[Federal Register Volume 59, Number 60 (Tuesday, March 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7270]


[[Page Unknown]]

[Federal Register: March 29, 1994]


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DEPARTMENT OF LABOR
[Application No. D-9623]

 

Proposed Exemption; Hensel Phelps Construction Co. Profit Sharing 
Plan

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restriction of the Employee 
Retirement Income Security Act of 1974 (the Act) and/or the Internal 
Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
request for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
request for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and
    (2) The nature of the person's interest in the exemption and the 
manner in which the person would be adversely affected by the 
exemption. A request for a hearing must also state the issues to be 
addressed and include a general description of the evidence to be 
presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. stated in each Notice of Proposed 
Exemption. The applications for exemption and the comments received 
will be available for public inspection in the Public Documents Room of 
Pension and Welfare Benefits Administration, U.S. Department of Labor, 
room N-5507, 200 Constitution Avenue, NW., Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of 
the Secretary of the Treasury to issue exemptions of the type requested 
to the Secretary of Labor. Therefore, these notices of proposed 
exemption are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Hensel Phelps Construction Co. Profit Sharing Plan (the Plan) Located 
in Greeley, Colorado

[Application No. D-9623]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted the restrictions of sections 406(a) and 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 proposed cash sale (the Sale) of certain 
real property (the Property) by the Plan to Hensel Phelps Construction 
Co. (the Employer), a party in interest with respect to the Plan; 
provided that (1) the Sale is a one-time transaction for cash; (2) the 
Plan does not suffer any loss nor incur any expenses in the proposed 
transaction; (3) the Plan receives as consideration the greater of 
either the fair market value of the property as determined by an 
independent appraiser on the date of the Sale, or receives all the 
funds expended by the Plan in acquiring and maintaining the Property; 
and (4) the trustee of the Plan has determined that the proposed Sale 
is appropriate for the Plan and is in the best interests of the Plan 
and its participants and beneficiaries.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan with total assets of 
$19,877,932 and approximately 394 participants and beneficiaries, as of 
November 30, 1993. The fiduciaries of the Plan consist of the Employer 
and Bank One, Greeley, N.A., located in Greeley, Colorado (the 
Trustee).
    The Employer implements its responsibilities as fiduciary through 
the appointment of the Administrative Committee, which currently 
consists of the Employer's President and Chief Executive Officer, the 
Vice President-Finance, and the Vice President-General Counsel. The 
Administrative Committee responsibilities, inter alia, are to appoint 
and monitor activities of the Trustee and arrange for the payment of 
benefits by the Plan. The Trustee has complete discretionary authority 
and responsibility for investing and reinvesting the assets of the 
Plan.
    The Employer is a Delaware corporation that is headquartered in 
Greeley, Colorado with district offices in Santa Clara and Irvine, 
California; Austin, Texas; and Little Rock, Arkansas. It is a 56-year-
old employee-owned company that specializes in commercial and 
industrial construction and has approximately 1,600 employees. During 
the fiscal year which ended May 31, 1993, the Employer generated 
revenues of $645,597,000.
    2. The Property is a condominium designated as Unit 34 in Writer 
Square Condominiums located at 1512 Larimer Street, Denver, Colorado. 
The Property was appraised at the request of the Trustee by an 
independent appraiser, Gary L. Berz, SRA, of Berz Appraisal Group, 
Ltd., located in Lakewood, Colorado, who determined the fair market 
value to be $260,000, as of June 24, 1993. The Property is described by 
Mr. Berz to consist of 2,624 square feet with 6 rooms, which include 3 
bedrooms and 2.5 bathrooms. Parking facilities are provided underground 
for two vehicles. Outer construction is brick. The location of Writer 
Square Condominiums is described by Mr. Berz to be on busy downtown 
streets with zoning classification for business-residential units.
    The Employer served Writer Square, Inc., Englewood, Colorado, as 
construction manager for the construction of Writer Square 
Condominiums, which included the Property. Final payment by Writer 
Square, Inc. to the Employer for its services as construction manager 
was made to the Employer on October 23, 1981.
    3. On March 18, 1983, at the direction of IntraWest Bank of 
Greeley, Greeley, Colorado, as trustee of the Plan at that time with 
discretionary authority, the Plan issued a loan for $275,000 to Rudy 
and Betty J. Marich to enable them to purchase the Property from Writer 
Square, Inc.1 The loan was secured by a first deed of trust, 
paying 12.5 percent per year on the outstanding balance. The monthly 
payments on the loan were $2,998.48, with the entire outstanding 
balance due on June 1, 1990. When the Marichs defaulted on the final 
payment on June 1, 1990, the successor trustee of the Plan agreed to 
refinancing the loan with the same terms and conditions, except the 
final payment on the outstanding balance would be due May 15, 1992.
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    \1\The Department notes that the decisions to issue and reissue 
a loan to the Marichs are governed by fiduciary responsibility 
requirements of Part 4, Subtitle B, Title I of the Act. In this 
regard the Department herein is not proposing relief for any 
violations of Part 4 of the Act which may have arisen as a result of 
the issuance and reissuance of the loan by the Plan.
    The applicant represents that the Marichs are not parties in 
interest with respect to the Plan.
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    Again the Marichs defaulted on the loan and the Plan commenced 
foreclosure proceedings to acquire title to the Property. At the 
foreclosure sale on December 28, 1993, the Plan bid an amount to cover 
the current balance due on the revised loan, including interest, 
attorney's fees and foreclosure costs, in order to obtain clear title 
to the Property upon the expiration of the 75 day redemption period on 
March 13, 1994.
    4. Upon obtaining clear title to the Property the Plan proposes to 
sell the Property to the Employer for the greater of either the fair 
market value of the Property on the date of the Sale as determined by a 
qualified, independent appraiser, or for the total amount of the funds 
the Plan expended in acquiring and maintaining the Property. The 
applicant represents that the Plan will not suffer any loss nor incur 
any expenses from the proposed transaction. The applicant further 
represents that by the Employer acquiring the Property, the Plan will 
avoid the impact of any future negative yields and fluctuations in the 
rental and market values of the Property and costs associated with 
leasing or selling the Property. Also, the applicant represents that 
the Sale will provide the Plan with liquid assets that can be placed in 
more diversified investments.
    The Trustee of the Plan represents that, as of February 22, 1994, 
the adjusted cost to the Plan for acquiring and maintaining the 
Property is $338,622.73; and the Trustee represents that this figure 
will be updated on the date of the Sale of the Property. The Trustee 
further represents that an appraisal by Mr. Berz was made of the 
Property on February 21, 1994, that determined the fair market value of 
the Property to be $325,000. In addition, the Trustee represents that a 
residential rental in Denver, Colorado is an asset that is an atypical 
investment for a profit sharing plan.
    5. In summary, the applicant represents that the proposed 
transaction will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act because (a) the proposed Sale will be a one-
time transaction for cash; (b) the Plan will receive as consideration 
for the Sale the greater of either the fair market value of the 
Property as determined by an independent appraiser on the date of the 
Sale, or will receive all of the funds expended by the Plan in 
acquiring and maintaining the Property; (c) the Plan will not suffer 
any losses nor incur any expenses in effecting the proposed 
transaction; (d) the proposed transaction will enable the Plan to 
diversify its assets to more liquid investments and avoid economic 
risks associated with ownership of the Property; and (e) the Trustee 
has determined that the proposed Sale is appropriate for the Plan and 
is in the best interests of the Plan and its participants and 
beneficiaries.
    For Further Information Contact: Mr. C. E. Beaver 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 of disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(b) of the act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete and 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 23rd day of March, 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 94-7270 Filed 3-28-94; 8:45 am]
BILLING CODE 4510-29-P