Approval of Special Withdrawal Liability Rules: Alaska Electrical Pension Plan of the Alaska Electrical Pension Fund, 48875-48877 [2018-21040]

Agencies

• Pension Benefit Guaranty Corporation

[Federal Register Volume 83, Number 188 (Thursday, September 27, 2018)]
[Notices]
[Pages 48875-48877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21040]


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PENSION BENEFIT GUARANTY CORPORATION


Approval of Special Withdrawal Liability Rules: Alaska Electrical 
Pension Plan of the Alaska Electrical Pension Fund

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of approval.

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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) received a 
request from the Alaska Electrical Pension Plan of the Alaska 
Electrical Pension Fund for approval of a plan amendment providing for 
special withdrawal liability rules. PBGC published a Notice of Pendency 
of the Request for Approval of the amendment. PBGC is now advising the 
public that the agency has approved the requested amendment.

FOR FURTHER INFORMATION CONTACT: Jon Chatalian, ext. 6757, Acting 
Assistant General Counsel ([email protected]), 202-326-4020, ext. 
6757, Office of the General Counsel, Suite 340, 1200 K Street NW, 
Washington, DC 20005-4026; (TTY 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 4203(a) of the Employee Retirement Income Security Act of 
1974, as amended by the Multiemployer Pension Plan Amendments Act of 
1980 (ERISA), provides that a complete withdrawal from a multiemployer 
plan generally occurs when an employer permanently ceases to have an 
obligation to contribute under the plan or permanently ceases all 
covered operations under the plan. Under section 4205 of ERISA, a 
partial withdrawal generally occurs when an employer: (1) Reduces its 
contribution base units by seventy percent in each of three consecutive 
years; or (2) permanently ceases to have an obligation under one or 
more but fewer than all collective bargaining agreements under which 
the employer has been obligated to contribute under the plan, while 
continuing to perform work in the jurisdiction of the collective 
bargaining agreement of the type for which contributions were 
previously required or transfers such work to another location or to an 
entity or entities owned or controlled by the employer; or (3) 
permanently ceases to have an obligation to contribute under the plan 
for work performed at one or more but fewer than all of its facilities, 
while continuing to perform work at the facility of the type for which 
the obligation to contribute ceased.
    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. For that reason, Congress established special 
withdrawal rules for the construction and entertainment industries.
    For construction industry plans and employers, 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 5 years without renewing the obligation to contribute at 
the time of resumption. In the case of a plan terminated by mass 
withdrawal (within the meaning of section 4041(A)(2) of ERISA), section 
4203(b)(3) provides that the 5-year restriction on an employer's 
resuming covered work is reduced to 3 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)(1) of ERISA provides that PBGC may prescribe 
regulations under which plans in other industries may be amended to 
provide for special withdrawal liability rules similar to the rules 
prescribed in section 4203(b) and (c) of ERISA. 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 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 plans may be amended to 
adopt special partial withdrawal liability rules upon a finding by PBGC 
that the adoption of such rules is consistent with the purposes of 
Title IV of ERISA.
    PBGC's regulations on Extension of Special Withdrawal Liability 
Rules (29 CFR part 4203) prescribe procedures for a multiemployer plan 
to ask PBGC to approve a plan amendment that establishes special 
complete or partial withdrawal liability rules. Section 4203.5(b) of 
the regulation requires PBGC to publish a notice of the pendency of a 
request for approval of special withdrawal liability rules in the 
Federal Register, and to provide interested parties with an opportunity 
to comment on the request.

The Request

    PBGC received a request from the Alaska Electrical Pension Plan of 
the Alaska Electrical Pension Fund (the ``Plan''), for approval of a 
plan amendment providing for special withdrawal liability rules. The 
Plan subsequently provided supplemental information in response to a 
request from PBGC. PBGC published a Notice of Pendency of the Request 
for Approval of the amendment on June 5, 2018. PBGC's summary of the 
actuarial reports provided by the Plan may be accessed on PBGC's 
website (https://www.pbgc.gov/prac/pg/other/guidance/multiemployer-notices.html). PBGC did not receive any comments from interested 
parties.
    In summary, the Plan is a multiemployer pension plan maintained

[[Page 48876]]

pursuant to a collective bargaining agreement between the Alaska 
Chapter National Electrical Contractors and the I.B.E.W. 1547 
(``Union''), collective bargaining agreements between individual 
employers and the Union, and ``special agreements'' between various 
employers and the Board to provide for participation by certain non-
bargained employees. The Plan covers unionized employees who 
predominantly work in the electrical industry in Alaska. Approximately 
one-third of the participants are employed in the building and 
construction industry and the remaining two-thirds are employed in the 
utilities and telecommunications industry.
    The Plan's proposed amendment would be effective for withdrawals 
occurring on or after January 1, 2017, and would create special 
withdrawal liability rules for employers contributing to the Plan whose 
employees work under a contract or subcontract with federal government 
agencies governed by the Service Contract Act (``SCA''), 41 U.S.C. 351 
et seq.; provided that substantially all of the employees for whom the 
employer is required to make a contribution work under a service 
contract (``SCA Employers''). The Plan's submission represents that the 
industry for which the rule is requested has characteristics similar to 
those of the construction industry. According to the Plan, the 
principal similarity is that when a contributing SCA Employer loses a 
contract, the applicable federal government agency typically contracts 
with a new SCA Employer to contribute at the same or substantially the 
same rate, because the SCA provides that employees must not be paid 
less than the minimum monetary wages and fringe benefits found 
prevailing in a particular locality in accordance with the applicable 
collective bargaining agreement.
    Under the following circumstances relating to SCA Employers, the 
Plan's proposed amendment defines a complete withdrawal as follows:
    (1) If an SCA Employer ceases to have an obligation to contribute 
to the Plan because it loses all its Service Contracts and the 
successor SCA Employer has an obligation to contribute to the Plan for 
work performed under the Service Contract at the same or a higher 
contribution rate and for at least 85% as many contribution base units 
as such SCA Employer had during the plan year ending before such SCA 
Employer lost the contract, a complete withdrawal occurs only if the 
SCA Employer:
    (A) Continues to perform work in the jurisdiction of the collective 
bargaining agreement of the type for which contributions were 
previously required; or
    (B) Within 5 years after the date on which the SCA Employer loses 
the Service Contract(s),
    (i) Such SCA Employer resumes such work and does not renew the 
obligation at the time of resumption; or
    (ii) The federal government decides to close the facility, have the 
work performed by government employees, or transfer the work covered by 
the Service Contract to another location that is not covered by a 
collective bargaining unit; or
    (iii) The successor SCA Employer ceases contributions to the Plan 
for work performed pursuant to the Service Contract.
    Under the following circumstances relating to SCA Employers, the 
Plan's proposed amendment defines a partial withdrawal as follows:
    (1) If an SCA Employer loses a contract to a successor SCA 
Employer, and if the successor has an obligation to contribute to the 
Plan for work performed under the Service Contract at the same or a 
higher contribution rate and for at least 85% as many contribution base 
units as such SCA Employer had during the plan year ending before such 
SCA Employer lost the contract, a partial withdrawal occurs only if the 
SCA Employer has an obligation to contribute for no more than an 
insubstantial portion of its work in the jurisdiction of a collective 
bargaining agreement for which contributions are or were required to 
the Plan, and either,
    (A) The SCA Employer continues to perform work in the jurisdiction 
of a collective bargaining agreement of the type for which 
contributions were previously required; or
    (B) Within 5 years after the date on which the SCA Employer loses 
the Service Contract,
    (i) The federal government decides to close the facility, have the 
work performed by government employees, or transfer the work covered by 
the service contract to another location that is not covered by a 
collective bargaining unit; or
    (ii) The successor SCA Employer ceases contributions to the Plan 
for work performed under the Service Contract.
    In the case of termination by mass withdrawal (within the meaning 
of section 4041A(a)(2) of ERISA), the proposed amendment provides that 
section 4203(b)(3) of ERISA, the provision that allows a construction 
employer to resume covered work after 3 years of withdrawal, rather 
than the standard 5-year restriction, is not applicable. Therefore, in 
the event of a mass withdrawal, there is still a 5-year restriction on 
resuming covered work in the jurisdiction of the Plan. The Plan's 
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.

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, based on 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 made 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 
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 SCA Employer withdrawals on the 
Plan's contribution base. Similar to construction industry employers, 
when an SCA Employer loses its contract, the applicable federal 
government agency contracts with a new SCA Employer to contribute at 
the same or substantially the same rate. This is because the SCA 
provides that employees must not be paid less than the wages and fringe 
benefits set by the collective bargaining agreement. The Plan presented 
historical data that demonstrates over the past 15 years, cessation of 
contributions by any individual SCA employer has not had an adverse 
impact on the Plan's contribution base. Most SCA employers that have 
ceased to contribute have been replaced by another employer who begins 
contributing for the same work. Therefore, PBGC has concluded that the 
amendment will apply to an industry that has characteristics that would 
make the use of special withdrawal liability rules appropriate.

[[Page 48877]]

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

    Exposure. The Plan is in a strong funded position. For each Plan 
year since the adoption of PPA, the Plan's actuary certified that it 
was not endangered, critical, or critical and declining status, and as 
of January 1, 2017, the Plan's funded percentage was 94.4%. The Plan is 
a Green zone plan with steady contributions and a solid base of active 
participants.
    Risk of loss. The record shows that the proposed amendment presents 
a low risk of loss to PBGC's multiemployer insurance program. SCA 
employers constitute a small part of the total number of employers 
obligated to contribute to the Plan. Eight of the Plan's approximately 
130 contributing employers are SCA employers and 3% of the Plan's 
active participants are employed by SCA Employers. In addition, the 
industry covered by the amendment has unique characteristics that 
suggest the SCA Employers' contribution base is likely to remain 
stable, and the historical data provided by the Plan demonstrates that 
if the proposed amendment had always been in effect, the Plan's 
withdrawal liability payments would have been reduced by only .03% of 
the Plan's $1.8 billion assets. Accordingly, the data substantiates the 
Plan's assertions that the SCA Employer contribution base is secure and 
the amendment will not pose a significant risk to the insurance system.

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.

    Issued in Washington, DC.
William Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2018-21040 Filed 9-26-18; 8:45 am]
 BILLING CODE 7709-02-P