4204 Asset Sale and avoiding partial withdrawal

[Guest Smash]

Hopefully, I am hitting the points I need to here -

Company A (Seller) has 4 (1-4) units participating in one pension plan, each through a separate CBA with a separate unit, each unit performing a slightly different service.

Company B (Buyer) wants to, wants to purchase unit 1's through an asset sale. The sale of unit 1 will not trigger a partial withdrawal for the Seller under the 70% decline rules. B is deciding whether or not to continue participation in the pension fund, but probably doesn't want to be in the pension plan for the long term.

If there is no 4204 asset sale, I am wondering if A will have a partial withdrawal triggered under the pension plan under the partial cessation rules. 4204 offers protection from a complete or partial withdrawal. Is the only contemplated (and maybe necessary) partial withdrawal protection under 4204 a 70% decline? Or does the 4204 protection somehow extend to the cessation rules? The Seller will not continue to perform the type of work covered under the CBA 1 unit and it will not transfer work performed at the facility covered by 1 to another facility in the Seller's control group. (but as an alternative, I guess it could have a non union operation in the jurisdiction of the CBA, and this is where the 4204 protection might come into play).

Under the cessation rules, the law says the employer ceases to have an obligation to contribute, but the employer continues to perform work in the jurisdiction of the CBA, or closes the facility and transfers work to another location. Does the cessation test look at whether the Buyer continues work the CBA covered work in the jurisdiction, or only the seller?

A and B are in separate control groups.

If the answer is that there is assessment due to cessation, is there any reason why B would agree to a 4204 asset sale?

Thanks.

[Bill Ecklund]

Under ERISA 4205(b)(2)(A) one only looks to whether or not the seller continues operations that previously required contributions to the plan. Assuming that A and B are separate unrelated entities, not part of any common control group, the sale of assets to B should not trigger a partial withdrawal. But keep in mind that for purposes of the 70% contribution decline test, CBU’s for unit 1 will continue to be counted as part of A’s contribution history. This means that if Units 2, 3, or 4 are sold off, there is a greater likelihood that the 70% threshold test would be met. By going through a 4204 sale, the contribution base units attributable to unit 1 are removed from the seller’s history. If B does not intend to contribute to the pension plan for any length of time, or not at all, it should not agree to a 4204 sale. If §4204 is utilized, B’s withdrawal liability on the date of it's purchase will include the last 5 years worth of contributions by the seller.