[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