Jump to content

Posting a Bond 4204


ERISA25

Recommended Posts

Section 4204 says that the buyer must post a bond for a 5-year period beginning in the first plan year after the sale year. Does that mean for example that if a sale occurs in July, the bond must be in place by Jan 1 for a calendar year plan? If the sale occurred on December 25, is there a delay allowed for the purchaser to purchase the bond, etc.? Is there any guidance on this point? e.g. PBGC Opinion Letters?

Link to comment
Share on other sites

Section 4204 says that the buyer must post a bond for a 5-year period beginning in the first plan year after the sale year. Does that mean for example that if a sale occurs in July, the bond must be in place by Jan 1 for a calendar year plan? If the sale occurred on December 25, is there a delay allowed for the purchaser to purchase the bond, etc.? Is there any guidance on this point? e.g. PBGC Opinion Letters?

I am also interested in knowing the timing requirements for the seller's bond under 4204; does the bond have to be posted by the closing date of the sale.

Link to comment
Share on other sites

Section 4204 says that the buyer must post a bond for a 5-year period beginning in the first plan year after the sale year. Does that mean for example that if a sale occurs in July, the bond must be in place by Jan 1 for a calendar year plan? If the sale occurred on December 25, is there a delay allowed for the purchaser to purchase the bond, etc.? Is there any guidance on this point? e.g. PBGC Opinion Letters?

I am also interested in knowing the timing requirements for the seller's bond under 4204; does the bond have to be posted by the closing date of the sale.

There is an arbitration decision that addressed this issue: Chemed Corp and Central States Fund 11 EBC 2681. In that decsion the arbitrator stated in his opinon:

"Purchaser did not timely obtain withdrawal liability bond as required to qualify for sale of assets exemption from withdrawal liability, where purchaser purported to make bond acquired nine months after asset sale retroactive to date ofsale, since, although bonding requirement need not be embodied in sale contract, purchaser must provide bond as offirst day ofplan year beginning after sale ofassets, in this case Jan. 1, 1987, following Dec. 31, 1986 sale, and since permitting lengthy lapse would leave pension fund without full protection to which it is legally entitled; no more than 30 days' grace is reasonable or required to afford purchaser flexibility in obtaining bond where sale occurs on last day ofplan year, by analogy to PBGC rule permitting limited bonding lapse where variance request is denied, as longer period would leave parties who did not seek timely bond waiver in better position than those who did so."

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...