Approval of Special Withdrawal Liability Rules: the Service Employees International Union Local 1 Cleveland Pension Plan, 18165-18168 [2017-07719]

Download as PDF Federal Register / Vol. 82, No. 72 / Monday, April 17, 2017 / Notices Document ADAMS accession No./web link NUREG/BR–0058, Revision 5, ‘‘Regulatory Analysis Guidelines of the U.S. NRC’’ .................. NUREG/BR–0058, Revision 4, ‘‘Regulatory Analysis Guidelines of the U.S. NRC’’ .................. NUREG/BR–0184, ‘‘Regulatory Analysis Technical Evaluation Handbook’’ ............................... SECY–14–0002, ‘‘Plan for Updating NRC’s Cost-Benefit Guidance,’’ January 2, 2014 ............. SECY–14–0087, ‘‘Qualitative Consideration of Factors in the Development of Regulatory Analyses and Backfit Analyses,’’ September 11, 2014. SECY–14–0143, ‘‘Regulatory Gap Analysis of the NRC’s Cost-Benefit Guidance and Practices,’’ December 16, 2014. SECY–12–0110, ‘‘Consideration of Economic Consequences within the U.S. NRC’s Regulatory Framework,’’ August 14, 2012. SRM for SECY–12–0110, ‘‘Consideration of Economic Consequences within the U.S. NRC’s Regulatory Framework,’’ March 20, 2013. SRM for SECY–14–0087, ’’Qualitative Consideration of Factors in the Development of Regulatory Analyses and Backfit Analyses,’’ March 4, 2015. NUREG–1409, ‘‘Backftting Guidelines’’ ....................................................................................... ‘‘Tasking Related to Implementation of Agency Backfitting and Issue Finality Guidance,’’ June 9, 2016. AO–15–98, ‘‘NRC Needs to Improve its Cost Estimates by Incorporating More Best Practices’’. GAO–09–3SP, ‘‘GAO Cost Estimating and Assessment Guide’’ ................................................ SRM for SECY–12–0157, ‘‘Consideration of Additional Requirements for Containment Venting Systems for Boiling Water Reactors with Mark I and Mark II Containments,’’ March 12, 2013. Dated at Rockville, Maryland, this 11th day of April 2017. For the Nuclear Regulatory Commission. Anita L. Lund, Director, Division of Policy and Rulemaking, Office of Nuclear Reactor Regulation. [FR Doc. 2017–07623 Filed 4–14–17; 8:45 am] BILLING CODE 7590–01–P NUCLEAR WASTE TECHNICAL REVIEW BOARD Formation of SES Performance Review Board Nuclear Waste Technical Review Board. ACTION: Notice. AGENCY: The Nuclear Waste Technical Review Board is announcing the members Performance Review Board. DATES: Effectively immediately and until April 30, 2018. FOR FURTHER INFORMATION CONTACT: For further information about the formation of the U.S. Nuclear Waste Technical Review Board’s Performance Review Board, please contact Debra L. Dickson at 703.235.4480 or via email at dickson@ nwtrb.gov, or via mail at 2300 Clarendon Blvd., Suite 1300, Arlington, VA 22201 SUPPLEMENTARY INFORMATION: Section 4314(c)(1) through (5) of Title 5 of the United States Code, requires each agency to establish, in accordance with regulations prescribed by the Office of Personnel Management, one or more SES Performance Review Boards. Section 4314(c)(4) of Title 5 requires that notice of appointment of board members be published in the Federal mstockstill on DSK30JT082PROD with NOTICES SUMMARY: VerDate Sep<11>2014 17:14 Apr 14, 2017 Jkt 241001 Register. The following executives have been designated as members of the Performance Review Board for the U.S. Nuclear Waste Technical Review Board: Steven M. Becker, Board Member, U.S. Nuclear Waste Technical Review Board Linda K. Nozick, Board Member, U.S. Nuclear Waste Technical Review Board Paul J. Turinsky, Board Member, U.S. Nuclear Waste Technical Review Board Katherine R. Herrera, Deputy General Manager, Defense Nuclear Facilities Safety Board Timothy J. Dwyer, Member, Technical Staff, Defense Nuclear Facilities Safety Board Richard E. Tontodonato, Deputy Technical Director, Defense Nuclear Facilities Safety Board Authority: 42 U.S.C. 10262. Dated: April 4, 2017. Debra L. Dickson, Director of Administration, U.S. Nuclear Waste Technical Review Board. [FR Doc. 2017–06998 Filed 4–14–17; 8:45 am] BILLING CODE P PENSION BENEFIT GUARANTY CORPORATION Approval of Special Withdrawal Liability Rules: the Service Employees International Union Local 1 Cleveland Pension Plan Pension Benefit Guaranty Corporation. ACTION: Notice of Approval. AGENCY: PO 00000 18165 Frm 00067 Fmt 4703 Sfmt 4703 ML17101A355. ML042820192. ML050190193. ML13274A519. ML14127A458 (Package). ML14280A426 (Package). ML12173A478 (Package). ML13079A055. ML15063A568. ML032230247. ML16133A575. http://www.gao.gov/assets/670/667501.pdf. http://www.gao.gov/new.items/d093sp.pdf. ML13078A017. The Service Employees International Union Local 1 Cleveland Pension Plan requested the Pension Benefit Guaranty Corporation (PBGC) to approve a plan amendment providing for special withdrawal liability rules for employers that maintain the Plan. PBGC published a Notice of Pendency of the Request for Approval of the amendment. In accordance with the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), PBGC is now advising the public that the agency has approved the requested amendment. ADDRESSES: A copy of the plan’s complete request may be requested from the Disclosure Officer, Pension Benefit Guaranty Corporation, 1200 K Street NW., Suite 11101, Washington, DC 20005 (fax 202–326–4042). FOR FURTHER INFORMATION CONTACT: Bruce Perlin, Assistant Chief Counsel (Perlin.Bruce@PBGC.gov), 202–326– 4020, ext. 6818 or Jon Chatalian, Deputy Assistant Chief Counsel (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: SUMMARY: Background The Pension Benefit Guaranty Corporation (PBGC) administers title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Under section 4201 of ERISA, an employer that completely or partially withdraws from a defined benefit multiemployer pension plan becomes E:\FR\FM\17APN1.SGM 17APN1 mstockstill on DSK30JT082PROD with NOTICES 18166 Federal Register / Vol. 82, No. 72 / Monday, April 17, 2017 / Notices liable for a proportional share of the plan’s unfunded vested benefits. The statute specifies that a ‘‘complete withdrawal’’ occurs whenever an employer either permanently (1) ceases to have an obligation to contribute to the plan, or (2) ceases all operations covered under the plan. See ERISA section 4203(a). Under the first test, an employer that remains in business but no longer has an obligation to contribute to the plan will incur withdrawal liability. Under the second test, an employer that closes or sells its operations will also incur withdrawal liability. The ‘‘partial withdrawal’’ provisions of sections 4205 and 4206 impose a lesser measure of liability upon employers who reduce, but do not eliminate, the obligations or operations that generate contributions to the plan. The withdrawal liability provisions of ERISA are a critical factor in maintaining the solvency of these pension plans and reducing claims made on the multiemployer plan insurance fund maintained by PBGC. Without withdrawal liability rules, an employer that participates in an underfunded multiemployer plan would have a powerful economic incentive to reduce expenses by withdrawing from the plan. Congress nevertheless allowed for the possibility that, in certain industries, the fact that particular employers go out of business (or cease operations in a specific geographic region) might not result in permanent damage to the pension plan’s contribution base. In the construction industry, for example, the funding base of a pension plan is the construction projects in the area covered by the collective bargaining agreements under which a pension plan is maintained. Even if the amount of work performed by a particular employer fluctuates markedly in any given year, individual employees will typically continue to work for other contributing employers in the same geographic area. Consequently, the withdrawal of an employer does not remove jobs from or damage the pension plan’s contribution base unless the employer continues to work in the geographic area covered by collective bargaining agreement without contributing to the plan. Although the general rules on complete and partial withdrawal identify events that normally result in a diminution of the plan’s contribution base, Congress recognized that, in certain industries and under certain circumstances, a complete or partial cessation of the obligation to contribute normally does not weaken the plan’s contribution base. This reasoning led Congress to establish special withdrawal VerDate Sep<11>2014 17:14 Apr 14, 2017 Jkt 241001 rules for the construction and entertainment industries. Section 4203(b)(2) of ERISA provides that a complete withdrawal occurs only if an employer ceases to have an obligation to contribute under a plan and the employer either continues to perform previously covered work in the jurisdiction of the collective bargaining agreement or resumes such work within five years without renewing the obligation to contribute. In the case of a plan terminated by mass withdrawal (within the meaning of ERISA section 4041(A)(2)), section 4203(b)(3) provides that the five-year restriction on an employer resuming covered work is reduced to three years. Section 4203(c)(1) of ERISA applies the same special definition of complete withdrawal to the entertainment industry, except that the pertinent jurisdiction is the jurisdiction of the plan rather than the jurisdiction of the collective bargaining agreement. In contrast, the general definition of complete withdrawal in section 4203(a) of ERISA includes the permanent cessation of the obligation to contribute regardless of the continued activities of the withdrawn employer. Congress also established special partial withdrawal liability rules for the construction and entertainment industries. Under section 4208(d)(1) of ERISA, ‘‘[a]n employer to whom section 4203(b) (relating to the building and construction industry) applies is liable for a partial withdrawal only if the employer’s obligation to contribute under the plan is continued for no more than an insubstantial portion of its work in the craft and area jurisdiction of the collective bargaining agreement of the type for which contributions are required.’’ Under section 4208(d)(2) of ERISA, ‘‘[a]n employer to whom section 4203(c) (relating to the entertainment industry) applies shall have no liability for a partial withdrawal except under the conditions and to the extent prescribed by the [PBGC] by regulation.’’ Section 4203(f) of ERISA provides that PBGC may prescribe regulations under which plans that are not in the construction industry may be amended to use special withdrawal liability rules similar to those that apply to construction plans. Under the statute, the regulations shall permit the use of special withdrawal liability rules only in industries that PBGC determines have characteristics that would make use of the special withdrawal liability rules appropriate. ERISA section 4203(f)(2)(A). In addition, each plan application must show that the special rule will not pose a significant risk to PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 the PBGC. ERISA section 4203(f)(2)(B). Section 4208(e)(3) of ERISA provides that a plan may adopt rules for the reduction or elimination of partial withdrawal liability—under regulations prescribed by PBGC—subject to PBGC’s determination that such rules are consistent with the purpose of ERISA. PBGC’s regulation on Extension of Special Withdrawal Liability Rules (29 CFR part 4203) prescribes the procedures a multiemployer plan must follow to request PBGC approval of a plan amendment that establishes special complete or partial withdrawal liability rules. The regulation may be accessed on PBGC’s Web site (http:// www.pbgc.gov). Under 29 CFR 4203.3(a), a complete withdrawal rule must be similar to the statutory provision that applies to construction industry plans under section 4203(b) of ERISA. Any special rule for partial withdrawals must be consistent with the construction industry partial withdrawal provisions. Each request for approval of a plan amendment establishing special withdrawal liability rules must provide PBGC with detailed financial and actuarial data about the plan. In addition, the applicant must provide PBGC with information about the effects of withdrawals on the plan’s contribution base. As a practical matter, the plan must show that the characteristics of employment and labor relations in its industry are sufficiently similar to those in the construction industry that use of the construction rule would be appropriate. Relevant factors include 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. PBGC will approve a special withdrawal liability rule only if a review of the record shows that: (1) The industry has characteristics that would make use of the special construction withdrawal rules appropriate; and (2) The adoption of the special rule will not pose a significant risk to the PBGC. After review of the application and all public comments, PBGC may approve the amendment in the form proposed by the plan, approve the application subject to conditions or revisions, or deny the application. E:\FR\FM\17APN1.SGM 17APN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 72 / Monday, April 17, 2017 / Notices The Request PBGC received a request, dated September 16, 2011, from the Service Employees International Union Local 1 Cleveland Pension Plan (the ‘‘Plan’’), for approval of a plan amendment providing for special withdrawal liability rules. Subsequently, the Plan requested that PBGC suspend review of the amendment. On January 24, 2014, the Plan requested that PBGC again consider the amendment and provided updated actuarial information. PBGC published a Notice of Pendency of the Request for Approval of the amendment on August 19, 2015 (80 FR 50339). PBGC’s summary of the actuarial reports provided by the Plan may be accessed on PBGC’s Web site (https:// www.pbgc.gov/prac/pg/other/guidance/ multiemployer-notices.html). The Plan is a multiemployer pension plan covering the commercial building cleaning and security industries in the greater Cleveland, Ohio area. The Plan represents in its submission that the industry for which the rule is requested—the commercial building cleaning industry—has characteristics similar to those of the construction industry. According to the Plan’s submission, the principal similarity is that when a contributing employer’s contract to clean a building expires, the cleaning work will generally continue to be performed by employees covered by the Plan, irrespective of the employer retained to perform the cleaning services. Under the proposed amendment, a complete withdrawal of an employer whose employees perform substantially all work in the commercial building cleaning industry will occur only when: (a) The employer ceases to have an obligation to contribute under the Plan and (b) the employer continues to perform work in the jurisdiction of the Plan of the type for which contributions were previously required or resumes such work within five years after the date on which the obligation to contribute under the plan ceases and does not renew the obligation at the time of the resumption. Additionally, the proposed amendment provides that a withdrawal from the Plan occurs if an employer sells or otherwise transfers a substantial portion of its business or assets to another individual or entity that performs work in the jurisdiction of the Plan of the type for which contributions are required without having an obligation to make contributions to the Plan. In the case of termination by mass withdrawal (within the meaning of ERISA section 4041A(a)(2)), the proposed amendment provides that section 4203(b)(3), VerDate Sep<11>2014 17:14 Apr 14, 2017 Jkt 241001 permitting a construction employer to resume covered work after three years of withdrawal instead of the standard fiveyear restriction, is not applicable to withdrawing commercial building cleaning industry employers. Therefore, in the event of a mass withdrawal, there is still a five-year restriction on resuming covered work in the jurisdiction of the Plan. The request includes the actuarial data on which the Plan relies to support its contention that the amendment will not pose a significant risk to the insurance system under Title IV of ERISA. The Plan submitted actuarial valuation reports for Plan years 2007– 2014. Although the Plan’s financial condition deteriorated after the 2007– 2008 financial crisis, the Plan immediately took action to increase employer contributions, by diverting contributions allocated to other employee benefit plans.1 In 2011, the Plan’s funding percentage and other tests of financial health placed the Plan in the Green zone (strongest category) and the Plan has been in the Green zone since.2 Although the number of active participants in the Plan dropped 19% between 2007 and 2013 (while retirees decreased 6%), contributions increased 13% over the same time period.3 To date, the Plan’s active participant base remains solid—about 36% of the participant population—and contributions remain steady. Decision on the Proposed Amendment The statute and the implementing regulation state that PBGC must make two factual determinations before it approves a request for an amendment that adopts a special withdrawal liability rule. ERISA section 4203(f); 29 CFR 4203.5(a). First, on the basis of a showing by the plan, PBGC must determine that the amendment will apply to an industry that has characteristics that would make use of 1 Under the Pension Protection Act of 2006 (PPA), the Plan would have certified as in critical status (Red zone) in 2009, but instead elected to freeze its 2008 Green zone status for one year pursuant to the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). 2 Updated actuarial information became available after the Notice of Pendency, and PBGC reviewed 5500s and Actuarial Valuation Reports for Plan years 2015–2016, which confirmed the Plan was still in the Green zone. 3 During Plan years 2014–2016, active participants decreased by another 5% (while retirees decreased 6%). The number of separated vested participants increased in recent years, but the average monthly benefit of these participants is less than the average monthly benefit of the current retiree population. Additionally, the updated actuarial information demonstrates a commitment to sustained contributions, as evidenced by a 5% increase in the average employer contribution rate between 2013 and 2015. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 18167 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. After review of the record submitted by the Plan, and having received no public comments, PBGC has entered the following determinations. 1. What is the nature of the industry? 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 Plan’s contribution base resembles that found in the construction industry. This threshold question requires consideration of the effect of employer withdrawals on the Plan’s contribution base. As the Plan has asserted, covered work must be performed at a commercial building located in the Cleveland, Ohio region. The work is local in nature and generally continues to be covered by the Plan regardless of the employer retained to do those services. An employer ceases to have an obligation to contribute when it loses a cleaning or security contract because the building owner outsources the work or retains a different service provider, or when the employer closes its business due to bankruptcy, retirement, or business relocation. Over the past 10 years, cessation of contributions by any individual employer has not had an adverse impact on the Plan’s contribution base. Most of the employers that have ceased to contribute have been replaced by another employer who begins contributions for the same employees at the same location for the same work. The Plan presented historical data supporting the notion that building contract employer withdrawals have not negatively affected the Plan’s contribution base. 2. What is the exposure and risk of loss to PBGC and participants? Exposure. Although the Plan’s financial condition deteriorated as a result of the 2007–2008 financial crisis, the Plan sponsor took assertive actions to help the Plan recover, significantly increasing contributions in Plan years 2010 and 2011. As a result, in 2011 the Plan’s actuary determined that the Plan’s financial health placed it in the Green zone and the Plan continues to be in the Green zone to date. Active participants in the Plan decreased by 19% from 2007 to 2013 (and retirees decreased by 6%), but contributions increased by 13% over the same time E:\FR\FM\17APN1.SGM 17APN1 18168 Federal Register / Vol. 82, No. 72 / Monday, April 17, 2017 / Notices period. Thus, the parties have worked to preserve an adequate cushion against market downturns. Risk of loss. The record shows that the Plan presents a low risk of loss to PBGC’s multiemployer insurance program. 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 commercial buildings in the greater Cleveland area. Plan representatives presented data demonstrating that building cleaning contracts for covered employment under the collective bargaining agreement have changed hands approximately 20– 25 times during the past 18 years, and the rate at which a new signatory employer has assumed a prior signatory employer’s building contract and has hired the prior employer’s employees to clean the same building is 90–92%. Accordingly, the data substantiates the Plan’s assertion that the 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 number of buildings covered does not decline. Conclusion Based on the Plan’s submissions and the representations and statements made in connection with the request for approval, PBGC has determined that the plan amendment adopting the 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 providing special withdrawal liability rules, as set forth herein. Should the Plan wish to amend these rules at any time, PBGC approval of the amendment will be required. W. Thomas Reeder, Director, Pension Benefit Guaranty Corporation. [FR Doc. 2017–07719 Filed 4–14–17; 8:45 am] BILLING CODE 7709–01–P mstockstill on DSK30JT082PROD with NOTICES POSTAL REGULATORY COMMISSION [Docket No. CP2017–162] New Postal Products Postal Regulatory Commission. Notice. AGENCY: ACTION: The Commission is noticing a recent Postal Service filing for the SUMMARY: VerDate Sep<11>2014 17:14 Apr 14, 2017 Jkt 241001 Commission’s consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps. DATES: Comments are due: April 19, 2017. Submit comments electronically via the Commission’s Filing Online system at http:// www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. ADDRESSES: FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction II. Docketed Proceeding(s) I. Introduction The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list. Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request’s acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request. The public portions of the Postal Service’s request(s) can be accessed via the Commission’s Web site (http:// www.prc.gov). Non-public portions of the Postal Service’s request(s), if any, can be accessed through compliance with the requirements of 39 CFR 3007.40. The Commission invites comments on whether the Postal Service’s request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 PO 00000 Frm 00070 Fmt 4703 Sfmt 9990 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II. II. Docketed Proceeding(s) 1. Docket No(s).: CP2017–162; Filing Title: Notice of United States Postal Service of Filing a Functionally Equivalent Global Expedited Package Services 7 Negotiated Service Agreement and Application for NonPublic Treatment of Materials Filed Under Seal; Filing Acceptance Date: April 11, 2017; Filing Authority: 39 CFR 3015.5; Public Representative: Curtis E. Kidd; Comments Due: April 19, 2017. This notice will be published in the Federal Register. Stacy L. Ruble, Secretary. [FR Doc. 2017–07706 Filed 4–14–17; 8:45 am] BILLING CODE 7710–FW–P POSTAL SERVICE Product Change—Priority Mail Negotiated Service Agreement AGENCY: ACTION: Postal ServiceTM. Notice. The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. SUMMARY: DATES: Effective date: April 17, 2017. FOR FURTHER INFORMATION CONTACT: Elizabeth A. Reed, 202–268–3179. The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on April 10, 2017, it filed with the Postal Regulatory Commission a Request of the United States Postal Service to Add Priority Mail Contract 306 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2017–111, CP2017–159. SUPPLEMENTARY INFORMATION: Stanley F. Mires, Attorney, Federal Compliance. [FR Doc. 2017–07630 Filed 4–14–17; 8:45 am] BILLING CODE 7710–12–P E:\FR\FM\17APN1.SGM 17APN1

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[Federal Register Volume 82, Number 72 (Monday, April 17, 2017)]
[Notices]
[Pages 18165-18168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07719]


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PENSION BENEFIT GUARANTY CORPORATION


Approval of Special Withdrawal Liability Rules: the Service 
Employees International Union Local 1 Cleveland Pension Plan

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of Approval.

-----------------------------------------------------------------------

SUMMARY: The Service Employees International Union Local 1 Cleveland 
Pension Plan requested the Pension Benefit Guaranty Corporation (PBGC) 
to approve a plan amendment providing for special withdrawal liability 
rules for employers that maintain the Plan. PBGC published a Notice of 
Pendency of the Request for Approval of the amendment. In accordance 
with the provisions of the Employee Retirement Income Security Act of 
1974, as amended (ERISA), PBGC is now advising the public that the 
agency has approved the requested amendment.

ADDRESSES: A copy of the plan's complete request may be requested from 
the Disclosure Officer, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Suite 11101, Washington, DC 20005 (fax 202-326-4042).

FOR FURTHER INFORMATION CONTACT: Bruce Perlin, Assistant Chief Counsel 
(Perlin.Bruce@PBGC.gov), 202-326-4020, ext. 6818 or Jon Chatalian, 
Deputy Assistant Chief Counsel (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

    The Pension Benefit Guaranty Corporation (PBGC) administers title 
IV of the Employee Retirement Income Security Act of 1974 (ERISA).
    Under section 4201 of ERISA, an employer that completely or 
partially withdraws from a defined benefit multiemployer pension plan 
becomes

[[Page 18166]]

liable for a proportional share of the plan's unfunded vested benefits. 
The statute specifies that a ``complete withdrawal'' occurs whenever an 
employer either permanently (1) ceases to have an obligation to 
contribute to the plan, or (2) ceases all operations covered under the 
plan. See ERISA section 4203(a). Under the first test, an employer that 
remains in business but no longer has an obligation to contribute to 
the plan will incur withdrawal liability. Under the second test, an 
employer that closes or sells its operations will also incur withdrawal 
liability. The ``partial withdrawal'' provisions of sections 4205 and 
4206 impose a lesser measure of liability upon employers who reduce, 
but do not eliminate, the obligations or operations that generate 
contributions to the plan. The withdrawal liability provisions of ERISA 
are a critical factor in maintaining the solvency of these pension 
plans and reducing claims made on the multiemployer plan insurance fund 
maintained by PBGC. Without withdrawal liability rules, an employer 
that participates in an underfunded multiemployer plan would have a 
powerful economic incentive to reduce expenses by withdrawing from the 
plan.
    Congress nevertheless allowed for the possibility that, in certain 
industries, the fact that particular employers go out of business (or 
cease operations in a specific geographic region) might not result in 
permanent damage to the pension plan's contribution base. In the 
construction industry, for example, the funding base of a pension plan 
is the construction projects in the area covered by the collective 
bargaining agreements under which a pension plan is maintained. Even if 
the amount of work performed by a particular employer fluctuates 
markedly in any given year, individual employees will typically 
continue to work for other contributing employers in the same 
geographic area. Consequently, the withdrawal of an employer does not 
remove jobs from or damage the pension plan's contribution base unless 
the employer continues to work in the geographic area covered by 
collective bargaining agreement without contributing to the plan.
    Although the general rules on complete and partial withdrawal 
identify events that normally result in a diminution of the plan's 
contribution base, Congress recognized that, in certain industries and 
under certain circumstances, a complete or partial cessation of the 
obligation to contribute normally does not weaken the plan's 
contribution base. This reasoning led Congress to establish special 
withdrawal rules for the construction and entertainment industries.
    Section 4203(b)(2) of ERISA provides that a complete withdrawal 
occurs only if an employer ceases to have an obligation to contribute 
under a plan and the employer either continues to perform previously 
covered work in the jurisdiction of the collective bargaining agreement 
or resumes such work within five years without renewing the obligation 
to contribute. In the case of a plan terminated by mass withdrawal 
(within the meaning of ERISA section 4041(A)(2)), section 4203(b)(3) 
provides that the five-year restriction on an employer resuming covered 
work is reduced to three years. Section 4203(c)(1) of ERISA applies the 
same special definition of complete withdrawal to the entertainment 
industry, except that the pertinent jurisdiction is the jurisdiction of 
the plan rather than the jurisdiction of the collective bargaining 
agreement. In contrast, the general definition of complete withdrawal 
in section 4203(a) of ERISA includes the permanent cessation of the 
obligation to contribute regardless of the continued activities of the 
withdrawn employer.
    Congress also established special partial withdrawal liability 
rules for the construction and entertainment industries. Under section 
4208(d)(1) of ERISA, ``[a]n employer to whom section 4203(b) (relating 
to the building and construction industry) applies is liable for a 
partial withdrawal only if the employer's obligation to contribute 
under the plan is continued for no more than an insubstantial portion 
of its work in the craft and area jurisdiction of the collective 
bargaining agreement of the type for which contributions are 
required.'' Under section 4208(d)(2) of ERISA, ``[a]n employer to whom 
section 4203(c) (relating to the entertainment industry) applies shall 
have no liability for a partial withdrawal except under the conditions 
and to the extent prescribed by the [PBGC] by regulation.''
    Section 4203(f) of ERISA provides that PBGC may prescribe 
regulations under which plans that are not in the construction industry 
may be amended to use special withdrawal liability rules similar to 
those that apply to construction plans. Under the statute, the 
regulations shall permit the use of special withdrawal liability rules 
only in industries that PBGC determines have characteristics that would 
make use of the special withdrawal liability rules appropriate. ERISA 
section 4203(f)(2)(A). In addition, each plan application must show 
that the special rule will not pose a significant risk to the PBGC. 
ERISA section 4203(f)(2)(B). Section 4208(e)(3) of ERISA provides that 
a plan may adopt rules for the reduction or elimination of partial 
withdrawal liability--under regulations prescribed by PBGC--subject to 
PBGC's determination that such rules are consistent with the purpose of 
ERISA.
    PBGC's regulation on Extension of Special Withdrawal Liability 
Rules (29 CFR part 4203) prescribes the procedures a multiemployer plan 
must follow to request PBGC approval of a plan amendment that 
establishes special complete or partial withdrawal liability rules. The 
regulation may be accessed on PBGC's Web site (http://www.pbgc.gov). 
Under 29 CFR 4203.3(a), a complete withdrawal rule must be similar to 
the statutory provision that applies to construction industry plans 
under section 4203(b) of ERISA. Any special rule for partial 
withdrawals must be consistent with the construction industry partial 
withdrawal provisions.
    Each request for approval of a plan amendment establishing special 
withdrawal liability rules must provide PBGC with detailed financial 
and actuarial data about the plan. In addition, the applicant must 
provide PBGC with information about the effects of withdrawals on the 
plan's contribution base. As a practical matter, the plan must show 
that the characteristics of employment and labor relations in its 
industry are sufficiently similar to those in the construction industry 
that use of the construction rule would be appropriate. Relevant 
factors include 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. PBGC will 
approve a special withdrawal liability rule only if a review of the 
record shows that:
    (1) The industry has characteristics that would make use of the 
special construction withdrawal rules appropriate; and
    (2) The adoption of the special rule will not pose a significant 
risk to the PBGC.
    After review of the application and all public comments, PBGC may 
approve the amendment in the form proposed by the plan, approve the 
application subject to conditions or revisions, or deny the 
application.

[[Page 18167]]

The Request

    PBGC received a request, dated September 16, 2011, from the Service 
Employees International Union Local 1 Cleveland Pension Plan (the 
``Plan''), for approval of a plan amendment providing for special 
withdrawal liability rules. Subsequently, the Plan requested that PBGC 
suspend review of the amendment. On January 24, 2014, the Plan 
requested that PBGC again consider the amendment and provided updated 
actuarial information. PBGC published a Notice of Pendency of the 
Request for Approval of the amendment on August 19, 2015 (80 FR 50339). 
PBGC's summary of the actuarial reports provided by the Plan may be 
accessed on PBGC's Web site (https://www.pbgc.gov/prac/pg/other/guidance/multiemployer-notices.html).
    The Plan is a multiemployer pension plan covering the commercial 
building cleaning and security industries in the greater Cleveland, 
Ohio area. The Plan represents in its submission that the industry for 
which the rule is requested--the commercial building cleaning 
industry--has characteristics similar to those of the construction 
industry. According to the Plan's submission, the principal similarity 
is that when a contributing employer's contract to clean a building 
expires, the cleaning work will generally continue to be performed by 
employees covered by the Plan, irrespective of the employer retained to 
perform the cleaning services. Under the proposed amendment, a complete 
withdrawal of an employer whose employees perform substantially all 
work in the commercial building cleaning industry will occur only when: 
(a) The employer ceases to have an obligation to contribute under the 
Plan and (b) the employer continues to perform work in the jurisdiction 
of the Plan of the type for which contributions were previously 
required or resumes such work within five years after the date on which 
the obligation to contribute under the plan ceases and does not renew 
the obligation at the time of the resumption. Additionally, the 
proposed amendment provides that a withdrawal from the Plan occurs if 
an employer sells or otherwise transfers a substantial portion of its 
business or assets to another individual or entity that performs work 
in the jurisdiction of the Plan of the type for which contributions are 
required without having an obligation to make contributions to the 
Plan. In the case of termination by mass withdrawal (within the meaning 
of ERISA section 4041A(a)(2)), the proposed amendment provides that 
section 4203(b)(3), permitting a construction employer to resume 
covered work after three years of withdrawal instead of the standard 
five-year restriction, is not applicable to withdrawing commercial 
building cleaning industry employers. Therefore, in the event of a mass 
withdrawal, there is still a five-year restriction on resuming covered 
work in the jurisdiction of the Plan.
    The request includes the actuarial data on which the Plan relies to 
support its contention that the amendment will not pose a significant 
risk to the insurance system under Title IV of ERISA. The Plan 
submitted actuarial valuation reports for Plan years 2007-2014. 
Although the Plan's financial condition deteriorated after the 2007-
2008 financial crisis, the Plan immediately took action to increase 
employer contributions, by diverting contributions allocated to other 
employee benefit plans.\1\ In 2011, the Plan's funding percentage and 
other tests of financial health placed the Plan in the Green zone 
(strongest category) and the Plan has been in the Green zone since.\2\ 
Although the number of active participants in the Plan dropped 19% 
between 2007 and 2013 (while retirees decreased 6%), contributions 
increased 13% over the same time period.\3\ To date, the Plan's active 
participant base remains solid--about 36% of the participant 
population--and contributions remain steady.
---------------------------------------------------------------------------

    \1\ Under the Pension Protection Act of 2006 (PPA), the Plan 
would have certified as in critical status (Red zone) in 2009, but 
instead elected to freeze its 2008 Green zone status for one year 
pursuant to the Worker, Retiree, and Employer Recovery Act of 2008 
(WRERA).
    \2\ Updated actuarial information became available after the 
Notice of Pendency, and PBGC reviewed 5500s and Actuarial Valuation 
Reports for Plan years 2015-2016, which confirmed the Plan was still 
in the Green zone.
    \3\ During Plan years 2014-2016, active participants decreased 
by another 5% (while retirees decreased 6%). The number of separated 
vested participants increased in recent years, but the average 
monthly benefit of these participants is less than the average 
monthly benefit of the current retiree population. Additionally, the 
updated actuarial information demonstrates a commitment to sustained 
contributions, as evidenced by a 5% increase in the average employer 
contribution rate between 2013 and 2015.
---------------------------------------------------------------------------

Decision on the Proposed Amendment

    The statute and the implementing regulation state that PBGC must 
make two factual determinations before it approves a request for an 
amendment that adopts a special withdrawal liability rule. ERISA 
section 4203(f); 29 CFR 4203.5(a). First, on the basis of a 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. After review of the record 
submitted by the Plan, and having received no public comments, PBGC has 
entered the following determinations.

1. What is the nature of the industry?

    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 Plan's contribution base 
resembles that found in the construction industry. This threshold 
question requires consideration of the effect of employer withdrawals 
on the Plan's contribution base.
    As the Plan has asserted, covered work must be performed at a 
commercial building located in the Cleveland, Ohio region. The work is 
local in nature and generally continues to be covered by the Plan 
regardless of the employer retained to do those services. An employer 
ceases to have an obligation to contribute when it loses a cleaning or 
security contract because the building owner outsources the work or 
retains a different service provider, or when the employer closes its 
business due to bankruptcy, retirement, or business relocation. Over 
the past 10 years, cessation of contributions by any individual 
employer has not had an adverse impact on the Plan's contribution base. 
Most of the employers that have ceased to contribute have been replaced 
by another employer who begins contributions for the same employees at 
the same location for the same work. The Plan presented historical data 
supporting the notion that building contract employer withdrawals have 
not negatively affected the Plan's contribution base.

2. What is the exposure and risk of loss to PBGC and participants?

    Exposure. Although the Plan's financial condition deteriorated as a 
result of the 2007-2008 financial crisis, the Plan sponsor took 
assertive actions to help the Plan recover, significantly increasing 
contributions in Plan years 2010 and 2011. As a result, in 2011 the 
Plan's actuary determined that the Plan's financial health placed it in 
the Green zone and the Plan continues to be in the Green zone to date. 
Active participants in the Plan decreased by 19% from 2007 to 2013 (and 
retirees decreased by 6%), but contributions increased by 13% over the 
same time

[[Page 18168]]

period. Thus, the parties have worked to preserve an adequate cushion 
against market downturns.
    Risk of loss. The record shows that the Plan presents a low risk of 
loss to PBGC's multiemployer insurance program. 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 commercial buildings in the greater 
Cleveland area. Plan representatives presented data demonstrating that 
building cleaning contracts for covered employment under the collective 
bargaining agreement have changed hands approximately 20-25 times 
during the past 18 years, and the rate at which a new signatory 
employer has assumed a prior signatory employer's building contract and 
has hired the prior employer's employees to clean the same building is 
90-92%. Accordingly, the data substantiates the Plan's assertion that 
the 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 number of buildings covered does not decline.

Conclusion

    Based on the Plan's submissions and the representations and 
statements made in connection with the request for approval, PBGC has 
determined that the plan amendment adopting the 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 providing special withdrawal liability 
rules, as set forth herein. Should the Plan wish to amend these rules 
at any time, PBGC approval of the amendment will be required.

W. Thomas Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2017-07719 Filed 4-14-17; 8:45 am]
 BILLING CODE 7709-01-P