80 FR 36366 - Pendency of Request for Exemption From the Bond/Escrow Requirement Relating to the Sale of Assets by an Employer Who Contributes to a Multiemployer Plan; Harrington Air Systems, LLC and J.C. Cannistraro, LLC
PENSION BENEFIT GUARANTY CORPORATION Federal Register Volume 80, Issue 121 (June 24, 2015)
Federal Register Volume 80, Issue 121 (June 24, 2015)
| Page Range | 36366-36367 | |
| FR Document | 2015-15415 |
[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)] [Notices] [Pages 36366-36367] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-15415] ======================================================================= ----------------------------------------------------------------------- PENSION BENEFIT GUARANTY CORPORATION Pendency of Request for Exemption From the Bond/Escrow Requirement Relating to the Sale of Assets by an Employer Who Contributes to a Multiemployer Plan; Harrington Air Systems, LLC and J.C. Cannistraro, LLC AGENCY: Pension Benefit Guaranty Corporation. ACTION: Notice of pendency of request. ----------------------------------------------------------------------- SUMMARY: This notice advises interested persons that the Pension Benefit Guaranty Corporation (``PBGC'') has received a request from Harrington Air Systems, LLC, and its sister company J.C. Cannistraro, LLC, for an exemption from the bond/escrow requirement of section 4204(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, with respect to the Sheet Metal Workers National Pension Fund. Section 4204(a)(1) provides that the sale of assets by an employer that contributes to a multiemployer pension plan will not constitute a complete or partial withdrawal from the plan if certain conditions are met. One of these conditions is that the purchaser posts a bond or deposits money in escrow for the five-plan-year period beginning after the sale. PBGC is authorized to grant individual and class exemptions from this requirement. Before granting an exemption PBGC is required to give interested persons an opportunity to comment on the exemption request. The purpose of this notice is to advise interested persons of the exemption request and solicit their views on it. DATES: Comments must be received on or before August 10, 2015. ADDRESSES: Comments may be submitted by any of the following methods:Federal eRulemaking Portal: http://www.regulations.gov. Follow the Web site instructions for submitting comments. Email: reg.comments@pbgc.gov. Fax: 202-326-4224. Mail or Hand Delivery: Regulatory Affairs Group, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. Comments received, including personal information provided, will be posted to www.pbgc.gov. Copies of comments and non-confidential portions of the request may be obtained by writing to Disclosure Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026 or calling 202-326-4040 during normal business hours. (TTY and TDD users may call the Federal relay service toll-free at 1-800-877-8339 and ask to be connected to 202-326-4040.) FOR FURTHER INFORMATION CONTACT: Bruce Perlin (Perlin.Bruce@PBGC.gov), 202-326-4020, ext. 6818 or Jon Chatalian (Chatalian.Jon@PBGC.gov), ext. 6757, Office of the Chief Counsel, Suite 340, 1200 K Street NW., Washington, DC 20005-4026; (TTY/TDD users may call the Federal relay service toll-free at 1-800-877-8339 and ask to be connected to 202-326- 4020.) SUPPLEMENTARY INFORMATION: Background Section 4204 of the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980 (``ERISA'' or ``the Act''), provides that a bona fide arm's-length sale of assets of a contributing employer to an unrelated party will not be considered a withdrawal if three conditions are met. These conditions, enumerated in section 4204(a)(1)(A)-(C), are that-- (A) The purchaser has an obligation to contribute to the plan with respect to the operations for substantially the same number of contributions base units for which the seller was obligated to contribute; (B) The purchaser obtains a bond or places an amount in escrow, for a period of five plan years after the sale, equal to the greater of the seller's average required annual contribution to the plan for the three plan years preceding the year in which the sale occurred or the seller's required annual contribution for the plan year preceding the year in which the sale occurred; and (C) The contract of sale provides that if the purchaser withdraws from the plan within the first five plan years beginning after the sale and fails to pay any of its liability to the plan, the seller shall be secondarily liable for the liability it (the seller) would have had but for section 4204. The bond or escrow described above would be paid to the plan if the purchaser withdraws from the plan or fails to make any required contributions to the plan within the first five plan years beginning after the sale. Additionally, section 4204(b)(1) provides that if a sale of assets is covered by section 4204, the purchaser assumes by operation of law the contribution record of the seller for the plan year in which the sale occurred and the preceding four plan years. Section 4204(c) of ERISA authorizes PBGC to grant individual or class variances or exemptions from the purchaser's bond/escrow requirement of section 4204(a)(1)(B) when warranted. The legislative history of section 4204 indicates a Congressional intent that the sales rules be administered in a manner that assures protection of the plan with the least practicable intrusion into normal business transactions. Senate Committee on Labor and Human Resources, 96th Cong., 2nd Sess., S.1076, The Multiemployer Pension Plan Amendments Act of 1980: Summary and Analysis of Considerations 16 (Comm. Print, April 1980); 128 Cong. Rec. S10117 (July 29, 1980). The granting of an exemption or variance from the bond/escrow requirement does not constitute a finding by PBGC that a particular transaction satisfies the other requirements of section 4204(a)(1). Under the PBGC's regulation on variances for sales of assets (29 CFR part 4204), a request for a variance or waiver of the bond/escrow requirement under any of the tests established in the regulation (Sec. Sec. 4204.12-4204.13) is to be made by the parties to the sale to the plan in question. PBGC will consider a waiver request by a purchaser or seller only if the transaction does not satisfy the regulatory tests or the parties decline to provide the plan financial information necessary to show satisfaction of one of the regulatory tests because it is privileged or confidential financial information within the meaning of 5 U.S.C. 552(b)(4) (the Freedom of Information Act). Under Sec. 4204.22 of the regulation, the PBGC shall approve a request for a variance or exemption if it determines that approval of the request is warranted, in that it-- (1) Would more effectively or equitably carry out the purposes of Title IV of the Act; and (2) Would not significantly increase the risk of financial loss to the plan. [[Page 36367]] Section 4204(c) of ERISA and Sec. 4204.22(b) of the regulation require PBGC to publish a notice of the pendency of a request for a variance or exemption in the Federal Register, and to provide interested parties with an opportunity to comment on the proposed variance or exemption. The Request The PBGC has received a request from Harrington Air Systems, LLC (``HAS'') and its sister company J.C. Cannistraro, LLC (``JCC'') (collectively, ``Cannistraro'' or the ``Buyer'') for an exemption from the bond/escrow requirement of Sec. 4204(a)(1)(B) with respect to the Sheet Metal Workers National Pension Fund (the ``Fund'') in connection with the purchase of most of the assets of Harrington Brothers Corporation (``HBC'' or the ``Seller'') on February 28, 2014. HAS is an entity set up by JCC in order to effectuate the purchase of HBC's assets. In the request, the Buyer represents that HAS and JCC are businesses under common control pursuant to 26 CFR 1.414(c)-2 and therefore treated as one employer under ERISA. Additionally, the Buyer represents, among other things, that: 1. Under the terms of the asset purchase agreement, the Buyer paid the Seller approximately $5.1 million in the form of an unsecured promissory note that may be adjusted post-closing based on the performance of certain construction contracts in place at the time of the transaction. 2. The Buyer is obligated to contribute to the Fund for the purchased operations for substantially the same contribution base units for which the Seller had an obligation to contribute. 3. The Seller has agreed to be secondarily liable for any withdrawal liability it would have had with regard to the sold operations (if not for Sec. 4204) should the Buyer withdraw from the Fund within the five plan years following the sale and fail to pay withdrawal liability. 4. The estimated amount of unfunded vested benefits allocable to the seller with respect to the operations sold is about $23.5 million. 5. The amount of the bond/escrow required under Sec. 4204(a)(1)(B) is $1.68 million. 6. After the close of the transaction, the Buyer requested that the trustees of the Fund waive the bond/escrow requirements of ERISA Sec. 4204. By its counsel, the Fund denied the request on the grounds that the Buyer had not satisfied the income or asset tests under PBGC's regulations for an exemption from the bond/escrow requirement of Sec. 4204(a)(1)(B). 7. The Fund determined that to receive a waiver of the bond/escrow requirement under the net income test of 29 CFR 4204.13(a)(1), the average net income needed for the three-year period prior to the transaction should have been $400,000 greater than the amount reported. 8. The Buyer asserts that the three-year average net income of JCC was lowered due to an ``aberrantly poor year'' in the construction industry in Massachusetts in 2011. The Buyer states that JCC's average net income for the years between 2011-2014 was approximately $1 million more than what was required to meet the net income test under 29 CFR 4204.13(a)(1), and that its net income for the 3 years between 2012- 2014 was approximately $1.5 million more than what was required. 9. The Buyer further asserts that, in denying the Buyer's request for a waiver, the Fund looked only at the average net income of JCC. It contends that aggregating the net incomes of JCC and HAS, two businesses under common control under 26 CFR 1.414(c)-2, shows that there ``can be no serious argument that a waiver will create risk for the Fund, let alone substantial risk.'' HAS's anticipated net income for 2014 is approximately $300,000. 10. The Buyer's request additionally states that a variance of the bond/escrow requirement in this instance furthers the purposes of Title IV of ERISA because Congress, in enacting Title IV, sought to minimize intrusions into normal business operations while protecting plans. The Buyer asserts that HBC had previously been a ``struggling enterprise'' and that the transaction has ``resulted in a more stable and financially secure contributing employer to the Fund.'' Comments All interested persons are invited to submit written comments on the pending exemption request. All comments will be made part of the administrative record. Issued in Washington, DC, on this 16th day of June, 2015. Alice C. Maroni, Acting Director, Pension Benefit Guaranty Corporation. [FR Doc. 2015-15415 Filed 6-23-15; 8:45 am] BILLING CODE 7709-02-P
![36366 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
2.206. As provided by this regulation, site instructions for submitting shall be secondarily liable for the
the director’s decision will constitute comments. liability it (the seller) would have had
the final action of the Commission 25 • Email: reg.comments@pbgc.gov. but for section 4204.
days after the date of the decision, • Fax: 202–326–4224. The bond or escrow described above
unless the Commission, on its own • Mail or Hand Delivery: Regulatory would be paid to the plan if the
motion, institutes a review of the Affairs Group, Office of the General purchaser withdraws from the plan or
director’s decision in that time. Counsel, Pension Benefit Guaranty fails to make any required contributions
Dated at Rockville, Maryland, this 17th day Corporation, 1200 K Street NW., to the plan within the first five plan
of June, 2015. Washington, DC 20005–4026. years beginning after the sale.
For the Nuclear Regulatory Commission. Comments received, including Additionally, section 4204(b)(1)
William M. Dean, personal information provided, will be provides that if a sale of assets is
Director, Office of Nuclear Reactor posted to www.pbgc.gov. Copies of covered by section 4204, the purchaser
Regulation. comments and non-confidential assumes by operation of law the
[FR Doc. 2015–15518 Filed 6–23–15; 8:45 am] portions of the request may be obtained contribution record of the seller for the
BILLING CODE 7590–01–P
by writing to Disclosure Division, Office plan year in which the sale occurred
of the General Counsel, Pension Benefit and the preceding four plan years.
Guaranty Corporation, 1200 K Street Section 4204(c) of ERISA authorizes
NW., Washington, DC 20005–4026 or PBGC to grant individual or class
PENSION BENEFIT GUARANTY
calling 202–326–4040 during normal variances or exemptions from the
CORPORATION
business hours. (TTY and TDD users purchaser’s bond/escrow requirement of
Pendency of Request for Exemption may call the Federal relay service toll- section 4204(a)(1)(B) when warranted.
From the Bond/Escrow Requirement free at 1–800–877–8339 and ask to be The legislative history of section 4204
Relating to the Sale of Assets by an connected to 202–326–4040.) indicates a Congressional intent that the
Employer Who Contributes to a FOR FURTHER INFORMATION CONTACT: sales rules be administered in a manner
Multiemployer Plan; Harrington Air Bruce Perlin (Perlin.Bruce@PBGC.gov), that assures protection of the plan with
Systems, LLC and J.C. Cannistraro, 202–326–4020, ext. 6818 or Jon the least practicable intrusion into
LLC Chatalian (Chatalian.Jon@PBGC.gov), normal business transactions. Senate
ext. 6757, Office of the Chief Counsel, Committee on Labor and Human
AGENCY: Pension Benefit Guaranty Suite 340, 1200 K Street NW., Resources, 96th Cong., 2nd Sess.,
Corporation. Washington, DC 20005–4026; (TTY/ S.1076, The Multiemployer Pension
ACTION: Notice of pendency of request. TDD users may call the Federal relay Plan Amendments Act of 1980:
service toll-free at 1–800–877–8339 and Summary and Analysis of
SUMMARY: This notice advises interested ask to be connected to 202–326–4020.) Considerations 16 (Comm. Print, April
persons that the Pension Benefit 1980); 128 Cong. Rec. S10117 (July 29,
SUPPLEMENTARY INFORMATION:
Guaranty Corporation (‘‘PBGC’’) has 1980). The granting of an exemption or
received a request from Harrington Air Background variance from the bond/escrow
Systems, LLC, and its sister company Section 4204 of the Employee requirement does not constitute a
J.C. Cannistraro, LLC, for an exemption Retirement Income Security Act of 1974, finding by PBGC that a particular
from the bond/escrow requirement of as amended by the Multiemployer transaction satisfies the other
section 4204(a)(1) of the Employee Pension Plan Amendments Act of 1980 requirements of section 4204(a)(1).
Retirement Income Security Act of 1974, (‘‘ERISA’’ or ‘‘the Act’’), provides that a Under the PBGC’s regulation on
as amended, with respect to the Sheet bona fide arm’s-length sale of assets of variances for sales of assets (29 CFR part
Metal Workers National Pension Fund. a contributing employer to an unrelated 4204), a request for a variance or waiver
Section 4204(a)(1) provides that the sale party will not be considered a of the bond/escrow requirement under
of assets by an employer that withdrawal if three conditions are met. any of the tests established in the
contributes to a multiemployer pension These conditions, enumerated in section regulation (§§ 4204.12–4204.13) is to be
plan will not constitute a complete or 4204(a)(1)(A)–(C), are that— made by the parties to the sale to the
partial withdrawal from the plan if (A) The purchaser has an obligation to plan in question. PBGC will consider a
certain conditions are met. One of these contribute to the plan with respect to waiver request by a purchaser or seller
conditions is that the purchaser posts a the operations for substantially the same only if the transaction does not satisfy
bond or deposits money in escrow for number of contributions base units for the regulatory tests or the parties
the five-plan-year period beginning after which the seller was obligated to decline to provide the plan financial
the sale. PBGC is authorized to grant contribute; information necessary to show
individual and class exemptions from (B) The purchaser obtains a bond or satisfaction of one of the regulatory tests
this requirement. Before granting an places an amount in escrow, for a period because it is privileged or confidential
exemption PBGC is required to give of five plan years after the sale, equal to financial information within the
interested persons an opportunity to the greater of the seller’s average meaning of 5 U.S.C. 552(b)(4) (the
comment on the exemption request. The required annual contribution to the plan Freedom of Information Act).
purpose of this notice is to advise for the three plan years preceding the Under § 4204.22 of the regulation, the
interested persons of the exemption year in which the sale occurred or the PBGC shall approve a request for a
request and solicit their views on it. seller’s required annual contribution for variance or exemption if it determines
DATES: Comments must be received on
tkelley on DSK3SPTVN1PROD with NOTICES
the plan year preceding the year in that approval of the request is
or before August 10, 2015. which the sale occurred; and warranted, in that it—
ADDRESSES: Comments may be (C) The contract of sale provides that (1) Would more effectively or
submitted by any of the following if the purchaser withdraws from the equitably carry out the purposes of Title
methods: plan within the first five plan years IV of the Act; and
• Federal eRulemaking Portal: http:// beginning after the sale and fails to pay (2) Would not significantly increase
www.regulations.gov. Follow the Web any of its liability to the plan, the seller the risk of financial loss to the plan.
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![Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices 36367
Section 4204(c) of ERISA and 7. The Fund determined that to SECURITIES AND EXCHANGE
§ 4204.22(b) of the regulation require receive a waiver of the bond/escrow COMMISSION
PBGC to publish a notice of the requirement under the net income test
[Investment Company Act Release No.
pendency of a request for a variance or of 29 CFR 4204.13(a)(1), the average net 31683; 812–14425]
exemption in the Federal Register, and income needed for the three-year period
to provide interested parties with an prior to the transaction should have Amplify Investments LLC and Amplify
opportunity to comment on the been $400,000 greater than the amount ETF Trust; Notice of Application
proposed variance or exemption. reported.
June 18, 2015.
The Request 8. The Buyer asserts that the three- AGENCY: Securities and Exchange
The PBGC has received a request from year average net income of JCC was Commission (‘‘Commission’’).
Harrington Air Systems, LLC (‘‘HAS’’) lowered due to an ‘‘aberrantly poor ACTION: Notice of an application for an
and its sister company J.C. Cannistraro, year’’ in the construction industry in order under section 12(d)(1)(J) of the
LLC (‘‘JCC’’) (collectively, ‘‘Cannistraro’’ Massachusetts in 2011. The Buyer states Investment Company Act of 1940 (the
or the ‘‘Buyer’’) for an exemption from that JCC’s average net income for the ‘‘Act’’) for exemptions from sections
the bond/escrow requirement of years between 2011–2014 was 12(d)(1)(A), (B), and (C) of the Act,
§ 4204(a)(1)(B) with respect to the Sheet approximately $1 million more than under sections 6(c) and 17(b) of the Act
Metal Workers National Pension Fund what was required to meet the net for an exemption from section 17(a) of
(the ‘‘Fund’’) in connection with the income test under 29 CFR 4204.13(a)(1), the Act, and under section 6(c) of the
purchase of most of the assets of and that its net income for the 3 years Act for an exemption from rule 12d1–
Harrington Brothers Corporation between 2012–2014 was approximately 2(a) under the Act.
(‘‘HBC’’ or the ‘‘Seller’’) on February 28, $1.5 million more than what was
2014. HAS is an entity set up by JCC in Summary of the Application:
required. Applicants request an order that would
order to effectuate the purchase of
HBC’s assets. In the request, the Buyer 9. The Buyer further asserts that, in (a) permit certain registered open-end
represents that HAS and JCC are denying the Buyer’s request for a management investment companies that
businesses under common control waiver, the Fund looked only at the operate as ‘‘funds of funds’’ to acquire
pursuant to 26 CFR 1.414(c)-2 and average net income of JCC. It contends shares of certain registered open-end
therefore treated as one employer under that aggregating the net incomes of JCC management investment companies,
ERISA. Additionally, the Buyer and HAS, two businesses under registered closed-end management
represents, among other things, that: common control under 26 CFR 1.414(c)- investment companies, business
1. Under the terms of the asset 2, shows that there ‘‘can be no serious development companies, as defined by
purchase agreement, the Buyer paid the argument that a waiver will create risk section 2(a)(48) of the Act (‘‘business
Seller approximately $5.1 million in the for the Fund, let alone substantial risk.’’ development companies’’), and
form of an unsecured promissory note HAS’s anticipated net income for 2014 registered unit investment trusts that are
that may be adjusted post-closing based is approximately $300,000. within or outside the same group of
on the performance of certain investment companies as the acquiring
construction contracts in place at the 10. The Buyer’s request additionally investment companies and (b) permit
time of the transaction. states that a variance of the bond/escrow certain registered open-end management
2. The Buyer is obligated to contribute requirement in this instance furthers the investment companies relying on rule
to the Fund for the purchased purposes of Title IV of ERISA because 12d1–2 under the Act to invest in
operations for substantially the same Congress, in enacting Title IV, sought to certain financial instruments.
contribution base units for which the minimize intrusions into normal Applicants: Amplify Investments LLC
Seller had an obligation to contribute. business operations while protecting (‘‘Adviser’’) and Amplify ETF Trust
3. The Seller has agreed to be plans. The Buyer asserts that HBC had (‘‘Trust’’).
secondarily liable for any withdrawal previously been a ‘‘struggling Filing Dates: The application was
liability it would have had with regard enterprise’’ and that the transaction has filed on February 20, 2015.
to the sold operations (if not for § 4204) ‘‘resulted in a more stable and Hearing or Notification of Hearing: An
should the Buyer withdraw from the order granting the requested relief will
financially secure contributing
Fund within the five plan years be issued unless the Commission orders
employer to the Fund.’’
following the sale and fail to pay a hearing. Interested persons may
withdrawal liability. Comments request a hearing by writing to the
4. The estimated amount of unfunded Commission’s Secretary and serving
vested benefits allocable to the seller All interested persons are invited to applicants with a copy of the request,
with respect to the operations sold is submit written comments on the personally or by mail. Hearing requests
about $23.5 million. pending exemption request. All should be received by the Commission
5. The amount of the bond/escrow comments will be made part of the by 5:30 p.m. on July 13, 2015, and
required under § 4204(a)(1)(B) is $1.68 administrative record. should be accompanied by proof of
million. Issued in Washington, DC, on this 16th day service on applicants, in the form of an
6. After the close of the transaction, of June, 2015. affidavit or, for lawyers, a certificate of
the Buyer requested that the trustees of service. Pursuant to rule 0–5 under the
Alice C. Maroni,
the Fund waive the bond/escrow Act, hearing requests should state the
Acting Director, Pension Benefit Guaranty
tkelley on DSK3SPTVN1PROD with NOTICES
requirements of ERISA § 4204. By its nature of the writer’s interest, any facts
counsel, the Fund denied the request on Corporation. bearing upon the desirability of a
the grounds that the Buyer had not [FR Doc. 2015–15415 Filed 6–23–15; 8:45 am] hearing on the matter, the reason for the
satisfied the income or asset tests under BILLING CODE 7709–02–P request, and the issues contested.
PBGC’s regulations for an exemption Persons who wish to be notified of a
from the bond/escrow requirement of hearing may request notification by
§ 4204(a)(1)(B). writing to the Commission’s Secretary.
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Document Created: 2015-12-15 14:09:06
Document Modified: 2015-12-15 14:09:06
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Notice of pendency of request. | |
| Dates | Comments must be received on or before August 10, 2015. | |
| Contact | Bruce Perlin ([email protected]), 202-326-4020, ext. 6818 or Jon Chatalian ([email protected]), ext. 6757, Office of the Chief Counsel, Suite 340, 1200 K Street NW., Washington, DC 20005-4026; (TTY/TDD users may call the Federal relay service toll-free at 1-800-877-8339 and ask to be connected to 202-326- 4020.) | |
| FR Citation | 80 FR 36366 |
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