| 83-13 |
| June 10, 1983 |
| REFERENCE: |
| 4203(b) Complete Withdrawal. Building & Construction Industry Exemption |
| OPINION: |
| This is in response to your recent letter to the Pension Benefit Guaranty Corporation concerning the application of section |
| 4203(b) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") to the * * * and * * * Pension |
| Funds ("the Funds"). |
| In your letter you represent that: |
| (1) The Funds involve approximately 880 employers and cover about 2,600-3,000 participants who are employed in |
| construction and related activity. |
| (2) Contributing employers are engaged in the contracting and subcontracting of work done in connection with the |
| construction, alteration, painting, or repair of buildings, docks, sewers, structures, highways, excavations, or similar work, |
| and the supply of materials utilized by employers engaged in such work, including asphalt, concrete, cement or other |
| (3) About 2 percent of all contributing employers are construction equipment vendors who employ mechanics to repair |
| cranes and other equipment used in construction projects. These employers have about 300 covered employees, about |
| half of whom perform repair and maintenance work on-site. |
| (4) About 34 of the employers, with about 50 covered employees, operate concrete and asphalt plants, some which are |
| located at the site of a construction project, or in close proximity to the project. |
| Based on these representations, you ask our opinion on the following questions: |
| (1) Under the facts and circumstances described, do the Funds primarily cover employees in the building and construction |
| industry within the meaning of section 4203(b)? |
| (2) Under these circumstances, may the bargaining parties consistent with Title IV of ERISA agree that Act section 4203(b) |
| applies to an employer who is obligated to contribute to the Funds where substantially all of the employees for whom that |
| employer is obligated to contribute, perform work in the building and construction industry? |
| (3) Accordingly, do you find anything in the contract proposal (Exhibit A) relating to section 4203(b) improper or illegal from |
| the point of view of Title IV of ERISA? |
| With respect to your first question, ERISA does not specifically define those activities that are included within the term |
| "building and construction industry". The Senate report on section 4203(b) indicates that PBGC and plan sponsors should |
| refer to labor-management relations law in defining the term "building and construction industry." Summary & Analysis of |
| S. 1076 (Senate Labor Comm.), p. 14 (April 1980). PBGC is currently in the process of developing a regulation on section |
| 4203(b), which will define the activities that are included within the building and construction industry, as well as the terms |
| "primarily" and "substantially all", which are critical to the implementation of section 4203(b). |
| Our understanding of the cases under the labor-management relations law is that the term "building and construction |
| industry" includes, but is not necessarily limited to, work performed at the site of a building or other structure in connection |
| with the erection, alteration of the building or other structure. cf. Carpet, Linoleum & Soft Tile Local Union 1247, et al., 156 |
| NLRB 951 (1966). You have represented that only about 8 percent of the employees covered under the plans are |
| engaged solely in work performed off the site of construction projects. Thus, since 92 percent of the covered employees |
| perform work at the site, it would appear that the Funds primarily cover employees in the building and construction industry |
| With respect to your second question, if substantially all of the employees with respect to whom an employer is obligated |
| to contribute under a plan perform work in the building and construction industry ("construction employer"), the special |
| withdrawal rule in section 4203(b) applies by operation of law to that employer, if the plan primarily covers employees in |
| the building and construction industry. The adoption of an agreement by the bargaining parties is not necessary to give |
| effect to the rule in section 4203(b) in that case, but we know of nothing in Title IV which would prohibit the adoption of |
| Finally, you ask whether the provisions in the contract proposal, designated as Exhibit A, relating to section 4203(b) are |
| improper or illegal from the point of view of Title IV of ERISA. The contract proposal provides that section 4203(b) shall |
| apply to an employer who is obligated to contribute to the Funds if substantially all of the employees for whom the |
| employer is obligated to contribute perform work in the building and construction industry, as that term is defined in |
| subparagraph B of the contract proposal. The contract proposal further provides that the understanding as to the |
| applicability of section 4203(b) shall be effective, retroactive to April 28, 1980, subject to applicable statute, interpretative |
|
As previously noted, we know of nothing in Title IV which would prohibit the adoption of an agreement by the bargaining |
|
parties that section 4203(b) applies to a "construction employer." As to the definition of the term "building and construction |
|
industry" in subparagraph B of the contract proposal, the PBGC has not yet issued any regulation, opinion or ruling on that |
|
term for purposes of Title IV. We are currently in the process of developing a regulation defining that term for purposes of |
|
section 4203(b). Once that regulation is issued and becomes final, plans will have to implement section 4203(b) in |
|
accordance with the regulation. In this regard, we note that the contract proposal is specifically made subject to applicable |
|
statute, interpretative rule or regulations. |
|
Henry Rose |
|
General Counsel |