Is it an Asset Sale or a Stock Sale for Title IV Purposes - You Make t

[Guest ERISAGuy]

A client is selling the stock of its wholly owned subsidiary to an unrelated buyer in an arms length transaction. They are both electing to make a 338(h) election under the IRC to deem the sale to be an asset sale for tax purposes. The wholly owned subsidiary contributes to a multi-employer pension plan. Will this transaction be treated as a stock sale or an asset sale for purposes of determining whether withdrawal liability is triggered as a result of the sale? Has any legal guidance been issued on this issue?

[QDROphile]

My uninformed vote is for stock sale. Seems to me that the fundamental issue is successor liability, which is a state law matter, not a tax code matter. Who has the obligation to make contributions seems more important than the tax bill.

If we make the call, do you still get paid?

[Kirk Maldonado]

QDROPhile:

Wouldn't ERISA preempt state law?

[Guest ERISAGuy]

I would think that the PBGC would clearly want to classify this transaction as an Asset Sale because of the additional protections to the Plan with the bonding requirement, etc. But, ERISA does not address this sort of sale - so I am not sure that ERISA would preempt state law because there is nothing in ERISA (at least which I can find) which can preempt the state law. Any other ideas or suggestions of where to look? Thank you. Any help will be greatly appreciated.

[Kirk Maldonado]

ERISAGuy:

Look at ERISA Section 514.

[Guest ERISAGuy]

Kirk:

That wasn't my point totally - and of course I do agree with you - I understand that ERISA will preempt state law - but are you saying that basically we are subject to the PBGC's (or the DOL's) interpretation (whatever it may be) even if there is a lack of authority out there? Which way would you come out on the question?

[Kirk Maldonado]

I asked that same question to the IRS a number of years ago in the context of a Section 401(k) plan. I believe that they said it should be treated as a sale of stock, but my memory is very, very hazy on this point.