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[Federal Register Volume 63, Number 97 (Wednesday, May 20, 1998)]
[Notices]
[Pages 27774-27779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13435]

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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.

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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

[[Page 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 ocean-going 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

[[Page 27776]]

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 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Taken 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

[[Page 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.

[[Page 27778]]

    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

[[Page 27779]]

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
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