[Federal Register Volume 59, Number 33 (Thursday, February 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3606]
[[Page Unknown]]
[Federal Register: February 17, 1994]
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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 94-15, et al.; Exemption Application
No. D-9460, et al.]
Grant of Individual Exemptions; G. Robert Taylor Individual
Retirement Account, et al.
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
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SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
Notices were published in the Federal Register of the pendency
before the Department of proposals to grant such exemptions. The
notices set forth a summary of facts and representations contained in
each application for exemption and referred interested persons to the
respective applications for a complete statement of the facts and
representations. The applications have been available for public
inspection at the Department in Washington, D.C. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are being granted solely by the Department because, effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR
47713, October 17, 1978) 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 (55 FR 32836, 32847, August 10, 1990) and based upon
the entire record, the Department makes the following findings:
(a) The exemptions are administratively feasible;
(b) They are in the interests of the plans and their
participants and beneficiaries; and
(c) They are protective of the rights of the participants and
beneficiaries of the plans.
G. Robert Taylor Individual Retirement Account (the Account) Located in
Chattanooga, Tennessee
[Prohibited Transaction Exemption 94-15; Exemption Application No. D-
9460]
Exemption
The sanctions resulting from the application of section 4975 of the
Code, by reason of section 4975(c)(1) (A) through (E) of the Code,
shall not apply to the sale for cash of certain shares of stock from
the Account to R. Scott Taylor, a disqualified person with respect to
the Account, provided that the following conditions are met:
1. The fair market value of the stock is established by an
appraiser independent of G. Robert Taylor;
2. The buyer pays no less than current fair market value for the
stock;
3. The transaction is entirely for cash; and
4. The Account pays no fees or commissions in regard to the sale.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on December 29, 1993, at 58
FR 68957.
FOR FURTHER INFORMATION CONTACT: Paul Kelty of the Department,
telephone (202) 219-8883. (This is not a toll-free number.)
Money Purchase Retirement Plan of Local 567, I.B.E.W. (the Plan)
Located in Falmouth, Maine
[Prohibited Transaction Exemption 94-16; Exemption Application D-9465]
Exemption
The restrictions of section 406(a), 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) through (E) of the Code,
shall not apply to the lease (the Lease) of 360 square feet of office
space (the Office Space) in a commercial office building located in
Falmouth, Maine, to the Plan by the Local No. 567, International
Brotherhood of Electrical Workers (I.B.E.W.), Building Corporation (the
Building Corporation), a corporation which is wholly-owned by the Local
No. 567 of the I.B.E.W., AFL-CIO (the Union), a party in interest with
respect to the Plan.
This exemption is conditioned upon the following requirements: (a)
The terms of the Lease are at least as favorable to the Plan as those
obtainable in an arm's-length transaction with an unrelated party; (b)
an independent, qualified appraiser determines annually the fair market
rental value of the Office Space; (c) the Lease payments are adjusted
annually by an independent, qualified fiduciary, to assure that such
Lease payments are not greater than the fair market rental value of the
Office Space; (d) the independent, qualified fiduciary determines that
the transaction is appropriate for the Plan and in the best interests
of the Plan's participants and beneficiaries; and (e) the independent,
qualified fiduciary monitors the transaction and the conditions of the
exemption and takes whatever action is necessary to enforce the Plan's
rights under the Lease.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on December 3, 1993 at 58 FR
64013.
FOR FURTHER INFORMATION CONTACT: Kathryn Parr of the Department,
telephone (202) 219-8971. (This is not a toll-free number.)
Scios Nova Inc., Scios Nova Inc. 401(k) Plan (the Plan) Located in
Mountain View, CA
[Prohibited Transaction Exemption 94-17; Application No. D-9551]
Exemption
The restrictions of sections 406(a), 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) through (E) of the Code
shall not apply to the sale by the Plan of Group Annuity Contract, No.
GA-10,021 (the GAC) issued by Mutual Benefit Life Insurance Company
(Mutual Benefit) to Scios Nova Inc. (the Employer), a party in interest
with respect to the Plan; provided the following conditions are
satisfied: (1) The sale is a one-time transaction for cash; (2) the
Plan receives no less than the fair market value of the GAC at the time
of the sale; (3) the Plan's trustee, acting as independent fiduciary
for the Plan, has determined that the sale price is not less than the
current fair market value of the GAC; and (4) the Plan's trustee has
determined that the transaction is appropriate for and in the best
interests of the Plan and its participants and beneficiaries.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on December 17, 1993 at 58
FR 66029.
FOR FURTHER INFORMATION CONTACT: Ms. Virginia J. Miller of the
Department, telephone (202) 219-8971. (This is not a toll-free
number.).
Local No. 60 Health and Welfare Fund (the Plan) Located in Leominster,
Massachusetts
[Prohibited Transaction Exemption 94-18; Exemption Application No. L-
9526]
Exemption
The restrictions of sections 406(a), 406 (b)(1) and (b)(2) of the
Act shall not apply to the cash sale of a parcel of real property (the
Property) by the Plan to the New England Joint Board of the Retail,
Wholesale and Department Store Union, AFL-CIO, for the greater of (1)
$170,000 in cash or (2) the fair market value of the Property as of the
date of the sale, provided the following conditions are satisfied: (a)
the purchase price is not less than the fair market value of the
Property on the date of the sale; and (b) the fair market value of the
Property is determined by a qualified, independent appraiser as of the
date of the sale.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on December 17, 1993 at 58
FR 66032.
WRITTEN COMMENTS AND HEARING REQUESTS: The Department received one
comment with respect to the proposed exemption, but it did not address
any issues relating to the subject transaction. The Department received
no requests for a hearing with respect to the proposed exemption.
Accordingly, the Department has determined to grant the exemption
as proposed.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Penn Mutual Life Insurance Company (Penn Mutual), Located in
Philadelphia, Pennsylvania, The Pennsylvania Trust Company (PTC),
Located in Radnor, Pennsylvania; Independence Capital Management, Inc.
(ICMI), Located in Horsham, Pennsylvania
[Prohibited Transaction Exemption 94-19; Application Nos. D-9194, D-
9195, D-9196]
Exemption
Section I. Covered Transactions
The restrictions of section 406(a)(1) (A) through (D) and section
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) through (E) of the Code, shall not apply to: (1) The
extension of credit by Penn Mutual, the sponsor and third party
guarantor of an investment product involving a guaranteed investment
contract (GIC), to a plan invested in the GIC pursuant to the terms of
its participation in the Independence Stable Asset Trust (Stable Asset
Trust); (2) the sale of the assets of a closed-end collective
investment fund (Fund) which is part of the Stable Asset Trust to Penn
Mutual upon termination of the Fund, or in connection with a non-
benefit withdrawal from the Fund; (3) the transfer of a Fund's assets
to Penn Mutual upon termination of the Fund, or in connection with a
non-benefit withdrawal from the Fund; and (4) the operation of the
Stable Asset Trust in accordance with the letter agreement between Penn
Mutual and PTC.
The exemption is subject to the following conditions which are set
forth below in Section II.
Section II. General Conditions
The relief provided under Section I is available only if the
following conditions are met:
1. The decision to invest in a Fund will be made by a plan
fiduciary who is responsible for and knowledgeable regarding the
investment of plan assets in GICs and similar investment products and
who is independent of Penn Mutual, PTC, and ICMI and any affiliates of
such entities (the Independent Fiduciary).
2. Prior to a plan's investment in a Fund, the Independent
Fiduciary for such plan receives the following written disclosures:
(a) All material facts concerning the structure, operation and
investment objectives of the Fund including:
i. A copy of the Supplement creating the Fund in which the plan
intends to invest which identifies the proposed investment portfolio of
the Fund (the Supplement), the Fund Commencement Date and the Scheduled
Fund Termination Date, the date projected for the funding of all
investments to be made in the Fund, the guaranteed rate of return for
the Fund, and any other material terms of the Fund;
ii. The confirmation document which confirms the plan fiduciary's
written approval of matters set forth in the Supplement;
iii. The Independence Stable Asset Trust Participant Investment
Agreement;
iv. The Declaration of Trust of the Short Term Investment Fund of
the Pennsylvania Trust Company for Employee Benefit Accounts; and
v. The letter agreement between the Pennsylvania Trust Company and
the Penn Mutual Life Insurance Company (Letter Agreement).
(b) The corporate affiliation existing between Penn Mutual, PTC and
ICMI and either the amount of the compensation or the method of
calculation of the compensation paid to such entities.
3. Neither Penn Mutual nor any of its affiliates has discretionary
authority or control with respect to the decision to invest plan assets
in the proposed investment product described herein or render
investment advice (within the meaning of 29 CFR 2510.3-21(c)) with
respect to those assets.
4. The interest charged by Penn Mutual with respect to an amount
advanced by Penn Mutual to a plan for a benefit payment advance will be
100% offset by the returns realized with respect to the Stable Asset
Trust units held by the plan and no other interest costs or charges
will be associated with benefit payment advances.
5. Penn Mutual provides copies of the proposed and final exemption
as published in the Federal Register to each plan which invests in the
proposed investment product.
6. The fees paid to Penn Mutual, PTC, and ICMI will not be in
excess of ``reasonable compensation'' within the meaning of section
408(b)(2) of the Act and such fees cannot be increased during the term
of a Fund as the result of any action taken by Penn Mutual, PTC or
ICMI.
7. Penn Mutual maintains or causes to be maintained, for a period
of six years, the records necessary to enable the persons described in
paragraph (8) of this section to determine whether the conditions of
this exemption have been met, except that (a) a prohibited transaction
will not be considered to have occurred if, due to circumstances beyond
the control Penn Mutual or its agents, the records are lost or
destroyed prior to the end of the six year period, and (b) no party in
interest other than Penn Mutual shall be subject to the civil penalty
that may be assessed under section 502(i) of the Act, or to the taxes
imposed by section 4975 (a) and (b) of the Code, if the records are not
maintained, or are not available for examination as required by
paragraph (8) below.
(8)(a). Except as provided in section (b) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to in paragraph 7 of this section
shall be unconditionally available at their customary location during
normal business hours by:
(1) Any duly authorized employee or representative of the
Department or Internal Revenue Service (the Service);
(2) Any fiduciary of an investing Plan or any duly authorized
representative of such fiduciary;
(3) Any contributing employer to an investing Plan or any duly
authorized employee or representative of such employee; and
(4) Any participant or beneficiary, any investing Plan, or any duly
authorized representative of such participant or beneficiary.
(b) None of the persons described above in subparagraph (2)-(4) of
this paragraph (8) shall be authorized to examine the trade secrets of
Penn Mutual or its affiliates or commercial or financial information
which is privileged or confidential.
The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application are true and complete, and that the application accurately
describes all material facts which are the subject of this exemption.
For purposes of this exemption, affiliate means
(a) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with such other person;
(b) Any officer, director or partner, in such other person; and
(c) Any corporation or partnership of which such other person is an
officer, director or partner.
Control means the power to exercise a controlling influence over
the management or policies of a person other than an individual.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on November 15, 1993 at 58
FR 60219.
Written Comments: The Department received one written comment and
no requests for hearing. The comment was submitted on behalf of the
applicants Penn Mutual, PTC and ICMI. The issues addressed in the
comment and the Department's responses are summarized as follows:
1. The applicants request that the first sentence of Section I.
Covered Transactions section of the Exemption be revised to include the
following phrase at the end of subsequent (2) and (3) ``or in
connection with a non-benefit withdrawal from the Fund,''. The
applicants represent that the added phrase is intended to reflect the
fact that it is contemplated that there may be sales of assets of a
Fund which form a part of the Stable Asset Trust to Penn Mutual in
connection with a non-benefit withdrawal from the Fund by a
participating plan. Such sales are authorized in section 5.6(e) of the
declaration of trust for the Stable Asset Trust. In accordance with the
applicants' request the Department has included the above-referenced
phrase at the end of subsections (2) and (3) of Section I of the final
exemption.
2. Paragraph 1 of Section II of the proposed exemption states that
the decision to invest in a Fund will be made by a plan fiduciary who
is responsible for and knowledgeable regarding the investment of plan
investments in GICs and similar investment products. Similarly,
paragraph 15(a) of the Summary of Facts and Representations section of
the proposed exemption states that the applicants represent that
investment of a Plan's assets in a Fund will be made and approved by a
plan fiduciary who is responsible for and knowledgeable regarding the
investment of plan assets in guaranteed investment contracts and
similar products.
The applicants wish to clarify that this condition will be
satisfied by an express representation that will be required to be made
by the Plan's independent fiduciary under the Independence Stable Asset
Trust Participant Investment Agreement.
3. The applicants have noted two factual errors in paragraph 1 of
the Summary of Facts and Representation section of the proposed
exemption. The correct name of the affiliate listed in the proposed
exemption as ``Penn Assurance and Annuity Company'' is ``Penn Insurance
and Annuity Company.'' Secondly, as of December 31, 1992, Penn Mutual
had $6.9 billion in consolidated assets and not $46.9 billion as
reported in the proposed exemption.
4. Paragraph 10 of the Summary of Facts and Representations section
of the proposed exemption includes a description of the non-benefit
withdrawal provisions of the synthetic GIC product. The description
includes statements to the effect that the withdrawing plan would be
subject to a surrender charge and that there would be a credit against
the amount of the surrender charge owing based on the excess of the
market value of the units of the Fund held by the Plan over the Plan
Account Amount as of such date.
The applicants represent that there may be cases where no surrender
charges will be applied with respect to non-benefit withdrawals and
also there may be circumstances where surrender charges will be applied
and will not be subject to any offset. Thus, the word ``would'' as
noted above should be changed to ``may''. These provisions, in each
case, however, will be determined and approved by the Plan fiduciary at
the Fund's inception.
5. Paragraph 11 of the Summary of Facts and Representations section
of the proposed exemption includes a reference to paragraph 12, which
does not appear to relate to the substance of that paragraph. The
Department notes that the paragraph labeled ``12'' was incorrectly
identified in the Federal Register and the designation for paragraph 13
omitted. As corrected, paragraphs 12 and 13 read as follows.
12. PTC, at its discretion, will be entitled at a Fund's
Termination Date to sell any one or more of the Fund assets to Penn
Mutual for a cash price sufficient to obtain net proceeds equal to the
aggregate of the Plan Account Amounts of plans holding units in the
Fund. The obligations of the parties under these arrangements will be
netted against one another, resulting in a ``swapping-out'' of the
entire remaining portfolio at an amount equal to the aggregate Plan
Account Amounts.
13. Penn Mutual's fee for its minimum yield, liquidity guarantees
and Plan Account Amount assurances will be an amount computed on and
payable as of pre-set quarterly dates from each Fund. The fee will be
equal to the product of the cost of the remaining invested assets in
the Fund adjusted in accordance with generally accepted accounting
principles for amortization of premium and accretion of discount, times
the Penn Mutual Quarterly Compensation Percentage specified in the
applicable Fund Supplement.
* * * * *
After consideration of the entire record, including the comment,
the Department has determined to grant the exemption as amended in the
manner described above.
For Further Information Contact: Ms. Lyssa E. Hall of the Department,
telephone (202) 219-8971. (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 exemptions 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) These exemptions are 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 these exemptions is subject to the express
condition that the material facts and representations contained in each
application are true and complete and accurately describe all material
terms of the transaction which is the subject of the exemption. In the
case of continuing exemption transactions, if any of the material facts
or representations described in the application change after the
exemption is granted, the exemption will cease to apply as of the date
of such change. In the event of any such change, application for a new
exemption may be made to the Department.
Signed at Washington, DC, this 10th day of February 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 94-3606 Filed 2-16-94; 8:45 am]
BILLING CODE 4510-29-P