[Federal Register Volume 60, Number 228 (Tuesday, November 28, 1995)]
[Notices]
[Pages 58645-58651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28911]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-103; Exemption Application No. D-
09611, et al.]
Grant of Individual Exemptions; General Motors, et al.
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of Individual Exemptions.
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[[Page 58646]]
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.
General Motors Retirement Program for Salaried Employes; General Motors
Hourly Rate Employes Pension Plan; the Saturn Individual Retirement
Plan for Represented Team Members; Saturn Personal Choices Retirement
Plan for Non-Represented Team Members; and Employees' Retirement Plan
for GMAC Mortgage Corporation (collectively, the Plans) Located in New
York, New York
[Prohibited Transaction Exemption No. 95-103; Application Nos. D-09611,
D-09612, and D-09809]
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 1 shall not
apply, effective May 21, 1993, to the purchase by a partnership (the
Partnership) of a parcel of improved real property (the Property)
located in Washington, DC, from Collin Equities, Inc. (the Seller), a
party in interest with respect to the Plans, pursuant to an agreement
which provided that the Plans would invest in the Partnership upon
purchase of the Property, provided the following conditions are met:
\1\ For purposes of this exemption reference to specific
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 of the purchase of the Property were no less
favorable to the Plans than those negotiated at arm's length in similar
circumstances with unrelated third parties;
(b) the fair market value of the Property was determined by an
independent, qualified appraiser;
(c) the Plans paid no commissions or fees in regard to the
transaction; and
(d) prior to investing in the Partnership an independent, qualified
fiduciary acting on behalf of the Plans, reviewed and recommended
approval of the transaction and determined that the transaction was in
the best interest of the Plans and the participants and beneficiaries
of such Plans.
EFFECTIVE DATE: The exemption is effective retroactively, as of May 21,
1993.
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department
invited all interested persons to submit written comments and requests
for a hearing on the proposed exemption. All comments and requests for
hearing were due by September 29, 1995.
During the comment period, the Department received no requests for
a hearing but did receive one letter from an interested person
commenting on the exemption. With respect to this comment letter, the
Department forwarded a copy to the applicant and requested that the
applicant address in writing the concerns raised by the commentator. In
this regard, the commentator raised four points which the applicant
responded to in turn. A description of the comments and the applicant's
responses are summarized below.
The commentator first alleges that General Motors Investment
Management Corporation (GMIMCO) would ``make sure they take care of
themselves and their fiduciary agents before they look after the
interests of the participants.'' The applicant notes that the
commentator cites no specific factual basis for his concerns other than
an unsupported assertion that ``the Corporation provides a profitable
interest to those fiduciary agents who do business with them, so that
such agents will act in kind for GM, regardless of the potential harm
to the Plan participants.'' In response, the applicant reiterates the
fact that it was completely coincidental that the Seller happened to be
a party in interest with respect to the Plans in this transaction and
that it was not known that the Seller was a party in interest at the
time the initial offering price was formulated. The applicant further
states that at no time after the Seller was identified as a subsidiary
of a service provider with respect to the Plans until the offer was
first submitted to the Seller, did GMIMCO argue or urge in any way to
have the price increased. Further, the applicant asserts that GMIMCO
did not profit from the transaction. Accordingly, the applicant
maintains that there is nothing in the record to indicate an intent on
the part of GMIMCO to favor either itself or the Seller.
In his second comment, the commentator cites the bailout of the
Savings and Loan industry, arising from bad real estate investments, as
a precedent for his uncertainty that the transaction is in the best
interest of the participants. In addition, the commentator expresses
concern that the desire and intention of GMIMCO to make money
ultimately may result in a loss to the Plans and the participants and
beneficiaries of such Plans. In response, the applicant submits that
the experience of the Savings and Loan industry in the late 1980's is
not relevant to this application for exemption, except perhaps to the
extent that it may have helped lay the backdrop for a depressed real
estate market in the early 1990's that appears to have enabled the
Plans to make a
[[Page 58647]]
favorable investment for their real estate portfolio in entering this
transaction. Further, the applicant maintains that it has provided
ample information on the value of the Property as part of its
submissions in support of the exemption. While the applicant agrees
that while intentions to make a profit can result in losses, it does
not follow that the transaction which is the subject of this exemption
was imprudent or was undertaken in a way that was not protective of the
interest of the Plans.
In his third comment, the commentator objected to the fact that the
Property was only 55.2% leased, as of March 1, 1993. In this regard,
the applicant notes that the fact that the Property was newly
constructed and was not fully leased at the time of the purchase was
taken into account in its pricing strategy and resulted in a
substantially discounted price for the Property in relation to similar
fully-leased Class A office buildings in the same market. Further, the
applicant points out that the Property is now essentially 100 percent
(100%) leased, and has met or exceeded all expectations for its value.
Finally, the commentator notes that the transaction is ``not
entirely free from doubt, in part because of the dearth of authority on
what constitutes an indirect prohibited transaction, regardless of its
``arm's length negotiation.'' In response, the applicant requests that
the dearth of legal authority in this area and the admitted uncertainty
of a legal conclusion of applicant's counsel, should not penalize the
applicant for its decision to seek the Department's guidance or an
exemption to cover the transaction.
After giving full consideration to the entire record, including the
written comments by the commentator 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 and the
responses of the applicant have 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-5638, U.S.
Department of Labor, 200 Constitution Avenue N.W., Washington, D.C.
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 Friday, July 21, 1995, 60 FR 37677.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883 (This is not a toll-free number.)
Prudential Property Investment Separate Account (PRISA) and Prudential
Property Investment Separate Account II (PRISA II), Located in Newark,
NJ
[Prohibited Transaction Exemption No. 95-104; Application Nos. D-09845
and D-09846]
Exemption
The restrictions of section 406(a), 406(b)(1), and 406(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,2 shall not apply, effective December 31, 1995, to the
advanced commitment to provide an enhanced return and the payment of
such return by the Prudential Insurance Company of America (Prudential)
to various employee benefit plans (the Plan or Plans) on the assets of
such Plans which are invested either in PRISA and/or PRISA II (the
Account or Accounts), as of April 1, 1994, and which remain invested
for all or any portion of a twenty-one (21) month period, beginning
April 1, 1994, and ending December 31, 1995, (the Investment Period),
provided that the following conditions are met:
\2\ For purposes of this exemption, references to specific
provisions of Title I of the Act, unless otherwise specified, refer
also to the corresponding provisions of the Code.
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(1) the decision to invest funds in either or both of the Accounts
for all or a portion of the Investment Period has been and will be made
by fiduciaries of the Plans independent of Prudential;
(2) the amount of the enhanced return payment with respect to the
assets of the Plans that are invested in either or both of the Accounts
for only a portion of the Investment Period will be calculated in the
same manner as the amount of the enhanced return payment with respect
to the assets of the Plans that remain invested in either or both of
the Accounts for the entire Investment Period;
(3) the enhanced return will be derived by comparing the cumulative
total return for the Investment Period reported by the expanded NCREIF
Property Index (the Index) with the cumulative total return of PRISA or
PRISA II for the same period;
(4) the Plans will obtain an enhanced rate of return (but not more
than 200 basis points) for amounts invested in one or both of the
Accounts during all or any portion of the Investment Period, if the
cumulative total investment return of such Account for such Investment
Period is less than that reported for the Index;
(5) the payments, if any, of enhanced return will be made by
Prudential to investors in the Accounts not later than thirty (30) days
following the final determination of the amounts owed;
(6) every property held by the Accounts is individually valued at
least once during the Investment Period and thereafter will be valued
at least once in each calendar year by an independent qualified
appraiser;
(7) a valuation policy committee, consisting of representatives
from an valuation management firm (the Valuation Management Firm),
Prudential Real Estate Investors (PREI), the interim and permanent
advisory councils (the Advisory Council or Advisory Councils) composed
of investors in PRISA and PRISA II and their consultants, and other
clients of PREI, will meet at least quarterly and set valuation policy
for the Accounts;
(8) the Valuation Management Firm, an independent third party, will
be responsible for retaining (and terminating) all appraisal firms
which value the properties in the Accounts; reviewing all appraisals
generated by such appraisal firms; and collecting, reviewing, and
distributing any information needed by such appraisal firms to appraise
the properties in the Accounts;
(9) the Plans invested in the Accounts who receive the enhanced
return will incur no additional cost or risk in connection with the
transaction;
(10) in connection with the determination of enhanced return
payments, no upward adjustment will be made by Prudential to the value
reported by an external independent appraiser of any Property in PRISA
and PRISA II without the concurrence of the Valuation Management Firm;
(11) any required state insurance regulatory approvals are obtained
for the transaction; and
(12) the Plans will receive the same treatment and proportional
payment under the enhanced return as any other investor in PRISA and
PRISA II.
EFFECTIVE DATE: This exemption will be effective on December 31, 1995.
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department
invited all interested persons to submit written comments and requests
for a hearing on the proposed exemption within forty-five (45) days of
the date of the publication of the Notice in the Federal Register on
September 13, 1995. All
[[Page 58648]]
comments and requests for hearing were due by October 30, 1995.
During the comment period, the Department received no requests for
hearing. However, the Department did receive a comment letter from
Prudential, dated September 20, 1995. In this letter, Prudential
requested a clarification of the meaning of one of the operant
conditions of the proposed exemption and suggested that certain
revisions to the Summary of Facts and Representations (SFR) would more
accurately describe the transactions.
With respect to Prudential's requested clarification of the operant
language of the exemption, on page 47594, column 1, lines 35-40, the
sixth condition in the Notice reads as follows: ``Every property held
by the Accounts is individually valued at least once during the
Investment Period and thereafter will be valued at least once in each
calendar year by an independent qualified appraiser.'' Prudential
represents that in accordance with current policy and practice and
state regulatory approvals, every property held by PRISA and PRISA II
is valued at least once in each calendar year by an independent
qualified appraiser. Accordingly, each such property will be valued at
least once during the Investment Period (i.e. the period April 1, 1994
through December 31, 1995). Although there are at present no plans to
seek regulatory approval to change the current policy and practice of
obtaining independent valuations at least annually, it is Prudential's
understanding that the above-quoted language of condition six is not
intended to preclude future modification of this policy and practice.
The Department concurs in Prudential's understanding in this matter.
However, we do note that condition 6, which requires that every
property held by the Accounts be valued at least annually, must be met
until the successful completion of the payment of the enhanced return
by Prudential to the Plans which were invested in the Accounts on April
1, 1995, and remain invested in the Accounts for any portion of the
Investment Period.
With respect to Prudential's suggested revisions of the facts as
reflected in the SFR, on page 47595, column 3, lines 19-25, with regard
to the expanded Russell-NCREIF Property Index (the Index), the Notice
reads as follows: ``The Index is produced in partnership between
Russell Real Estate Consulting (a division of the Frank Russell
Company, an investment consulting firm) and the National Council of
Real Estate Investment Fiduciaries (NCREIF).'' Prudential has informed
the Department that, while the statement in the Notice correctly
identifies the parties responsible for the production of the Index
through the final quarter of 1994, commencing with the first quarter of
1995, the Index has been produced solely by NCREIF without
participation by Russell Real Estate Consulting and, accordingly, is
currently referred to as the NCREIF Property Index. The Department
concurs with this comment and has incorporated this change in the
reference to the Index in condition three of the operant language of
this exemption.
On page 47596, column 2, lines 52-58, regarding the PRISA and PRISA
II Advisory Councils, the Notice reads as follows: ``It is represented
that formal meetings of the Advisory Councils will be held quarterly
approximately thirty (30) days following the end of each quarter, with
additional meetings to be held at the discretion of the Advisory
Councils.'' Prudential has informed the Department that meetings of the
PRISA and PRISA II Advisory Councils are scheduled at the discretion of
each respective Advisory Council. In this regard, during 1994, both
Advisory Councils met more frequently than quarterly. During 1995, the
PRISA Advisory Council has met four times and is expected to have at
least one more meeting before year end. The PRISA II Advisory Council
has met once during 1995, and is expected to have at least one more
meeting before year end. Both Advisory Councils have the discretion to
schedule additional meetings. The Department concurs in this comment.
After giving full consideration to the entire record, including the
written comment from Prudential, the Department has decided to grant
the exemption, as described and concurred in above. In this regard, the
comment letter submitted by Prudential 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-5638, 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
Wednesday, September 13, 1995, at 60 FR 47593.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883 (This is not a toll-free number.)
Plumbers and Steamfitters Local No. 177 Health and Welfare Fund (the
Welfare Plan), and Plumbers and Steamfitters Local No. 177 Pension
Trust Fund (the Pension Plan; collectively, the Plans) Located in
Brunswick, Georgia
[Prohibited Transaction Exemption 95-105; Exemption Application Nos. L-
09927, D-09928 and L-09929]
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 (1) effective February 17, 1994, to the past sale by
the Welfare Plan of an office building located in Brunswick, Georgia
(the Office Building) to Plumbers and Steamfitters Local No. 177 (the
Union), a party in interest with respect to the Plans; and (2)
effective February 16, 1995, to the leases of space in the Office
Building by the Union to the Plans (the Leases); provided the following
conditions are satisfied:
(a) The purchase price paid by the Union for the Office Building
was no less than the fair market value of the Office Building as of the
date of the sale;
(b) All terms of the Leases are at least as favorable to the Plans
as those which the Plans could obtain in arm's-length transactions with
unrelated parties;
(c) Rents paid under the Leases do not exceed the fair market
rental values of the leased spaces;
(d) The interests of the Plans under the Leases for all purposes
are represented by a qualified independent fiduciary who monitors the
Leases and takes appropriate action to enforce the Union's compliance
with all Lease terms and conditions; and
(e) Within 60 days of the publication in the Federal Register of
this notice granting the exemption, the Union pays any excise taxes
applicable under section 4975(a) of the Code by virtue of the past
Leases for the period commencing February 17, 1994 to February 16,
1995.
EFFECTIVE DATE: This exemption is effective as of February 17, 1994
with respect to the sale of the Office Building, and February 16, 1995
with respect to the Leases.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on September 21, 1995 at 60 FR 49014.
[[Page 58649]]
FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
State Mutual Life Assurance Company of America (State Mutual) Located
in Worcester, MA
[Prohibited Transaction Exemption 95-106; Exemption Application No. D-
10008]
Exemption
Section I. Covered Transactions.
Effective October 16, 1995, 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 (a) the receipt of common stock of Allmerica
Financial Corporation, State Mutual's prospective sole owner, or (b)
the receipt of cash or policy credits, by or on behalf of an employee
benefit plan policyholder of State Mutual (the Plan), other than any
policyholder which is a Plan maintained by State Mutual or an affiliate
of State Mutual for its own employees (the State Mutual Plans), in
exchange for such policyholder's membership interest in State Mutual,
in accordance with the terms of a plan of reorganization (the
Demutualization Plan) adopted by State Mutual and implemented pursuant
to section 19E (Section 19E) of Chapter 175 of the Massachusetts
General Laws.
In addition, effective October 16, 1995, the restrictions of
section 406(a)(1)(E) and (a)(2) and section 407(a)(2) of the Act shall
not apply to the receipt and holding, by the Allmerica Financial Cash
Balance Pension Plan (the Allmerica Pension Plan), of employer
securities in the form of excess stock, in accordance with the terms of
the Demutualization Plan.
This exemption is subject to the conditions set forth below in
Section II.
Section II. General Conditions.
(a) The Demutualization Plan is implemented in accordance with
procedural and substantive safeguards that are imposed under
Massachusetts law and is subject to the review and supervision by the
Massachusetts Commissioner of Insurance (the Commissioner).
(b) The Commissioner reviews the terms of the options that are
provided to certain policyholders of State Mutual, which include, but
are not limited to the subject Plans and the State Mutual Plans (the
Eligible Policyholders), as part of such Commissioner's review of the
Demutualization Plan, and approves the Demutualization Plan following a
determination that such Demutualization Plan is not prejudicial to all
Eligible Policyholders.
(c) The Demutualization Plan is filed with the New York
Superintendent of Insurance (the Superintendent) who determines whether
the Demutualization Plan is fair and equitable to Eligible
Policyholders from New York.
(d) Each Eligible Policyholder has an opportunity to comment on the
Demutualization Plan and decide whether to vote to approve such
Demutualization Plan after full written disclosure is given such
Eligible Policyholder by State Mutual, of the terms of the
Demutualization Plan.
(e) Any election by an Eligible Policyholder which is a Plan
(including the State Mutual Plans), to receive stock, cash or policy
credits, pursuant to the terms of the Demutualization Plan is made by
one or more independent fiduciaries (the Independent Fiduciaries) of
such Plan and neither State Mutual nor any of its affiliates exercises
any discretion or provides investment advice with respect to such
election.
(f) In the case of the State Mutual Plans, where the consideration
is in the form of stock, the Independent Fiduciary--
(1) Elects the form of consideration that such Plans receive;
(2) Monitors, on behalf of such Plans, the acquisition and holding
of the stock;
(3) Makes determinations on behalf of such Plans with respect to
the voting, the continued holding or the disposition of such stock; and
(4) Disposes, in a prudent manner, shares of stock exceeding the 10
percent holding limitation of section 407(a)(2) of the Act within 90
days following its receipt by the Allmerica Pension Plan. Such shares
that are not disposed of during this initial 90 day period must be
disposed of within an additional period of 90 days.
(g) After each Eligible Policyholder entitled to receive stock is
allocated at least 28 shares of stock, additional consideration is
allocated to Eligible Policyholders who own participating policies
based on actuarial formulas that take into account each participating
policy's contribution to the surplus of State Mutual which formulas
have been approved by the Commissioner and the Superintendent.
(h) All Eligible Policyholders that are Plans participate in the
transactions on the same basis as other Eligible Policyholders that are
not Plans.
(i) No Eligible Policyholder pays any brokerage commissions or fees
in connection with their receipt of stock or in connection with the
implementation of the commission-free sales program.
(j) All of State Mutual's policyholder obligations remain in force
and are not affected by the Demutualization Plan.
Section III. Definitions.
For purposes of this proposed exemption:
(a) The term ``State Mutual'' means State Mutual Life Assurance
Company of America and any affiliate of State Mutual as defined in
paragraph (b) of this Section III.
(b) An ``affiliate'' of State Mutual includes--
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with State Mutual. (For purposes of this paragraph, the term
``control'' means the power to exercise a controlling influence over
the management or policies of a person other than an individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an
officer, director or a 5 percent partner or owner.
(c) The term ``Eligible Policyholder'' means a policyholder whose
name appears on the conversion date on the insurer's records as owner
of a participating policy under which there is a right to vote and
which is in full force on both the December 31 immediately preceding
the conversion date and the date the insurer's board of directors first
votes to convert to stock form. Under Massachusetts law, only such
policyholders are entitled to receive consideration in the
demutualization. Policyholders who are not Eligible Policyholders will
not receive any stock or other consideration. As used herein, the term
``Eligible Policyholder'' includes, but is not limited to, the State
Mutual Pension Plan as well as those Plans that are not sponsored by
State Mutual.
(d) The term ``policy credit'' means (i) for an individual life
insurance policy, an increase in the dividend accumulation account,
(ii) for an individual deferred annuity policy where the owner has
elected a dividend accumulation option, an increase in the dividend
accumulation account, (iii) for all other individual deferred annuity
policies, an increase to the dividend addition value, and (iv) for a
supplementary contract or settlement option issued by State Mutual to
effect the annuitization of an individual deferred annuity, an increase
in the contract reserve which shall provide for an increase in the
monthly income payment equal to the ratio of the reserve
[[Page 58650]]
increase to the then current contract reserve.
EFFECTIVE DATE: This exemption is effective as of October 16, 1995.
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 (the Notice) published on September
21, 1995 at 60 FR 49016.
Written Comments
The Department received one written comment with respect to the
Notice. The comment was submitted by State Mutual and is intended to
clarify information contained in the Notice. Discussed below is State
Mutual's comment.
1. Form of Transaction. State Mutual represents that in describing
the demutualization transaction, the Notice refers to the receipt by
policyholders of common stock of State Mutual and the substitution of
the common stock of Allmerica, State Mutual's prospective sole owner,
for the State Mutual stock. State Mutual explains that while this
structure was initially considered, the Demutualization Plan ultimately
adopted called for the issuance of Allmerica stock directly to
policyholders in exchange for such policyholder's membership interests
in State Mutual. Accordingly, State Mutual represents that reference to
the issuance of State Mutual stock to policyholders and the
substitution of the Allmerica stock should be amended to reflect the
direct issuance of Allmerica stock to policyholders in exchange for
their policyholder interests.
2. The Initial Public Offering (the IPO). State Mutual explains
that the Notice states that Allmerica ``may'' sell new Allmerica stock
in an underwritten IPO. However, State Mutual advises that the
Demutualization Plan now requires the IPO as a condition to the
effectiveness of the reorganization.
3. Adoption of Demutualization Plan, Policyholder Vote and Hearing.
State Mutual notes that its Board of Directors adopted the
Demutualization Plan on February 28, 1995 and that on June 30, 1995,
the Demutualization Plan was approved by a vote of the policyholders.
On June 17 and June 27, 1995, State Mutual represents that the
Commissioner held a hearing on the Demutualization Plan and issued an
order on August 2, 1995, approving such plan.
4. Minimum Consideration. State Mutual explains that the Notice
states that each Eligible Policyholder will be allocated a minimum
consideration of 30 shares. While section 7.1(b)(i) of the
Demutualization Plan refers to a fixed component of consideration equal
to 30 shares, that number, according to State Mutual, is subject to
proportional adjustment as provided in section 9.6 of the
Demutualization Plan. Pursuant to this provision, State Mutual asserts
that the number of shares constituting the minimum consideration has
been adjusted to 28 shares and that the exemption should be amended to
reflect 28 shares rather than 30 shares as the minimum consideration.
5. Definition of Policy Credit. State Mutual points out that the
Notice contained the following definition of the term ``policy credit''
which it now considers to be out of date:
``(d) The term ``policy credit'' means an increase in
accumulation account value (to which no surrender or similar charges
are applied) in the general account or an increase in a dividend
accumulation on a policy.''
To make the definition more comprehensive, State Mutual has
redefined this term as follows:
``(d) The term ``policy credit'' means (i) for an individual
life insurance policy, an increase in the dividend accumulation
account, (ii) for an individual deferred annuity policy where the
owner has elected a dividend accumulation option, an increase in the
dividend accumulation account, (iii) for all other individual
deferred annuity policies, an increase to the dividend addition
value, and (iv) for a supplementary contract or settlement option
issued by State Mutual to effect the annuitization of an individual
deferred annuity, an increase in the contract reserve which shall
provide for an increase in the monthly income payment equal to the
ratio of the reserve increase to the then current contract
reserve.''
6. Plan Name Change and Coverage. State Mutual represents that the
Notice describes the State Mutual Companies' Pension Plan (the State
Mutual Pension Plan) as covering exclusively eligible career agents,
general agents and clerical employees of State Mutual and its
affiliates. State Mutual wishes, however, to clarify that the name of
the State Mutual Pension Plan has been changed to the ``Allmerica
Financial Cash Balance Pension Plan'' and to explain that this Plan
covers all eligible employees of State Mutual.
7. Trustee Change. State Mutual advises that the trustee of the
Allmerica Pension Plan (i.e., the former State Mutual Pension Plan) is
currently First National Bank of Boston and not Mechanics Bank of
Worcester.
8. Independent Fiduciary. State Mutual represents that the Notice
requires State Street Bank & Trust Company (State Street), an
independent fiduciary, to act on behalf of all State Mutual Plans.
Specifically, State Street is required to--(a) elect the form of
consideration that such Plans receive; (b) monitor, on behalf of such
Plans, the acquisition and holding of the stock; (c) make
determinations on behalf of the Plans with respect to the voting, the
continued holding or the disposition of such stock; and (d) dispose, in
a prudent manner, shares of stock exceeding the 10 percent holding
limitation of section 407(a)(2) of the Act within 90 days following its
receipt by the Allmerica Pension Plan. Such shares that are not
disposed of during this initial 90 day period must be disposed of
within an additional period of 90 days.
Although State Street has been retained as independent fiduciary on
behalf of all of the State Mutual Plans throughout the demutualization
process, State Mutual believes that once the transaction has been
consummated and the Allmerica Pension Plan has reduced its holdings of
employer stock to under the 10 percent limitation of section 407(a)(2)
of the Act, the retention of State Street should not be required
indefinitely. Therefore, State Mutual wishes to clarify that once a
State Mutual Plan's holdings have been reduced to below the 10 percent
threshold, the continued retention of State Street will be at the
discretion of a State Mutual Plan's named fiduciary.
9. Retroactivity of Exemption. State Street requests that the
exemption reflect a retroactive effective date of October 16, 1995
which is the closing date of the demutualization and the IPO.
The Department does not object to any of the clarifications or
modifications of the Notice that have been described by State Street in
its comment letter and it has revised the exemption, accordingly.
Thus, after giving full consideration to the entire record, the
Department has decided to grant the subject exemption. State Street's
comment letter 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 and
Welfare Benefits Administration, Room N-5638, U.S. Department of Labor,
200 Constitution Avenue, N.W., Washington, D.C. 20210.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
[[Page 58651]]
Charleston Area Medical Center Deferred Profit Sharing Plan (the Plan);
Located in Charleston, West Virginia
[Prohibited Transaction Exemption 95-107; Exemption Application No. D-
10009]
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 past cash sale by the Plan to the Camcare &
Affiliates Malpractice Self-Insurance Trust (the Malpractice Trust) of
certain publicly-traded securities, provided the following conditions
were satisfied: a) the sale was a one-time transaction for cash; b) the
Plan paid no commissions or other fees in connection with the
transaction; and c) the transaction involved publicly-traded
securities, the fair market values of which were determined by an
independent bank by reference to the closing price for the securities
on the New York Stock Exchange.
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 September 25, 1995 at 60
FR 49423.
EFFECTIVE DATE: This exemption is effective November 30, 1993.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (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, D.C., this 21st day of November, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 95-28911 Filed 11-27-95; 8:45 am]
BILLING CODE 4510-29-P