[Federal Register Volume 78, Number 100 (Thursday, May 23, 2013)]
[Notices]
[Pages 30936-30937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-12236]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Exemption From Certain Prohibited Transaction Restrictions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Grant of Individual Exemption.
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SUMMARY: This document contains an exemption issued by the Department
of Labor (the Department) 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: 2013-07, The Mo-Kan Teamsters
Apprenticeship and Training Fund (the Fund) L-11720.
SUPPLEMENTARY INFORMATION: A notice was published in the Federal
Register of the pendency before the Department of a proposal to grant
such exemption. The notice set forth a summary of facts and
representations contained in the application for exemption and referred
interested persons to the application for a complete statement of the
facts and representations. The application has been available for
public inspection at the Department in Washington, DC. The notice also
invited interested persons to submit comments on the requested
exemption to the Department. In addition, the notice stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicant has represented that it has
complied with the requirements of the notification to interested
persons. No requests for a hearing were received by the Department.
Public comments were received by the Department as described in the
granted exemption.
The notice of proposed exemption was issued and the exemption is
being granted solely by the Department because, 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 proposed to the Secretary of Labor.
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part
2570, Subpart B (76 FR 66637, 66644, October 27, 2011) \1\ and based
upon the entire record, the Department makes the following findings:
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\1\ The Department has considered exemption applications
received prior to December 27, 2011 under the exemption procedures
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August
10, 1990).
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(a) The exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its
participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants
and beneficiaries of the plan.
The Mo-Kan Teamsters Apprenticeship and Training Fund (the Fund)
Located in Kansas City, Missouri
[Prohibited Transaction Exemption 2013-07; Exemption Application No. L-
11720]
Exemption
The restrictions of sections 406(a)(1)(A) and (D) of the Act shall
not apply to the purchase (the Purchase) by the Fund of certain real
property located in Kansas City, Missouri (the Property) from Jim
Kidwell Construction, a party in interest with respect to the Fund;
provided that the following conditions are satisfied:
(a) The terms and conditions of the Purchase are at least as
favorable to the Fund as those obtainable in an arm's length
transaction with an unrelated party;
(b) The Purchase is a one-time transaction for cash;
(c) The Fund pays the lesser of $1,500,000 or the fair market value
of the Property, as of the date of the Purchase, as determined by a
qualified, independent appraiser (the Appraiser);
(d) The Fund's fiduciaries (the Trustees) review and approve the
methodology used by the Appraiser, ensure that such methodology is
properly applied in determining the fair market value of the Property,
and determine whether it is prudent to go forward with the transaction;
and
(e) The Fund pays only reasonable closing costs with respect to the
Purchase that a similarly situated buyer would customarily pay in a
similar transaction.
Written Comments
The Department invited all interested persons to submit written
comments with respect to the notice of proposed exemption on or before
February 10, 2013. During this comment period, the Department received
one written comment. To ensure that all participants had been given the
opportunity to comment, the Department decided to extend the comment
period until March 21, 2013. During the second comment period, the
Department received three written comments from Fund participants.
Of the four comments received by the Department, one commenter
disapproved of the proposed transaction because he thought it might
affect his benefits. The three comments that were substantive were, in
part, concerned with the value of the Property. The participants'
comments, as well as the responses to these comments by the Appraiser
and the Trustees, are described below.
Comments Regarding Property Overvaluation and Purchase Not Negotiated
in Good Faith
In three comment letters, the participants noted that the
Property's value was overstated. One commenter attached an online
document (the Document) that placed the fair market value of the
Property at $300,000.00, as of January 17, 2013. The commenter further
stated that the Purchase was not negotiated in good faith.
The Appraiser's Response
The Appraiser reviewed the comments relating to the value of the
Property and the Document. The Appraiser states that he disagrees with
the participants' assertion that the Property is overvalued. The
Appraiser also explains that the Document only depicts the value of a
single parcel of land rather than the twelve parcels comprising the
Property.
In addition, the Appraiser notes that the Document was obtained
from the Jackson County, Missouri Web site, containing the tax
assessment information. According to the Appraiser, this information
has no relevance for the purposes of assessing market value and is not
a source of information that the Appraiser relied on or should rely on.
Comment Regarding Union Voting and Fund Assets Invested in the Property
Another participant inquired about the lack of information offered
to the union membership and why the transaction was not subject to a
union vote. The participant also questioned
[[Page 30937]]
the knowledge and experience of the Fund with managing a mine that is
located on the Property. Further, the participant questioned whether it
is prudent to spend 83% of the Fund's cash on the Purchase.
Trustees' Response
In response to the participant's comments, the Trustees note that
the decision to purchase the Property was a financial decision made by
the Trustees for the benefit of the participants and beneficiaries of
the Fund. The Trustees state further that all of the Trustees are
familiar with the matters regarding the Purchase. According to the
Trustees, the decision to purchase the Property by the Fund is not a
union matter or a decision that the union or its members were required
or permitted to make.
With respect to the knowledge and experience of the Fund to manage
the mine, the Trustees state that there is no requirement that the Fund
manage the mine or conduct mining activities on the Property. The
Trustees point out that the Property will be used for the purpose of
truck driving, heavy equipment training, and equipment storage
underneath the surface where the mine is located. The Trustees explain
that they expect to oversee and employ proper personnel to handle
issues of maintenance when necessary.
In response to the participant's comment regarding the high
percentage of the Fund's assets involved in this Purchase, the Trustees
represent that the decision to purchase the Property was made with due
diligence as established and required by the regulations under the Act.
The Trustees represent further that based on this due diligence, they
have determined that purchasing the Property is in the Fund's best
interest. The Trustees note that the Fund will be able to make any
changes or additions to meet future training requirements of the
Training Fund and its apprenticeship program without the consent or
outside interference from other parties. In addition, the Fund will
acquire an equity interest in the Property which will, in return, have
a future value as a plan asset, and the Purchase is a transaction that
is customary for similarly situated employee benefit plans.
After giving full consideration to the entire record, including the
written comments, the Department has decided to grant the exemption, as
described above. The complete application is made available for
inspection in the Public Disclosure Room of the Employee Benefits
Security Administration, Room N-1513, U.S. Department of Labor, 200
Constitution Ave. NW., Washington, DC 20210.
For a complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the proposed exemption published in the Federal Register on December
28, 2012 at 77 FR 76776.
FOR FURTHER INFORMATION CONTACT: Mr. Asrar Ahmed of the Department,
telephone (202) 693-8557. (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 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) This exemption is supplemental to and not in derogation of, any
other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional 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
(3) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2013-12236 Filed 5-22-13; 8:45 am]
BILLING CODE 4510-29-P