[Federal Register Volume 60, Number 2 (Wednesday, January 4, 1995)]
[Notices]
[Pages 486-492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-109]



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DEPARTMENT OF LABOR
[Application No. D-9727, et al.]


Proposed Exemptions; Hospital Supplies, Inc. Pension Plan, et al.

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. 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.

Hospital Supplies, Inc. Pension Plan (the Plan) Located in Radnor, 
Pennsylvania; Proposed Exemption

[Application No. D-9727]
    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 C.F.R. 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 of two adjacent parcels of real property (the 
Properties) by the Plan to Armond J. Civera, Jr. (Mr. Civera)1, a 
disqualified person with respect to the Plan, provided that the 
following conditions are satisfied:

    \1\Because Mr. Civera is the only participant in the Plan and 
the Employer is wholly owned by Mr. Civera there is no jurisdiction 
with respect to the Plan under Title I of the Act pursuant to CFR 
2510.3-3(b) and (c). However, there is jurisdiction under Title II 
of the Act pursuant to section 4975 of the Code.
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    (a) the proposed sale will be a one-time cash transaction;
    (b) the Plan will receive for each Property the current fair market 
value established at the time of the sale by an independent qualified 
appraiser;
    (c) the Plan will pay no expenses associated with the sale.

Summary of Facts and Representations

    1. The Plan is a defined benefit pension plan with one participant, 
Mr. Civera, who is also the trustee of the Plan and the owner of the 
Plan sponsor. Mr. Civera is a sole participant of the Plan. As of 
December 31, 1993, the Plan's assets were $594,061.63.2 The Plan 
sponsor is a Pennsylvania corporation which provides consulting 
services to the medical industry and to the print technology industry 
(the Employer).

    \2\In this regard, the Plan's financial statement lists the 
aggregate value of the Properties as $485,000.
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    2. In October 1989, the Plan acquired a 100 percent interest in a 
single family residence built on a 1.17 acres of land, which is located 
at 1128 King of Prussia Road, Tredyffrin Township, Pennsylvania 
(Property 1). The total purchase price of Property 1, including related 
closing costs, was $170,000. In March 1993, the Plan also allocated 
approximately $60,000 for certain structural improvements for Property 
1. This construction work was done by companies that have no 
relationship to the Plan and the Employer. It is represented that 
Property 1 was purchased from Roseanne Koczicki, who has no 
relationship to the Plan and the Employer. In March 1993, the Plan 
acquired a 100 percent interest in a 1.026 acre parcel of vacant land 
(Property 2), which is adjacent to Property 1. The total purchase price 
of Property 2, including related closing [[Page 487]] costs, was 
$77,500. Subsequently, the Plan expended approximately $47,500 for 
improvements associated with the subdivision of Property 2. These 
improvements were done by entities that have no relationship to the 
Plan and the Employer. It is represented that Property 2 was purchased 
from Tom and Beth Nojunas, who also have no relationship to the Plan 
and the Employer. It is represented that neither Property is adjacent 
to any other properties owned by disqualified persons, and that neither 
Property has ever been used by a disqualified person. Furthermore, 
neither of the Properties are encumbered by any debt.
    3. It is represented that Mr. Civera, in his trustee capacity, made 
the original decision to acquire the Properties. The Properties were 
originally acquired as long-term Plan investments and were to be 
developed and sold. However, the real estate market did not perform 
well and the Properties did not generate any income for the Plan. In 
this regard, it is represented that Property 1 has been vacant since it 
was originally acquired by the Plan.
    4. The Properties were appraised on May 23, 1994 (collectively; the 
Appraisals) by Thomas M. Descano, ASA, an independent real estate 
appraiser certified in the State of Pennsylvania (Mr. Descano). In 
appraising Property 1, Mr. Descano relied primarily on the market 
comparison approach as well as the cost approach, and determined that 
the fair market value of Property 1 was $200,000. In appraising 
Property 2, Mr. Descano determined that the fair market value was 
$205,200. In the Appraisal of Property 2, Mr. Descano stated that the 
local market did not provide any comparable sales of vacant land, and 
as such he had to abstract land value from recent improved property 
sales. Mr. Descano represented that this is done by estimating the 
depreciated value of the improvements and then deducting that value 
from the sale price, thereby arriving at the approximate value of the 
land. On June 22, 1994, in a supplemental statement to the Appraisals, 
Mr. Descano stated that the adjacency of Property 1 and Property 2 does 
not merit a premium above the fair market value to Mr. Civera, the 
purchaser of both Properties.
    5. Mr. Civera proposes to purchase the Properties from the Plan in 
a one-time cash transaction. The applicant states that the proposed 
exemption would be in the best interest and protective of the Plan 
because the transaction will divest the Plan of non-income producing 
assets, provide the Plan with liquidity, and enable the Plan to 
diversify its assets.3 The applicant also notes that the 
transaction is protective of the Plan because as a result of the sale 
the Plan will receive the current fair market value for each Property 
established at the time of the sale by an independent qualified 
appraiser.

    \3\This exemption,if granted, extends relief from section 
4975(c)(1)(D) and (E) of the Code, for the sale of the Properties by 
the Plan to a disqualified person. However, no relief is provided 
herein for any prohibited transaction which may have arisen as a 
result of the Plan's acquisition and holding of the Properties.
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    6. In summary, the applicant represents that the transaction 
satisfies the statutory criteria of section 4975(c)(2) of the Code 
because:
    (a) the proposed sale will be a one-time cash transaction;
    (b) the Plan will receive the current fair market value for each 
Property established at the time of the sale by an independent 
qualified appraiser;
    (c) the Plan will pay no expenses associated with the sale;
    (d) the sale will provide the Plan with liquidity; and
    (e) Mr. Civera as the sole participant of the Plan will be the only 
individual affected by the transaction.

Notice to Interested Persons

    Because Mr. Civera is the sole participant of the Plan, it has been 
determined that there is no need to distribute the notice of proposed 
exemption to interested persons. Comments and requests for a hearing 
are due 30 days from the date of publication of this notice in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 219-8883. (This is not a toll-free number.)

Jerome Companies Profit Sharing Plan and Trust (the Plan) Located 
in Barron, Wisconsin; Proposed Exemption

[Application No. D-09829]
    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 the 
Guaranteed Investment Contract #62043 (the GIC) issued by Confederation 
Life Insurance Company (Confederation), a Canadian insurance 
corporation, by the Plan to Jerome Food, Inc. (the Employer), a 
Wisconsin corporation, the sponsoring employer and a party in interest 
with respect to the Plan; provided that (1) the Sale is a one-time 
transaction for cash; (2) the Plan experiences no loss nor incurs any 
expense from the Sale; and (3) the Plan receives as consideration from 
the Sale the greater of either the fair market value of the GIC as 
determined on the date of the Sale, or the principal amount of $500,000 
plus simple interest accrued at the rate of 9.03 percent per annum on 
the principal amount of the GIC for the period from January 25, 1994, 
to the date of the Sale.

Summary of Facts and Representations

    1. The Employer, located in Barron, Wisconsin, is an integrated 
turkey distributor, which raises and slaughters turkeys, packages and 
distributes whole turkeys, and processes and distributes specialty 
turkey products, such as ground turkey and GobbleStix (a registered 
trademark of the Employer). It is a closely held company which employs 
approximately 2,400 employees.
    2. The Plan is a defined contribution plan with individual accounts 
for its participants that is intended to meet the qualification 
requirements of sections 401(a) and 401(k) of the Code. The Plan 
intends also to comply with the provisions of section 404(c) of the Act 
whereby participants self-direct the investments of assets in their 
respective individual accounts. As of December 31, 1993, the Plan had 
approximately 1,466 participants and total assets of $17,822,946.
    In 1990 when the Plan invested in the GIC, the Vice President of 
Finance for the Employer selected various investment vehicles for the 
participants of the Plan, subject to the approval of the trustee for 
the Plan, Marquette Bank Minneapolis, N.A. (subsequently acquired by 
First Trust, N.A.)4 All such investment decisions are now made by 
a subcommittee composed of officers/employees of the Employer and are 
subject to review and approval by the Corporate Executive Committee, 
which consists of the President and 6 Vice Presidents of the Employer.

    \4\The Department notes that decisions to acquire and hold the 
GIC are governed by the fiduciary responsibility provisions of Part 
4 of Title I of the Act. In this regard the Department is not 
proposing relief for any violations of Part 4 which may have arisen 
as a result of the acquisition and holding of the GIC.
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    The independent trustee for the Plan is First Trust, N.A. (the 
Trustee), a national banking association chartered by the Comptroller 
of the Currency. The [[Page 488]] Trustee is a wholly-owned subsidiary 
of First Bank System, Inc., a Delaware corporation headquartered in 
Minneapolis, Minnesota.
    3. Approximately 2.8 percent of the total assets in the Plan are 
invested in the GIC which was acquired by the Plan on January 25, 1990, 
for the principal amount of $500,000. Currently there are 327 
participants who have their respective individual accounts holding 
various proportional interests in the GIC.
    The terms of the GIC guarantees the Plan a non-compounded 9.03 
percent annual rate of return on its $500,000 investment until January 
24, 1995, when the GIC expires and the principal amount is returned to 
the Plan. Interest earned by the GIC is payable to the Plan each year 
in January. All annual interest payments through January 24, 1994, have 
been paid by Confederation, leaving only the interest that has accrued 
since January 25, 1994, to be paid to the Plan. Under the terms of the 
GIC, the Plan may not deposit additional amounts nor withdraw amounts 
from its initial $500,000 investment.
    4. Confederation, which is owned by its policyholders, has 
operations in Canada, United States and Britain, and has been in 
operation 123 years. In the United States, Confederation operates as 
the Confederation Life Insurance and Annuity Company of Atlanta.
    At the time the Plan acquired the GIC, Standard & Poor's ranked 
Confederation as an ``AAA'' insurance company. Beginning in January 
1992, Confederation ratings began to decrease as it suffered losses in 
its commercial mortgage and real estate investments in the United 
States and Canada. In April 1994, Confederation disclosed its net 
losses for 1993 were $29 million in Canadian dollars. On August 11, 
1994, the board of directors of Confederation voted to turn over 
control of the Confederation to the Superintendent of Financial 
Institutions for Canada. On August 12, 1994, the Michigan Insurance 
Commissioner, through the Ingham County Circuit Court, Lansing, 
Michigan, had Confederation's United States subsidiary placed in 
conservatorship and rehabilitation to prevent the transfer of assets of 
Confederation located in the United States. The action by the Michigan 
Circuit Court suspended all payments on contracts of Confederation, 
including the GIC. It is not known whether, when, or under what 
circumstances Confederation will resume payments of interest pursuant 
to the terms of the GIC or whether it will be permitted to make payment 
of the principal upon maturity of the GIC.
    5. In order to avoid the continued risk to the participants and 
beneficiaries of the Plan from the investment in the GIC, the Employer 
proposes to purchase the GIC from the Plan for cash in a one-time 
transaction with no loss nor expense to the Plan.5 The Employer 
intends to pay the Plan the greater of either the fair market value of 
the GIC as determined on the date of the Sale, or the GIC's principal 
amount of $500,000 plus simple interest accrued at the rate of 9.03 
percent per annum on the principal amount for the period from January 
25, 1994, to the date of the Sale. (January 25, 1994, was the last date 
on which the Plan received its annual interest payment from 
Confederation.)

    \5\Section 3.04 of the GIC provides that the GIC may not be 
assigned. The applicant is negotiating with Confederation to obtain 
a waiver of this assignment restriction.
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    In addition the applicant represents that considering the unstable 
circumstances of Confederation and the uncertainty of reimbursing the 
holders of the GIC, the proposed Sale will enable the Plan to recoup 
its initial investment plus the accrued interest, and then invest the 
proceeds of the Sale in more stable investments that will generate a 
return to the Plan.
    In a written statement the Trustee represented that in its capacity 
of independent fiduciary of the Plan and based upon all the surrounding 
facts and circumstances, including the status of Confederation, that 
the proposed Sale is in the best interests of the Plan and its 
participants and beneficiaries.
    6. In summary, the applicant represents that the proposed 
transaction will satisfy the criteria for an exemption under section 
408(a) of the Act because (a) the Plan will receive from the Employer 
in a one-time transaction cash in an amount that is not less than the 
fair market value of the GIC, or an amount that is equal to the total 
amount paid by the Plan for the GIC, plus earnings the GIC would have 
received to the date of the Sale if Confederation had not been placed 
under conservatorship and rehabilitation by the Circuit Court of 
Michigan; (b) the transaction will enable the Plan and its participants 
and beneficiaries to avoid any risk associated with the continued 
holding of the GIC; (c) the Plan will not incur any loss or expense 
from the proposed transaction; and (d) the Trustee of the Plan has 
determined that the proposed transaction 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.)

Iron Workers Pension Trust of Colorado (The Pension Plan); and Colorado 
Iron Workers (Erection) Statewide Joint Apprenticeship and Trust Fund 
(the Apprenticeship Plan; together, the Plans) Located in Denver, 
Colorado; Proposed Exemption

[Application Nos. D-9690 and L-9691]
    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 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 loan (the Loan) of $141,601.36 by the Pension Plan to the 
Apprenticeship Plan, under the terms described in this notice of 
proposed exemption, provided the following conditions are satisfied: 
(a) the Loan represents less than 25% of the assets of the Pension 
Plan; (b) the terms of the Loan are not less favorable to either Plan 
than those obtainable in arm's-length transactions with unrelated 
parties; (c) the trustees of each Plan approved the Loan as being 
appropriate for, and in the best interest of each Plan; (d) no trustee 
of either Plan made such determination on behalf of the other Plan; and 
(e) the property securing the Loan (the Property) has been appraised by 
a qualified, independent appraiser as having a fair market value in 
excess of 150% of the principal amount of the Loan.

Effective Date: If the proposed exemption is granted, the exemption 
will be effective August 11, 1992.

Summary of Facts and Representations

    1. The Pension Plan is a defined benefit plan which provides 
retirement benefits under a unit benefit formula. The Pension Plan is a 
Taft-Hartley plan which is maintained pursuant to a collective 
bargaining agreement between Local 24 of the International Association 
of Bridge, Structural and Ornamental Iron Workers, AFL-CIO (the Union) 
and the participating employers. The Pension Plan had 983 participants 
as of March 31, 1991 and total assets of approximately $36 million as 
of July 31, 1992.
    2. The Apprenticeship Plan is an employee welfare benefit plan 
which is [[Page 489]] also maintained pursuant to the collective 
bargaining agreement between the Union and the participating employers. 
The Apprenticeship Plan is designed to provide funding for programs to 
recruit and train workers as iron workers and to provide continued and 
advanced training for existing iron workers. The Apprenticeship Plan 
had 554 participants and assets of $324,262 as of July 31, 1992. The 
applicants represent that one employee of the Apprenticeship Plan is a 
participant in the Pension Plan. Therefore, the Apprenticeship Plan is 
a party in interest with respect to the Pension Plan.
    3. On August 11, 1992, the Pension Plan made the Loan of 
$141,601.36 to the Apprenticeship Plan. The Loan bears interest at a 
rate of 9.25%, and calls for equal monthly payments of $1,457.35, 
consisting of both principal and interest, amortized over a 15 year 
period. A balloon payment is scheduled to be made by the Apprenticeship 
Plan at the end of the fifth year, at which time the Loan will be 
repaid in full. Spelman Baird & Warner, an independent mortgage banking 
firm located in Denver, Colorado, has reviewed the terms of the Loan 
and has represented that the terms of the Loan are reasonable and 
comparable to loans between unrelated parties being made at the time 
the Loan was entered into.
    4. The Loan is secured by a first mortgage on the Property, which 
is real estate located at 3385 Walnut Street, Denver, Colorado. The 
Property is used by the Apprenticeship Plan to conduct the training and 
apprenticeship programs offered by the Apprenticeship Plan. The 
Property has been appraised by Curtis W. Wells, MAI, an independent 
appraiser in Denver, Colorado, as having a fair market value of 
$233,000 as of June 25, 1992. Thus, the collateral-to-loan ratio for 
the Loan is approximately 165%.
    5. The applicants represent that the Board of Trustees of each Plan 
determined that the Loan was in the best interest of its respective 
Plan. The applicants represent that there is one trustee who is common 
to both Plans, but that trustee has and will continue to abstain from 
all decisions involving the Loan. The applicants represent that none of 
the other members of either Board of Trustees will be representing any 
interests adverse to those of their respective Plans and will be acting 
for the exclusive benefit of their respective Plans.
    6. RMI Capital Management Co. (RMI) is a registered investment 
adviser which is serving as an independent fiduciary for the Pension 
Plan with respect to this transaction. RMI represents that at the 
request of the Pension Plan, RMI investigated the possibility of the 
Pension Plan making the Loan to the Apprenticeship Plan. RMI determined 
that the Loan was a good investment opportunity for the following 
reasons: (a) the Loan was adequately collateralized by the Property; 
(b) RMI negotiated the terms of the Loan with the Apprenticeship Plan 
and closed the transaction; (c) the rate of interest on the Loan is a 
market rate of interest which is consistent with current market rates 
being charged by other mortgage lenders; (d) RMI selected the appraiser 
independently and verified the appraisal as reasonable; and (e) RMI did 
an in-depth investigation of the Apprenticeship Plan's credit history 
and determined that the Apprenticeship Plan was a good credit risk and 
would have no difficulty meeting its obligations under the Loan.6

    \6\On November 1, 1991, Rocky Mountain Investors, Inc. (now 
known as RMI) entered into a Consent Order and Final Judgment (the 
CO) with the Department and the United States District for the 
District of Colorado in Martin v. Rocky Mountain Investors, Inc., 
et.al., Civil Action No. 91-S-1951 (D. Colo.). Pursuant to that CO, 
RMI agreed to comply with all terms of an attached ``Rocky Mountain 
Investors, Inc. Investment Policy and Underwriting Criteria'' (the 
Guidelines) in carrying out its fiduciary responsibilities with 
respect to employee benefit plans under the Act. The Guidelines were 
incorporated by reference into the CO. RMI represents that it acted 
in compliance with the Guidelines in approving the Loan on behalf of 
the Pension Plan, and further that the Loan itself is in compliance 
with the Guidelines.
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    7. RMI represents that it is a partnership owned by JBGP 
Corporation and Strategic Property Advisors, Inc. RMI is not owned or 
controlled by either Plan, nor are any of RMI's employees participants 
or employees of the Plans. RMI represents that with respect to this 
transaction, it determined the facts surrounding the Loan, the 
valuation of the Property and the structure of the Loan. RMI has also 
monitored, and will continue to monitor the Loan on behalf of the 
Pension Plan and take whatever action is necessary to enforce the 
Pension Plan's rights under the Loan.
    8. In summary, the applicants represent that the subject 
transaction meets the criteria of section 408(a) of the Act because: 
(a) the Loan represents approximately 0.39% of the assets of the 
Pension Plan; (b) the Loan is at fair market rate terms not less 
favorable to either Plan than those obtainable in an arm's-length 
transaction with unrelated parties; (c) the Property securing the Loan 
has been appraised by a qualified, independent appraiser as having a 
fair market value approximately 1.65 times the principal amount of the 
Loan; (d) the trustees of both Plans have determined that the Loan is 
in the best interest of their respective Plans; (e) RMI, the Pension 
Plan's independent fiduciary, determined that the transaction is 
appropriate for, and in the best interest of, the Pension Plan, and (f) 
RMI has monitored, and will continue to monitor the Loan and take 
whatever action is necessary to enforce the Pension Plan's rights under 
the Loan.

NOTICE TO INTERESTED PERSONS: Notice of the proposed exemption will be 
provided by first class mail to all interested persons within 30 days 
of the date of publication of the notice of pendency in the Federal 
Register. The notice will include a copy of the notice of proposed 
exemption and will inform interested persons of their right to comment 
with respect to the proposed exemption. Comments to the Department are 
due within 60 days of the date of publication of this notice of 
proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Employees' Savings Plan of Bassett-Walker, Inc. (the Plan) Located in 
Martinsville, Virginia; Proposed Exemption

[Application No. D-09894]
    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 
the Guaranteed Investment Contract No. 62012 (the GIC) issued by 
Confederation Life Insurance Company of Atlanta, Georgia 
(Confederation) by the Plan to VF Corporation, a Pennsylvania 
corporation headquartered in Wyomissing, Pennsylvania, a party in 
interest with respect to the Plan; provided that (1) the Sale is a one-
time transaction for cash; (2) the Plan experiences no loss nor incurs 
any expense from the Sale; and (3) the Plan receives as consideration 
from the Sale the greater of either the fair market value of the GIC as 
determined on the date of the Sale, or $1.5 million, the principal 
amount of the GIC, plus simple interest accrued at [[Page 490]] the 
rate of 8.70 percent per annum on the principal amount of the GIC for 
the period from April 4, 1994, to the date of the Sale.

Summary of Facts and Representations

    1. The sponsoring employer of the Plan is Bassett-Walker, Inc., a 
Virginia corporation headquartered in Martinsville, Virginia. It is 
engaged primarily in the manufacturing and marketing of high-quality 
fleece and printwear. Bassett-Walker, Inc. was incorporated on 
September 24, 1984, and is wholly-owned by VF Corporation, the proposed 
purchaser of the GIC.
    VF Corporation, a Pennsylvania corporation headquartered in 
Wyomissing, Pennsylvania, was incorporated on December 4, 1899, and has 
its securities publicly traded on the New York and Pacific stock 
exchanges. It is engaged primarily in the domestic and international 
manufacturing and marketing of jeanswear, casual/sportswear, and 
intimate and other types of apparel.
    2. The Plan is a profit sharing plan that maintains individual 
accounts for its participants and is intended to satisfy the 
qualification requirements of sections 401(a) and 401(k) of the Code. 
The net assets of the Plan were $27,158,367, as of December 31, 1993. 
There are currently approximately 5,547 participants and beneficiaries 
of the Plan.
    The applicant represents that the Plan is administered by a 
committee (the Committee) which is appointed by the sponsoring employer 
pursuant to the terms of the Plan. The Committee has the discretionary 
responsibility for the overall administration of the Plan, including 
the appointment of legal counsel, accountants, and the trustee for the 
Plan. The current members of the Committee are Carl Reynolds 
(Chairman), Steven Fritz and Margaret Bouldin (Secretary), who are 
employees of the sponsoring employer of the Plan, and Louis J. Fecile, 
an officer of VF Corporation, the proposed purchaser of the GIC.
    The applicant also represents that UMB Bank, N.A. (formerly known 
as United Missouri Bank, N.A.) was appointed trustee (the Trustee), for 
the Plan, effective February 2, 1993. The Trustee is located in Kansas 
City, Missouri. It acts as custodian of the assets of the Plan, ensures 
that the assets of the Plan are held in trust as required by the Act, 
and oversees the establishment and maintenance of investment and 
disbursement accounts of the Plan.
    3. The GIC was acquired by the Plan, effective April 4, 1990, 
pursuant to $1.5 million tendered by the Plan to Confederation on April 
3, 1990.7 Under the terms of the GIC, simple interest was to be 
paid by Confederation to the Plan at a guaranteed rate of interest in 
the amount of 8.70 percent per annum through April 3, 1995. All annual 
interest payments through April 3, 1994, have been paid by 
Confederation, leaving only the interest yield that accrued since April 
4, 1994, remaining to be paid to the Plan. Under the terms of the GIC, 
the Plan may not deposit additional amounts to nor withdraw amounts 
from its initial $1.5 million investment. As of August 31, 1994, the 
GIC was valued at $1,514,315 and represented approximately 5.04 percent 
of the total value of Plan assets.

    \7\The Department notes that decisions to acquire and hold the 
GIC are governed by the fiduciary responsibility provisions of Part 
4 of Title I of the Act. In this regard the Department is not 
proposing relief for any violations of Part 4 which may have arisen 
as a result of the acquisition and holding of the GIC.
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    On August 12, 1994, the Ingham County Circuit Court, Lansing, 
Michigan placed Confederation in conservatorship and rehabilitation, 
causing Confederation to suspend all payments on its contracts, 
including the GIC. The applicant represents that it is not known 
whether, when, or under what circumstances Confederation will resume 
interest payments under the terms of the GIC or whether it will be 
permitted to pay the principal amount of the GIC to the Plan upon the 
maturity of the GIC.
    4. In order to eliminate the risk associated with continued 
investment in the GIC and to allow the Plan to distribute or otherwise 
invest the assets of the Plan currently invested in the GIC in more 
stable investments that produce a return to the Plan, VF Corporation 
proposes to purchase the GIC from the Plan.8 The applicant 
represents that the Sale would eliminate the risks inherent in the 
continued investment in the GIC by the Plan and would be in the best 
interests of the Plan and its participants and beneficiaries.

    \8\Section 3.04 of the GIC provides that the GIC may not be 
assigned. The applicant represents that it is negotiating with 
Confederation to obtain a waiver of the assignment restriction.
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    The Trustee in a letter dated November 10, 1994 also has 
represented that the Sale as proposed is in the best interests of the 
Plan and its participants and beneficiaries and that the proposed 
transaction is protective of the rights of the Plan participants and 
beneficiaries.
    The applicant states that the Sale would be a one-time transaction 
for cash and the Plan would not incur any expenses from the Sale nor 
experience any loss. The applicant also states that the Plan would 
receive as consideration for the Sale the greater of either the fair 
market value of the GIC as determined by the Trustee on the date of the 
Sale, or the amount of funds expended by the Plan in acquiring the 
principal amount of the GIC plus any interest accrued and not paid on 
the GIC until the date of the Sale.
    5. In summary, the applicant represents that the proposed 
transaction will satisfy the criteria for an exemption under section 
408(a) of the Act because (a) the Plan will receive from the Sale in a 
one-time transaction cash in amount that is not less than the fair 
market value of the GIC as determined by the Trustee, or an amount that 
is equal to the total amount paid by the Plan for the GIC plus earnings 
the GIC would have paid to the date of the Sale if Confederation had 
not been placed under conservatorship and rehabilitation by the Circuit 
Court of Michigan; (b) the transaction will enable the Plan and its 
participants and beneficiaries to eliminate any risk from continued 
holding of the GIC and invest the funds from the transaction in more 
stable and paying investments; (c) the Plan will not incur any loss nor 
expense from the proposed transaction; and (d) the Trustee of the Plan 
has determined that the proposed transaction is in the best interests 
of the Plan and its participants and beneficiaries as well as 
protective of the rights of the 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.)

Employee Profit Sharing-Savings Plan and Trust Agreement of Modern 
Globe, Inc. (the Plan) Located in Wyomissing, Pennsylvania; Proposed 
Exemption

[Application No. D-09893]
    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 
the Guaranteed Investment Company Contract No. 62580 (the GIC), issued 
by Confederation Life Insurance of Atlanta, [[Page 491]] Georgia 
(Confederation), by the Plan to VF Corporation, a Pennsylvania 
corporation (the Employer), the sponsoring employer and a party in 
interest with respect to the Plan; provided that (1) the Sale is a one-
time transaction for cash; (2) the Plan experiences no loss nor incurs 
any expense from the Sale; and (3) the Plan receives as consideration 
from the Sale the greater of either the fair market value of the GIC as 
determined on the date of the Sale, or an amount that is equal to the 
total amount expended by the Plan when acquiring the GIC, plus all 
interest accruing under the terms of the GIC until date of Sale.

Summary of Facts and Representations

    1. The Employer, a Pennsylvania corporation which was incorporated 
on December 4, 1899, is headquartered in Wyomissing, Pennsylvania, and 
its securities are publicly traded on the New York and Pacific stock 
exchanges. It is primarily engaged in the domestic and international 
manufacturing and marketing of jeanswear, casual/sportswear, and 
intimate and other types of apparel.
    2. The Plan is a profit sharing plan that maintains individual 
accounts for its 838 participants and beneficiaries and is intended to 
satisfy the qualification requirements of sections 401(a) and 401(k) of 
the Code.9 The net assets of the Plan were $12,468,562, as of 
December 31, 1993. The Plan was ``frozen'' effective December 31, 1992, 
resulting in no further contributions nor participants being added to 
the Plan; and all active participants became fully vested in their 
respective account balances. Under the amendments adopted December 1, 
1992, the Employer was designated sponsor of the Plan and UMB Bank, 
N.A. of Kansas City, Missouri (the Trustee) became trustee of the Plan. 
The Trustee is custodian of Plan assets and oversees the establishment 
and maintenance of the investment and disbursement accounts for the 
Plan.

    \9\The Plan was originally sponsored by Modern Globe, Inc., a 
Delaware corporation, which was wholly-owned by the Employer. As of 
December 1, 1992, Modern Globe, Inc. ceased to exist when it was 
merged into another wholly-owned subsidiary of the Employer.
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    The Plan is administered by VF Pension Plan Committee (the 
Committee) which is appointed by the Board of Directors of the 
Employer. The Committee is responsible for the administration of the 
Plan, and appoints legal counsel, accountants, and the Trustee for the 
Plan. The members of the Committee are Harold E. Addis, Frank C. 
Pickard III, and Lori M. Tarnoski, each of whom is an officer of the 
Employer.
    3. Confederation issued the GIC to the Plan effective November 20, 
1991, for the consideration of $2 million.10 The terms of the GIC 
provide that compounded interest is to accrue at the guaranteed rate of 
6.50 percent per annum on the principal amount of the GIC through 
November 19, 1994, at which time the accrued interest and principal 
amount of the GIC is to be paid to the Plan. As of August 31, 1994, the 
applicant represents that the GIC was valued at $2,381,958 and equaled 
approximately 21.09 percent of the total value of the Plan assets.

    \10\The Department notes that decisions to acquire and hold the 
GIC are governed by fiduciary responsibility provisions of Part 4 of 
Title I of the Act. In this regard the Department is not proposing 
relief for any violations of Part 4 which may have arisen as a 
result of the acquisition and holding of the GIC.
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    On August 12, 1994, the Ingham County Circuit Court, Lansing, 
Michigan, placed Confederation in conservatorship and rehabilitation, 
causing Confederation to suspend all payments on its contracts, 
including the GIC. The applicant represents that it is not known 
whether, when, or under what circumstances Confederation will resume 
payments on its contracts, including payment of the interest and the 
principal amount of the GIC.
    4. In order to eliminate the risk associated with continued 
investment in the GIC by the Plan and to allow the Plan to distribute 
or otherwise invest the assets currently invested in the GIC, the 
Employer proposes to purchase the GIC from the Plan.11 The 
applicant represents that the elimination of the risks inherent in the 
continued investment in the GIC by the Plan would be in the best 
interests of the Plan and its participants and beneficiaries and would 
serve to protect their rights under the Plan.

    \11\Although section 3.04 of the GIC provides that it may not be 
assigned, the applicant represents that it is negotiating with 
Confederation to obtain a waiver of the assignment restriction.
---------------------------------------------------------------------------

    The applicant represents that the Employer will pay the Plan for 
the GIC in a one-time transaction for cash, and any expenses in 
connection with the transaction will be absorbed by the Employer with 
the Plan experiencing no loss nor incurring any expense from the 
transaction. Also, the applicant represents that the GIC would be 
either purchased from the Plan at the higher of (1) its fair market 
value, as determined by the Trustee at the time of the Sale, or (2) at 
the amount expended by the Plan when acquiring the GIC plus all the 
interest accruing under the terms of the GIC until the date of the 
Sale.
    In addition, the Trustee has represented in a letter dated November 
10, 1994, that in its opinion the proposed purchase of the GIC by the 
Employer is in the best interests of the Plan and its participants and 
beneficiaries. Furthermore, the Trustee expressed the opinion that the 
proposed transaction is protective of the rights of the Plan's 
participants and beneficiaries.
    5. In summary, the applicant represents that the proposed 
transaction will satisfy the criteria for an exemption under section 
408(a) of the Act because (a) the Plan will receive from the Employer 
in a one-time transaction cash the greater of the fair market value of 
the GIC as determined by the Trustee, or an amount that is equal to the 
total amount expended by the Plan in acquiring the GIC plus all 
interest accruing under the terms of the GIC until the date of Sale; 
(b) the transaction will enable the Plan and its participants and 
beneficiaries to avoid any risk associated with the continued holding 
of the GIC; (c) the Plan will not incur any loss or expense from the 
proposed transaction; and (d) the Trustee of the Plan has determined 
that the proposed transaction is in the best interests of the Plan and 
its participants and beneficiaries and would serve to protect their 
rights under the Plan.

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 [[Page 492]] 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 that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 29th day of December, 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits, 
Administration, U.S. Department of Labor.
[FR Doc. 95-109 Filed 1-3-95; 8:45 am]
BILLING CODE 4510-29-P