[Federal Register Volume 59, Number 133 (Wednesday, July 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16980]


[[Page Unknown]]

[Federal Register: July 13, 1994]


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DEPARTMENT OF LABOR
[Application No. D-9703]

 

Proposed Exemptions; Thomas G. Soper, M.D., S.C. Employees' 
Pension Plan and Trust

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
    Unless otherwise stated in the Notice of Proposed Exemption, all 
interested persons are invited to submit written comments, and with 
respect to exemptions involving the fiduciary prohibitions of section 
406(b) of the Act, requests for hearing 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. 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, N.W., Washington, D.C. 
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, N.W., Washington, D.C. 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.

Thomas G. Soper, M.D., S.C. Employees' Pension Plan and Trust (the 
Plan) Located in Evanston, Illinois

[Application No. D-9703]

Proposed Exemption
    The Department is considering granting an exemption under the 
authority of 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 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 Thomas E. Soper, a disqualified person with 
respect to the Plan; provided that (1) the Sale is a one-time 
transaction for cash; (2) the Plan does not experience any loss nor 
incur any expenses in the proposed transaction; and (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 an amount equal to all the funds expended by 
the Plan in acquiring and maintaining the Property.
Summary of Facts and Representations
    1. The Plan is a defined contribution plan that is designated as a 
money purchase pension plan. It has one participant, Thomas G. Soper, 
M.D., and as of December 31, 1993, it had total assets of $355,000. The 
fiduciaries of the Plan, who have investment discretion, are Thomas G. 
Soper, M.D. and his wife, Julie Kelly Soper. Dr. Soper and his wife are 
the parents of Thomas E. Soper, the proposed purchaser of the Property, 
and are the applicants of the exemption.
    The sponsoring employer of the Plan is an Illinois professional 
corporation, Thomas G. Soper, M.D., S.C., which is engaged in the 
practice of medical surgery in Evanston, Illinois. It is wholly owned 
by Thomas G. Soper, M.D., who is its president and sole director.1
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    \1\Since Dr. Soper is the sole shareholder of the sponsor of the 
Plan and the only participant of the Plan, there is no jurisdiction 
under Title I of the Act, pursuant to 29 CFR 2510.3-3(c)(1). 
However, there is jurisdiction under Title II of the Act pursuant to 
section 4975 of the Code.
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    2. The Property is located at 2428 Grant Street in Evanston, 
Illinois and is approximately 150 feet in depth and 49.5 feet in width. 
The improvements on the Property consist of a one and one-half story 
frame residence with a detached garage at the back of the lot. The 
residence, which is 76 years old, is in need of extensive repairs. Its 
kitchen and first floor bathroom are unfinished and unusable. The 
basement floor has been removed and currently consists of a one-inch 
gravel base over clay and soil. There is a need for repairs to the 
walls of the basement because of recent flooding.
    Eleanor N. Hall of Cyrus Realtors located in Evanston, Illinois 
represents that she evaluated the Property with the intent to present 
the Property for sale and, although she found the Property to be in a 
good location, amid higher priced houses, and situated on a well 
landscaped lot, she determined at this time that without a kitchen the 
Property is unmarketable.
    The Property was purchased by the Plan for the consideration of 
$167,000 on September 5, 1991, from the conservator of the estate of an 
elderly individual, who had no relationship with respect to the Plan or 
the participant. During the occupancy of the previous owner, the 
Property had deteriorated so that by September 1991 the Property was 
experiencing foundation and structural faults, unsafe wiring, and 
roofing defects. The Plan purchased the Property with the understanding 
that because of its desirous location it could be rehabilitated and 
resold for a substantial gain. The Plan has made no attempt to find 
tenants for the Property because of the dilapidated condition of the 
Property; however, rehabilitation of the Property was commenced upon 
its purchase by the Plan. Although approximately 85 percent of the 
repairs are completed, delays have occurred because of the need for 
engineering studies and the procurement of permits from regulatory 
agencies of the city or county, and because of the additional 
structural damage to the Property from a broken water main during 
January 1994.
    The applicants represent that from September 5, 1991, to June 6, 
1994, the Plan incurred expenses of $34,126 from improving and 
maintaining the Property. These expenses included (a) Homeowners 
Insurance, totalling $1,276 for the years 1991 through 1993; (b) Real 
Estate taxes, totalling $15,375 for the years 1991 through 1993; (c) 
Drywall in October 1991, totalling $5,150; (d) Landscape expenses, 
totalling $4,000; (e) Kitchen Cabinets (not installed), totalling $915; 
and (f) Electrical expenses, totalling $7,380.
    The Property was appraised by Richard Anselmo, Certified General 
Appraiser, State Certification #153-000832, of Bulthuis Realty 
Consultants, Oakbrook, Illinois, who determined the fair market value 
of the Property to be $215,000, as of May 28, 1994.
    3. Cognizant that the Property's fair market value represents 
approximately 60 percent of the total assets of the Plan,2 the 
applicants propose selling the Property to their son for cash as soon 
as possible following the issuance of the requested exemption. Their 
son, Thomas E. Soper, is unmarried and has recently returned from 
living in California. He is presently residing with his parents and 
intends to finish rehabilitating the Property.
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    \2\In this proposed exemption the Department expresses no 
opinion with respect to the Plan's lack of diversification of 
investments caused by the acquisition and holding of the Property.
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    Thomas G. Soper, M.D., the sole participant of the Plan is planning 
to retire from his practice by the end of 1994 or early in 1995. His 
primary source of retirement income will be from the assets of the Plan 
and a profit sharing plan, also sponsored by his professional 
corporation.
    The applicants represent that it is in the best interests of the 
Plan and its sole participant to sell the Property in its present 
condition as soon as possible in order to avoid additional expenses to 
the Plan and to generate liquid assets that can produce earnings for 
the distribution of benefits to the participant upon his contemplated 
retirement.
    4. In summary, the applicants represent that the proposed 
transaction will satisfy the criteria of section 4975(c)(2) of the Code 
because (a) the Sale of the Property involves a one-time transaction 
for cash; (b) the Plan will not incur any expenses incidental to the 
Sale; (c) the Plan will receive as consideration for the Sale the 
greater of either the fair market value of the Property as determined 
on the date of the Sale by a qualified, independent appraiser, or will 
receive all of the funds expended by the Plan in obtaining and 
maintaining the Property; (d) the Sale will permit the Plan to reinvest 
illiquid assets into income producing, liquid assets; and (e) the Plan 
will avoid the expenses and risks involved in retaining and developing 
the Property.

NOTICE TO INTERESTED PERSONS: Since the applicants and their son are 
the only persons affected by the proposed transaction, there is no need 
to distribute notice to interested persons. Comments are due 30 days 
after publication of this notice in the Federal Register.

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 8th day of July, 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 94-16980 Filed 7-12-94; 8:45 am]
BILLING CODE 4510-29-P