[Federal Register Volume 60, Number 105 (Thursday, June 1, 1995)]
[Notices]
[Pages 28626-28631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13300]



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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-39; Exemption Application No. D-
09358, et al.]


Grant of Individual Exemptions; NCNB Real Estate Fund, 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, D.C. 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.
NCNB Real Estate Fund (the Fund), NationsBank Pension Plan, NationsBank 
Retirement Savings Plan Located in Charlotte, North Carolina; Exemption

[Prohibited Transaction Exemption 95-39; Exemption Application Nos. D-
09358, D-09359 and D-09360, respectively]

    Based on the facts and representations set forth in the 
application, the Department and the Service have determined to grant 
the following 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, 
August 10, 1990) and Revenue Procedure 75-26, 1975-1 C.B. 722.

Section I: Covered Transactions

    1. 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 (the Sale) of units in the Fund (Units) by 
plans participating in the Fund (the Plans) pursuant to an Option 
election made available by NationsBank, N.A. (Carolinas) (the Bank), to 
a standby trust (the Standby Trust) established and maintained by 
NationsBank, Corporation (the Holding Company), a party in interest 
with respect to the Plans. This exemption is subject to the conditions 
set forth in Section II.
    2. The restrictions of sections 406(a)(1)(D), 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) (D) and (E) of the 
Code shall not apply to any decision by the Bank to sell a property 
held by the Fund to a third party, and jointly owned by the Plans and 
the Holding Company, provided that: each Plan receives no less than 
fair market value for its interest in the property; and 
[[Page 28627]] the Independent Fiduciary approves the reasonableness 
and propriety of the sale of the property.

Section II: Conditions

    (a) The properties held by the Fund (the Properties) shall be 
appraised by an independent and qualified appraiser within twelve 
months and updated within fifteen days before the Settlement Valuation 
Date.
    (b) The Plans selling Units pursuant to the Options will receive a 
price equal to the value of each Unit sold based on the value of the 
Fund as of the Settlement Valuation Date (the Unit Purchase Price) plus 
the Interest Amount which will be calculated by the Bank and reviewed 
and approved by the Independent Fiduciary who has been retained to 
represent the interests of the Plans with respect to the Sale and the 
subsequent activities of the Fund related to the Fund's liquidation.
    (c) Plans selling Units pursuant to Options 1 or 2 will receive the 
Unit Purchase Price plus the Interest Amount for each Unit sold on the 
settlement date (Settlement Date) which will be no more than 120 days 
after the Settlement Valuation Date.
    (d) If Options 2 or 4 are elected, the Plans involved will receive 
the final payment, if any, within sixty days after the two year 
anniversary of the Settlement Valuation date for Option 2, or the date 
of complete liquidation of the Fund for Option 4.
    (e) Prior to the Settlement Valuation Date, the Bank will provide 
each Plan with written information regarding the terms of the Sale. 
Such information includes, but is not limited to:
    (i) notice that each Plan will be entitled to elect one or more 
Options which will permit the Plan to sell all or part of its Units to 
the Stand-by Trust, or to continue to hold all or part of its Units in 
the Fund until the Fund's liquidation is complete, provided that if 
multiple Options are elected they must be uniform with respect to the 
grant, or failure to grant, a Release to the Bank,
    (ii) a description of each Option,
    (iii) the date by which a Plan must elect an Option (Option 
Election Date), and
    (iv) forms for electing the Options.
    (f) Except for Plans with respect to which the Bank or any of its 
Affiliates is an employer, the decision whether to authorize the 
Independent Fiduciary to make an Option election on behalf of the Plan 
will be made by a fiduciary independent of the Bank and its Affiliates 
and the Independent Fiduciary.
    (g) The Bank and any Affiliate which is an employer with respect to 
a Plan will authorize the Independent Fiduciary to choose among all of 
the Options.
    (h) A Plan's Option election will be made by a Plan fiduciary who 
is independent of the Bank and its Affiliates or by the Independent 
Fiduciary.
    (i) The Independent Fiduciary's duties and responsibilities are set 
forth in the Independent Fiduciary Agreement between the Independent 
Fiduciary and the Bank dated April 1, 1994 and amended by the First 
Amendment thereto dated September 1, 1994. These duties and 
responsibilities include such activities as:
    (1) Reviewing and determining whether to rely on the appraisals of 
the Properties;
    (2) Ordering a new appraisal to the extent it deems necessary in 
cases in which it has determined that an existing appraisal cannot be 
relied upon;
    (3) Reviewing and approving all of the relevant disclosures, 
written explanations, and forms furnished to the Plans by the Bank;
    (4) Furnishing certain information to an independent Plan 
fiduciary, in advance of any date by which the independent Plan 
fiduciary is required to respond in order to authorize the Independent 
Fiduciary to make a decision on behalf of the Plan. Such information 
includes, but is not limited to:
    (i) the Unit Purchase Price;
    (ii) a description and explanation of the Options;
    (iii) dates by which the Plans must act in order to make Option 
elections and authorize the Independent Fiduciary to make Option 
elections on behalf of the Plan;
    (iv) information summarizing: the effect of failing to authorize 
the Independent Fiduciary to make Option elections on behalf of the 
Plan, the effect of failing to make an Option election after informing 
the Independent Fiduciary that the independent Plan fiduciary would 
make the decision to select an Option election, and the availability 
and effect of the different Option election authorizations which the 
Plan may provide to the Independent Fiduciary, in language calculated 
to be reasonably understood by the average independent Plan fiduciary 
responsible for making decisions on behalf of a Plan with regard to 
Units of the Fund held by the Plan;
    (5) making Option elections on behalf of any Plan if: (a) the Bank 
or any of its Affiliates is an employer with respect to the Plan; (b) 
the independent Plan fiduciary authorizes the Independent Fiduciary to 
make Option elections on behalf of that Plan; or (c) the independent 
Plan fiduciary fails to make an option election prior to the Option 
Election Date;
    (6) providing certain assistance regarding the four Options, to 
those independent Plan fiduciaries who wish to make their own Option 
elections;
    (7) reviewing and determining whether to approve the Unit Purchase 
Price as of the Settlement Valuation Date, and the value of a Unit in 
the Fund as of two years from the Sale of the Units by the Plans to the 
Standby Trust (for purposes of determining the amount which is due to 
those Plans electing Option 2);
    (8) reviewing and determining whether to approve the Interest 
Amount payable to any Plan which elected either Option 1 or 2;
    (9) exercising its veto authority with regard to the proposed Unit 
Purchase Price, Interest Amount, or value of Fund Units pursuant to 
Option 2, which it has determined not to approve;
    (10) monitoring, by attending the Bank's Trust Real Estate 
Investment Committee's quarterly meetings, the Bank's efforts to 
dispose of the Properties during the liquidation of the Fund;
    (11) approving the reasonableness and propriety of sales of the 
Properties during the period in which the Standby Trust owns units in 
the Fund.
    (j) The Independent Fiduciary may be removed by a majority vote of 
the Plans ``for cause.''
    (i) The term ``for cause'' shall mean that there must be sufficient 
and reasonable grounds for removal and the grounds must be related to 
the ability and fitness of the Independent Fiduciary to perform his 
required duties.
    (ii) Each Plan's vote for or against removal will be proportionate 
to its ownership interest in the Fund exclusive of Units owned by the 
Standby Trust.
    (k) The Bank and the Holding Company will be bound by the decisions 
and determinations made by the Independent Fiduciary.
    (l) The Bank will continue its efforts, with due diligence to 
liquidate the Fund.
    (m) Any distributions made by the Fund will be made pro rata, in 
cash.
    (n) Any payment made pursuant to any of the Options will be made in 
cash.
    (o) The Independent Fiduciary is responsible for taking reasonable 
steps consistent with its duties and responsibilities hereunder to 
monitor compliance with the terms and conditions of the exemption at 
all times. [[Page 28628]] 

Section III: Definitions

    For purposes of this exemption:
    (a) Affiliate of the Bank includes:
    (1) Any person directly or indirectly through one or more 
intermediaries controlling, controlled by, or under common control with 
the Bank;
    (2) Any officer, director or employee of the Bank, or of a person 
described in paragraph (a)(1) of Section II; and
    (3) Any partnership in which the Bank is a partner;
    (b) Control means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    (c) Affiliate of the Independent Fiduciary includes:
    (1) Any person directly or indirectly through one or more 
intermediaries controlling, controlled by, or under common control with 
the Independent Fiduciary;
    (2) Any officer or director of the Independent Fiduciary (where the 
Independent Fiduciary is other than a partnership);
    (3) Any partner in the Independent Fiduciary with the authority to 
make, or who actually makes, fiduciary decisions which are within the 
scope of the Independent Fiduciary's duties and responsibilities under 
this exemption, or who holds a five percent (5%) or greater interest in 
the Independent Fiduciary;
    (d) Independent Fiduciary means a person who:
    (1) Is not an Affiliate of the Bank as defined in Section III(a);
    (2) does not have an ownership interest in the Bank or its 
Affiliates;
    (3) is not a corporation or partnership in which the Bank or any of 
its Affiliates has an ownership interest;
    (4) is not a fiduciary with respect to any of the Plans other than 
in connection with the transactions described in this exemption;
    (5) has acknowledged in writing acceptance of fiduciary 
responsibility;
    (6) is either:
    (i) A business organization which has at least (5) years of 
experience with respect to commercial real estate investments or other 
relevant experience;
    (ii) a committee comprised of three to five individuals who each 
have at least five (5) years of experience with respect to commercial 
real estate investments or other relevant experience; or
    (iii) a committee comprised both of a business organization or 
organizations and individuals having the qualifications described in 
paragraphs (d)(1) through (6)(ii) above.
    (7) An individual acting in a fiduciary capacity with respect to 
the Fund on behalf of, and at the direction of, an Independent 
Fiduciary meeting the conditions of paragraphs (d)(1) through (6)(iii) 
above shall be considered an Independent Fiduciary.
    For purposes of this definition, no organization or individual may 
serve as an Independent Fiduciary for the Fund for any fiscal year, if 
the gross income received by such organization or individual (or by any 
partnership or corporation of which such organization or individual is 
an officer, director, or ten percent (10%) or more partner or 
shareholder) from the Bank, or any Affiliate, for that fiscal year 
exceeds five percent (5%) of its or his annual gross income from all 
sources for the prior fiscal year. If such organization or individual 
has no income for the prior fiscal year, the 5% limitation shall be 
applied with reference to the fiscal year in which such organization or 
individual serves as an independent fiduciary. The income limitation 
will include income received for services rendered to the Plans and the 
Fund as Independent Fiduciary, as described in this exemption.
    In addition, no organization or individual who is an Independent 
Fiduciary or an Affiliate of such Independent Fiduciary, and no 
partnership or corporation of which such Independent Fiduciary is an 
officer, director, or ten percent (10%) or more partner or shareholder 
with the authority to cause such corporation or partnership to engage 
in the following transactions, or who exercises such authority in 
conjunction with others, may:
    (1) Acquire any property from, sell any property to, or borrow any 
funds from, the Bank, its Affiliates, or any collective investment 
vehicle or separate trust maintained or advised by the Bank or its 
Affiliates, during the period that such organization or individual 
serves as an Independent fiduciary and continuing for a period of six 
(6) months after such organization or individual ceases to be an 
Independent Fiduciary; or
    (2) Negotiate any such transaction, described above in paragraph 
(1) above during the period that such organization or individual serves 
as Independent Fiduciary.
    No Plan fiduciary or sponsor of a Plan or a designee of such Plan 
fiduciary, sponsor or Plan may serve as the Independent Fiduciary with 
respect to the Fund.
    (e) Option(s) means the following:
    Option 1: A Plan will accelerate the liquidation of its investment 
in the Fund by selling each of its Units subject to this Option to the 
Standby Trust for an amount equal to the Unit Purchase Price plus the 
Interest Amount. A Plan electing this Option will reserve all rights it 
may have with respect to the Fund, the Bank and other appropriate 
persons. However, with respect to a participant directed account Plan, 
the Plan sponsor and an authorized independent Plan fiduciary will 
provide a Release to the Fund, the Bank and other appropriate persons 
without any affect on the rights of the participants or beneficiaries 
regarding the matters covered by the Release.
    Option 2: A Plan will accelerate the liquidation of its investment 
in the Fund by selling each of its Units subject to this Option to the 
Standby Trust for an amount equal to the Unit Purchase Price plus the 
Interest Amount. In addition, the Bank will pay promptly following the 
second anniversary of the Settlement Valuation Date, an amount equal to 
the excess, if any, of (A) the sum of (1) the value that the Unit would 
have had at the Valuation Date two years after the Settlement Valuation 
Date if such Unit had not been sold, plus (2) the amount of any 
distributions made with respect to such Unit during such two year 
period, over (B) the Unit Purchase Price plus the Interest Amount. The 
Bank will pay Litigation Expenses to the Plan, if any. Under this 
Option, a Plan will release the Fund, the Bank and other appropriate 
persons with respect to all matters relating to the investment in the 
Fund occurring prior to the Sale.
    Option 3: A Plan will continue its investment in the Fund through 
the end of the liquidation process. Under this Option, a Plan reserves 
all rights with respect to the Fund, the Bank and all other appropriate 
persons. However, with respect to a participant directed account Plan, 
the Plan sponsor and an authorized independent Plan fiduciary will 
provide a Release to the Fund, the Bank and other appropriate persons 
without any affect on the rights of the participants or beneficiaries 
regarding the matters covered by the Release.
    Option 4: A Plan will continue its investment in the Fund through 
the end of the liquidation process. For a Plan electing this Option, 
the Bank will agree to pay promptly following the completion of the 
liquidation of the Fund, with respect to each Unit subject to this 
Option, an amount equal to the excess, if any, of the (i) the value of 
a Unit on September 28, 1990 over (ii) the value of all distributions 
made to the Plan with respect to such Unit since September 29, 1990 and 
during the liquidation of the Fund. The Bank will also pay Litigation 
Expenses to the Plan, if any. Plans electing this Option will 
[[Page 28629]] release the Fund, the Bank and other appropriate persons 
with respect to all matters related to the investment in the Fund 
occurring prior to the Sale.
    (f) Unit Purchase Price means the amount which is calculated by 
dividing the value of all of the assets of the Fund, as reviewed and 
approved by the Independent Fiduciary, by the total number of units in 
the Fund.
    (g) Interest Amount means the amount approved by the Independent 
Fiduciary, equal to the net income earned on a Fund unit during the 
period commencing on the Settlement Valuation Date and ending on the 
day immediately preceding the Settlement Date, exclusive of realized or 
unrealized appreciation or depreciation.
    (h) Settlement Valuation Date means the date on which the value of 
the Fund will be determined by the Bank in order to establish the Unit 
Purchase Price in connection with the Sale. The Settlement Valuation 
Date will be the last business day of the calendar month following the 
calendar month in which final prospective approval will be granted by 
the Office of the Comptroller of the Currency subsequent to the final 
grant of this exemption and approval of the transaction which is the 
subject of this exemption by the Federal Reserve Board.
    (i) Litigation Expenses means the out-of-pocket expenses of 
litigation instituted before November 24, 1992 by or on behalf of a 
Plan against the Bank or the Fund with respect to the Plan's investment 
in the Fund exclusive of any expense of litigation with respect to a 
case which has proceeded to trial, or with respect to which there is a 
judgment against the Bank or the Fund, prior to the Option Election 
Date, plus interest. The total amount of Litigation Expenses, the rate 
of interest and the period for which interest is paid must be agreed to 
in writing between the Bank and the Plan prior to the Plan's election 
of Options 2 or 4. However, in the event there has never been a written 
settlement agreement specifying the amount of Litigation Expenses, 
prior to the date on which the Plan elects Option 2 or 4, Litigation 
Expenses will be the amounts requested by the Plan, unless such 
expenses are unreasonable.
    (j) Option Election Date means the date as communicated to the 
Plans, at least Ninety (90) days subsequent to the Settlement Valuation 
Date and at least sixty (60) days subsequent to the completion of the 
mailing of the general post Settlement Valuation Date disclosure to all 
of the Plans by the Independent Fiduciary, on or prior to which a Plan 
must submit its Option election forms to the Bank.
    (k) Settlement Date means the date, no more than 120 days after the 
Settlement Valuation Date, on which the transfer of the Units to the 
Standby Trust and delivery of Releases to the Bank will be effected 
pursuant to the Options.
    (l) Release means a release covering activities and transactions in 
connection with the Fund prior to, and during, the Fund's liquidation, 
but in no case shall be effective on or after the Settlement Date. In 
this regard, the Release does not cover activities and transactions 
necessary to comply with the exemption, the conditions of the 
exemption, and the material representations made in connection 
therewith, which form the basis for the Department's decision to grant 
the exemption for the Sale and subsequent dispositions of properties 
owned by the Fund.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department 
invited all interested persons to submit written comments and requests 
for a hearing on the proposed exemption within 30 days of the date of 
publication of the Notice in the Federal Register on March 20, 1995.
    During the comment period, the Department received no requests for 
a hearing. However, the Department received four comment letters; one 
from a person who appears to represent an employee benefit plan 
invested in the Fund, one from the Bank, and two from Arthur Anderson, 
the Independent Fiduciary.
    The comment on behalf of Drs. Auman, Anderson & Munt, who appear to 
represent an employee benefit plan invested in the Fund, favored the 
liquidation of the plan's interest in the Fund.
    The comment from the Bank dated March 30, 1995, states that the 
name of the applicant has been changed from ``Nations Bank of North 
Carolina, N.A.'' to NationsBank, N.A. (Carolinas). The Department 
concurs.
    The comment letter from Arthur Andersen dated, May 1, 1995, as well 
as a second letter clarifying certain comments in the first letter, 
requested certain modifications and clarifications of the conditions of 
the exemption and certain revisions of the language of the Summary of 
Facts and Representations in the Notice (SFR). Arthur Andersen's 
comments are as follows:
    First, Arthur Andersen requests modification of the condition 
contained in Section II(i) on page 14781 of the Notice. A list of 
activities follows the language, ``[t]he Independent Fiduciary's duties 
and responsibilities include, but are not limited to,'' which appears 
at the beginning of paragraph (i). Arthur Andersen suggests replacing 
the quoted language with the following language: ``[t]he Independent 
Fiduciary's duties and responsibilities are set forth in the 
Independent Fiduciary Agreement between the Independent Fiduciary and 
the Bank dated April 1, 1994, and amended by the First Amendment 
thereto dated September 1, 1994. These duties and responsibilities 
include such activities as.'' Arthur Andersen states that this change 
would clarify that Section II(i) is meant to describe the terms of the 
Agreement which the parties should look to in order to determine the 
specific scope of Arthur Andersen's responsibilities. The Department 
concurs.
    Second, the condition contained in Section II(i)(1) on page 14781 
of the Notice states that the Independent Fiduciary's duties include 
``reviewing and determining whether to approve appraisals of the 
Properties.'' Arthur Andersen suggests replacing the word, ``approve,'' 
with the words, ``rely on.'' Arthur Andersen explains that its role is 
limited to reviewing the appraisals to determine whether they can 
reasonably be relied upon as the basis for establishing the Unit 
Purchase Price. The Department concurs.
    Further, the third sentence of item 9 of the SFR on page 14785 of 
the Notice states that ``[t]he Independent Fiduciary will review and 
approve the qualifications of the appraisers and their technical 
analyses and methodologies employed.'' Arthur Andersen states that it 
will not approve the professional qualifications of the appraisers, but 
rather will evaluate and consider their qualifications in the course of 
its review of the appraisals. The Department concurs.
    Moreover, the fourth sentence of item 9 of the SFR on page 14785 
states that ``[a]s part of this approval process, the Independent 
Fiduciary will determine whether such appraisals are reasonable and 
adequate to establish the fair market value of the Properties.'' Arthur 
Andersen states that it would be more accurate to say that the 
Independent Fiduciary will determine to what extent such appraisals 
provide a reasonable basis for such purpose. Arthur Andersen explains 
that it's role will be limited to reviewing the appraisals to determine 
whether they can reasonably be relied upon as a basis for establishing 
the Unit Purchase Price, rather than approval of the underlying 
appraisals. The Department concurs.
    In addition, the fourth sentence of the second paragraph of item 9 
of the SFR [[Page 28630]] on page 14785 states that ``[f]urther, if the 
Independent Fiduciary believes that the Unit Purchase Price proposed by 
the Bank is not accurate, the Independent Fiduciary has the authority 
to order the Bank to recalculate the Unit Purchase Price.'' Arthur 
Andersen suggests that the quoted language above should be replaced 
with the following language: ``[f]urther, if the Independent Fiduciary 
cannot approve the Unit Purchase Price proposed by the Bank, the 
Independent Fiduciary has the authority to order the Bank to 
recalculate the Unit Purchase Price.'' Arthur Andersen explains that 
the word, ``accurate,'' is not the appropriate term to use, because the 
property values will be based on a range of reasonableness. The 
Department concurs.
    Third, the condition contained in Section II(i)(2) on page 14781 of 
the Notice states that the Independent Fiduciary is responsible for 
``[o]rdering a new appraisal in cases in which it has determined not to 
approve an existing appraisal.'' Arthur Andersen suggests that the 
quoted language above be replaced with the following language: 
``[o]rdering a new appraisal to the extent it deems necessary in cases 
in which it has determined that an existing appraisal cannot be relied 
upon.'' Arthur Andersen explains that this revision would make this 
condition consistent with the above described revision it proposes for 
the first sentence in Section II(i) of the conditions. The Department 
concurs.
    Fourth, the condition contained in Section II(i)(3) on page 14781 
of the Notice states that the Independent Fiduciary is responsible for 
``[r]eviewing and approving all of the disclosures, written 
explanations, and forms furnished to the Plans by the Bank.'' Arthur 
Andersen states that the word, ``relevant,'' should be inserted before 
the word, ``disclosures.'' In this regard, Arthur Andersen explains 
that it will review and approve materials only insofar as they are 
relevant to Arthur Andersen's duties and responsibilities in connection 
with the Option election process. Other communications by the Bank to 
the Plans would be outside the scope of Arthur Andersen's role under 
the exemption. Arthur Andersen believes this is particularly 
appropriate since the Bank may engage in a number of communications to 
the Plans during the liquidation period which are unrelated to the 
exemption or the Independent Fiduciary's role. The Department concurs.
    Fifth, the condition contained in Section II(i)(4) on page 14781 of 
the Notice states that the Independent Fiduciary is responsible for 
``[f]urnishing information to an independent Plan fiduciary, in advance 
of any date by which the independent Plan fiduciary is required to 
respond in order to authorize the Independent Fiduciary to make a 
decision on behalf of the Plan.'' Arthur Andersen suggests inserting 
the word, ``certain,'' between the word, ``furnishing,'' and the word, 
``information.'' Arthur Andersen explains that the change would clarify 
that it is responsible for providing certain types of information 
relevant to its role as Independent Fiduciary. The Department concurs.
    Sixth, the condition contained in paragraph (i)(4) (renumbered in 
the final exemption as (i)(5)) on page 14782 of the Notice states that 
the Independent Fiduciary is responsible for--

    Making Option elections on behalf of any Plan if: (a) the Bank 
or any of its Affiliates is an employer with respect to the Plan; 
(b) the independent Plan fiduciary authorizes the Independent 
Fiduciary to make an Option elections on behalf of that Plan; or (c) 
the independent Plan fiduciary does not reserve the right to make an 
Option election and fails to make an Option election prior to the 
Option Election Date.

    Arthur Andersen suggests that the language in item (c) quoted 
above, should be replaced with the following language: ``the 
independent Plan fiduciary fails to make Option election prior to the 
Option Election Date.'' Arthur Andersen states that Independent Plan 
fiduciaries that reserve the right to make an Option election but fail 
to do so within the prescribed time frames are not described in the 
current language quoted above.
    Because Arthur Andersen will make Option elections for such Plans, 
the language in item (c) should include this omitted category, which 
can be accomplished by eliminating the distinction between Plan 
fiduciaries that do or do not reserve the right to make option 
elections. The Department concurs.
    Further, the second paragraph of item 12 of the SFR on page 14786 
states that--

    [I]f the Plan reserves the right to make it's own Option 
election and subsequently fails to make an Option election by the 
Option Election Date, the Plan will be deemed to have elected Option 
3. If the Plan does not reserve the right to make its own Option 
election and the Plan fails to make: a sufficiently broad 
authorization; any authorization at all; or fails to complete the 
profile survey, Arthur Andersen will elect only between Options 1 
and 3 for the Plan. However, Arthur Andersen will choose among all 
four Options if the independent Plan fiduciary completes and returns 
timely all required parts of the profile/survey and the related 
authorization form expressly authorizing Arthur Andersen to choose 
among all four Options. The Bank represents that it will authorize 
Arthur Andersen to choose among all four Options for Plans with 
respect to which the Bank or any of its Affiliates is an employer.

    Arthur Andersen states that the above quoted language should be 
clarified to indicate that ``where the Plan fails to make its own 
Option election by the Option Election Date, Andersen will make an 
election for the Plan between Options 1 and 3, unless otherwise 
expressly authorized in writing by an independent Plan fiduciary to 
elect from among all four options. The Option election will not 
automatically default in certain cases to Option 3.'' Arthur Andersen 
explains that in each case, an Option election will be made either by a 
Plan's independent fiduciary, a plan participant or beneficiary in a 
participant-directed plan (where applicable), or by Arthur Anderson as 
Independent Fiduciary, as described in the Notice, and in no case will 
an Option election automatically default to any particular Option. The 
Department concurs.
    Seventh, the condition contained in Section II(i)(5) (renumbered in 
the final exemption as (i)(6)) on page 14782 of the Notice states that 
the Independent Fiduciary is responsible for ``providing guidance 
regarding the four Options, to those independent Plan fiduciaries who 
wish to make their own Option elections.'' Arthur Andersen states that 
the words, ``certain assistance,'' should replace the word, 
``guidance.'' Arthur Andersen explains that where independent Plan 
fiduciaries have decided to make their own Option elections, they will 
not be depending on Arthur Andersen in making their decisions. 
Consequently, the word, ``guidance,'' would overstate the interaction 
between Arthur Andersen and such fiduciaries regarding Option 
elections, whereas ``certain assistance'' more accurately describes 
this interaction. The Department concurs.
    Further, the first sentence of the fourth paragraph of item 12 of 
the SFR on page 14786 states that ``[w]ith respect to those independent 
Plan fiduciaries who notify Arthur Andersen that they will be making 
their own Option elections, Arthur Andersen is prepared to counsel any 
Plan fiduciary regarding the election process.'' Arthur Andersen 
suggests substituting the word, ``assist,'' for the word, ``counsel.'' 
Arthur Andersen wishes to clarify that with respect to those 
independent Plan fiduciaries who notify Arthur Andersen that they will 
be making their own Option elections, Arthur Andersen is prepared to 
assist any Plan fiduciary [[Page 28631]] regarding the election 
process. Arthur Andersen explains that in this context, the word, 
``assist,'' is more accurate. The Department concurs.
    Eighth, the condition contained in Section II(i)(9) (renumbered in 
the final exemption as (i)(10)) on page 14782 of the Notice states that 
the Independent Fiduciary is responsible for ``monitoring the Bank's 
efforts to dispose of the Properties during the liquidation of the 
Fund.'' Arthur Andersen suggests modifying this phrase to read: 
``monitoring, by attending the Bank's Trust Real Estate Investment 
Committee's quarterly meetings, the Bank's efforts to dispose of the 
Properties during the liquidation of the Fund.'' Arthur Andersen states 
that the additional language more accurately reflects its duties under 
the Agreement, as amended. The Department concurs.
    In addition, the condition contained in Section II(o) on page 14782 
of Notice states that ``[t]he Independent Fiduciary is responsible for 
monitoring compliance with the terms and conditions of the exemption at 
all times.'' Arthur Andersen suggests deleting the word, 
``monitoring,'' and inserting after the words, ``responsible for,'' the 
following language: ``taking reasonable steps consistent with its 
duties and responsibilities hereunder to monitor.'' In this regard, 
Arthur Andersen explains that it would not have an affirmative 
obligation to engage in additional activities to determine compliance 
beyond participation in the quarterly meetings of NationsBank's Trust 
Real Estate Investment Committee. Arthur Andersen believes that it must 
act reasonably within the scope of its defined role, and to the extent 
it determines there is non-compliance, it must take appropriate action.
    Arthur Andersen represents that notwithstanding its comments 
regarding its responsibilities under the conditions contained in 
Sections II(i)(9) and (o) of the Notice, Arthur Andersen will be 
responsible for obtaining the information necessary to execute its 
duties as follows: (a) To approve, in advance of any sales of the 
Properties during the period in which the Standby Trust owns Units in 
the Fund, the reasonableness and propriety of such sales; and (b) to 
approve, in advance of the payments to Plans under Option 2 following 
the second anniversary of the Settlement Valuation Date, the 
reasonableness and propriety of the value of the Fund Units pursuant to 
Option 2, using procedures parallel to those used in reviewing and 
approving the reasonableness of the Unit Purchase Price. The Department 
concurs.
    Ninth, the definition in Section II(c)(2) (renumbered in the final 
exemption as Section III(c)(2)) on page 14782 of the Notice states that 
``[a]ny officer or director of the Independent Fiduciary'' is defined 
as an Affiliate of the Independent Fiduciary. Arthur Andersen requests 
that the parenthetical ``(where the Independent Fiduciary is other than 
a partnership)'' be appended to the end of the language quoted above. 
Arthur Andersen explains that the change would clarify that Section 
III(c)(2) is not intended to apply to a partnership. The Department 
concurs.
    Tenth, the definition in Section II(c)(3) (renumbered in the final 
exemption as Section III(c)(3)) on page 14782 of the Notice defines 
Affiliate of the Independent Fiduciary to include ``[a]ny partner in 
the Independent Fiduciary, or any other related individual, with the 
authority to make, or who actually makes, fiduciary decisions which are 
within the scope of the Independent Fiduciary's duties and 
responsibilities under this exemption, or who holds a five percent (5%) 
or greater interest in the Independent Fiduciary.'' Arthur Andersen 
suggests that the italicized phrase above be deleted. Arthur Andersen 
explains that section (d)(7) of the definitions, already reaches 
persons who are not partners in the Independent Fiduciary but 
nevertheless act in a fiduciary capacity. The Department concurs.
    After giving full consideration to the record, including the 
comments by commentators, the Department has determined to grant the 
exemption as described herein. In this regard, the comments submitted 
to the Department have been included as part of the public record of 
the exemption application. The complete application file, including all 
supplemental submissions received by the Department is made available 
for public inspection in the Public Documents Room of the Pension and 
Welfare Benefits Administration, Room N-5507, U.S. Department of Labor, 
200 Constitution Avenue NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption published 
refer to the notice of proposed exemption published Monday March 20, 
1995, at 60 FR 14781.

FOR FURTHER INFORMATION CONTACT: Eric Berger 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 material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 25th day of May 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-13300 Filed 5-31-95; 8:45 am]
BILLING CODE 4510-29-P