[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 8093-8096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3406]
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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 95-09; Exemption Application No. D-
09462, et al.]
Grant of Individual Exemptions; Peoples Security Life Insurance
Company, 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.
Peoples Security Life Insurance Company (Peoples) Located in Durham,
North Carolina
[Exemption Application No.: D-09462]
Commonwealth Life Insurance Company (Commonwealth) Located in
Louisville, Kentucky
[Prohibited Transaction Exemption 95-09; Exemption Application No.: D-
09463]
Exemption
The restrictions of section 406(a) of the Act and the sanctions
resulting from the application of section 4975(c)(1) (A) through (D) of
the Code, shall not apply, effective March 1, 1992, to: (1) The
extension of credit by Peoples or Commonwealth (the Applicants), the
sponsors of an investment product (the Group Annuity Contract or GAC)
in connection with a plan's investment in the GAC; and (2) the
reimbursement of Peoples or Commonwealth for benefit payments made to
investing plans from the cashflow generated by the investments in the
plans' Custodian Accounts which are set up by a plan pursuant to the
GAC, or (3) the reimbursement of Peoples or Commonwealth for benefit
payments made to investing plans from the proceeds generated by
liquidation of investments in the Custodial Accounts upon termination
of the Group Annuity Contract provided:
1. The decision to enter into the Group Annuity Contract will be
made [[Page 8094]] by a plan fiduciary who is independent of Peoples
and Commonwealth and any affiliates of such entities (the Independent
Fiduciary).
2. Prior to a plan's investment in the Group Annuity Contract, the
Independent Fiduciary for such plan receives full and detailed written
disclosures of all features of the Group Annuity Contract including all
applicable premium charges.
3. Neither Peoples nor Commonwealth or any of their affiliates has
discretionary authority or control with respect to the decision to
invest plan assets in the investment product described herein or
renders investment advice (within the meaning of 29 CFR 2510.3-21(a))
with respect to those assets.
4. Neither Peoples nor Commonwealth or any of their affiliates
exercises any discretion or renders investment advice on behalf of a
plan with respect to the ongoing acquisition, management or disposition
of Custodian Account assets.
5. For all transactions that occur after the date of publication of
the proposed and final exemptions, Peoples and Commonwealth provide
copies of the proposed and final exemptions as published in the Federal
Register to each plan which invests in a Group Annuity Contract.
6. The premiums charged by Peoples and Commonwealth for the GAC
(including early termination charges assessed in the event of early
contract termination) will not be in excess of ``reasonable
compensation'' within the meaning of section 408(b)(2) of the Act and
will constitute the only fees charged by Peoples or Commonwealth in
connection with such contract other than accrued interest on
unreimbursed benefit payments.
7. Peoples and Commonwealth maintain or cause to be maintained, for
a period of six years, the records necessary to enable the persons
described in paragraph (8) of this section to determine whether the
conditions of this exemption have been met, except that (a) a
prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of Peoples or Commonwealth or its
agents, the records are lost or destroyed prior to the end of the six
year period, and (b) no party in interest other than Peoples or
Commonwealth shall be subject to the civil penalty that may be assessed
under section 502(i) of the Act, or to the taxes imposed by section
4975(a) and (b) of the Code, if the records are not maintained, or are
not available for examination as required by paragraph (8) below.
8(a). Except as provided in section (b) of the paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to in paragraph 7 of this section
shall be unconditionally available at their customary location during
normal business hours by:
(1) Any duly authorized employee or representative of the
Department or the Internal Revenue Service (the Service);
(2) Any fiduciary of an investing Plan or any duly authorized
representative of such fiduciary;
(3) Any contributing employer to an investing Plan or any duly
authorized employee or representative of such employee; and
(4) Any participant or beneficiary of an investing Plan, or any
duly authorized representative of such participant or beneficiary.
(b) None of the persons described above in subparagraph (2)-(4) of
this paragraph 8 shall be authorized to examine the trade secrets of
Peoples or Commonwealth or its affiliates or commercial or financial
information which is privileged or confidential.
For purposes of this exemption, affiliate means:
(a) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with such other person;
(b) Any officer, director or partner, in such other person; and
(c) Any corporation or partnership of which such other person is an
officer, director or partner.
Control means the power to exercise a controlling influence over
the management or policies of a person other than an individual.
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department
invited all interested persons to submit written comments on the
proposed exemption within 45 days from the date of publication of the
Notice in the Federal Register. All written comments were to have been
received by the Department by December 29, 1994. The Department
received one written comment submitted by the Applicants. The issue
addressed in the comment and the Department's response are summarized
as follows:
The application for exemption submitted by the Applicants requested
a March 1, 1992 effective date for the requested exemption. The
effective date was not specified in the notice of proposed exemption
published in the Federal Register on November 14, 1994 (59 FR 5655).
Accordingly, the Applicants request that the Department clarify that
the final exemption is effective as of March 1, 1992.
The Department concurs with the Applicants' comment and notes that,
in order for the exemption to apply to a covered transaction, all of
the conditions in the exemption except condition 5 (relating to the
provision of copies of the proposed and final exemption to plan
investors) must have been met.
FOR FURTHER INFORMATION CONTACT: Lyssa E. Hall of the Department,
telephone (202) 219-8971. (This is not a toll-free number.)
CNA Employees' Retirement Trust (the Trust) Located in Chicago,
Illinois
[Prohibited Transaction Exemption 95-10; Exemption Application Nos. D-
09539 through D-09544]
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, effective January 17, 1992, to fifteen past sales and
purchases by the Trust of twelve issues of short-term commercial paper
(the CNA Transactions), as identified in the Notice of Proposed
Exemption, involving the Continental Casualty Company, the Continental
Assurance Company, the Continental Assurance Company Guaranteed
Investment Fund, the Valley Forge Life Insurance Company, Valley Forge
Insurance Company, and the American Casualty Company of Reading,
Pennsylvania (collectively, the CNA Companies), each of which is a
party in interest with respect to the CNA Employees' Retirement Plan,
whose assets are held by the Trust; provided that the following
conditions are satisfied:
(A) In each of the CNA Transactions, the Trust paid no more, or
received no less, than the fair market value of the commercial paper
involved in the transaction;
(B) The CNA Transactions constituted, in the aggregate, less
than four percent of all commercial paper transactions of the Trust
during 1992; and
(C) The CNA Companies have undertaken efforts to prevent any
recurrence of direct or indirect transactions involving the Trust
and the CNA Companies, including the appointment of an independent
investment manager of all the Trust's commercial paper investments.
EFFECTIVE DATE: This exemption is effective as of January 17, 1992.
For a more complete statement of the facts and representations
supporting the [[Page 8095]] Department's decision to grant this
exemption, refer to the notice of proposed exemption published on
November 28, 1994 at 59 FR 60843.
Written Comments
The Department received one written comment, which included a
request for a hearing. The comment did not address substantively the
transactions which were the subject of the proposed exemption.
Subsection (b) of 29 CFR 2570.46, in the prohibited transaction
exemption procedure, states that the Department will grant a request
for a hearing where a hearing is necessary to fully explore material
factual issues identified by the person requesting the hearing. The
Department has determined that no issues have been identified which
would require the convening of a hearing, and, accordingly, has
determined not to hold a public hearing.
After careful consideration of the entire record, the Department
has determined to grant the exemption.
FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Hospital Supplies, Inc. Pension Plan (the Plan) Located in Radnor,
Pennsylvania
[Prohibited Transaction Exemption 95-11; Application No. D-09727]
Exemption
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 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 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.
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 January 4, 1995 at 60 FR
486/487.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (202) 219-8883. (This is not a toll-free number.)
Clarence E. Coker, Jr. and the Clarendon Family Practice, PA Employee
Retirement Plan (the Plan) Located in Manning, South Carolina
[Prohibited Transaction Application 95-12; Exemption Application No. D-
09736]
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 of approximately eight acres of unimproved
land (the Land) by the Plan to Dr. Clarence E. Coker, Jr., (Dr. Coker),
a party in interest with respect to the Plan; provided that the
following conditions are satisfied:
(a) The sale will be a one-time cash transaction;
(b) The Plan will receive the higher of: (1) the original
acquisition cost;2 or (2) the current fair market value plus a
certain premium related to the adjacency of the Land to other real
property owned by Dr. Coker, established at the time of the sale by an
independent qualified appraiser; and
\2\The original acquisition cost is determined as follows:
(original purchase price+aggregate real estate taxes)-aggregate
rental income=original acquisition cost.
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(c) The Plan will pay no expenses associated with the sale. 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 December 19, 1994 at 59 FR 65396/65397.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (202) 219-8883. (This is not a toll-free number.)
Alucobond Technologies, Incorporated Employees' Savings Plan (the Plan)
Located in St. Louis, Missouri
[Prohibited Transaction Exemption 95-13; Application No. D-09834]
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
Alucobond Technologies, Incorporated (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. CG01285A3A (the GIC) issued by
Executive Life Insurance Company (Executive Life); provided the
following conditions are satisfied:
(A) No interest or expenses are paid by the Plan in connection with
the transaction;
(B) The Loan will be repaid only out of amounts paid to the Plan by
Executive Life, its successors, or any other responsible third party;
and
(C) 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 December 19, 1994 at 59
FR 65393.
FOR FURTHER INFORMATION CONTACT: Virginia J. Miller 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 accurately describes all [[Page 8096]] material terms of
the transaction which is the subject of the exemption.
Signed at Washington, D.C., this 7th day of February, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 95-3406 Filed 2-9-95; 8:45 am]
BILLING CODE 4510-29-P