[Federal Register Volume 76, Number 87 (Thursday, May 5, 2011)]
[Notices]
[Pages 25711-25723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10999]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Proposed Exemptions from Certain Prohibited Transaction
Restrictions
AGENCY: Employee Benefits Security Administration, Labor
ACTION: Notice of Proposed Exemptions.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the
Internal Revenue Code of 1986 (the Code). This notice includes the
following proposed exemptions: D-11513, North Trust Corporation; D-
11634, The United Brotherhood of Carpenters Pension Fund (the Fund); D-
11639, Wolverine Bronze Profit Sharing Plan and Trust (the Plan); and
L-11651 and L-11652, Verizon Communications, Inc. (Verizon and Cellco
Partnership, doing business as Verizon Wireless (Verizon Wireless;
collectively, the Applicants) et al.]
DATES: All interested persons are invited to submit written comments or
requests for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register Notice.
ADDRESSES: Comments and requests for a hearing should state: (1) The
name, address, and telephone number of the person making the comment or
request, and (2) the nature of the person's interest in the exemption
and the manner in which the person would be adversely affected by the
exemption. A request for a hearing must also state the issues to be
addressed and include a general description of the evidence to be
presented at the hearing.
All written comments and requests for a hearing (at least three
copies) should be sent to the Employee Benefits Security Administration
(EBSA), Office of Exemption Determinations, Room N-5700, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210. Attention: Application No. ------, stated in each Notice of
Proposed Exemption. Interested persons are also invited to submit
comments and/or hearing requests to EBSA via e-mail or FAX. Any such
comments or requests should be sent either by e-mail to:
[email protected], or by FAX to (202) 219-0204 by the end of the
scheduled comment period. The
[[Page 25712]]
applications for exemption and the comments received will be available
for public inspection in the Public Documents Room of the Employee
Benefits Security Administration, U.S. Department of Labor, Room N-
1513, 200 Constitution Avenue, NW., Washington, DC 20210.
Warning: If you submit written comments or hearing requests, do not
include any personally-identifiable or confidential business
information that you do not want to be publicly-disclosed. All comments
and hearing requests are posted on the Internet exactly as they are
received, and they can be retrieved by most Internet search engines.
The Department will make no deletions, modifications or redactions to
the comments or hearing requests received, as they are public records.
SUPPLEMENTARY INFORMATION:
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
The proposed exemptions were requested in applications filed
pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the
Code, and in accordance with procedures set forth in 29 CFR part 2570,
Subpart B (55 FR 32836, 32847, August 10, 1990). Effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
(1996), transferred the authority of the Secretary of the Treasury to
issue exemptions of the type requested to the Secretary of Labor.
Therefore, these notices of proposed exemption are issued solely by the
Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.
Northern Trust Corporation
Located in Chicago, IL
[Application No. D-11513]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of ERISA and section 4975(c)(2) of the
Code, and in accordance with the procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847, August 10, 1990).
Section I. Transactions
If the proposed exemption is granted, the restrictions of section
406(a)(1)(A) and (D) and section 406(b)(1) and (2) of ERISA and the
sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A), (D), and (E) of the Code, shall not
apply, effective October 31, 2008, to the sale (the Sale) by a Plan (as
defined in Section III(e)) of an Auction Rate Security (ARS, as defined
in Section III(c)) to Northern Trust Corporation or an affiliate
thereof (Northern), if the conditions of Section II are met.\1\
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\1\ For purposes of this proposed exemption, references to
section 406 of ERISA should be read to refer also to the
corresponding provisions of section 4975 of the Code.
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Section II. Conditions
(a) The Plan acquired the ARS in connection with brokerage or
advisory services provided by Northern to the Plan;
(b) The last auction for the ARS was unsuccessful;
(c) The Sale is made pursuant to a written offer by Northern (the
Offer) containing all of the material terms of the Sale, in which the
Plan would have the opportunity to sell the ARS but would be under no
obligation to do so, and would include but is not limited to the
following:
(i) Northern will distribute each Offer to its eligible customers,
marked, or otherwise prepared in a manner reasonably designed to
prominently indicate to the recipient the subject matter, importance,
and time-sensitivity of the information provided;
(ii) Acceptance of an Offer would cause Northern to purchase the
eligible ARS at the next applicable coupon interest payment date as
described therein. Purchase dates may vary depending on when an Offer
is accepted and when the next coupon interest payment date for such
eligible ARS occurs;
(iii) Acceptance of the Offer could be withdrawn at any time until
three business days prior to the payment date; and
(iv) The Offer will comply with ``plain English'' standards and
will include: A reference to a Web site containing a description of the
eligibility criteria used by Northern; a reference to where the Plan
fiduciary can find a list of eligible ARS held in the account
(including the amount and other identifying information); the
background of the Offer; the methods and timing by which eligible
customers may accept the Offer; the manner of determining the purchase
dates for eligible ARS pursuant to the Offer; the timing of payment for
eligible ARS purchased pursuant to the Offer; the methods and timing by
which a customer may elect to withdraw its acceptance of the Offer; the
expiration date of the Offer; a suggestion that eligible customers
consult their tax advisors to determine the tax consequences, if any,
of accepting the Offer and to ensure that accounting and financial
reporting complies with applicable accounting guidance; and how to
obtain additional information concerning the Offer;
(d) The Sale is a one-time transaction for no consideration other
than cash payment against prompt delivery of the ARS;
(e) The sales price for the ARS is equal to the par value of the
ARS, plus any accrued but unpaid interest or dividends as applicable,
as of the date of the Sale;
(f) The Plan does not waive any rights or claims in connection with
the Sale;
(g) The decision to accept the Offer or retain the ARS is made by
an Independent Fiduciary (as defined in Section III(d)).\2\
Notwithstanding the foregoing, in the case of an individual retirement
account (IRA) which is beneficially owned by an employee, officer,
director or partner of Northern, the decision to accept the Offer or
retain the ARS may be made by such employee, officer, director, or
partner;
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\2\ The Department notes that ERISA's general standards of
fiduciary conduct would apply to the transactions described herein.
In this regard, section 404 requires, among other things, that a
fiduciary discharge his duties respecting a plan solely in the
interest of the plan's participants and beneficiaries and in a
prudent manner. Accordingly, a plan fiduciary must act prudently
with respect to, among other things, the decision to sell the ARS to
Northern for the par value of the ARS. The Department further
emphasizes that it expects plan fiduciaries, prior to entering into
any of the transactions, to fully understand the risks associated
with this type of transaction, following disclosure by Northern of
all the relevant information.
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(h) Neither Northern nor an affiliate thereof exercises investment
discretion or renders investment advice, within the meaning of 29 CFR
2510.3-21(c), in connection with the decision to sell or retain the
ARS;
(i) The Plan does not pay any commissions or any other transaction
costs with respect to the Sale;
(j) The Sale is not part of an arrangement, agreement, or
understanding designed to benefit a party in interest or disqualified
person to the Plan;
[[Page 25713]]
(k) Northern maintains, or causes to be maintained, for a period of
six (6) years from the date of the Sale such records as are necessary
to enable the persons described below in paragraph (l)(i), to determine
whether the conditions of this proposed exemption, if granted, have
been met, except that--
(i) No party in interest or disqualified person with respect to a
Plan which engages in a Sale, other than Northern and its affiliates,
as applicable, shall be subject to a civil penalty under section 502(i)
of ERISA or the taxes imposed by section 4975(a) and (b) of the Code,
if such records are not maintained, or not available for examination,
as required, below by paragraph (l)(i); and
(ii) A separate prohibited transaction shall not be considered to
have occurred solely because, due to circumstances beyond the control
of Northern or its affiliates, as applicable, such records are lost or
destroyed prior to the end of the six-year period; and
(l)(i) Except as provided below in paragraph (l)(ii), and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of ERISA, the records referred to above in paragraph (k) are
unconditionally available at their customary location for examination
during normal business hours by--
(A) Any duly authorized employee or representative of the
Department, the Internal Revenue Service, or the U.S. Securities and
Exchange Commission; or
(B) Any fiduciary of any Plan, including an IRA owner, that engages
in a Sale, or any duly authorized employee or representative of such
fiduciary; or
(C) Any employer of participants and beneficiaries and any employee
organization whose members are covered by a Plan that engages in the
Sale, or any authorized employee or representative of these entities;
(ii) None of the persons described above in paragraph (l)(i)(B)-(C)
shall be authorized to examine trade secrets of Northern, or commercial
or financial information which is privileged or confidential; and
(iii) Should Northern refuse to disclose information on the basis
that such information is exempt from disclosure, Northern shall, by the
close of the thirtieth (30th) day following the request, provide a
written notice advising that person of the reasons for the refusal and
that the Department may request such information.
III. Definitions
For purposes of this exemption:
(a) The term ``affiliate'' of another person means: (1) Any person
directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with such person;
(2) any officer, director, partner, employee, or relative (as defined
in section 3(15) of ERISA) of such other person; and (3) any
corporation or partnership of which such other person is an officer,
director, partner, or employee;
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual;
(c) The term ``Auction Rate Security'' or ``ARS'' means a debt
obligation of a corporation, business entity, municipality or other
governmental agency with a nominal long-term maturity for which the
interest rate is reset through a Dutch Auction typically held every 7,
14, 28, 35 or 49 days, with interest paid at the end of each auction
period. The term also means preferred stock issued by a corporation or
other business entity for which the dividend is reset and paid through
the same process;
(d) The term ``Independent Fiduciary'' shall mean the fiduciary of
the Plan making the decision to engage the Plan in the covered
transactions, provided that such fiduciary may not be Northern or an
affiliate thereof; and
(e) The term ``Plan'' means an individual retirement account (an
IRA) or similar account described in section 4975(e)(1)(B) through (F)
of the Code; or an employee benefit plan as defined in section 3(3) of
ERISA.
Effective Date: If granted, this proposed exemption will be effective
as of October 31, 2008.
Summary of Facts and Representations
1. Northern Trust Corporation (hereinafter, either ``Northern'' or
the ``applicant'') is a financial holding company that is a leading
provider of investment management, asset and fund administration,
fiduciary, and banking solutions for corporations, institutions, and
affluent individuals. Northern conducts business through various U.S.
and non-U.S. subsidiaries, including The Northern Trust Company (the
``Bank''), an Illinois bank headquartered in Chicago, Illinois.
The Bank is a member of the Federal Reserve System, its deposits
are insured by the FDIC, and it is subject to regulation by both of
those entities, as well as by the Division of Banking of the Illinois
Department of Financial and Professional Regulation. Northern's
national bank subsidiaries are members of the Federal Reserve System
and are subject to regulation by the Office of the Comptroller of the
Currency, with deposits insured by the FDIC to the extent provided by
the Federal Deposit Insurance Act. Northern Trust Bank, FSB is a
federal savings bank that is not a member of the Federal Reserve System
and is subject to regulation by the Office of Thrift Supervision and
the FDIC.
Northern also has a number of direct and indirect subsidiary
registered investment advisers that are subject to the Investment
Advisers Act of 1940, and a subsidiary broker-dealer, Northern Trust
Securities, Inc. (NTSI), an SEC registered broker-dealer that is
subject to the supervision of various governmental and self-regulatory
bodies.
Northern has a network of 79 offices in 18 states and has
international offices in 16 locations in North America, Europe, and the
Asia-Pacific region. As of December 31, 2009, Northern had consolidated
total assets of $74.3 trillion and stockholders' equity of $6.3
trillion. The Bank, founded in 1889, conducts its business through its
U.S. operations, its Toronto, London, and Singapore branches, and
various U.S. and non-U.S. subsidiaries. As of December 31, 2009, the
Bank had assets under management of $627.2 billion and assets under
custody of $3.7 trillion.
2. In connection with the liquidity problems in the Auction Rate
Securities (ARS) market, Northern offered to purchase certain ARS from
certain client accounts, including certain Plan (as defined in Section
III(e)) accounts.\3\ The ARS typically trade through Dutch Auctions.\4\
While many of these
[[Page 25714]]
securities continue to be rated by independent credit rating agencies
as investment grade credit, many ARS continue to experience failed
auctions.
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\3\ ARS may be issued as either debt or preferred stock. In the
case of debt, they generally have a long-term nominal maturity and
an interest rate that is reset through a Dutch Auction process. In
the case of preferred stock, they generally have no maturity and a
dividend that is reset through a Dutch Auction process. A Dutch
Auction is a competitive process used to determine rates on each
auction date. Bids are submitted to the auction agent by the broker-
dealer on behalf of the investors interested in selling their
securities. The auction agent matches bids with securities offered
by the bondholders and the winning bid is the highest price (lowest
interest rate or dividend) at which the auction clears. That means
the lowest interest rate at which the total number of securities
demanded equals the total number auctioned. If the market does not
clear, then there is a failed auction, and the securities may not be
sold in their entirety.
\4\ In a Dutch Auction, prospective investors may submit a bid
that specifies the par amount of the securities they wish to acquire
and the minimum interest rate or dividend they are willing to
accept. Existing holders may submit (i) a hold order, which means
they want to hold their position at whatever rate is set via the
auction, (ii) a hold at rate order, which means they want to hold
their position but only if the rate is set at or above their
specified level, or (iii) a sell order, which means they wish to
exit their position, regardless of the rate set via the auction. The
auctions generally take place periodically (i.e., daily or 7, 28, 35
or 49 day periods are typical). The securities trade at par and are
bought or sold on designated auction dates, presuming a successful
auction. These securities also may be redeemed by issuers (through
announced full or partial redemptions). Although they nominally are
long term instruments, because of the interest rate and dividend
reset features, they historically have been priced and traded as
short term instruments due to the auction process. They generally
are issued in minimum denominations ranging from $25,000 to
$100,000.
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Because Northern is a party in interest or disqualified person with
respect to the ERISA or the Code Plan accounts, Northern requests an
administrative exemption granting both retroactive and prospective
relief for the sale (the Sale) by a Plan of an ARS to Northern where
the auctions for those securities have failed. The applicant opines
that, in instances where Northern is not a fiduciary, section
408(b)(17) of ERISA should provide the necessary exemptive relief.\5\
In some cases, Northern has discretionary authority with respect to the
Plan accounts. In other cases, Northern may have provided advice such
that IRA owners or other Plan fiduciaries could claim that Northern is
a fiduciary. Where Northern is or could be a fiduciary with respect to
a Plan, exemptive relief is necessary to cover Northern's purchases of
eligible ARS from specified Plan accounts, including (i) individual
retirement accounts or similar accounts (which may be beneficially
owned by an employee, officer, director or partner of Northern); and
(ii) employee benefit plans.
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\5\ The Department expresses no opinion herein as to whether the
conditions of section 408(b)(17) of ERISA were or are satisfied by
any purchase of ARS from a Plan by Northern.
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3. Northern made one or more written offers (an ``Offer'') to all
of its eligible customers to purchase all eligible ARS held by such
customers for cash at par value, plus accrued but unpaid interest,
pursuant to the relevant Offer, described further in Item 4, below.
Each Offer was open for a minimum of 30 days from the date it was first
distributed by Northern to its eligible customers, or for such longer
period as determined by Northern from time to time.
Acceptance of an Offer would cause Northern to purchase the
eligible ARS on the next applicable coupon interest payment date as
described in the relevant Offer Document. Purchase dates may vary
depending on when an Offer is accepted and when the next coupon
interest payment date for such eligible ARS occurs.
Acceptance of the Offer could be withdrawn at any time until three
business days prior to the payment date. If an eligible customer has
not accepted the Offer and the eligible customer holds an account with
respect to which Northern has discretionary control, Northern documents
the customer's direction to retain the eligible ARS and clarifies that
Northern has no investment responsibility with respect to those
securities.
4. The Offer that Northern distributed to its eligible customers
was marked, or otherwise prepared in a manner reasonably designed to
prominently indicate to the recipient the subject matter, importance,
and time-sensitivity of the information provided.
The Offer complies with ``plain English'' standards and included
disclosure of, or a fair and adequate summary of, all material aspects
of:
The terms and conditions of the Offer, including reference
to a Web site containing a description of the eligibility criteria used
by Northern;
A list of eligible ARS held in the account (including the
amount, identifying information, and CUSIP);
The background of the Offer;
The methods and timing by which eligible customers may
accept the Offer;
The manner of determining the purchase dates for eligible
ARS pursuant to the Offer;
The timing of payment for eligible ARS purchased pursuant
to the Offer;
The methods and timing by which a customer may elect to
withdraw its acceptance of the Offer;
The expiration date of the Offer;
A suggestion that eligible customers consult their tax
advisors to determine the tax consequences, if any, of accepting the
Offer and to ensure that accounting and financial reporting complies
with applicable accounting guidance;
For advisory clients, disclosure that (a) acceptance of
the Offer by an eligible customer will constitute such customer's
direction to Northern to purchase the eligible ARS, and (b) rejection
of the Offer by an eligible customer will constitute such customer's
direction to Northern to retain the eligible ARS in the account; and
How to obtain additional information concerning the Offer.
All client accounts which accepted the Offer were paid on a date
that coincided with the interest payment date so that there would be no
accrued but unpaid interest, or were paid accrued interest. No
brokerage commissions or other fees were charged.
5. In summary, the applicant represents that the transactions
described herein satisfy the statutory criteria of section 408(a) of
ERISA because, among other things:
(a) Each covered Sale shall be made pursuant to a written Offer;
(b) Each covered Sale shall be a one-time transaction for no
consideration other than cash payment against prompt delivery of the
ARS;
(c) The sales price in each covered Sale shall equal the par value
of the ARS, plus any accrued but unpaid interest or dividends as
applicable, as of the date of the Sale;
(d) Plans would not waive any rights or claims in connection with
any covered Sale as a condition for engaging in such transaction;
(e)(1) the decision to accept an Offer or retain the ARS shall be
made by an Independent Fiduciary; and (2) neither Northern nor an
affiliate thereof shall exercise investment discretion or render
investment advice, within the meaning of 29 CFR 2510.3-21(c), in
connection with the decision to accept the Offer or retain the ARS;
(f) Plans shall not pay any commissions or transaction costs with
respect to any covered Sale;
(g) A covered Sale shall not be part of an arrangement, agreement,
or understanding designed to benefit a party in interest or
disqualified person to the affected Plan.
Notice to Interested Persons
The applicant represents that all the potentially interested
persons cannot be identified and that, therefore, the only practicable
means of notifying interested persons of this proposed exemption is by
the publication of this notice in the Federal Register. Comments and
requests for a hearing are due within 45 days from the date of
publication of this notice of proposed exemption in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department,
telephone (202) 693-8557. (This is not a toll-free number.)
The United Brotherhood of Carpenters Pension Fund (the Plan or the
Applicant) Located in Las Vegas, Nevada [Application No. D-11634]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847, August 10, 1990).\6\ If the
exemption is granted, the restrictions of sections 406(a)(1)(A), (D)
[[Page 25715]]
and 406(b)(2) of the Act and the sanctions resulting from the
application of section 4975(c)(1)(A) and (D) of the Code, shall not
apply to the proposed sale (Sale) of a 10.89 acre parcel of real
property (the Parcel), which is part of larger parcel of real property
(the Nevada Property), from the Plan-owned Bermuda Hidden Well, LLC
(Bermuda LLC) to the Southwest Regional Council of Carpenters (the
Council), a party in interest with respect to the Plan; provided that
the following conditions are satisfied:
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\6\ For purposes of this proposed exemption, references to the
provisions of Title I of the Act, unless otherwise specified, refer
also to the corresponding provisions of the Code.
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(a) The terms and conditions of the Sale are at least as favorable
to the Plan as those obtainable in an arm's length transaction with an
unrelated party;
(b) The Sale is a one-time transaction for cash;
(c) As consideration, the Plan receives the greater of $5,383,577,
or the fair market value of the Parcel as determined by a qualified,
independent appraiser (the Appraiser) in an appraisal (the Appraisal)
of the Nevada Property, which is updated on the date of Sale (Sale
Date);
(d) The Plan pays no commissions, costs or fees with respect to the
Sale, except for customary closing costs (the Seller Closing Costs) and
50% of certain rental credits (the Rental Credits) that are paid to
unrelated parties; and
(e) The Plan fiduciaries review and approve the methodology used by
the Appraiser, ensure that such methodology is properly applied in
determining the fair market value of the Parcel, and also determine
whether it is prudent to go forward with the proposed transaction.
Summary of Facts and Representations
The Parties
1. United Brotherhood of Carpenters and Joiners of America (UBC),
the Plan sponsor, is an international labor organization with 725 local
unions and 37 councils, including the Council. UBC's General President
has the authority to appoint members to the Plan's Board of Trustees
(the Board), with approval of UBC's General Executive Board. UBC is a
fiduciary with respect to the Plan.
2. The Council, which is based in Los Angeles, California, is a
contributing employer to the Plan and some of its employees are covered
by the Plan. The Council is an intermediate labor organization that is
aligned with 35 local unions. In this regard, the Council represents
over 65,000 carpenters in Southern California, Nevada, Arizona, Utah,
New Mexico and West Texas. It has its own by-laws, elected officers,
representatives and employers.
Although the Council is aligned with the UBC, as mentioned above,
it is a separate and autonomous entity from UBC. As a contributing
employer to the Plan, the Council is a party in interest. However, it
is not a fiduciary with respect to the Plan because the Board is not
comprised of any Council members or local union members within the
jurisdiction of the Council. Further, the Council has no discretion
over the management or disposition of the Plan's assets.
3. The Plan is a defined benefit, multiemployer plan, located in
Las Vegas, Nevada. As of December 31, 2009, the Plan had 4,615
participants and beneficiaries. Also, as of December 31, 2009, the Plan
had total assets of $588,857,770.
The Board consists of eight trustees (the Trustees), who include
representatives from UBC, the Chicago Regional Council of Carpenters,
the St. Louis Missouri District Council, the Alberta and Northwest
Territories Regional Council and Local Union 745 (which is not in the
territory of the Council). Of the Trustees, four are general officers
of UBC. The four remaining Trustees are officers of councils or local
unions that are not aligned with the Council.
The Board has appointed a subcommittee to make decisions regarding
the Parcel and the Sale described herein. Michael Draper, the District
Vice President of UBC for the Western District of UBC and Frank Libby,
the Executive Secretary-Treasurer of the Chicago Regional Council of
Carpenters are the sole members of the subcommittee.
The Nevada Property--History and the Plan's Acquisition
4. The Nevada Property is located at 6855 Bermuda Road Las Vegas,
Nevada, south of the McCarran International Airport. UBC owns a
building to the west of the Nevada Property, located at 6801 Placid
Street, Las Vegas, Nevada. The Nevada Property is zoned as M-1, Light
Industrial district by the City of Las Vegas. The permitted uses for
this district include office, light industrial, general commercial and
auto related uses.
The Nevada Property can be subdivided into two parcels. The Parcel,
itself, a 10.89 acre tract of land, consists solely of asphalt-paved
parking areas with curbs, light poles and some chain link fencing
around the perimeter. The Parcel represents approximately 36.1% of the
Nevada Property. The remaining 19.25 acre tract of land, which is not
subject to the proposed Sale, represents 63.9% of the Nevada Property.
Situated on the 19.25 acre tract are a car rental facility, which has a
passenger terminal, a car wash, a car repair facility with a service
bay, steel canopies, and other site improvements, such as covered
parking spaces, yard lighting, fencing curbing and several booths.
5. On April 19, 2001, the Plan incorporated Bermuda LLC, a limited
liability company, in the State of Delaware, with the Plan serving as
both sole member and owner. Bermuda LLC was formed to hold real
property on behalf of the Plan and specifically to acquire the Nevada
Property.
On June 11, 2001, Bermuda LLC acquired the Nevada Property from LV-
Airport Investors, LLC, an unrelated party, for a total cash price of
$10,464,126. At the time of the acquisition, the Nevada Property was
encumbered by a lease (the Lease) between LV-Airport Investors, LLC, as
lessor and Alamo Rent-A-Car, LLC (Alamo), an unrelated party, as
lessee. Alamo, which provided car rental services from the Nevada
Property, used the Nevada Property as its office and as a car pick-up
and return facility.
LV-Airport Investors, LLC had originally entered into the Lease
with Alamo on April 12, 2001. The Lease was subject to separate
guaranty by ANC Rental Corporation, an unrelated party and an affiliate
of Alamo, that would guarantee the rental payments and other
obligations under the Lease on behalf of Alamo.
6. Bermuda LLC assumed the Lease in June 2001 and remains the
lessor under the Lease. Although the Nevada Property has been
continuously leased, the lessee has repeatedly changed from 2001 to the
present. In 2003, Vanguard Car Rental USA, Inc. (Vanguard), an
unrelated party, assumed the Lease from Alamo pursuant to an assignment
during bankruptcy proceedings involving ANC Rental Corporation, Alamo
and related entities. In addition, as part of the bankruptcy
proceedings, ANC Rental Corporation's guaranty was eliminated.
Currently, the Lease payments are no longer subject to a guaranty.
7. In April 2007, McCarran International Airport opened a
centralized car return facility. As a result, the Nevada Property would
no longer be used for vehicle pick-ups and returns. Instead, the Nevada
Property would be used henceforth for car cleaning and maintenance. On
April 5, 2007, Vanguard entered into a sublease with the Clark County
Aviation Authority (the Authority) for the Parcel and an additional 7.8
acres of the Nevada Property. Thus, the Authority subleased
approximately 18.69 acres
[[Page 25716]]
from the Plan for $105,883 per month or $.13 per month per square foot.
The sublease expired on April 14, 2009 and it was not renewed.
Currently, the Parcel is not being subleased.
8. By letter dated June 13, 2007, Vanguard advised Bermuda LLC that
all of Vanguard's issued and outstanding stock had been purchased by an
affiliate of Enterprise Rent-A-Car (Enterprise). The Applicant
represents that this purchase would not result in a change in the
Vanguard corporate legal entity, and that Vanguard and/or its
subsidiaries would continue to be responsible for all of its respective
obligations following the purchase with respect to the Plan.
9. Effective August 1, 2009, in accordance with Alamo's bankruptcy
proceedings, Alamo officially assigned the Lease to Enterprise Lease
Company--West, LLC (Enterprise Leasing), an unrelated party, who is the
current lessee of the Nevada Property. The Lease expires on April 30,
2021. There are two 5 year renewal options at market rent that could
possibly extend the Lease until 2031.
10. The Lease is a triple net lease requiring the lessee to pay for
real estate taxes, insurance and maintenance costs. Under the Lease,
the annual basic rent for the Nevada Property was $908,500 for the
first year. Thereafter, the annual rent has been subject to an increase
based upon the lesser of (a) the product obtained by multiplying the
basic rent for the prior rental period by 2%, or (b) the product
obtained by multiplying the basic rent for the prior year by three
times the percentage change in the Department's Bureau of Labor
Statistics, Consumer Price Index for All Urban Consumers--U.S. City
Average (CPI) during such prior rental period. The current rent cannot
be reduced below the rent floor set in the prior rental period. For the
rental year ending April 30, 2011, the monthly rent for the Nevada
Property is $88,704.36 per month or $1,064,452.32 per rental year.
The Management and Holding of the Nevada Property
11. Although Bermuda LLC holds the Nevada Property for the Plan,
the Plan and any officers, that it may select, make all management
decisions for Bermuda LLC. From September 1, 2002 through June 30,
2004, the Plan had retained Strategic Property Advisors (SPA) to serve
as the qualified professional asset manager (QPAM) for the Nevada
Property. From July 1, 2004 through the present, the Plan has retained
Strategic Capital Advisers (SCA) to serve as the Plan's QPAM. SPA has
entered into a subadvisory role with SCA and SPA remains a fiduciary
with respect to the Plan. Currently, Commerce TNP, Inc. (Commerce TNP)
serves as the property manager for the Nevada Property.
12. The Nevada Property has annually generated income in excess of
expenses for the Plan since the time of acquisition. For the period
between 2001 through 2005, the Plan income and expenses for the Nevada
Property are presented as follows in Table 1:
Table 1
----------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005 Totals
----------------------------------------------------------------------------------------------------------------
Total Rental Income............... 454,250 920,613 939,026 957,806 976,962 4,248,657
----------------------------------------------------------------------------------------------------------------
Property Expenses
----------------------------------------------------------------------------------------------------------------
Property Management Fee.......... 0 0 0 0 0 ...........
Administration Fee................ 97 0 195 0 0 ...........
Engineering Expense............... 0 0 0 0 0 ...........
Statement of Business Publication 25 25 25 25 30 ...........
Fee..............................
Legal Fee......................... 1,100 0 0 0 0 ...........
Appraisal Fee..................... 0 0 0 6,498 0 ...........
Delaware State Franchise Tax...... 0 200 100 305 200 ...........
Nevada Annual List of Managers Fee 0 85 105 155 155 ...........
Nevada/Delaware CSC Reg. Agent Fee 0 350 448 468 488 ...........
Asset Management Fee.............. 0 0 5,000 7,000 13,000 ...........
-----------------------------------------------------------------------------
Total Property Expenses....... 1,222 660 5,873 14,451 13,873 36,079
-----------------------------------------------------------------------------
Net Income................ 453,028 919,953 933,153 943,355 963,089 4,212,578
----------------------------------------------------------------------------------------------------------------
It should be noted that the 2001 income reflects the period from
April 1, 2001 to December 31, 2001. Additionally, the 2001 and 2002
expenses are estimates.
13. For the period 2006-2010, the Plan income and expenses for the
Nevada Property are presented as follows in Table 2:
Table 2
----------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 Totals
----------------------------------------------------------------------------------------------------------------
Rental Income..................... 996,501 1,016,431 1,036,760 1,043,581 1,146,200 5,239,473
----------------------------------------------------------------------------------------------------------------
Property Expenses
----------------------------------------------------------------------------------------------------------------
Property Management Fee........... 0 0 12,000 14,400 14,400 ...........
Administration Fee................ 0 0 25 0 0 ...........
Engineering Expense \7\........... 0 0 0 2,500 16,974 ...........
Statement of Business Publication 30 30 30 30 30 ...........
Fee..............................
Legal Fee......................... 0 0 0 0 480 ...........
[[Page 25717]]
Appraisal Fee..................... 0 6,000 2,900 6,000 6,000 ...........
Delaware State Franchise Tax...... 200 200 200 250 250 ...........
Nevada Annual List of Managers Fee 155 155 125 125 125 ...........
Nevada Sec of State-Business 0 0 0 0 200 ...........
License Fee......................
Nevada/Delaware CSC Reg. Agent Fee 508 528 552 582 612 ...........
Asset Management Fee.............. 13,000 13,000 13,000 13,000 13,000 ...........
-----------------------------------------------------------------------------
Total Property Expenses....... 13,893 19,913 28,832 36,887 52,071 151,596
-----------------------------------------------------------------------------
Net Income................ 982,608 996,518 1,007,928 1,006,694 1,094,369 5,088,117
----------------------------------------------------------------------------------------------------------------
14. After combining the expenses in Tables 1 and 2, the Plan has
incurred total expenses of $187,675 excluding acquisition costs for the
Nevada Property. The acquisition cost to the Plan was $10,464,126 for
the Nevada Property. Therefore, the total acquisition and holding costs
for the Nevada Property are $10,651,801 (i.e., $10,464,126 acquisition
costs + $187,675 in holding costs). After combining the rental income
in Tables 1 and 2, the Plan's total rental income for the years 2001-
2010 is $9,488,130. After factoring in total rental income, the Plan's
net acquisition and holding costs for the Nevada Property are
$1,163,671 (i.e., total acquisition and holding costs of $10,651,801--
total rental income of $9,488,130).
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\7\ The Plan paid $2,500 in 2009 and $16,974 in 2010 for
engineering fees (Engineering Fees). The Engineering Fees included
the surveying of the Nevada Property and the creation of a new,
separate legal description for the 10.89 acre Parcel.
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Lease Modification and Rental Credit
15. On April 23, 2010, SPA, a sub-adviser to SCA, the Plan's QPAM,
negotiated a modification to the Lease on behalf of the Plan. This
modification would permit the potential termination of Enterprise
Leasing's leasehold interest in the 10.89 Parcel in return for a
termination fee of $100,000 paid to Enterprise Leasing (Lease
Modification Fee). The 19.25 acre tract of land would remain subject to
the Lease. Additionally, the Lease Modification would result in a pro
rata reduction in Enterprise Leasing's rental payments to 63.9% of the
original monthly rent since it would no longer be leasing the Parcel
from the Plan.
In order to free the Parcel for sale, the Lease Modification
requires that Enterprise Leasing agree not to sublease the Parcel until
the proposed Sale is finalized. Therefore, SPA negotiated the Rental
Credit that went into effect beginning in mid-October 2010 through mid-
January 2011. The Applicant represents that the Rental Credit is
necessary because Enterprise Leasing is restricted from subleasing the
Parcel while the Applicant awaits an administrative exemption from the
Department. In accordance with the Lease Modification, the Plan has
been required to provide Enterprise Leasing a $15,000 per month rental
credit since October 2010. The Rental Credit is to be applied in
calendar year 2011. The Rental Credit was renewed in mid-January 2011
through mid-July 2011. To assist the Plan, SPA and the Council later
agreed that the Council would pay $7,500 per month or 50% of the total
Rental Credit.
The Appraisal
16. SPA retained Cushman & Wakefield of Nevada, Inc., located in
Las Vegas, the Plan's current appraiser, to appraise a leased fee
interest in the Nevada Property (i.e., the 10.89 acre Parcel and the
19.25 acre tract) effective March 1, 2010 in an appraisal report dated
June 11, 2010. Associate Director Stephen E. Wilson and Senior Director
Kaye A. Cuba, who are employed by the Appraiser, conducted the
Appraisal. Mr. Wilson entered the real estate business in 1998. He is a
Certified General Appraiser in both Nevada and Arizona and is an
associate member of the Appraisal Institute (MAI). Mr. Wilson is
experienced in appraising multi-family, office, retail, industrial/
warehouse, residential subdivisions and vacant land. He has also
completed professional courses and seminars with various appraisal
organizations including the MAI.
Ms. Cuba has 25 years of experience in the appraisal field
primarily in the banking industry and fee appraisal business. She is an
MAI Appraiser and a Certified General Appraiser in Nevada, California
and Arizona. Ms. Cuba also serves on the Appraisal Institute's
Education Committee and is the 2010 President of its Las Vegas chapter.
She has served as a panelist addressing appraisal review issues at
local chapter seminars and a regional conference. Furthermore, Ms. Cuba
has extensive experience and knowledge in the preparation of appraisals
for commercial properties, including retail properties, restaurants,
residential properties, light industrial properties, health care
facilities, residential subdivisions and vacant land. She joined the
Appraiser in February 2007 as Senior Director of Valuation & Advisory
Services in the Las Vegas office. Her responsibilities include real
estate valuation and consulting services for clients with properties
located in Southern Nevada and Northwest Arizona.
The Appraiser represents that the fees it received from the Council
and its affiliates in 2009 were less than 1% of the Appraiser's annual
gross income within that year. The Appraiser also acknowledges it is
aware that the Appraisal is being used for the purposes of obtaining an
individual exemption from the Department.
17. According to the Appraisal, the Appraiser determined that the
Nevada Property, subject to the Lease had an ``As-Is'' fair market
value of $14,900,000.00 as of March 1, 2010. The Appraiser used the
Cost Approach and the Income Capitalization Approach to valuation. The
Appraiser explains it did not use the Sales Comparison Approach because
the Nevada Property has a specialized land use and public information
regarding similar sale transactions was generally insufficient.
Under the Cost Approach, the Appraiser approximated the cost to
replace the Nevada Property with an equivalent facility. In order to do
so, the Appraiser used sale comparisons to determine that the value of
the underlying land was $11,820,000. After considering such factors as
the replacement cost of the Nevada Property, indirect costs,
entrepreneurial profit, the structures, depreciation and a rent
deficit, the Appraiser concluded that, under the Cost Approach, the
Nevada Property was worth $15,700,000.00 as of March 1, 2010.
Under the Income Capitalization Approach, the Appraiser
approximated
[[Page 25718]]
the anticipated income and expenses (i.e., anticipated economic
benefits) to determine the fair market value of the Nevada Property.
The Appraiser determined that this approach resulted in a fair market
value of $14,900,000 for the Nevada Property as March 1, 2010.
The Appraiser then reconciled the various valuation methods and
determined that the fair market value of the leased fee interest in the
Nevada Property was $14,900,000 as of March 1, 2010. The Appraiser
weighed the Income Capitalization Approach more heavily in the
Appraisal because this methodology mirrored the methodology used by
purchasers of this type of property. Thus, on the basis of the
Appraisal, the fair market value of the Parcel was $5,383,577 as of
March 1, 2010 ($14,900,000 x 10.89 acres/30.14 acres).
It should be noted that the Appraiser, also surveyed local real
estate brokers for the Appraisal. These brokers indicated that upon the
completion of renovations at the adjacent McCarran International
Airport, the Nevada Property could increase in value. The Nevada
Property appraised valued peaked in 2007 when it was appraised at
$21,740,000 by the Appraiser. In an August 4, 2010 letter, the
Appraiser represented that at the date of the Appraisal, the Appraiser
did not anticipate that the completion of the McCarran Airport
renovations would have any significant short-term effect on industrial
land values within the subject's submarket. Moreover, the Appraiser
represented that it did not anticipate that the Nevada Property would
return to its 2007 peak value within the next few years. Instead, any
recovery with the industrial market would require a significant
improvement in the Las Vegas unemployment rate and an improvement in
the local, state and national manufacturing sectors.
The Nevada Property is also located within the vicinity of real
property owned by UBC. In a separate December 15, 2010 letter, Mr.
Wilson stated that the Appraiser did not believe the Nevada Property
had any assemblage value due to its close proximity to UBC's building.
Finally, the Appraiser provided an updated summary appraisal report
(the Summary Appraisal), dated March 3, 2011, which valued a leased fee
interest of the 10.89 acre Parcel and the 19.25 acre tract of land
comprising the Nevada Property (in an ``as is'' condition) at
$11,000,000 as of March 1, 2011. The Summary Appraisal utilized both
the Cost Approach and the Income Capitalization Approach to valuation,
but gave the most weight to the Income Capitalization Approach because
it mirrored the methodology used by purchasers of this property type.
Thus, on the basis of the Summary Appraisal, the fair market value of
the Parcel was $3,960,000 as of March 1, 2011 ($11,000,000 * 10.89
acres/30.14 acres).
Terms of the Sale
18. The Council had been trying to obtain property for the
construction of a training facility over the past five years. The
Council had made offers on several tracts of land and such offers have
either been refused or encountered problems. The Council selected the
Parcel because it is suitable for a training facility and is visible to
freeways. The Council may lease a future facility to the Southwest
Carpenters Training Fund, the Applicant represents that the Council has
not voted whether to enter into such future lease.\8\
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\8\ The Department wishes to point out that any future leasing
of the Parcel by the Council to the Southwest Carpenters Training
Fund for training purposes must be compliant with the terms and
conditions of PTE 78-6, 43 FR 23024 (May 30, 1978). PTE 78-6
exempts, among other transactions, the leasing of real property
other than office space by an apprenticeship plan from a
contributing employer, a wholly-owned subsidiary of such employer,
or an employee organization any of whose members' work results in
contributions being made to the apprenticeship plan. The Department
also notes that PTE 78-6 provides exemptive relief from section
406(a)(1)(A), (C) and (D) of the Act, but no relief from the
fiduciary self-dealing or conflict of interest provisions under
section 406(b)(1) and (2) of the Act.
---------------------------------------------------------------------------
Although the Plan has not any made efforts to sell the Parcel to
unrelated parties nor has it received any unsolicited purchase offers
from unrelated parties, the Council's purchase of the Parcel would
allow the Plan to receive a profit. In this regard, the proposed Sale
price for the Parcel that will be paid by the Council will be
(excluding certain Seller Costs and Rental Credits) the higher of
$5,383,577 ($14,900,000 \9\ * 10.89 acres/30.14 acres) or the fair
market value of the Parcel on the Sale Date as determined by the
Appraiser in an updated Appraisal on the Sale Date. The pro rata
purchase price for the Parcel was approximately $3,780,834 ($10,464,126
original purchase price * 10.89 acres/30.14 acres). Therefore, the pro
rata gain for the Parcel is $1,602,743 ($5,383,577 purchase price-
$3,780,834 original purchase price) or an approximately 42% gain
($1,602,743 gain/$3,780,847 cost basis) for the Parcel, without taking
into account certain Seller Closing Costs and Rental Credits.
---------------------------------------------------------------------------
\9\ The Council proposes to base the purchase price for the
Parcel on the $14.9 million fair market value of the Nevada Property
as determined as of March 1, 2010 in the Appraisal rather than the
$11 million fair market value for such property as determined as of
March 1, 2011 in the Summary Appraisal.
---------------------------------------------------------------------------
19. The Plan will pay certain Seller Closing Costs in connection
with the Sale. These Seller Closing Costs include owner's title
insurance of $4,263.79, escrow fees of $1,265, recording fees of
approximately $100 and the Clark County real estate transfer tax which
is estimated to be approximately $27,458.40, or total Seller Closing
Costs of $33,087.19.\10\ The Seller Closing Costs amount to less than 1
percent of the proposed Sale price.
---------------------------------------------------------------------------
\10\ Susan Borst, director of the Commerce Real Estate
Solutions, an alliance member of the Appraiser, and a certified
Commercial Investment Member, with over 15 years of real estate
industry experience, represented that it is the customary and normal
practice in Clark County, Nevada for the seller to pay real estate
transfer taxes. Ms. Borst also states that less than 1% of her 2010
annual income was derived from the Council and its affiliates.
---------------------------------------------------------------------------
In addition to the Seller Closing Costs, the Plan will pay
Enterprise Leasing 50% of all Rental Credits, as described above in
Representation 15. These Rental Credits will cost the Plan a total of
$67,500. Accordingly, the Plan's aggregate costs are estimated at
$100,587.19.
The Applicant represents that a hypothetical sale to an unrelated
third party would require the Plan to pay a sales commission. The
Applicant states that such commissions typically amount to 4% of the
value of the Sale or, in this case, $215,343. In a hypothetical sale to
an unrelated third party, the Plan would pay $248,432 (i.e., a $215,343
commission plus $33,087 in Seller Closing Costs). Thus, according to
the Applicant, the Plan would pay less in closing and transaction costs
in the proposed Sale when compared to a hypothetical sale to an
unrelated third party. (The Department notes, however, that it is
unlikely that a hypothetical buyer would also pay a Lease Modification
Fee and 50% of the Rental Credits like the Council).
Rationale for the Sale
20. The Applicant represents that the following reasons support the
Sale:
The Lease is no longer subject to the ANC Rental
Corporations's guaranty and is appraised at below market value.
Enterprise no longer uses the Nevada Property as its car
pick-up and return site and the Parcel is vacant.
Annual rental increases are subject to the lesser of 2% or
a CPI-linked formula. Accordingly, annual rental increases may not keep
pace with periods of high inflation.
The Lease is subject to two extensions that could lock the
Plan into the Lease until 2031.
[[Page 25719]]
SCA has advised that it would be advantageous to the Plan
to enter into the proposed Sale.
The Council would pay a portion of the costs associated
with the Sale. Aside from purchase price, the Council would pay: (a)
$16,734 to the Plan for its 2010 Engineering Fees; (b) 50% of all
Rental Credits from October 2010 through mid-July 2011 or $67,500; (c)
the Lease Modification Fee of $100,000 to Enterprise Leasing; (d) an
ALTA title insurance upgrade which is approximately $2,842.53; and (e)
escrow charges of approximately $1,265.00. Therefore, the total
transaction costs paid by the Council would be $188,341.53 (which is
more than the Seller Closing Costs and Rental Credits paid by the
Plan).
The Plan would not have to pay a sales commission in
connection with the Sale.
Because the value of the Nevada Property peaked in 2007
and has declined up to the time of the Summary Appraisal, selling the
Parcel would allow the Plan to recognize some profit it has gained
since the purchase of the Nevada Property.
Because the Nevada Property had a 12 month rate of return
of negative 13.39%, the Sale would reduce risks to the Plan from
holding the Parcel and allow the Plan to receive a profit from a
portion of such property.
Exemptive Relief Requested
21. According to the Applicant, the Sale represents a sale and
transfer of plan assets between the Plan and the Council, a party in
interest, that would violate section 406(a)(1)(A) and (D) of the Act.
The Applicant also requests exemptive relief from the fiduciary
conflict of interest provision of section 406(b)(2) of the Act. The
Applicant represents that although none of the Trustees are employees
or officers of the Council, it is possible a potential conflict of
interest exists since two of the Trustees (Mr. Draper and Mr. Libby),
who are members of the Board subcommittee, are UBC officers or officers
of other intermediate labor councils aligned with UBC. Because the
Council is, itself, aligned with UBC, the Applicant contends that these
two Trustees may have interests which are adverse to the interests of
the Plan or the interests of the Plan's participants or beneficiaries.
Therefore, the Applicant asserts that exemptive relief from section
406(b)(2) of the Act is required.
Appropriateness of the Sale
22. The Applicant represents that the proposed Sale by the Plan of
the Parcel to the Council would be administratively feasible because
the Sale would be a one-time transaction for cash. Furthermore, the
Plan would pay no commissions, costs or fees in connection with the
Sale, except for 50% of the Rental Credits and the Seller Closing Costs
which are customarily paid to unrelated parties. Finally, Mr. Draper
and Mr. Libby would review and approve the methodology used by the
Appraiser, ensure that such methodology is properly applied in
determining the fair market value of the Parcel, and also determine
whether it is prudent to go forward with the proposed transaction.
The Applicant states that the proposed Sale would also be in the
interests of the Plan and its participants and beneficiaries because
the Plan would realize a gain of nearly 42% stemming from its
acquisition and holding of the Parcel and further diversify its assets,
and become more liquid. Further, the Applicant states that the proposed
Sale would be protective of the rights of the Plan's participants and
beneficiaries because the Plan would receive the greater of $5,383,577
or the fair market value of the Parcel as determined by the Appraiser
in an Appraisal of the Nevada Property, which is updated on the Sale
Date. Furthermore, the terms of the Sale would be no less favorable to
the Plan than the terms negotiated under similar circumstances at arm's
length with unrelated parties. Accordingly, the Applicant requests an
exemption from the Department.
Summary
23. In summary, the Applicant represents that the Sale will satisfy
the statutory requirements for an exemption under section 408(a) of the
Act because:
(a) The terms and conditions of the Sale will be at least as
favorable to the Plan as those obtainable in an arm's length
transaction with an unrelated party;
(b) The Sale will be a one-time transaction for cash;
(c) As consideration, the Plan will receive the greater of
$5,383,577, or the fair market value of the Parcel as determined by the
Appraiser in an Appraisal of the Nevada Property, which is updated on
the Sale Date;
(d) The Plan will pay no commissions, costs or fees, with respect
to the Sale, except for the Seller Closing Costs and 50% of the Rental
Credits that are paid to unrelated parties; and
(e) The Plan fiduciaries will review and approve the methodology
used by the Appraiser, ensure that such methodology will be properly
applied in determining the fair market value of the Parcel, and also
will determine whether it is prudent to go forward with the proposed
transaction.
Notice to Interested Parties
Notice of the proposed exemption will be given to interested
persons within 20 days of the publication of the notice of proposed
exemption in the Federal Register. The notice will be given to
interested persons by first class mail or personal delivery. Such
notice will contain a copy of the notice of proposed exemption, as
published in the Federal Register, and a supplemental statement, as
required pursuant to 29 CFR 2570.43(b)(2). The supplemental statement
will inform interested persons of their right to comment on and/or to
request a hearing with respect to the pending exemption. Written
comments and hearing requests are due within 50 days of the publication
of the notice of proposed exemption in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Mr. Anh-Viet Ly of the Department at
(202) 693-8648. (This is not a toll-free number.)
Wolverine Bronze Profit Sharing Plan and Trust (the Plan) and BDR Oil,
LLC
Located in Roseville, Michigan
Exemption Application Number D-11639
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Employee Retirement Income Security
Act of 1974 (ERISA or the Act) and section 4975(c)(2) of the Internal
Revenue Code of 1986, as amended (the Code), and in accordance with the
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836,
32847, August 10, 1990).\11\
---------------------------------------------------------------------------
\11\ For purposes of this proposed exemption, references to
section 406 of ERISA should be read to refer to the corresponding
provisions of section 4975 of the Code as well.
---------------------------------------------------------------------------
If the proposed exemption is granted, the restrictions of section
406(a)(1)(A) and (D), 406(b)(1) and (b)(2) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1)(A), (D) and (E) of the Code, shall not apply, to
the cash sale (the Sale) by the Plan of a note receivable (the Note)
and royalty interests (ORRIs), collectively known as the Alternative
Investments, to BDR Oil, LLC, which is owned by Richard A. Smith,
William Smith and Douglas Smith (also know as the Alternative
Investment Group or the AIG), provided that the following conditions
are met:
(a) The Sale is a one-time transaction for cash;
[[Page 25720]]
(b) The terms and conditions of the Sale are at least as favorable
as those obtainable in an arm's length transaction with an unrelated
third party;
(c) The Plan will receive no less than the fair market value of the
Alternative Investments at the closing of the proposed transaction;
(d) The fair market value of the Alternative Investments will be
determined by a qualified independent appraiser;
(e) All valuations will be updated by a qualified independent
appraiser on the date that the Sale is consummated;
(f) The Plan pays no commissions, fees or other expenses in
connection with the Sale;
(g) The Sale was not part of an arrangement, agreement, or
understanding designed to benefit a party in interest to the Plan and
is a result of the Plan's conversion from a ``traditional'' profit
sharing plan to a 401(k) plan;
(h) The Plan will reallocate $1,450.17 to the account balances of
its participants and beneficiaries, excluding the AIG, to reflect the
difference between the value assigned to the Note by the Plan trustee
on the date of the Plan conversion, and the value of the Note on that
same date as determined by the qualified independent appraiser;
(i) An independent fiduciary, who is not a party to the proposed
transaction,
(1) Determines, among other things, whether it is in the best
interest of the Plan to proceed with the sale of the Alternative
Investments;
(2) Reviews and approves the methodology used in the appraisal that
is being relied upon; and
(3) Ensures that such methodology is applied by the qualified
independent appraiser in determining the fair market value of the
Alternative Investments, as updated, on the day of the Sale; and
(j) The Plan has not waived or released and does not waive or
release any claims, demands, and/or causes of action which such Plan
may have in connection with the Sale.
Summary of Facts and Representations
1. Wolverine Bronze Company (Wolverine), a privately held non-
ferrous jobbing foundry, located in Roseville, Michigan, is the sponsor
of Wolverine Bronze Profit Sharing Plan and Trust (the Plan). The
Shareholders of Wolverine are: Richard A. Smith, Christopher S. Smith,
Robert J. Smith, William P. Smith, Jr., and Nicolas L. Smith. The Plan
was a ``traditional'' profit sharing plan maintained by Wolverine
before its conversion to a 401(k) plan effective January 1, 2010. Prior
to the conversion, the Plan's assets were invested in, among other
things, stocks, bonds, and mutual funds which were selected by the
discretionary trustees. The discretionary trustees also invested the
Plan's assets into a note receivable (the Note) for Robert O. Keller,
Jr., an unrelated third party, and royalty interests (ORRIs)\12\,
collectively known as the Alternative Investments. As of December 31,
2009 the Plan had approximately 104 participants and total assets of
approximately $6,282,474.95. The trustees of the Plan are Richard A.
Smith and Charles Arent.
---------------------------------------------------------------------------
\12\ According to the valuation completed by Andrew M. Malec,
Ph.D. of Gordon Advisors, an ORRI is an investment in which an
investor receives cash flow from oil sales resulting from production
in the oil well according to the ownership percentage, net of oil
well production tax, but does not pay for drilling or monthly
operating expenses of the well. In addition, the life of an ORRI
investment is perpetual (subject to the terms of the lease), changes
in the working interest holder will not affect the standing of the
interest holder of the royalties, and the owner of the royalty
interest benefits from future oil sales on any additional wells
drilled on the lease.
---------------------------------------------------------------------------
The conversion to a 401(k) plan was a result of the Plan sponsor's
determination that it would be in the best interest of the participants
to make elective deferrals and self direct investments. Participants
were given the option to select from a group of mutual funds
representing a broad range of investment alternatives, and also were
given the opportunity to have all or a portion of their account
invested in the Alternative Investments.
2. Following the Plan's conversion to a 401(k) plan, only 3
participants selected to invest in the Alternative Investments, which
were offered.\13\ The group of individuals who selected these
investments are Richard A. Smith (fiduciary and Chief Executive
Officer), William Smith (V.P. of Operations, prior to his termination
of employment on January 1, 2011) and Douglas Smith (V.P. of
Manufacturing, prior to his termination of employment on January 1,
2011)--these 3 individuals are brothers, and are collectively known as
the Alternative Investment Group (the AIG). The AIG determined that
they were not able to diversify their investments in the Plan so as to
minimize risk. The discretionary trustees then concluded that in order
for the AIG to fully participate in the new Plan design and minimize
fiduciary risk, the Alternative Investments should be liquidated so
that the proceeds may be reinvested in the investment offerings
provided under the Plan. As a result, the AIG proposes to purchase the
Alternative Investments from the Plan.
---------------------------------------------------------------------------
\13\ Prior to such conversion, the Department's Cincinnati
Regional Office conducted an investigation of the Plan and focused
on, among other things, the valuation of the ORRIs. As a result of
the investigation, the Plan modified its valuation of the ORRIs that
was used for purposes of valuing the individual account balances.
The applicant represents that this modification satisfied the
Regional Office's requirements, and that the Plan will use the same
modified valuation for the proposed transaction as was used for
other purposes including the conversion of the Plan from a
``traditional'' profit sharing plan to a 401(k) plan.
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3. The principal amount of the Note, dated June 1, 2007, was
$65,000.00. The Note bears interest on the unpaid principal balance at
the fixed rate of 10 percent per annum and is payable in equal monthly
installments of $1,381.06 which includes both principal and interest.
Payments under the Note commenced on July 1, 2007 and will continue
until a final installment equal to the total unpaid principal balance
is due on June 1, 2012. To date, all required payments on the Note have
been paid as due.
The Note was executed by the Plan and Mr. Robert O. Keller, Jr., an
unrelated third party, and secured by a lien interest on a 1980 Diesel
Truck owned by Mr. Keller. According to the applicant, the Plan has
incurred no costs in connection with the administration of the Note.
4. At the time of the conversion, a fair market value of $36,254.83
was assigned to the Note by the Plan trustee. The Note was recently
valued by Andrew Malec with Gordon Advisors, P.C., (Gordon Advisors)
located in Troy, Michigan, who has a PhD in economics. Mr. Malec used a
different methodology than originally used by the Plan trustees, and
determined at that time that a fair market value of $37,950.00 was
appropriate. Mr. Malec's calculation, which uses the present value of
the expected cash flows from the Note, results in an amount of
$1,450.17 more than the opening balances actually credited to the
participants and beneficiaries. The applicant represents that the
methodology used by Gordon Advisors for purposes of establishing the
value of the Note will be used for the proposed transaction. The
applicant further represents that the resulting $1,450.17 difference
between the value originally assigned to the Note by the trustee, as
compared to the value determined by Gordon Advisors, will be
reallocated to the participant and beneficiary account balances to
reflect the change in calculation for the opening balances.
The applicant represents Mr. Malec to be a qualified independent
appraiser with an expertise in valuing privately-held securities,
spanning across a broad range of industries. Mr. Malec's experience has
involved performing for
[[Page 25721]]
numerous purposes including acquisitions, fairness opinions, financial
reporting, gift and estate taxation, litigation, marital dissolution,
purchase price allocation, shareholder disputes, other tax and
corporate related matters, and shareholder planning. The previously
referenced cash flow methodology used by Mr. Malec takes into account
that the rate of return on a debt security is composed of a nominal
risk-free rate of interest \14\ plus several factors that reflect
inflation, the risk of the security, and the security's marketability.
As a result, Mr. Malec concluded that a 6.98% rate of return should
apply to the cash flow stream of the Note as of the valuation date. As
of December 22, 2010, the estimated fair market value of the Note is
$23,628.00. There were 18 remaining payments on the Note as of December
27, 2010.
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\14\ Mr. Malec selected this component of the rate of return
based on 1-Year U.S. Treasury Notes.
---------------------------------------------------------------------------
5. The ORRIs also were valued by Andrew Malec. Based on the
valuation of the ORRIs completed on February 9, 2010, the Plan
maintains investments in 23 ORRIs. These ORRIs represent interests in
various oil wells located within the state of Texas. The Plan
originally acquired the ORRIs on March 12, 1990 from Peter Nunez, an
unrelated third party, for the purchase price of $141,205.12. As of
December 31, 2009, the estimated fair market value of the ORRIs is
$555,000.00.
In determining the required rate of return for the ORRIs, the
Dividend Discount Model (DDM), an Income Approach, was used. The DDM is
a procedure for valuing the price of a stock by using predicted
dividends and discounting them back to present value. It is essentially
a method for valuing stocks based on the net present value of the
future dividends. Mr. Malec stressed the importance of an appropriate
rate of return commensurate with achieving the expected cash flow based
on the fact that investors typically place a great deal of weight upon
the expected future cash flow earned on the various ORRI investments.
Therefore, the appraiser represents that the DDM is an appropriate
methodology for valuing the ORRIs because it estimates the annual cash
flow to be received by the royalty interest (i.e. the ``stream of
payments'' to the investor) by taking into account the rate of return
proportionate with realizing this estimated cash flow.
6. The applicant proposes the sale of the Alternative Investments
from the Plan to the AIG through BDR Oil, LLC (BDR), a Michigan limited
liability company and entity owned by the AIG, at fair market value at
the time of the closing of the Sale. The Alternative Investments
constitute approximately 9% of the total Plan assets (as of December
31, 2009). The applicant represents that the Sale of the Alternative
Investments to BDR is in the best interests of the Plan because the
administrative burden of separately accounting for and valuing the
Alternative Investments would no longer be necessary, thereby reducing
the costs to the Plan. Further, the participants comprising the AIG
would be able to diversify their investments in the Plan, which will,
in turn, ensure that the Plan will have sufficient liquidity to pay the
benefits when due.
7. The applicant represents that the Sale will be a one-time
transaction for cash and that the Plan will incur no fees, commissions,
or other expenses in connection with the Sale. BDR will bear the costs
of the exemption application and of notifying interested persons. The
applicant further represents that to-date the valuations performed by
Mr. Malec were paid by Wolverine on behalf of the Plan for yearly
valuation purposes, but that the update of the valuation for the Sale
will be paid by BDR. The applicant also represents that the fees that
will be paid to Gordon Advisors by BDR represent less than 1% of the
firm's annual income.
8. It is also represented that a Plan fiduciary, Charles Arent, who
is neither a party to the proposed subject transaction nor a relation
to the AIG members, both has and will continue to review and approve
the methodology used by the qualified independent appraiser, thereby
ensuring that such methodology is properly applied, and that it is
prudent to go forward with the proposed transaction. With respect to
the Sale, the applicant represents that Richard A. Smith has recused
himself from his fiduciary responsibilities to the Plan.
9. The Plan has not waived or released and does not waive or
release any claims, demands, and/or causes of action which such Plan
may have against BDR and/or the AIG in connection with the sale of
assets to BDR.
10. In summary, the applicant represents that the proposed
transaction satisfies the criteria for an exemption under section
408(a) for the following reasons: (a) The Sale is a one-time
transaction for cash; (b) the terms and conditions of the Sale are at
least as favorable as those obtainable in an arm's length transaction
with an unrelated third party; (c) the Plan will receive no less than
the fair market value of the Alternative Investments at the closing of
the proposed transaction; (d) the fair market value of the Alternative
Investments are to be determined by a qualified independent appraiser;
(e) all valuations will be updated on the date that the Sale is
consummated; (f) the Plan pays no commissions, fees or other expenses
in connection with the Sale; (g) the Sale was not part of an
arrangement, agreement, or understanding designed to benefit a party in
interest to the Plan and is a result of the Plan's conversion from a
``traditional'' profit sharing plan to a 401(k) plan; (h) the Plan will
reallocate $1,450.17 to the account balances of its participants and
beneficiaries, excluding the AIG, to reflect the difference between the
value assigned to the Note by the Plan trustee on the date of the Plan
conversion, and the value of the Note on that same date by the
qualified independent appraiser; (i) the Plan fiduciary who is not an
interested party to the proposed transaction, Charles Arent, (1)
determines, among other things, whether it is in the best interest of
the Plan to proceed with the sale of the Alternative Investments; (2)
reviews and approves the methodology used in the appraisal that is
being relied upon; and (3) ensures that such methodology is applied by
the qualified independent appraiser in determining the fair market
value of the Alternative Investments, as updated, on the day of the
Sale; and (j) the Plan has not waived or released and does not waive or
release any claims, demands, and/or causes of action which such Plan
may have in connection with the Sale.
FOR FURTHER INFORMATION CONTACT: Breyana A. Penn of the Department,
telephone (202) 693-8546. (This is not a toll-free number.)
Verizon Communications, Inc. (Verizon) and Cellco Partnership, doing
business as Verizon Wireless (Verizon Wireless; collectively, the
Applicants)
Located in Basking Ridge, New Jersey
[Application Nos. L-11651 and L-11652]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and in accordance with the
procedures set forth in 29 CFR part 2570, Subpart B (55 FR 32836,
32847, August 10, 1990). If the exemption is granted, the restrictions
of sections 406(a) and (b) of the Act shall not apply to the
reinsurance of risks and the receipt of premiums therefrom by Exchange
Indemnity Company (EIC), a wholly-owned subsidiary of Verizon, in
connection with an insurance contract sold by Prudential Life Insurance
Company (Prudential) or any successor
[[Page 25722]]
insurance company to Prudential which is unrelated to Verizon, to
provide group-term life insurance to certain employees and retirees of
Verizon and Verizon Wireless under The Plan for Group Insurance
maintained by Verizon and the Verizon Wireless Health and Welfare
Benefits Plan maintained by Verizon Wireless (collectively, the Plans),
provided the following conditions are met:
(a) EIC--
(1) Is a party in interest with respect to the Plan by reason of a
stock or partnership affiliation with Verizon that is described in
section 3(14)(E) or (G) of the Act,
(2) Is licensed to sell insurance or conduct reinsurance operations
in at least one State as defined in section 3(10) of the Act,
(3) Has obtained a Certificate of Authority from the Insurance
Commissioner of its domiciliary state which has neither been revoked
nor suspended,
(4)(A) Has undergone and shall continue to undergo an examination
by an independent certified public accountant for its last completed
taxable year immediately prior to the taxable year of the reinsurance
transaction; or
(B) Has undergone a financial examination (within the meaning of
the law of its domiciliary State, Vermont) by the Insurance
Commissioner of Vermont within 5 years prior to the end of the year
preceding the year in which the reinsurance transaction occurred, and
(5) Is licensed to conduct reinsurance transactions by a State
whose law requires that an actuarial review of reserves be conducted
annually by an independent firm of actuaries and reported to the
appropriate regulatory authority;
(b) The Plans pay no more than adequate consideration for the
insurance contracts;
(c) In subsequent years, the formula used to calculate premiums by
Prudential or any successor insurer will be similar to formulae used by
other insurers providing comparable coverage under similar programs.
Furthermore, the premium charge calculated in accordance with the
formula will be reasonable and will be comparable to the premium
charged by the insurer and its competitors with the same or a better
rating providing the same coverage under comparable programs;
(d) The Plans only contract with insurers with a rating of A or
better from A.M. Best Company. The reinsurance arrangement between the
insurer and EIC will be indemnity insurance only, i.e., the insurer
will not be relieved of liability to the Plans should EIC be unable or
unwilling to cover any liability arising from the reinsurance
arrangement;
(e) No commissions, costs or other expenses are paid with respect
to the reinsurance of such contracts; and
(f) For each taxable year of EIC, the gross premiums and annuity
considerations received in that taxable year by EIC for life and health
insurance or annuity contracts for all employee benefit plans (and
their employers) with respect to which EIC is a party in interest by
reason of a relationship to such employer described in section 3(14)(E)
or (G) of the Act does not exceed 50% of the gross premiums and annuity
considerations received for all lines of insurance (whether direct
insurance or reinsurance) in that taxable year by EIC. For purposes of
this condition (f):
(1) The term ``gross premiums and annuity considerations received''
means as to the numerator the total of premiums and annuity
considerations received, both for the subject reinsurance transactions
as well as for any direct sale or other reinsurance of life insurance,
health insurance or annuity contracts to such plans (and their
employers) by EIC. This total is to be reduced (in both the numerator
and the denominator of the fraction) by experience refunds paid or
credited in that taxable year by EIC.
(2) all premium and annuity considerations written by EIC for plans
which it alone maintains are to be excluded from both the numerator and
the denominator of the fraction.
Summary of Facts and Representations
1. Verizon Communications, Inc. (Verizon) is a world-wide
telecommunications company. Verizon maintains The Plan for Group
Insurance, a welfare plan within the meaning of section 3(1) of the
Act, for the benefit of its employees. The Plan for Group Insurance
provides various types of welfare benefits and includes a group-term
life insurance component (basic, supplemental and dependent coverage),
which is fully insured.
2. (2) Verizon Wireless is a Delaware Partnership and is a
worldwide cellular telephone company. Verizon Wireless is a majority
owned subsidiary of Verizon. Verizon Wireless maintains the Verizon
Wireless Health and Welfare Benefits Plan, a welfare plan within the
meaning of section 3(1) of the Act, for the benefit of its employees.
The Verizon Wireless Health and Welfare Benefits Plan provides various
types of welfare benefits and includes a group-term life insurance
component (basic, supplemental and dependent coverage), which is fully
insured.
3. EIC is a 100% owned subsidiary of Verizon (EIC is 53% owned by
NYNEX and 47% owned by GTE, each of which are wholly owned subsidiaries
of Verizon). EIC is domiciled in the State of Vermont. As of September
30, 2010, EIC reported approximately $918 million in 2010 gross annual
premiums and $1,713 million in total assets. The Applicants represent
that for each taxable year of EIC, the total amount of premiums, both
for the subject reinsurance transactions as well as for any direct sale
or other reinsurance of life insurance and health insurance for all
employee benefit plans for which EIC is a party in interest by reason
of a relationship to the sponsoring employer described in section
3(14)(E) or (G) of the Act have not exceeded and will not exceed 50% of
the gross premiums received by EIC from all lines of insurance in that
taxable year.
4. The group-term life insurance component of The Plan for Group
Insurance has approximately 74,774 participants and beneficiaries and
the group-term life insurance component of the Verizon Wireless Health
and Welfare Benefits Plan has approximately 66,522 participants and
beneficiaries. The proposed reinsurance shall only apply with respect
to certain participants (the Affected Participants) in the Plans.
Affected Participants shall include: (a) Non-union represented
employees and their dependents; (b) retirees who were non-union
represented employees while employed, and their dependents; and (c)
union represented employees and retirees of Verizon Wireless.
5. The life insurance is currently underwritten by Prudential Life
Insurance Company (Prudential), an unaffiliated insurance carrier.
Verizon and Verizon Wireless have entered into a policy with Prudential
for 100% of this coverage. Verizon proposes to use its subsidiary, EIC,
to reinsure 100% of the risk through a reinsurance contract between EIC
and Prudential in which Prudential would pay 100% of the premiums to
EIC. The Applicants represent that there is no additional cost to the
Plan as a result of the reinsurance arrangement. From the Affected
Participants' perspective, they have a binding contract with
Prudential, which is legally responsible for the group-term life
insurance risk associated under the Plan. Prudential is liable to
provide the promised coverage regardless of the proposed reinsurance
arrangement.
6. The Applicants represent that the proposed transaction will not
in any way affect the cost to the insureds of the
[[Page 25723]]
group-term life insurance contracts, and the Plans will pay no more
than adequate consideration for the insurance. Verizon, Verizon
Wireless and/or EIC will not profit from the reinsurance arrangement at
the expense of the Plans or the Affected Participants. Also, the
Affected Participants are afforded insurance protection from Prudential
at competitive rates arrived at through arm's-length negotiations.
Prudential is rated ``A+'' by the A. M. Best Company, whose insurance
ratings are widely used in financial and regulatory circles. Prudential
has assets in excess of $667 billion. Prudential will continue to have
the ultimate responsibility in the event of loss to pay insurance
benefits to the employee's beneficiary. The Applicants represent that
EIC is a sound, viable company which is dependent upon insurance
customers that are unrelated to itself and its affiliates for premium
revenue.
7. The Applicants represent that the proposed reinsurance
transaction will meet all of the conditions of PTE 79-41 covering
direct insurance transactions: (a) EIC is a party in interest with
respect to the Plans (within the meaning of section 3(14)(G) of the
Act) by reason of stock affiliation with Verizon and Verizon Wireless,
which maintain the Plans.
(b) EIC is licensed to do business in the State of Vermont.
(c) EIC has undergone an examination by an independent certified
public accountant for its fiscal year ending December 31, 2009.
(d) EIC has received a Certificate of Authority from its
domiciliary State (as defined in Act section 3(10)), the State of
Vermont, which has neither been revoked nor suspended.
(e) The Plans will pay no more than adequate consideration for the
insurance. The proposed transaction will not in any way affect the cost
to the insureds of the group-term life insurance transaction.
(f) No commissions, costs or other expenses will be paid with
respect to the acquisition of reinsurance by Prudential from EIC.
(g) For each taxable year of EIC, the ``gross premiums and annuity
considerations received'' in that taxable year for group life and
health insurance (both direct insurance and reinsurance) for all
employee benefit plans (and their employers) with respect to which EIC
is a party in interest by reason of a relationship to such employer
described in section 3(14)(E) or (G) of the Act will not exceed 50% of
the ``gross premiums and annuity considerations received'' by EIC from
all lines of insurance in that taxable year. All of the premium income
of EIC comes from reinsurance. EIC has received no premiums for the
group-term life insurance in the past.
8. In summary, the Applicants represent that the proposed
transaction will meet the criteria of section 408(a) of the Act
because: (a) Plan participants and beneficiaries are afforded insurance
protection by Prudential, an ``A+'' rated group insurer, at competitive
market rates arrived at through arm's-length negotiations; (b) EIC is a
sound, viable insurance company which does a substantial amount of
public business outside its affiliated group of companies; and (c) each
of the protections provided to the Plans and the Affected Participants
and their beneficiaries by PTE 79-41 will be met under the proposed
reinsurance transaction.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 693-8546. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which, among other things, require a fiduciary
to discharge his duties respecting the plan solely in the interest of
the participants and beneficiaries of the plan and in a prudent fashion
in accordance with section 404(a)(1)(b) of the Act; nor does it affect
the requirement of section 401(a) of the Code that the plan must
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries, and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Signed at Washington, DC, this 2nd day of May, 2011.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2011-10999 Filed 5-4-11; 8:45 am]
BILLING CODE 4510-29-P