[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24899-24904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11536]



-----------------------------------------------------------------------

DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-09872, et al.]


Proposed Exemptions; T.J. Lambrecht Construction, Inc. et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of Proposed Exemptions.

-----------------------------------------------------------------------

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 [[Page 24900]] 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.

T.J. Lambrecht Construction, Inc., Employees' Profit Sharing Plan and 
Trust (the TJLC Plan); Brown & Lambrecht Earthmovers, Inc. Employees' 
Profit Sharing Plan and Trust (the B&L Plan; collectively referred to 
as the Plans)

Located in Joliet, Illinois

[Application Nos. D-09872 and D-09873]

Proposed Exemption

    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), 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) by each of 
the Plans of a 12.5% partnership interest in Prime Industries (the 
Partnership Interest) to Mr. Thomas J. Lambrecht (Mr. Lambrecht), a 
party in interest with respect to the Plans; provided the following 
conditions are satisfied: (1) The Sale is a one-time transaction for 
cash; (2) the sale price for each Partnership Interest will be the 
higher of (a) the fair market value of the Partnership Interest as 
determined by a qualified independent appraiser at the time of the Sale 
or, (b) each Plan's total investment in the Partnership Interest 
($300,000); and (3) the Plans do not suffer any loss nor incur any 
expenses in connection with the transaction.

Summary of Facts and Representations

    1. The Plans are defined contribution profit sharing plans. As of 
December 31, 1994, the TJLC Plan had 48 participants and $1,472,427.00 
in assets. As of September 30, 1994, the B&L Plan had 29 participants 
and $6,253,423.00 in assets. T.J. Lambrecht Construction, Inc. and 
Brown & Lambrecht Earthmovers, Inc. (the Employers) are Illinois 
subchapter S corporations in the business of earthmoving and road 
construction. Mr. Lambrecht is the sole trustee of the TJLC Plan and 
co-trustee (with Mr. Paul Lambrecht) of the B&L Plan. Mr. Lambrecht is 
also the sole shareholder and sole director of both Employers.
    2. The Plans purchased the Partnership Interests in Prime 
Industries from Lennon Wallpaper Company in 1991. The total purchase 
price of each Partnership Interest was $258,750.00. The applicant 
represents that both Lennon Wallpaper Company and Prime Industries are 
unrelated to the Employers. Prime Industries' only asset is a 300,000 
square foot steel building on 15.6 acres located in Shorewood, Illinois 
(the Partnership Property). From 1991 through September 30, 1994, each 
Plan advanced additional funds in the amount of $125,000.00 for 
improvements to the Partnership Property. The applicant represents 
that, during this same time period, the Partnership Property generated 
income for each Plan in the amount of $83,750.00. The applicant also 
represents that the Partnership Property continues to generate income 
for the Plans in the form of rental payments from tenants who are not 
related to the Plans or the Employers. In addition, it is represented 
that the Partnership Interest currently represents 25.47% of the TJLC 
Plan's assets and 6% of the B&L Plan's assets.1

      1The Department notes that the decisions to acquire and hold 
the Interests are governed by the fiduciary responsibility 
requirements of Part 4, Subtitle B, Title I of the Act. In this 
regard, the Department herein is not proposing relief for any 
violations of Part 4 which may have arisen as a result of the 
acquisition and holding of the Interests by the Plans.
---------------------------------------------------------------------------

    3. The applicant represents that, because the Partnership Interests 
are minority interests and because the interests are not publicly 
traded, there is not an established market for the Partnership 
Interests. Furthermore, it is represented that the Partnership Property 
is the only asset owned by the partnership. The applicant represents 
that, for the foregoing reasons, the interests are valued according to 
the proportionate value of the underlying property. In this regard, the 
applicant submitted a letter prepared by Charles Sharp, a general 
partner of the partnership, in which Mr. Sharp explained that the sole 
value of the Partnership Interests is the value of the Partnership 
Property itself and that the Partnership Interests have no value in and 
of themselves.
    4. The applicant represents that Brown & Lambrecht Earthmovers, 
Inc. was merged into T.J. Lambrecht Construction, Inc. on January 1, 
1995. As a result, the B&L Plan is in the process of being terminated. 
In addition, the TJLC Plan is being terminated and T.J. Lambrecht 
Construction, Inc. is in the process of establishing a new profit 
sharing plan which will allow for participant-directed investments. The 
applicant requests an exemption to permit the Sale by the Plans of the 
Partnership Interests to Mr. Lambrecht. Each Plan will receive the 
greater of (1) the fair market value of the Partnership Interest as 
determined by an independent appraiser at the time of the Sale, or (2) 
the Plan's total investment in the Partnership Interest. The applicant 
represents that this Sale is in the best interests of Plan participants 
and beneficiaries because it will allow the Plans to convert the 
Partnership Interests into cash, creating the liquidity needed for 
distributions to participants who, at their election, have the right to 
roll over their Plan benefits into the new profit sharing plan. It is 
also represented that the Sale will facilitate implementation of 
participant-directed investment of accounts in the new profit sharing 
plan.
    5. The Property was appraised by Mr. Joseph Batis, MAI, a State of 
Illinois Certified General Real Estate Appraiser who is independent of 
the Plans, the Employers, and Mr. Lambrecht. In analyzing the value of 
the Partnership Property, Mr. Batis stated that he relied mainly on the 
direct sales comparison approach but also considered the cost approach 
and the income approach to estimate the value of the property. The 
appraised value of the Partnership Property as of September 30, 1994 
was $4,000,000.00. The ratable value of each Plan's 12.5% interest in 
the Partnership Property as of that date was $500,000.00.2

    \ 2\The applicant represents that the fair market value of the 
Partnership Interests will not be discounted for lack of 
marketability, or for any other reason.
---------------------------------------------------------------------------

    6. The applicant represents that the Plans would incur no expenses 
or commissions with respect to the Sale. The applicant also represents 
that the proposed transaction is administratively feasible and 
protective of the Plans' participants and beneficiaries. Finally, the 
applicant represents that the proposed transaction will provide the 
Plans with the liquidity needed to fund participant-directed 
investments and cash distributions to Plan participants.
    7. In summary, the applicant represents that the transaction 
satisfies the statutory criteria of section 408(a) of the Act and 
section 4975(c)(2) of the Code because: (1) The Sale will be a one-time 
transaction for cash; (2) no [[Page 24901]] commissions or fees will be 
paid by the Plans as a result of the Sale; (3) the Sale will enable the 
Plans to liquidate their assets and will facilitate implementation of 
participant-directed investments; and (4) the Sale price will be the 
higher of: (a) The fair market value of the Partnership Interest on the 
date of the Sale, or (b) the Plan's total investment in the Partnership 
Interest.

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

Pediatric Dentistry Ltd. Profit Sharing Trust (the Plan),

Located in Fargo, North Dakota

[Exemption Application No. D-09903]

Proposed Exemption

    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), 406(b)(1), and 
406(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 Code3 shall not apply to the proposed cash sale of a 
parcel of improved real property (the Property) by the Plan to William 
Hunter, M.D. (Dr. Hunter), a party in interest with respect to the 
Plan; provided that: (1) The sale will be a one-time transaction for 
cash; (2) as a result of the sale, the Plan will receive in cash the 
greater of $79,000 or the fair market value of the Property, as 
determined by an independent, qualified appraiser, as of the date of 
the sale; (3) the Plan will pay no commissions, fees, or other expenses 
as a result of the transaction; and (4) the terms of the sale will be 
no less favorable to the Plan than those it would have received in 
similar circumstances when negotiated at arm's length with unrelated 
third parties.

    \3\For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

Summary of Facts and Representations

    1. The Plan is a defined contribution profit sharing plan sponsored 
by Pediatric Dentistry Ltd. (the Employer). As of November 29, 1994, 
there were seven (7) participants. As of November 17, 1994, the assets 
of the Plan totaled approximately $1,295,866. Approximately seven 
percent (7%) of the Plan's assets are invested in the Property. 
Northern Capital Trust Company is the trustee (the Trustee) of the 
Plan. Dr. Hunter is the administrator of the Plan.
    2. The Employer which sponsors the Plan is a professional service 
corporation providing dental services. The Employer's business office 
is located in a residential area immediately adjacent to the Property. 
Dr. Hunter is the sole shareholder of the Employer.
    3. In 1989, the Property was purchased at a price of $67,500 from 
third parties unrelated to Dr. Hunter or to any other beneficiary of 
the Plan. It is represented that one of the factors contributing to the 
purchase was the view that eventually the Property would be needed for 
the Employer's business and would at that time satisfy the definition 
of ``qualifying employer real property,'' as set forth in section 
407(d)(4) of the Act.4

    \ 4\The Department notes that the decisions of the fiduciary, 
acting on behalf of the Plan, in connection with the acquisition and 
holding of the Property are governed by the fiduciary responsibility 
requirements of part 4, subpart B, of Title I. The Department 
expresses no opinion herein, as to whether any of the relevant 
provisions of part 4, subpart B, of title I have been violated 
regarding the Plan's investment in and subsequent holding of the 
Property, and no exemption from such provisions is proposed herein.
---------------------------------------------------------------------------

    However, it is represented that since the acquisition by the Plan, 
the Property has been rented to various parties unrelated to Dr. Hunter 
or to any other beneficiary of the Plan. It is represented that the 
annual average return on the investment to the Plan since the Property 
was acquired in 1989, has been 4.31%.
    4. The Property is described as a one-story detached single family 
residence on a corner lot in a newer diversified neighborhood in Fargo, 
North Dakota. The Property consists of an 8,447 square foot level site 
improved by a structure that contains a 1,253 square foot finished 
living area above grade and a basement of the same size below grade. 
The Property is located at 1206 15 Avenue South and is situated on the 
lot adjacent to the Employer's business office.
    5. This exemption is requested to permit the Plan to sell the 
Property to Dr. Hunter for the greater of $79,000 or the appraised fair 
market value of the Property on the date of sale. Dr. Hunter represents 
that beginning in April, 1992, the Property was listed with a local 
realtor as part of the multiple listing service. The Property was 
initially listed at a price of $71,950 which it is represented 
reflected the fair market value of the Property at that time based on 
an appraisal. Subsequently, the price of the Property was reduced to 
$68,950. Though the Property was shown to prospective buyers by several 
realtors who participate in the multiple listing service, it is 
represented that the Plan did not receive any offers from those buyers 
to purchase the Property.
    It is represented that the proposed transaction is feasible in that 
it involves a one-time sale of the Property for cash. In addition, the 
proposed transaction is in the interest of the Plan in that the price 
offered by Dr. Hunter could not be obtained otherwise. In addition, the 
Plan will be able to sell the Property without incurring any further 
expense of searching for a buyer and without paying brokerage 
commissions, fees, or other expenses as a result of the transfer. The 
Trustee is desirous of selling the Property, which is illiquid, in 
order to facilitate the establishment of participant directed 
individual accounts in the Plan. It is anticipated that once the 
Property is sold the cash proceeds would be invested in marketable 
securities.
    In the opinion of the Trustee, the proposed transaction is 
protective of the participants and beneficiaries of the Plan in that 
the sales price would be based on the fair market value of the Property 
as determined by an independent, qualified appraiser, as of the date of 
the sale. Further, the Trustee will review the transaction and make the 
final determination regarding the sale of the Property to Dr. Hunter. 
In this regard, the Trustee represents that in its fiduciary capacity 
with respect to the Plan, it will review the contemplated transaction 
so as to insure that the interests of the participants of the Plan are 
protected.
    6. An appraisal of the Property was prepared by Jerry Link (Mr. 
Link), of Appraisal Services, Inc., in Fargo, North Dakota. It is 
represented that Mr. Link is qualified in that he is licensed by the 
State of North Dakota as an appraiser. It is further represented that 
he is independent in that he has no present or prospective interest in 
the Property and has no personal interest or bias with respect to the 
participants in the proposed transaction. Mr. Link represents that 
neither his employment nor his compensation was conditioned upon the 
appraised value of the Property, nor was he required to report a 
predetermined value or base the appraisal on a requested minimum value 
for the Property. After physically inspecting the Property, and 
reconciling values for the Property established by the cost approach, 
income approach, and sales comparison approach, Mr. Link determined 
that the fair market [[Page 24902]] value of the Property was $79,000, 
as of January 13, 1994.
    Because the Property is located on the lot adjacent to the 
Employer's business office, Mr. Link was asked to determine whether 
there would be any premium value associated with the Property. In this 
regard, Mr. Link indicated that the Property is a single family 
dwelling located in an R-l, One/Two Family Dwelling District. It is 
represented that this zoning category does not allow commercial 
development without a special use permit. According to Mr. Link the 
highest and best use of the Property is single family. Based on this 
highest and best use, it is the opinion of Mr. Link that the Property's 
location next to the Employer's business office does not result in a 
premium associated with the value of the Property to Dr. Hunter.
    7. In summary, the applicant represents that the proposed 
transaction meets the statutory criteria for an exemption under section 
408(a) of the Act because:
    (a) the sale of the Property will be a one-time transaction for 
cash; (b) as a result of the sale, the Plan will receive in cash the 
greater of $79,000 or the fair market value of the Property, as 
determined by an independent, qualified appraiser, as of the date of 
the sale; (c) the Plan will pay no commissions, fees, or other expenses 
as a result of the transaction; (d) the terms of the sale will be no 
less favorable to the Plan than those it would have received in similar 
circumstances when negotiated at arm's length with unrelated third 
parties; (e) the Plan will be able to invest the proceeds from the sale 
of the Property in marketable securities; (f) the Plan will be able to 
dispose of the Property which is illiquid; and (g) the sale of the 
Property will facilitate the establishment of participant directed 
individual accounts in the Plan.

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

Bob Murphy, Inc. Profit Sharing Plan (the Plan)

Located in Boynton Beach, Florida

[Exemption Application No. D-09949]

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 sale (the Sale) of certain works of art (the Art Work) by 
the Plan to Robert J. Murphy, Jr., a disqualified person with respect 
to the Plan.\5\

    \5\Since Robert J. Murphy, Jr. and his wife, Gail F. Murphy, are 
the only participants in the Plan, there is no jurisdiction under 
Title I of the Act pursuant to 29 CFR 2510.3-3(b). However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
---------------------------------------------------------------------------

    This proposed exemption is conditioned upon the following 
requirements: (1) all terms and conditions of the Sale are at least as 
favorable to the Plan as those obtainable in an arm's length 
transaction between unrelated parties; (2) the Sale is a one-time cash 
transaction; (3) the Plan is not required to pay any commissions, costs 
or other expenses in connection with the Sale; and (4) the Plan 
receives a sales price equal to the fair market value of the Art Work 
on the date of the Sale as determined by an independent, qualified 
appraiser.

Summary of Facts and Representations

    1. The Plan is a profit sharing Plan whose only participants are 
Mr. Murphy and his wife, Gail F. Murphy. As of June 30, 1994, the Plan 
had total assets of $572,050. Mr. and Mrs. Murphy serve as the trustees 
of the Plan (the Trustees) and have sole investment discretion with 
respect to its assets.
    2. The Plan has approximately 17 percent of its assets in the Art 
Work, which consists of ten Leroy Nieman serigraphs. The Plan received 
the Art Work as a rollover from the Bob Murphy, Inc. Defined Benefit 
Pension Plan (the DB Plan), which the trustees terminated on November 
15, 1987. The DB Plan purchased the Art Work between 1980 and 1987 from 
two dealers--Hammers Gallery in New York and Hanson Gallery in New 
Orleans. Mr. Murphy represents that he is independent of, and unrelated 
to, both Hammers Gallery and Hanson Gallery.
    3. Following its acquisition, the Art Work has been in the 
possession of Mr. Murphy at his residence at Delray Beach, Florida and 
his office at the Delray Dunes Country Club in Boynton Beach, Florida. 
In an examination report dated January 6, 1993, the Internal Revenue 
Service (the Service) determined that Mr. and Mrs. Murphy had engaged 
in prohibited transactions by reason of their use of the Art Work for 
the years 1989, 1990 and 1991. Mr. Murphy represents that on August 22, 
1994 he filed Forms 5330 with the Service and paid the applicable 
excise taxes associated with the past prohibited transaction in the 
amount of $9,195.
    4. Because the Art Work is not an income producing asset for the 
Plan and certain pieces of the Art Work have declined in value, Mr. 
Murphy proposes to purchase the Art Work from the Plan for a cash 
amount equal to its fair market value on the date of the Sale. 
Accordingly, Mr. Murphy requests an administrative exemption from the 
Department to permit his purchase of the Art Work from the Plan under 
the terms and conditions described herein.
    5. Celeste B. Stover, the Assistant Director for Hanson Gallery in 
New Orleans, Louisiana, valued the Art Work as of August 10, 1994. In 
her capacity as Assistant Director, Ms. Stover has actively represented 
the work of Leroy Nieman since 1983. Ms. Stover represents that while 
Mr. Murphy has been a client of the Hanson Gallery since 1984, both she 
and Hanson Gallery are unrelated to, and independent of, Mr. and Mrs. 
Murphy. Ms. Stover states that she derives less than 1 percent of her 
annual income from Mr. Murphy.
    In determining the fair market value of the Art Work, Ms. Stover 
represents that she looked to the recommended retail values of Leroy 
Nieman serigraphs provided yearly to Hanson Gallery by Knoedler and 
Co., the publishers of Leroy Nieman's prints. The recommended values 
are based upon current demand for the specific image as well as 
availability of the image and previous bids within the last year. Ms. 
Stover's valuations of the Art Work are as follows:

------------------------------------------------------------------------
                                                                   Fair 
                              Work                                Market
                                                                  Value 
------------------------------------------------------------------------
Rush Street Bar................................................   $6,500
Elephant Nocturne..............................................   10,000
New York Stock Exchange........................................   15,000
P.J. Clarkes...................................................   15,000
Buena Vista Bar................................................    8,000
Harry's Wall Street Bar........................................    7,000
Bistro Gardens.................................................    6,800
Polo Lounge....................................................   11,000
Bar at 21......................................................    7,000
Fix McRory's Whiskey Bar.......................................   12,000
------------------------------------------------------------------------

    6. In summary, it is represented that the proposed transactions 
will satisfy the statutory criteria for an exemption under section 
4975(c)(2) of the Code because: (a) All terms and conditions of the 
Sale will be at least as favorable to the Plan as those obtainable in 
an arm's length transaction between unrelated parties; (b) the Sale 
will be a one-time cash transaction; (c) the Plan will not be required 
to pay any commissions, costs [[Page 24903]] or other expenses in 
connection with the Sale; (d) the Plan will receive a sales price equal 
to the fair market value of the Art Work based on a determination by an 
independent, qualified appraiser.

Notice to Interested Persons

    Since Mr. and Mrs. Murphy are the only participants in the Plan, it 
has been determined that there is no need to distribute the notice of 
proposed exemption to interested persons. Comments are due within 
thirty days after publication of this notice in the Federal Register.

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

The Brown Group, Inc., 401(k) Savings Plan (the Plan),

Located in St. Louis, Missouri

[Application No. D-09951]

Proposed Exemption

    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 C.F.R. Part 
2570, Subpart B (55 FR 32836, August 10, 1990). If the exemption is 
granted 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 proposed guarantee (the Guarantee) by The 
Brown Group, Inc. (the Employer), the sponsor of the Plan, of amounts 
due the Plan with respect to a guaranteed investment contract issued by 
Confederation Life (Confederation Life), including the Employer's 
potential cash advances to the Plan (the Advances) pursuant to the 
Guarantee and the potential repayment of the Advances (the Repayments); 
provided that the following conditions are satisfied:
    (A) No interest and/or expenses are paid by the Plan;
    (B) The Advances are made in lieu of amounts due the Plan under the 
terms of the GIC;
    (C) The Repayments are restricted to cash proceeds actually 
received by the Plan from Confederation Life or any other entity making 
payment with respect to Confederation Life's obligations under the 
terms of the GIC, or from the sale or transfer of the GIC to unrelated 
third parties (the GIC Proceeds), and no other Plan assets are used to 
make the Repayments; and
    (D) The Repayments will be waived to the extent the Advances exceed 
the GIC Proceeds.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan which includes a cash or 
deferred arrangement under section 401(k) of the Code, and which 
provides for employer matching contributions and additional employer 
discretionary contributions. As of December 31, 1994 the Plan had 
approximately 2,500 participants and total assets of approximately 
$44,937,281. The trustee of the Plan is Boatmen's Trust Company (the 
Trustee), located in St. Louis, Missouri. The Employer, a New York 
publicly-traded corporation, is engaged in the manufacture, import and 
retail sales of shoes, with its corporate headquarters in St. Louis, 
Missouri.
    2. The Plan provides for individual participant accounts (the 
Accounts) and for participant-directed investment of each Account. Plan 
participants direct investment of their Accounts among four investment 
options (the Funds), and may reallocate their Account balances among 
the Funds on a periodic basis. The Funds include a guaranteed interest 
fund (the G.I. Fund), which invests in guaranteed investment contracts 
issued by insurance companies.
    3. Among the assets of the G.I. Fund is the GIC, a guaranteed 
investment contracts issued to the Plan in 1992 by Confederation Life 
Insurance Company (Confederation Life), a Canadian insurance company 
doing business in the United States. The GIC is a single-deposit, 
benefit-responsive contract, principal amount $1,000,000, earning 
interest at a guaranteed annual rate of 7.15% (the Contract Rate). The 
GIC's terms enable the G.I. Fund to make monthly withdrawals (the 
Withdrawals) to effect, in accordance with the terms of the Plan, 
benefit distributions, in-service withdrawals, participant Advances, 
and participant-directed transfers of Account balances to other Funds 
offered by the Plan (the Withdrawal Events). Interest at the Contract 
Rate is credited daily, calculated on the balance remaining deposited 
under the GIC. If interest earned under the GIC exceeds the amount 
withdrawn, the difference is paid annually (the Interest Payments) on 
December 31. All Interest Payments were made when due through December 
31, 1993. The terms of the GIC also require Confederation Life to make 
a final payment to the Plan on December 12, 1996 (the Maturity Payment) 
in the amount of the GIC's total principal deposits plus interest 
earnings at the Contract Rate less previous withdrawals (Accumulated 
Book Value) as of such date. As of July 31, 1994, the GIC had an 
Accumulated Book Value of $1,034,447.59.
    4. Commencing August 1, 1994 (the Receivership Date), insurance 
regulatory authorities in Canada and the state of Michigan instituted 
proceedings to place Confederation Life in receivership (the 
Receivership).\6\ Consequently, Confederation Life's assets and 
operations are frozen, and payments on all its guaranteed investment 
contracts, including the GIC held by the Plan, were suspended effective 
as of the Receivership Date. Since the commencement of the 
Receivership, the Plan has been unable to make withdrawals from the GIC 
to fund Withdrawal Events with respect to Account balances invested in 
the GIC, and the Employer represents that it is uncertain whether, or 
to what extent, the Plan will receive any GIC payments or withdrawals 
to enable funding of future Withdrawal Events. Additionally, the 
Employer represents that it is uncertain whether and to what extent the 
Maturity Payment under the GIC will be paid. The Employer desires to 
alleviate the G.I. Fund of risks associated with investments in the 
GIC, and to enable the G.I. Fund to fully fund the Withdrawal Events 
with respect to Account balances invested in the G.I. Fund. 
Accordingly, the Employer proposes to guarantee (the Guarantee) that 
the Plan will recover all amounts due under the GIC, and in its 
discretion to make advances to the Plan (the Advances) pursuant to the 
Guarantee. The Employer requests an exemption for the Guarantee and the 
Advances, as well as the potential repayment of the Advances (the 
Repayments), under the terms and conditions described herein.

    \6\The Department notes that the decisions to acquire and hold 
the GIC are governed by the fiduciary responsibility requirements of 
Part 4, Subtitle B, Title I of the Act. In this proposed exemption, 
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.
---------------------------------------------------------------------------

    5. The Employer and the Trustee will execute a written agreement 
embodying all the terms and conditions of the Guarantee, the Advances 
and the Repayments (the Agreement).
    The Guarantee: The Guarantee is the Employer's undertaking to 
insure that in the eventual resolution of the Receivership, the Plan 
recovers a total amount with respect to the GIC which is no less than 
its investment in the GIC as of the Receivership Date, plus interest 
thereafter at the Contract Rate. Accordingly, the amount which the 
Employer guarantees under the [[Page 24904]] Agreement (the Guaranteed 
Amount) is the Receivership Date Accumulated Book Value of the GIC, 
which is $1,034,447.59, less the sum of GIC Proceeds (cash proceeds 
actually received by the Plan from Confederation Life or any other 
entity making payment with respect to Confederation Life's obligations 
under the terms of the GIC, or from the sale or transfer of the GIC to 
unrelated third parties) and Advances under the Agreement as described 
below, plus interest on the net of the foregoing amount after the 
Receivership date at the Contract Rate of 7.15 percent.
    The Advances: On the monthly occasions when the Employer, as Plan 
administrator, would otherwise request a withdrawal from the GIC to 
fund Withdrawal Events with respect to Account balances invested in the 
GIC, the Employer will instead notify the Trustee of the requested 
withdrawal amount. The Trustee will then determine whether it can 
satisfy the withdrawal request by using the assets in the G.I. Fund 
other than the GIC. If the Trustee determines that the funds available 
from the G.I. Fund are insufficient to honor the withdrawal request, 
the Trustee will determine the amount of additional funds necessary to 
honor the withdrawal request, and the Employer will make an Advance in 
that amount to the Plan. Valuation of the Account balances invested in 
the GIC for purposes of the Advances will be based on the Guaranteed 
Amount as described above.
    Final Advance: The Agreement provides for a final Advance after the 
completion of the Receivership. After the Trustee has determined that 
the Plan will not receive any further proceeds from Confederation Life 
or its successors with respect to the GIC, the Employer shall make a 
final Advance to the Plan in the amount necessary to enable the Plan's 
recovery of the Guaranteed Amount. In the event the Receivership 
extends beyond the year 2000, the Employer will make the final Advance 
on the first business day in the year 2001 in the amount required on 
such date to enable the Plan to recover the Guaranteed Amount.
    The Repayments: The Agreement provides that the Repayments of the 
Advances are restricted to the principal amounts of the Advances, and 
the Plan will pay no interest and will incur no expenses with respect 
to the Advances. The Repayments may be made only from the GIC Proceeds 
received by the Plan. No other Plan assets will be available for the 
Repayments. If the GIC Proceeds are not sufficient to repay fully the 
Advances, the Agreement provides that the Employer will have no 
recourse against the Plan, or against any participants or beneficiaries 
of the Plan, for the unpaid amount. To the extent the Plan receives GIC 
Proceeds in excess of the total amount of the Advances, such additional 
amounts will be retained by the Plan and allocated among the Accounts 
invested in the G.I. Fund.
    6. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act for the 
following reasons: (1) The Advances enable the Plan to resume the full 
funding of the Withdrawal Events; (2) The Advances will protect the 
Plan's investment in the GIC and will ensure that the Plan will recover 
all amounts due under the terms of the GIC; (3) The Plan will pay no 
interest or incur any expenses with respect to the Advances; (4) 
Repayment of the Advances will be made only from GIC Proceeds and no 
other Plan assets will be involved in the transactions; (5) Repayment 
of the Advances will be waived to the extent the Plan recoups less from 
the GIC Payors than the total amount of the Advances; and (6) In the 
event the Plan receives GIC Proceeds in excess of the Guaranteed 
Amount, such amounts will be retained by the Plan and allocated among 
the Accounts.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department (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 that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.
Ivan Strasfel,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-11536 Filed 5-9-95; 8:45 am]
BILLING CODE 4510-29-P