[Federal Register Volume 59, Number 71 (Wednesday, April 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8843]
[[Page Unknown]]
[Federal Register: April 13, 1994]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 94-30, et al.; Exemption Application
No. D-8865, et al.]
Grant of Individual Exemptions; Operating Engineers Pension
Trust, 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, DC. 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.
Operating Engineers Pension Trust (the Plan) Located in Pasadena,
California
[Prohibited Transaction Exemption No. 94-30; Application No. D-8865]
Exemption
The restrictions of section 406(a) 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 (D) of the Code, shall not apply to
the leasing by the Plan of mobile home lots (the Lots) at mobile home
parks (the Parks) owned and to be owned by the Plan to active
participants (the Actives) in the Plan who are parties in interest
thereto within the meaning of section 3(14)(H) of the Act because they
are employees of employers who contribute to the Plan, provided: (a)
leases with Actives will be on the same basis as transactions engaged
in with the general public, utilizing standard form lease agreements
and with rental rates determined according to the existing market; (b)
the transaction will cover only those Plan participants who are parties
in interest because they are employees of a contributing employer to
the Plan, and no Lots will be leased to Plan fiduciaries, officers,
directors or 10 percent shareholders of contributing employers to the
Plan or to persons who are parties in interest for any reason other
than that they are employees of a contributing employer; (c) the leases
ordinarily will be for relatively short, one year terms, and the Plan
will adjust rental rates annually based on experience with market
conditions; (d) no Lot will be leased to an Active unless the lease is
approved by Buss-Shelger Associates (the Manager), the independent
fiduciary who will also monitor such lease to assure that its terms,
and enforcement thereof, are at least as favorable to the Plan as those
the Plan could obtain in similar transactions with unrelated parties;
(e) neither Mr. Ronald L. Buss, President of the Manager, nor the
Manager is related to any employer who contributes to the Plan or to
the International Union of Operating Engineers or its Local Union No.
12 (collectively, the Union), and the Manager does not derive any of
its income from the Union or from any such employer; (f) no more than
50 percent of the Lots in the Parks will be leased to Actives; and (g)
no more than 1 percent of Plan assets will be involved in leases to
Actives.
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department
invited all interested persons to submit written comments and any
requests for a hearing on the proposed exemption. The applicant
represents that interested persons were provided with a copy of the
Notice, plus a copy of the supplemental statement (the Supplemental
Statement), as required pursuant to 29 CFR 2570.43(b)(2), either
through first class mailing of such documents or through publication of
such documents in the bi-monthly Union newsletter, ``News-Record.'' The
newsletter was also distributed to various Union offices and hiring
halls. All written comments and requests for a hearing were to have
been received by the Department by February 1, 1994, based on an
anticipated publication date of December 17, 1994, for the newsletter
containing the Notice and the Supplemental Statement. Subsequently, the
applicant notified the Department that the publication of the
newsletter had been delayed and that the newsletter was not actually
mailed to interested persons until January 5, 1994. In light of this
fact, the Department determined to extend the comment period on the
proposed exemption until February 28, 1994, to ensure that all
interested persons had sufficient time to comment on the proposed
exemption. In this regard, the Department required the applicant to
notify interested persons of the extended comment period by enclosing a
notice of extension of time to comment (the Notice of Extension of
Time) with each monthly report form mailed to contributing employers,
by asking employers to post the Notice of Extension of Time or
distribute it to employees, and by posting the Notice of Extension of
Time together with a copy of proposed exemption in all Union offices
and hiring halls. In a letter dated January 31, 1994, the applicant
notified the Department that it had completed notification to all
interested persons as required by the Department.
As of the close of the comment period on February 28, 1994, the
Department had received one letter from an interested person commenting
on the proposed exemption and requesting a hearing. In the opinion of
the commentator the transaction involved a highly speculative
investment in real property that would jeopardize the ability of the
Plan to provide stable retirement pension income to participants and
beneficiaries.
The Department forwarded a copy of the commentator's letter to the
applicant and requested that the applicant address in writing the
concerns raised by the commentator. In response, the applicant stated
that the general concern of the commentator regarding the Plan's
purchase of the Lots and construction of the Parks was not at issue in
the application, as relief was requested only for the lease of the Lots
to Actives who are parties in interest solely because they are
employees of contributing employers to the Plan. With respect to the
leasing of Lots to Actives by the Plan, the applicant points out that
no fiduciary or other party in interest except Actives will be allowed
to lease Lots from the Plan. Further, an independent fiduciary will be
required to review the leases to Actives and the number of such leases
will be limited. The transactions would involve a very small percentage
of the assets of the Plans. In the opinion of the applicant, the
requested exemption would make the Plan's investment more productive by
increasing the rental income to the Plan and would permit the Actives
to decide whether to live in one of the Parks, rather than being
prohibited from doing so.
With respect to the purchase of the Lots by the Plan and
construction of the Parks, the applicant maintains that such an
investment by the Plan was not a prohibited transaction and did not
require an exemption. In the opinion of the applicant, there is
substantial evidence in the application file which addresses the
propriety and attractiveness of the purchase by the Plan of the Lots
and the construction of the Parks, which took into account the Plan's
portfolio and the general investment objective to achieve the highest
rate of return commensurate with safety of principal over the long
term. In this regard, it is represented that the investment satisfied
the Plan guidelines requiring diversification and profitability, and
that the Board of Trustees made such determination, after considering
independent professional investment advice.
In addition to commenting on the transaction, the commentator
requested the Department schedule a hearing on the matter. The
Department notes that in its final regulation on procedures for filing
and processing prohibited transaction exemption applications, 29 CFR
2570.46, there is no provision for a hearing unless the exemption is
from the fiduciary self-dealing prohibitions of section 406(b) of the
Act. This exemption does not grant relief from section 406(b) of the
Act. Further, the Department does not believe that any issues have been
raised which would require the convening of a hearing.
Accordingly, after giving full consideration to the record,
including the comment by an interested person and the responses of the
applicant, the Department has determined to grant the exemption, as
described herein. In this regard, the comment submitted to the
Department has been included as part of the public record of the
exemption application. The complete application file, including all
supplemental submissions received by the Department, is made available
for public inspection in the Public Documents Room of the Pension
Welfare Benefits Administration, room N-5507, U.S. Department of Labor,
200 Constitution Avenue NW., Washington, DC 20210.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the Notice published on October 29, 1993, 58 FR 58190.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883 (This is not a toll-free number.)
CS Holding and its Worldwide Affiliates Headquartered in Zurich,
Switzerland
[Prohibited Transaction Exemption 94 -31; Exemption Application No.
D-9605]
Exemption
CS Holding and each of its affiliates (collectively, CS Holding),
except Banque Leu Luxembourg (BLL), shall not be precluded from
functioning as a ``qualified professional asset manager'' pursuant to
Prohibited Transaction Exemption 84-14 (PTE 84-14, 49 FR 9494, March
13, 1984) solely because of a failure to satisfy Section I(g) of PTE
84-14, as a result of affiliation with BLL, including any current or
future affiliate of CS Holding, other than BLL, which is, or in the
future may become, eligible to serve as a QPAM under PTE 84-14.
Effective Date: This exemption is effective as of December 17, 1993.
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 February 9, 1994 at 59 FR
6049.
WRITTEN COMMENTS: The Department received one written comment and no
requests for a hearing. The comment was submitted on behalf of the
applicant, CS Holding, in supplementation of the Notice of Proposed
Exemption (the Notice). The matters addressed in the applicant's
comment are summarized as follows:
1. The Notice indicated that the location of CS Holding and
Affiliates is New York, New York. The applicant states that the
corporate headquarters of CS Holding is actually located in Zurich,
Switzerland, and its affiliates operate in a variety of worldwide
locations. Accordingly, the exemption heading has been amended to
include this information.
2. The operative exemption language in the Notice concluded with
the following phrase: ``* * * including any current or future affiliate
of CS Holding, other than BLL, which in the future may become eligible
to serve as a QPAM under PTE 94-14.'' The applicant requests, in the
interests of completeness and accuracy, that the words ``is or'' be
inserted between the words ``which'' and ``in''. In response to this
request, the operative exemption language in the final exemption
includes the requested insertion, and the phrase reads as follows: ``*
* * including any current or future affiliate of CS Holding, other than
BLL, which is, or in the future may become, eligible to serve as a QPAM
under PTE 94-14.''
3. The Notice states that the proposed exemption was requested ``on
behalf of CS Holding affiliates that are banks, investment banking
firms, or registered investment advisers which are or may become
eligible to serve as QPAMs.'' The applicant comments that it is more
accurate to state that the proposed exemption was requested ``on behalf
of CS Holding affiliates that include banks, investment banking firms,
and investment advisers which are, or may become, eligible to serve as
QPAMs.''
After consideration of the entire record, the Department has
determined to grant the exemption, as supplemented by the applicant's
comment.
FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,
telephone (202) 523-8881. (This is not a toll-free number.)
Richmond, Fredericksburg and Potomac Railway Company Employee Thrift
and Investment Plan (the Plan) Located in Richmond, Virginia
[Prohibited Transaction Exemption 94-32; Application No. D-9578]
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 a guaranteed investment
contract, No. GA-5250 (the GIC) issued by Mutual Benefit Life Insurance
Company of New Jersey (Mutual Benefit) to the Richmond, Fredericksburg
& Potomac Corporation (RFP), 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 GIC at the time of the sale; (3) the Plan's
trustee, acting as independent fiduciary for the Plan, has determined
that the proposed sale price is not less than the current fair market
value of the GIC; and (4) the Plan's trustee has determined that the
proposed 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 February 9, 1994 at 58 FR
6074.
FOR FURTHER INFORMATION CONTACT: Ms. Virginia J. Miller of the
Department, telephone (202) 219-8971. (This is not a toll-free
number.).
Stroh Brewery Company, Inc. Salaried Employees' Thrift Plan (the Plan)
Located in Detroit, Michigan
[Prohibited Transaction Exemption 94-33; Exemption Application No. D-
9580]
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 cash sale (the Sale) of certain pooled fund units from
the Plan to Stroh Brewery Company, Inc., a party in interest with
respect to the Plan.
This exemption is conditioned upon the following requirements: (1)
all terms and conditions of the Sale are at least as favorable to the
Plan as those obtainable in an arm's-length transaction; (2) the Sale
is a one-time cash transaction; (3) the Plan is not required to pay any
commissions, costs or other expenses in connection with this
transaction; and (4) the Plan receives a sales price equal to the fair
market value of its residual interest in the Morgan Guaranty Trust
Company of New York Convertibles Fund.
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 February 9, 1994 at 59 FR
6049.
EFFECTIVE DATE: This exemption is effective as of December 31, 1993.
FOR FURTHER INFORMATION CONTACT: Kathryn Parr 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 8th day of April, 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 94-8843 Filed 4-12-94; 8:45 am]
BILLING CODE 4510-29-P