4204 Sale of Assets Exception to Lease?

[Benefits to all]

Is there any chance or authority that allows the sale of assets exception to the withdrawal liability to be extended to a bona fide good faith lease? The case would be where the lessee is analogous to a buyer in the sale of assets? My inclination is no and I am jumping into some research, but I wanted to see if anyone had any thoughts on how to avoid withdrawal liability when the lessee is assuming all the contracts of the lessor.

[jpod]

Maybe this is analogous. I had a situation where our client was being hired to run a City-owned facility, replacing the current contractor. Our client would hire the union employees and become a party to the CBA requiring multiemployer pension plan contributions. I felt that there was no authority for triggering 4204. That is not to say that the three parties in your situation (the current lessee, the new lessee and the Plan) couldn't agree to an arrangement that mimics 4204, but I doubt the statutory provision would apply.

[Benefits to all]

Thanks for your thoughts. But they cannot agree to limit the withdrawal liability payment that would become due upon the withdrawal, right? The agreement that you reference is taking place for the contracts and assuming the duty to contribute, but I don't think that the lessor can escape the withdrawal liability.

[jpod]

I think if the trustees believe it is consistent with their fiduciary responsibility to the plan they can agree to waive the current w/l if the other parties agree to a structure identical to what 4204 would allow/require if 4204 had applied.

[Benefits to all]

jpod, that would be great (as it is essentially what we would like to do), but is there any authority that would allow this? Or is your suggestion just based on the general fiduciary discretion to take certain actions (e.g., enter into a settlement) in satisfaction of WL under 4224 and PBGC Op. Ltr. 87-12? I am not sure about the denying a payment that is legally owed to the plan being in the best interests of the plan participants.

[jpod]

I am not saying it's a no brainer, just that it's a possibility.

[Benefits to all]

Yeah, I understand. I appreciate all your help jpod!

[Jim Dexter]

I've never been involved in a situation quite like this but I've heard about situations where the plan concluded that 4204 had been complied with when the assets sold were pretty minimal. For example, the incoming contractor purchased a few desks, etc. from the outgoing contractor. Whether that complies with 4204 is a bit gray but if you do that at least you can argue that there has been an asset sale somewhere in the picture.

[Benefits to all]

Yeah, that is a possibility. There is a case that seems to suggest a pretty minimal asset transcaction combined with some lease assumptions would fit the "sale of assets" transaction, but I am not sure if it is directly on point. Thanks for the input.