[Federal Register Volume 59, Number 143 (Wednesday, July 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18264]


[[Page Unknown]]

[Federal Register: July 27, 1994]


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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 94-56; Exemption Application No. L-
9412, et al.]

 

Grant of Individual Exemptions; Beaumont Area Pipefitters Joint 
Apprenticeship Committee, 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.

Beaumont Area Pipefitters Joint Apprenticeship
Committee (the Plan)
Located in Beaumont, Texas
[Application No. L-9412]
Proposed Exemption
    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act 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 (2) of the Act shall not apply to 
the purchase of certain real property (the Property) by the Plan from 
Pipefitters Local 195 of the United Association of Journeymen and 
Apprentices of the Plumbing and Pipefitting Industry (the Union), a 
party in interest with respect to the Plan, provided that the following 
conditions are met:
    1. An independent fiduciary determines that the proposed 
transaction is in the best interests of the Plan;
    2. The fair market value of the Property is established by an 
appraiser unrelated to the Plan or the Union;
    3. The Plan pays no more than the lesser of $462,800 or the fair 
market value of the Property as determined at the time of purchase;
    4. The purchase is a one-time transaction for cash; and
    5. The Plan pays no fees or commissions in regard to the 
transaction.
Summary of Facts and Representations
    1. The Plan is an apprenticeship training plan established and 
administered pursuant to the provisions of section 302 of the Labor 
Management Relations Act of 1947. As of January 31, 1994, the Plan had 
580 participants and total assets of $1,248,499. On the same date, the 
number of employers contributing to the Plan totaled 21.
    2. The Property consists of 2.74 acres of land and improvements 
located adjacent to property of the Union. The improvements include 
three one and two-story buildings, constructed by the Union in 1968 and 
1978, designed for use as classroom and apprenticeship training 
facilities for the Plan and its participants. From 1968 to 1988 the 
Plan operated an apprenticeship program on the Property pursuant to a 
lease of the Property by the Union to the Plan.\1\ In August 1988 the 
Union sold the Property to the Plan. The Plan partially financed this 
purchase by obtaining a loan from the Sabine Area Pipefitters Local 195 
Pension Trust Fund (Local 195 Pension Plan). The Local 195 Pension 
Plan, which was later merged into the Plumbers and Pipefitters National 
Pension Fund, had interlocking trustees with the Plan and the Plan made 
some contributions to the Local 195 Pension Plan on behalf of its 
participants. The loan was repaid in June 1991.
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    \1\Prohibited transaction exemption (PTE) 78-5 (43 FR 23024, May 
30, 1978) permits, under certain conditions, the leasing of real 
property by an apprenticeship plan from a sponsoring employee 
organization. The Department expresses no opinion as to whether the 
above lease satisfied the conditions of PTE 78-5 nor is any relief 
provided herein.
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    In September 1990 the Department commenced an investigation of the 
Plan regarding the sale of the Property by the Union to the Plan and 
the loan between the Plan and the Local 195 Pension Plan.2 Also, 
an application for exemption for retroactive relief from the prohibited 
transaction provisions of the Act was submitted to the Department for 
these transactions. In a letter in January 1992, the Department cited 
as reasons for denying the exemption application, among other factors, 
the lack of the review and prior approval of the transactions by an 
independent fiduciary. Following this exemption denial, an agreement 
was reached with the Department which required that the Property be 
sold back by the Plan to the Union. Such sale occurred in December 
1992. Since that date, the Plan has utilized the Property as a training 
facility without charge from the Union. However, the applicant 
represents that because of an economic downturn in the area, the Union 
considers it a hardship to continue this arrangement.
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    \2\The above described transactions may have constituted 
prohibited transactions under section 406 of the Act. Such section 
prohibits, in part, a sale or exchange of property between a plan 
and a party in interest, a use of plan assets for the benefit of a 
party in interest, and the acting of a fiduciary in a plan 
transaction on behalf of a party whose interests are adverse to 
those of the plan or its participants.
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    3. The applicant obtained an appraisal on the Property on January 
14, 1994, from Donnie M. Jones, MAI (Jones), a real estate appraiser 
located in Port Arthur, Texas. Jones represents that he is not related 
in any way to the Plan or the Union. Utilizing the income, cost and 
sales comparison approaches to value, Jones estimated that the Property 
had a fair market value of $462,800 as of the date of the appraisal. By 
letter dated March 1, 1994, Jones stated that he was aware, in 
preparing the appraisal, that the Plan was the prospective buyer of the 
Property and that this knowledge had no influence on his calculation of 
value.
    4. The Plan now proposes to purchase the Property from the Union so 
that the Plan itself will own the training and educational facilities 
used to train journeymen and apprentices. Plan fiduciaries note that 
ownership of the Property will give the Plan full control of the 
buildings, grounds and parking lots and will enable the Plan to make 
improvements to the Property as needed. The Plan will pay no more than 
current fair market value for the Property, as established by an 
updated independent appraisal. The purchase will be a one-time 
transaction for cash and the Plan will pay no fees or commissions in 
regard to the purchase. The applicant represents that, after the 
purchase of the Property, the Plan will have more than enough funds for 
operational purposes of the training program.
    5. The Plan and the Union have selected Joseph P. Connors, Sr. 
(Connors), an attorney with the firm of Connors Associates, Inc. in 
Washington, D.C. to serve as independent fiduciary in regard to the 
proposed transaction. The applicant represents that Connors is 
independent of the Plan and the Union.
    Connors states that he has had extensive experience working with 
Taft-Hartley plans, including serving as chairman of funds of the 
United Mine Workers. Connors further states that he is well aware that 
while acting as independent fiduciary he assumes personal liability and 
he must act solely in the interest of the Plan and its participants.
    Connors maintains that the proposed transaction is definitely in 
the best interests of the Plan. In this regard, Connors has met with 
officers of the Union and trustees of the Plan and has made an 
inspection of the Property with Russell Allen, the training director 
for the Plan. The Plan has operated an apprenticeship program utilizing 
the Property since the initial time of construction in 1968. As 
independent fiduciary, Connors will make certain that the Plan pays no 
more than fair market value for the Property and will enforce all 
rights of the Plan in regard to the proposed transaction.
    6. In summary, the applicant represents that the proposed 
transaction will satisfy the statutory criteria of section 408(a) of 
the Act because: (1) the purchase of the Property will give the Plan 
ownership of the facilities it uses for its apprenticeship training 
program; (2) an independent fiduciary has determined that the proposed 
transaction is in the best interests of the Plan and its participants; 
(3) the Plan will pay no more than fair market value for the Property, 
based on an updated independent appraisal; (4) the purchase will be a 
one-time transaction for cash; and (5) the Plan will pay no fees or 
commissions in regard to the transaction.

FOR FURTHER INFORMATION CONTACT: Paul Kelty of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

Novo Nordisk Bioindustrials, Inc.
401(k) Thrift Plan (the Plan)
Located in Danbury, Connecticut
[Prohibited Transaction Exemption 94-57;
Application No. D-9661]
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 (1) the interest-free loan to the Plan (the Loan) by 
Novo Nordisk Bioindustrials, Inc. (the Employer), a party in interest 
with respect to the Plan, and (2) the Plan's potential repayment of the 
Loan upon the receipt by the Plan of payments under Guaranteed 
Investment Contract No. GA-4607 (the GIC) issued by Mutual Benefit Life 
Insurance Company (MBL); provided the following conditions are 
satisfied:
    (A) No interest or expenses are paid by the Plan in connection with 
the proposed transaction;
    (B) The Loan is made to reimburse the Plan for amounts invested 
with MBL under the terms of the GIC;
    (C) The Loan will be repaid only out of amounts paid to the Plan by 
MBL, its successors, or any other responsible third parties; and
    (D) Repayment of the Loan is waived with respect to the amount by 
which the Loan exceeds GIC proceeds.
    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 May 25, 1994 at 59 FR 
27035.

FOR FURTHER INFORMATION CONTACT: Ms. Virginia J. Miller of the 
Department, telephone (202) 219-8971. (This is not a toll-free number.)

Hollingsworth & Vose Company Savings Plan (the Plan)
Located in East Walpole, Massachusetts
[Prohibited Transaction Exemption 94-58;
Exemption Application No. D-9677]
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 August 26, 1992 loan (the Loan) of $188,000 to 
the Plan by Hollingsworth & Vose Company, provided the following 
conditions were satisfied: a) no interest or expense was incurred by 
the Plan with respect to the Loan; b) the Loan enabled the Plan to 
effect the transfer of amounts held in participant accounts to new 
investments made available under the Plan; c) accounts transferred from 
the Plan's GIC Fund were credited with amounts representing the 
allocable principal deposit in the GIC Fund plus accrued interest at 
the GIC Fund rate; d) accounts which remained invested in the GIC Fund 
continued to receive interest at the same rate; and e) repayment of the 
Loan was restricted to amounts held in or allocated to the GIC Fund, 
and no other Plan assets were used for that purpose.
    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 May 25, 1994 at 59 FR 
27036.
    Effective Dates: This exemption is effective from August 26, 1992 
through November 10, 1992.

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 22nd day of July, 1994.
Ivan Strasfeld,
Director of Exemption Determinations Pension and Welfare Benefits 
Administration U.S. Department Of Labor.
[FR Doc. 94-18264 Filed 7-26-94; 8:45 am]
BILLING CODE 4510-29-P