the Pacific coast of the

United States, including all ports in the

states of California, Oregon and

Washington. The only cargoes not

covered by the Plan are petroleum

products and other liquid cargoes and

certain cargoes handled by inland

boatmen.

The PMA is an employer association

whose principal business is to negotiate

and administer maritime labor

agreements with ILWU. The PMA is

composed of stevedore companies and

terminal operators as well as American

and foreign flag vessel carriers who

regularly operate from Pacific coast

ports.

As of June 30, 1996, the Plan covered

8,185 active workers, was paying

benefits to 9,049 pensioners and

survivors, and had 87 inactive

participants (or survivors) with vested

entitlements. For the Plan Year ending

June 30, 1996, the Plan received $99.7

million in contributions, and paid $95

million in benefits and $1.9 million in

operating expenses. As of June 30, 1996,

Plan assets were more than 13 times

total Plan disbursements during the July

1, 1995–June 30, 1996 Plan Year. As of

June 30, 1997, the market value of Plan

assets was approximately $1.631 billion

and the present value of vested

liabilities was approximately $1.640

billion.

Plan benefit levels are set in

negotiations between the PMA and the

ILWU. Contribution rates to the Plan,

which are on the basis of either hours

worked, shipping tonnage or a

combination of the two, are determined

annually, solely by the PMA. Since

December 24, 1983, the hours worked

contribution rate has provided 100

percent of the contributions to the Plan.

The total number of contributing

employers has remained relatively

stable since 1971. There were 110

contributors in 1972, 107 in 1979, and

114 in 1996. Forty-two percent of the

1996 contributors were not contributors

in 1979, and nearly 40 percent of the

1979 contributors were no longer

contributing by 1996.

According to the request, over the

past four decades the west coast

shipping industry has grown steadily,

and it looks forward to increased growth

in the future. Total dry cargo at all

covered ports amounted to 29 million

tons in calendar year 1960, 114 million

tons in 1980, 182 millions tons in 1990

and 216 million tons in 1996. Because

of dramatic productivity gains, this

increased shipping activity did not

result in increased hours worked. For a

time, the industry did not require new

workers to replace those retiring from

the work force. This accounts for the

current high ratio of retirees to active

employees covered by the Plan.

However, the gains in productivity and

the consequent drop in unit labor costs

did make it possible to increase wages,

contribution rates and total

contributions during a period in which

the utilization of labor decreased.

It now appears that productively gains

alone can no longer keep pace with the

increase in shipping activity. Covered

hours worked have remained relatively

consistent with prior periods from less

than 16 million in 1975 to more than 18

million in 1980. However, with the

recent growth in trade, covered hours

worked have increased from fewer than
27776 Federal Register / Vol. 63, No. 97 /Wednesday, May 20, 1998 / Notices

15.6 million in 1993 to over 18 million

in 1996.

As part of the request, copies of six of

the Plan’s most recent actuarial

valuation reports were submitted. Plan

costs for funding purposes are

determined on the entry age normal,

level dollar method. Benefits are subject

to collective bargaining, and

contributions are allocated among

contributing employers on the basis of

the ERISA minimum funding

requirements.

The reports show that during the 6-

year period spanned by the reports

(7/1/91–6/30/97), the Plan population

was relatively stable. During that period,

the number of retirees decreased 1.8

percent, while the number of active

participants decreased 3.4 percent.

However, during this same period,

tonnage handled increased nearly 20

percent. And, as of the end of the June

30, 1996 Plan Year, annual

contributions had increased from $71.1

million to $99.7 million, and Plan assets

had risen from $747 million to $1.329

billion.

There were three benefit increases

under the Plan during the period

covered by the reports. The first,

effective July 1, 1992, increased the

unfunded actuarial accrued liability by

$49 million. The second increase,

effective July 1, 1993, increased the

unfunded actuarial accrued liability by

$501 million. Finally, the third increase,

effective July 1, 1996, increased the

unfunded actuarial accrued liability by

$52 million to approximately $534

million. The Plan’s monthly accrual rate

for each year of service went from $37

to $70. PBGC notes that the Plan’s

benefit level exceeds the maximum

benefit guaranteed by PBGC under

section 4022A(c) of ERISA, which is

$16.25 per month per year of service.

The monthly maximum benefit payable

under the Plan increased from $1,295 to

$2,450.

From 1991–1995, contributions

increased at a faster rate than benefit

payouts. In 1991, benefit payouts were

97% of contributions, and in 1995, they

were 95% of contributions.

A summary of the six actuarial

valuations is set forth below.

SUMMARY OF ACTUARIAL VALUATION RESULTS 1

Valuation date

7/1/96 7/1/95 7/1/94 7/1/93 7/1/92 7/1/91

Number of active participants ................... 8,185 7,856 7,682 8,141 8,339 8,469

Number of retired participants .................. 9,049 9,236 9,244 8,979 9,132 9,214

Monthly benefit accrual rate ..................... 70 69 69 69 39 37

Maximum monthly benefit ......................... 2,450 2,415 2,415 2,415 1,365 1,295

Contributions (000) ................................... N/A 99,696 99,023 87,316 74,139 71,074

Benefits (000) ............................................ N/A 94,963 92,437 85,293 71,321 68,848

Market value assets (000) ........................ 1,329,082 1,143,335 957,661 950,030 835,063 746,993

Net minimum funding charges w/o credit

balance (000) ........................................ 79,154 85,787 81,247 80,034 47,307 43,987

Normal cost, including operating expenses (000) ......................................... 20,527 19,180 17,831 18,529 12,821 12,334

Unfunded accrued liability (assets at market value) (000) ..................................... 534,416 637,646 710,802 664,096 341,037 360,009

Unfunded liability—vested benefits (assets at market value) (000) ................... 354,821 462,132 530,092 476,168 N/A N/A

Valuation interest rate ............................... 6.5 6.5 6.5 6.5 6.5 6.5

1Taken from actuarial reports submitted with request.

Approved Special Rules

The complete text of the relevant

provisions of the Plan document, the

ILWU–PMA Pension Agreement

(‘‘Pension Agreement’’), containing the

approved special withdrawal liability

rules is set forth in the Notice of

Approval, 49 FR 6043 (1984). Interested

persons may obtain a copy of that notice

by contacting PBGC. Following is a

summary of the special withdrawal

liability rules in effect and the text of

the approved modification to those

rules.

Under the special rules, a complete

withdrawal occurs if an employer who

makes contributions to the Plan for

longshore work permanently ceases to

have an obligation to make

contributions to the Plan, and: (1)

Continues to perform work of the type

for which contributions to the Plan are

currently or were previously required at

any Pacific Coast port in the United

States, (2) resumes such work at any

time during the Plan Year in which the

contribution obligation ceased through

the end of the fifth succeeding Plan Year

without renewing the contribution

obligation, (3) sells or otherwise

transfers a substantial portion of its

business or assets to another person that

performs longshore work without

having an obligation to make

contributions to the Plan under the

collective bargaining agreements under

which the Plan is maintained, or (4)

ceases to have an obligation to

contribute in connection with the

withdrawal of every employer from the

Plan or substantially all of the

employers within the meaning of

section 4219(c)(1)(D) of ERISA. A partial

withdrawal occurs if an employer incurs

a partial withdrawal within the meaning

of section 4205 of ERISA and, in

addition, at any time from the date of

the partial withdrawal through the

succeeding five Plan Years: (1) Performs

work of the type for which contributions

to the Plan are currently or were

previously required at any Pacific Coast

port in the United States without having

an obligation to contribute to the Plan

for such work, or (2) sells or otherwise

transfers a substantial portion of its

business or assets to another person that

performs longshore work without

having an obligation to make

contributions to the Plan under the

collective bargaining agreements under

which the Plan is maintained.

The amendment adopting the special

withdrawal liability rules also added

funding requirements to the Agreement.

Paragraph 4.042(c) of the Pension

Agreement requires a ‘‘Special

Contribution Amount’’ and specifies the

funding goals that the Plan must meet

for Plan Years beginning July 1, 1984:

‘‘(i) The ‘Special Contribution Amount’

shall be the level annual amount which, on

the basis of a Certified Actuarial Projection,

the Plan Actuary certifies will, when added

to the amounts otherwise required by law

(determined without regard to any credit
Federal Register / Vol. 63, No. 97 /Wednesday, May 20, 1998 / Notices 27777

balance in the funding standard account)

* * *, be sufficient to make the Funding

Percentage as of the Applicable Funding Goal

Date at least equal to the Applicable Funding

Goal.’’

‘‘(ii) The term ‘Funding Percentage’ shall

mean for any Plan Year, the percentage

derived by dividing the market value of the

assets of the Pension Fund by the present

value of the nonforfeitable benefits within

the meaning of ERISA section 4213(c)(A),

both values to be as determined in the

Certified Actuarial Projection as of the end of

such Plan Year.’’

‘‘(iii) For the first through the fifth Plan

Years commencing on or after July 1, 1984,

the term ‘Applicable Funding Goal’ for each

such Plan Year shall mean 50 percent (50%),

and the ‘‘Applicable Funding Goal Date’’ for

each such Plan Year shall mean the last day

of the tenth such Plan Year; for each

succeeding Plan Year, the term ‘Applicable

Funding Goal’ shall mean the percentage set

forth in the Accelerated Funding Schedule

for the Plan Year commencing four years

after the end of the Plan Year in question,

and the ‘‘Applicable Funding Goal Date’’ for

each such Plan Year shall mean the last day

of the Plan Year commencing four years after

the end of the Plan Year in question.’’

‘‘(iv) The ‘Accelerated Funding Schedule’

shall be the following schedule:

Plan year Percent

10 .............................................. 50

11 .............................................. 53

12 .............................................. 56

13 .............................................. 59

14 .............................................. 62

15 .............................................. 65

16 .............................................. 68

17 .............................................. 71

18 .............................................. 74

19 .............................................. 77

20 and over ............................... 80

‘‘(v) The ‘Certified Actuarial Projection’

shall be a projection, which is prepared as of

each actuarial valuation date so as to derive

the Funding Percentage on the Applicable

Funding Goal Date, by using the actuarial

assumptions and methods utilized in the

December 31, 1982 Actuarial Valuation of the

Plan and the then current assets and census

data, which projection shall be certified to in

each Plan Year by the Plan actuary. This

projection shall be on the basis of (1) the

benefit levels in effect during the Plan Year

for which the projection is made and (2) the

Contributions required for such Plan Year

* * * together with any Special Contribution

Amounts. When the Applicable Funding

Goal is met for the twentieth or subsequent

Plan Year, the Special Contribution Amount

may be limited to the amount necessary to

maintain such Applicable Funding Goal for

each subsequent Plan Year.’’

Notice of Approval, 49 FR 6043, 6046 (1984).

An additional funding requirement is

contained in paragraph 4.011 of the

Pension Agreement. That provision

requires that: ‘‘Notwithstanding any

other provision of this Plan, the

Contributions for each Plan Year shall

be not less than the total administrative

costs and benefits to be paid by the

Trustee during the Plan Year.’’ Notice of

Approval, 49 FR 6043, 6045 (1984).

Modification to Special Rules

On July 21, 1997, the bargaining

parties (ILWU and PMA) adopted an

amendment to the approved special

withdrawal liability rules, which

amendment eliminates the requirement

under paragraph 4.011 of the Pension

Agreement that contributions for each

Plan Year shall be at least equal to

benefits and administrative costs paid in

the year. In lieu of that requirement, the

parties signed a Letter of Understanding

on July 21, 1997, whereby the parties

agree that:

[S]hould the Funding Percentage for the

ILWU–PMA Pension Plan (as defined in

paragraph 4.042(c)(ii) of the Plan) fall below

eighty-five percent (85%) as of the beginning

of a particular Plan Year, the Contributions

in the following Plan Year shall not be less

than the lesser of (a) the total administrative

costs and benefits to be paid by the Trustees

during said following Plan Year or (b) the

amount required to increase the Funding

Percentage for said following Plan Year to

eighty-five percent (85%).

Because the requirement that

contributions be no less than

administrative costs and benefits paid in

a given year is no longer specifically set

out in the Pension Agreement, PBGC

indicated in the February 3, 1998 Notice

of Pendency that if PBGC should

approve the amendment modifying the

Plan’s special withdrawal liability rules

such approval would be under the

following condition:

The Plan’s special withdrawal liability

rules will be void as of the first day of the

Plan Year following a Plan Year for which

the Plan is not at least eighty-five percent

(85%) funded, and during said following

Plan Year the Contributions are less than the

least of (a) total administrative cost and

benefits for said following Plan Year or (b)

the amount required to increase the Funding

Percentage to eighty-five percent (85%) for

said following Plan Year or (c) the maximum

tax-deductible contribution to the Plan.

The Plan agreed that it would certify to

this condition annually.

No other changes were proposed to

the Plan’s special withdrawal liability

rules.

Decision

To approve a request for an

amendment modifying special

withdrawal liability rules, PBGC must

make two independent determinations,

as provided in section 4203(f) of ERISA

and 29 CFR 4203.4(a). First, on the basis

of a clear showing by the plan, PBGC

must determine that the amendment

will apply to an industry that has

characteristics that would make use of

the special rules appropriate. Second,

PBGC must determine that the plan

amendment will not pose a significant

risk to the insurance system. PBGC’s

discussion on each of those issues

follows.

a. Appropriateness

The basic consideration in

determining the appropriateness of

special withdrawal liability rules is the

effect of cessations of contributions by

employers on the plan’s contribution

base. Various characteristics may be

indicative of an industry in which

cessations typically do not weaken the

contribution base. In determining

whether an industry has the

characteristics that would make an

amendment to special rules appropriate,

an important line of inquiry is the

extent to which the particular industry

possesses those characteristics that led

Congress to adopt special rules for the

construction and entertainment

industries. An industry that is similar in

terms of those characteristics is

generally appropriate for rules similar to

the construction and entertainment

rules.

The appropriate characteristics

include, but are not necessarily limited

to, the mobility of the employees, the

intermittent nature of the employment,

the project-by-project nature of the

work, extreme fluctuations in the level

of an employer’s covered work under

the plan, the existence of a consistent

pattern of entry and withdrawal by

employers, and the local nature of the

work performed.

In approving the Plan’s request for an

amendment providing for special

withdrawal liability rules on February

16, 1984, PBGC determined that the

industry covered by the Plan clearly

evidenced characteristics similar to

those of the construction industry, the

most important of which was the local

nature of the work. The characteristics

of the west coast longshore industry that

supported approval of special

withdrawal liability rules in 1984

continue to apply to the industry today.

Specifically, work covered under the

Plan is dependent on the comings and

goings of ocean-going vessels at west

coast ports. Workers are employed by a

covered stevedoring company, generally

on a daily basis through a dispatch hall

system, to work pursuant to contracts

with vessel operators. The work must be

performed at the port of embarkation or

debarkation. Thus, so long as west coast

shipping continues, the work performed

will continue to be covered by the Plan.
27778 Federal Register / Vol. 63, No. 97 /Wednesday, May 20, 1998 / Notices

In addition, an employer in this

industry cannot withdraw from the Plan

while continuing to perform longshore

work at Pacific ports, because longshore

work along the entire west coast for all

ocean-going dry cargo work is covered

under collective bargaining agreements

that require contributions to the Plan.

Because the entire coast is one

bargaining unit, and all ports through

which ocean-going dry cargo is shipped

are completely organized by the ILWU,

it is not possible for such cargo to be

loaded or unloaded at any point on the

coast without contributions being paid

to the Plan. Thus, as a practical matter,

it is not realistic to expect

noncontributory, covered work.

Nonetheless, if a former contributing

employer were to compete against the

Plan’s other employers in this way,

thereby diminishing the Plan’s

contribution base, withdrawal liability

would be imposed.

Because of the local nature of the

work and the requirement that

contributions be made to the Plan for all

longshore work done on the Pacific

coast, the comings and goings of

employers do not have an adverse effect

on the Plan’s contribution base, which

is dependent upon the vitality of the

west coast shipping industry as a whole,

and not upon the continued existence of

any particular employers. For these

reasons, the covered industry evidences

characteristics that indicate that

cessations by employers typically do not

have a weakening effect on the Plan’s

contribution base. Thus, PBGC has

concluded that the Pacific coast

longshore industry continues to

evidence characteristics that make the

use of special withdrawal liability rules

appropriate.

The only comment received in

response to the notice questioned the

validity of the Plan amendment that is

the subject of the request

(‘‘Amendment’’). Specifically, since the

Amendment was not executed and

submitted by the Plan’s Board of

Trustees, the comment questioned

whether the Amendment was properly

executed and submitted to PBGC. The

response to the comment asserts that the

process of adopting the Amendment is

a settlor function left to the collective

bargaining parties, ILWU and PMA.

Section 7.02 of the Pension Agreement

provides that ‘‘[t]he (ILWU) and (PMA)

by their mutual agreement in writing

may at any time amend, modify, or

delete any provisions of the [ILWU–

PMA Pension] Agreement.’’ Nothing in

the Pension Agreement or the collective

bargaining agreement between ILWU

and PMA indicates that the Plan’s Board

of Trustees has the authority to amend

the Pension Agreement. The document

effecting the Amendment clearly shows

that representatives of ILWU and PMA

executed it. Thus, based on the Pension

Agreement and the executed

Amendment, PBGC agrees that the

Amendment was properly executed by

the appropriate parties, ILWU and PMA.

The comment also questioned

whether the Plan’s request for approval

of the Amendment was properly

submitted to PBGC pursuant to PBGC

regulation. Pursuant to 29 CFR

4203.4(b), a request for PBGC’s approval

of a plan amendment must be submitted

by the plan sponsor or a duly authorized

representative acting on behalf of the

plan sponsor. The comment asserts that

any request should have been submitted

by the Plan sponsor, the Board of

Trustees, not PMA or a representative of

PMA. Further, the comment asserts that

the current Board of Trustees did not

approve the request or give PMA the

authority to engage a representative to

act on behalf of the Board of Trustees in

preparing and submitting the request to

PBGC. The response to the comment

asserts that the Plan’s previous Board of

Trustees authorized PMA to engage a

representative to submit the request on

behalf of the Plan. Also, a Plan fiduciary

submitted information in support of the

position that PMA had the previous

Board of Trustees’ authorization to

proceed with the submission of the

request. No information was provided

supporting the position that the Plan’s

previous Board of Trustees failed to

authorize PMA to prepare and submit

the request. Consequently, PBGC

disagrees with the comment and

believes that the request was properly

submitted for approval by a duly

authorized representative of the Plan

sponsor.

b. Risk to the Insurance System

In addition to determining that the

special withdrawal liability rules are

appropriate to this case, PBGC must find

that their use will not pose a significant

risk to the insurance program.

Copies of the Plan’s actuarial reports

for the 6-year period (7/1/91–6/30/97)

were submitted with the request. The

most recent of those reports indicates an

unfunded actuarial accrued liability of

$534 million, an unfunded liability for

vested benefits of $355 million, and

assets of $1.329 billion. In the 6-year

period, the Plan’s unfunded accrued

liability increased from $360 million to

$534 million, and the monthly accrual

rate went from $37 to $70 per month per

year of service. These changes increased

the monthly maximum benefit from

$1,295 to $2,450. The $70 monthly

accrual rate exceeds the maximum

monthly accrual rate guaranteed by

PBGC under section 4022A of ERISA,

which is $16.25, or 23.2 percent of the

Plan’s accrual rate. On the other hand,

from 1991–1995, contributions

increased at a faster rate than benefit

payouts. In 1991, benefit payouts were

97% of contributions, and in 1995, they

were 95% of contributions.

In addition to the information already

mentioned, the actuarial reports show a

stable Plan population, an increase in

annual contributions ($71.1 million to

$99.7 million), and an increase in Plan

assets ($747 million to $1.329 billion).

Plan income has also consistently

exceeded benefit payouts. The Plan and

the covered industry have unique

characteristics that suggest that the

Plan’s contribution base is likely to

remain stable. Contributions to the Plan

are made with respect to all west coast

dry cargo. The industry has had

significant growth over the past decades

and that growth is expected to continue.

The Plan’s continuation is dependent

only on the continued activity in the

west coast shipping industry as a whole.

Consequently, the Plan’s contribution

base is secure and the departure of one

employer from the Plan is not likely to

have an adverse effect on the

contribution base so long as the level of

shipping does not decline.

The request states that the main

reason that the Plan requests an

amendment modifying its special

withdrawal liability rules is that the

Plan is approaching the point where

contributions would no longer be

deductible due to ERISA’s full funding

limit. This has occurred because the

Plan’s funded status has significantly

improved since approval of the

amendment establishing special

withdrawal liability rules in 1984. The

1984 amendment required that the Plan

meet specific funding objectives that

were designed to improve the Plan’s

financial condition. In order for the

special rules to apply, the Plan had to

meet the objectives each year. At the

time that PBGC approved the 1984

amendment establishing the rules,

PBGC believed that ‘‘meeting these

objectives (would) place the Plan on a

sound long-term financial basis.’’ The

1984 amendment established a funding

objective of fifty percent (50%) in 1984,

increasing to eighty percent (80%) in

2004. Every year since the 1984

amendment, the Plan has more than met

the funding objectives. Under the

proposed Amendment, the Plan’s

funding goal objective is increased from

a projected eighty percent (80%) in 2004

to eighty-five percent (85%) henceforth.

If the Amendment is approved, the Plan

has agreed that in any Plan Year in
Federal Register / Vol. 63, No. 97 /Wednesday, May 20, 1998 / Notices 27779

1A member who wishes to act as a market maker

and as a floor broker on the same business day is

subject to the restrictions of CBOE Rule 8.8,

‘‘Restrictions on Acting as a Market-Maker and a

Floor Broker.’’

which the Plan’s modified funding

objectives are not met, the special

withdrawal liability rules will be void.

The comment raised concerns relating

to the potential for increased risk to the

insurance system if the proposed

Amendment is approved. According to

the comment, ‘‘[b]y eliminating the

requirement that contributions for each

Plan Year be at least equal to benefits

and administrative costs, the proposed

Plan Amendment would slow the Plan’s

progress towards a fully funded status

while increasing the insurance risk on

the (PBGC).’’ The comment states that

the Plan’s actuarial projections show

that the Plan’s full funding limit will

not be reached for at least another two

years and possibly longer, and that the

projections show a gradual decline in

contributions, not a sudden drop.

In addressing the comment PBGC has

considered the actuarial information

provided with the request and the

response to the comment. The evidence

indicates that the west coast shipping

industry covered by the Plan has shown

steady growth over the past decades,

and the growth is projected to continue.

The evidence also indicates that as a

result of the steady growth in the

industry, the Plan’s contribution base

has been stable and secure. Due to the

nature of the industry, departures of

individual employers would not pose a

risk to the Plan or the PBGC insurance

system. In approving the Plan’s special

withdrawal liability rules in 1984, PBGC

found that meeting the associated

funding objectives would place the Plan

on a ‘‘sound long-term financial basis.’’

Those objectives have been met earlier

than projected. The proposed

modification to the Plan’s special

withdrawal liability rules is conditioned

on the Plan meeting at least the same

funding objectives. Therefore, PBGC has

concluded that the proposed

modification will not pose a significant

risk to the insurance system.

Based on the facts of this case and the

representations and statements made in

connection with the request for

approval, PBGC has determined that the

Plan Amendment modifying special

withdrawal liability rules (1) will apply

only to an industry that has

characteristics that would make the use

of special withdrawal liability rules

appropriate, and (2) will not pose a

significant risk to the insurance system.

Therefore, PBGC hereby grants the

Plan’s request for approval of a plan

amendment modifying special

withdrawal liability rules, as set forth

herein. PBGC grants approval under the

condition that such approval will

expire, and the Plan’s special

withdrawal liability rules will be void

as of the first day of the Plan Year

following a Plan Year for which the Plan

is not at least eighty-five percent (85%)

funded, and during said following Plan

Year the Contributions are less than the

least of (a) total administrative cost and

benefits for said following Plan Year or

(b) the amount required to increase the

Funding Percentage to eighty-five

percent (85%) for said following Plan

Year or (c) the maximum tax-deductible

contribution to the Plan. The Plan has

agreed to certify to these conditions

annually. Should the Plan wish to again

amend these rules at any time, PBGC

approval of the amendment will be

required.

Issued at Washington, DC, on this 14th day

of May 1998.

David Strauss,

Executive Director.

[FR Doc. 98–13435 Filed 5–19–98; 8:45 am]

BILLING CODE 7708–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39987]; File No. SR–CBOE–

98–19]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Inc., Relating to Nominees of Member

Organizations

May 12, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘ACT’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on May 5, 1998, the

Chicago Board Options Exchange, Inc.

(‘‘CBOE’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by the CBOE. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to revise CBOE

Rule 3.8, ‘‘Nominees,’’ to clarify that a

nominee trading for his/her own

account pursuant to CBOE Rule

3.8(a)(4)(C) may trade as an independent

market maker and/or an independent

floor broker.1 The CBOE also proposes

to replace a reference in CBOE Rule

3.8(a)(4)(C) to the CBOE’s Market

Surveillance Department with a

reference to the Exchange.

The text of the proposed rule change

is available at the Office of the

Secretary, CBOE, and at the

Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV below.

The self-regulatory organization has

prepared summaries, set forth in

sections (A), (B), and (C) below, of the

most significant aspects of such

statements.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

CBOE Rule 3.8(a)(4)(B) provides that

a nominee of a member organization

may perform floor functions only on

behalf of the member organization for

which he or she is authorized. However,

CBOE Rule 3.8(a)(4)(C) sets forth an

exception to this requirement.

Specifically, CBOE 3.8(a)(4)(C) provides

that, notwithstanding the provisions of

CBOE Rule 3.8(a)(4)(B), a nominee may

trade for his/her own account provided

that the following three requirements

are satisfied: (i) the nominee is a

registered broker-dealer; (ii) the

nominee has the prior written approval

of the nominee’s member organization

to trade for his/her own account; and

(iii) the nominee has the prior written

approval of the Exchange’s Market

Surveillance Department to trade for

his/her own account. CBOE Rule

3.8(a)(4)(C) also provides that the

approval of the nominee’s member

organization and of the CBOE’s Market

Surveillance Department must be filed

with the CBOE’s Membership

Department.

In addition, CBOE Rule 3.8(a)(2)

requires a nominee’s member

organization to guaranty all obligations

arising out of the nominee’s

representation of the member

organization, including transactions for

the nominee’s own account as

authorized pursuant to CBOE Rule

3.8(a)(4)(C).

The purpose of the proposal is to

clarify that authorization of a nominee