[Federal Register Volume 60, Number 109 (Wednesday, June 7, 1995)]
[Notices]
[Pages 30106-30114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13910]



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

DEPARTMENT OF LABOR
[Application No. D-09909, et al.]


Proposed Exemptions; Phillips Petroleum Company

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 [[Page 30107]] 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, NW., Washington, DC 
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, NW., Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of 
the Secretary of the Treasury to issue exemptions of the type requested 
to the Secretary of Labor. Therefore, these notices of proposed 
exemption are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Phillips Petroleum Company (Phillips), Located in Bartlesville, OK; 
Proposed Exemption

[Application No. D-09909]

    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 (1) The proposed making of interest-free loans 
to the Thrift Plan of Phillips Petroleum Company (the Plan) by 
Phillips, the Plan sponsor pursuant to the terms of a credit facility 
arrangement; and (2) the proposed repayment of such loans by the Plan 
to Phillips.
    This proposed exemption is conditioned on the following 
requirements:
    (a) Each loan executed under the proposed credit facility 
arrangement provides short-term funds to the Plan in connection with 
inter-fund transfers, withdrawals and participant loans and permits the 
orderly disposal of Phillips common stock.
    (b) Each loan made under the proposed credit facility arrangement 
is unsecured and no interest, commissions or expenses are paid by the 
Plan.
    (c) In the event of a loan default or delinquency, Phillips has no 
recourse against the Plan.
    (d) Each loan is initiated, accounted for and administered by an 
independent fiduciary who monitors the terms and conditions of the 
exemption, if granted.

Summary of Facts and Representations

    1. Phillips, which maintains its principal place of business in 
Bartlesville, Oklahoma, was incorporated in the State of Delaware on 
June 13, 1917. Phillips is engaged in various business activities 
ranging from worldwide petroleum exploration and production to the 
production and distribution of chemicals. Phillips is also a leader in 
research and development and it holds 3,400 patents in technology that 
support company business lines. As of December 31, 1993, Phillips had 
assets of approximately $10.9 billion, liabilities of approximately 
$7.8 billion, annual revenues totaling $12.5 billion and net income of 
$243 million. As of September 30, 1994, Phillips had 74,300 
shareholders and 18,796 employees.
    2. The Plan, of which Phillips is the sponsor, is a defined 
contribution plan having 15,394 participants and total assets of $1.27 
billion as of May 16, 1994. The trustee of the Plan (the Trustee) is 
Bankers Trust Company of New York, New York.
    3. The Plan permits participants to direct the investment of their 
account balances among several investment funds (the Funds) and to 
receive participant loans from their accounts. Generally, any regular 
employee on the payroll of Phillips is eligible to participate in the 
Plan except non-managerial retail outlet marketing employees. Plan 
participants may have up to 15 percent of their pay deposited in the 
Plan each month. The first 5 percent is designated as regular deposits 
with any excess being designated as supplemental deposits. Deposits may 
be further designated by a participant as ``before-tax'' or ``after-
tax'' deposits. Before-tax deposits represent participant contributions 
made pursuant to an election by the participant under section 401(k) of 
the Code to have his or her salary reduced in exchange for the 
contribution. Before-tax deposits are participant contributions to the 
Plan that are made from participant earnings prior to the payment of 
Federal or state taxes. After-tax deposits are Plan contributions made 
by a participant from the participant's pay after Federal and state 
taxes have been paid. Plan participants are allowed to change their 
investment directions and deposit rates only during designated 
enrollment periods.
    4. Employee deposits are placed in a special investment fund called 
the ``Temporary Investment Fund.'' The deposits are initially invested 
in certain short-term securities for up to 45 days after receipt by the 
Trustee. Then, the deposits and earnings thereon are paid into four 
other Funds, namely, Funds A, B, E or F as directed by the participant, 
and invested as follows:
    a. In Fund A, a commingled trust government/corporate bond index 
fund held by Wells Fargo Institutional Trust Company.
    b. In Fund B which holds Phillips common stock.
    c. In Fund E, a Standard and Poor's equity index commingled fund 
held by the Trustee.
    d. In Fund F, a commingled money market fund managed by the 
Trustee.1

     1The applicant represents that investments by the Plan in Fund 
E and Fund F are covered by and comply with section 408(b)(8) of the 
Act. However, the Department expresses no opinion herein on whether 
such investments satisfy the terms and conditions of section 
408(b)(8) of the Act. [[Page 30108]] 
---------------------------------------------------------------------------

    In addition to the above, there are two other Funds that comprise 
the trust funds. They are Fund C and Fund D. Fund C is composed 
primarily of Phillips common stock. Fund D, which is closed to new 
deposits, holds guaranteed investment contracts.
    Phillips contributes 25 percent of an employee's regular deposits 
to Fund B and 15 percent of regular deposits to any of the other 
investment Funds. The interest of a participant in each Fund is 
represented by units allocated to such participant.
    5. The Plan allows a participant to elect a direct rollover of most 
distributions to an individual retirement account (the IRA) or to 
another tax qualified plans. The Plan also provides for participant 
loans as well as for transfers among certain of the Funds. In this 
regard, the Plan does not permit transfers to Fund C, Fund D or the 
Temporary Investment Fund.2 However, it does allow transfers from 
these Funds with limited exceptions.3

      2For example, with respect to the Temporary Investment Fund, 
the applicant represents that its purpose is to hold participant 
contributions until they are transferred to the elected investment 
Fund. Due to the short-term nature of this Fund, the applicant 
explains that participants are not entitled to transfer deposits to 
the Temporary Investment Fund from any other Fund.
    \3\In the case of Fund C, the applicant explains that 
participants may make a one-time transfer from Fund C after 
retirement. In the case of Fund D, the applicant represents that a 
participant may not transfer from Fund D except to transfer upon the 
expiration of such participant's Class Year (guaranteed investment 
contract) Account.
---------------------------------------------------------------------------

    6. Phillips represents that the right to transfer monthly from Fund 
to Fund and to borrow from the Plan has given participants greater 
control of their plan investments. Thus, for any valuation date (the 
Valuation Date) (i.e., the first working day for the Trustee and The 
New York Stock Exchange following the 14th of each month), participants 
may elect (to the extent permitted by the Plan) to transfer their 
account balances from one investment alternative to another, to 
withdraw funds or to borrow a portion of their account. As of the 
Valuation Date, Phillips common stock will be valued based on the 
closing sales prices for such stock. The steps that a participant may 
undertake in effecting transfers, withdrawals or participant loans are 
described as follows:
    a. Inter-Fund Transfers. In order to transfer assets from one Fund 
to another, a participant must complete a standard transfer form 
applicable to all transfers or withdrawals. The transfer form must be 
delivered to the Plan Administrator by the last business day before the 
monthly Valuation Date. The transfer will be effective on the next 
Valuation Date.
    b. Withdrawals from Funds. If the participant wishes to withdraw 
assets from a Fund, the procedure for withdrawal is essentially the 
same as that to transfer Funds. The participant must complete a 
withdrawal form and deliver it to the Plan Administrator by the last 
business day before the monthly Valuation Date. The withdrawal is 
effective as of the Valuation Date and it is usually paid within two 
weeks. If the participant intends to have the assets paid to an IRA or 
a qualified plan, the participant must provide the Plan Administrator 
with descriptive information concerning such plan or IRA, including the 
name and address. The participant must also verify that the recipient 
plan or IRA will accept the direct payment from the Plan.
    c. Participant Loans. Assuming the participant requests a 
participant loan, such participant must be an active employee of 
Phillips with a vested account in the Plan of $2,000 or more. A 
participant may have up to two regular loans (any loan except a home 
loan) and one home loan outstanding at any one time. The maximum amount 
of any loan is limited to the lesser of: $50,000 less the highest loan 
balance in the last 12 months (determined as of the previous month's 
Valuation Date) or 50 percent of the vested account balance less the 
current outstanding loan balance for all loans, with values determined 
as of the previous month's Valuation Date. A participant may not apply 
for a loan if he or she has the maximum number of loans outstanding, 
has borrowed the maximum amount in the last 12 months or has an 
outstanding loan that is delinquent. The minimum amount of any single 
loan is $1,000.4

    \4\The applicant represents that the Plan's participant loan 
provisions are designed and administered to comply with section 
408(b)(1) of the Act and applicable regulations. However, the 
Department expresses no opinion herein on whether such loans satisfy 
the terms and conditions of section 408(b)(1) of the Act and the 
regulations promulgated thereunder.
---------------------------------------------------------------------------

    A participant may apply for a participant loan by telephone, then 
sign a transaction authorization form approved by the Plan 
Administrator and consent to irrevocable payroll deductions that will 
provide the amount necessary to repay the loan. Loan applications can 
be made only by telephone during the first 10 calendar days of each 
month. Loans will be processed once a month on the applicable Valuation 
Date. Proceeds will be paid within two to three weeks after the date 
the loan is processed. Participants may not make a withdrawal on the 
same Valuation Date that the loan is processed, even if the withdrawal 
form is submitted first.
    7. To effect the aforementioned transfers, withdrawals or 
participant loans, the Trustee is required to liquidate assets held in 
the Fund or Funds from which the proceeds are needed. In this regard, 
the Plan document provides that the Trustee must take reasonable steps 
to invest deposits received for Funds B and C in Phillips common stock 
as soon as reasonably possible provided, however, that up to $10 
million of cash equivalent investments may be maintained in the Funds 
to effect transfers, withdrawals and loans on the next regular 
Valuation Date. The Trustee must take reasonable steps to effect 
transfers, withdrawals or participant loans from Funds B and C5 
within 5 business days (on which both the Trustee and The New York 
Stock Exchange are in business) following the appropriate Valuation 
Date. The Trustee is also required to spread the sales of Phillips 
common stock that will be used to effect the transfers, withdrawals or 
participant loans ratably over the remaining trading days before the 
next regular Valuation Date.6 However, if the number of shares 
which are to be sold would result in ratable sales of less than 10,000 
shares a day, the Trustee is not required to sell less than 10,000 
shares per day.

    \ 5\Although transfers are restricted from Fund C, withdrawals 
are permitted of vested company contributions. Loans can be taken 
from Fund C after all of the other Funds have been depleted subject 
to the loan limitation rules in the Plan.
    \ 6\Although the Department expresses no opinion herein on the 
requirement that the Trustee spread the sales of Phillips common 
stock over the remaining trading days before the next regular 
Valuation Date, it notes that Trustee's decision to spread stock 
sales should be in the interests of the Plan and consistent with the 
provisions of section 404 of the Act.
---------------------------------------------------------------------------

    To the extent that the cash necessary to effect the transfers, 
withdrawals and participant loans within the 5 day trading period 
exceeds $10 million, the Trustee is permitted to borrow funds to 
provide sufficient liquidity to Funds B and C. Expenses and other costs 
attributable to such borrowings will be allocated to Funds B and C.
    8. To bridge the gap between the immediate need for assets to fund 
transfers, withdrawals or participant loans and the disposal of 
Phillips common stock, the Trustee entered into a one-year, renewable 
revolving credit facility arrangement with NationsBank of Dallas, Texas 
on July 14, 1993. By its terms, the credit facility arrangement 
initially permitted the Trustee, on behalf of the Plan, to borrow up to 
$50 [[Page 30109]] million on a short-term and unsecured basis. 
Interest is charged on a sliding scale margin above the London 
Interbank Offered Rate. The Plan is required to repay each loan in cash 
within 30 days of its making with proceeds from the sale of Phillips 
common stock. In addition, NationsBank charges the Plan a commitment 
fee of .10 percent of any unused amount of funds and a margin of .25 
percent over NationsBank's actual cost of funds.
    The Trustee has drawn upon the credit facility arrangement three 
times, resulting in loans to the Plan in the following amounts over the 
following time frames: (a) $3.3 million for 10 days; (b) $850,000 for 
12 days; and (c) $10,000 for 8 days. As of March 10, 1995, the Plan had 
repaid all principal for the loans, including interest and expenses 
totaling $94,144. Although the credit facility arrangement was expected 
to expire in July 1994, it has been extended by NationsBank until July 
12, 1995. However, the credit facility amount has been reduced from $50 
million to $25 million.
    9. The Plan wishes to terminate its credit facility arrangement 
with NationsBank. Therefore, Phillips requests an administrative 
exemption from the Department in order that it may provide the Plan 
with a similar lending arrangement. Phillips represents that it is 
aware that Prohibited Transaction Exemption (PTE) 80-26 (45 FR 28545, 
April 29, 1980) permits interest-free loans to a plan by a party in 
interest. In this regard, Phillips notes that PTE 80-26 permits an 
unsecured loan by a party in interest to a plan for a purpose 
incidental to the ordinary operation of the plan and for a period not 
exceeding 3 days. If the loan proceeds are used only for the payment of 
operating expenses of the plan, including the payment of benefits, 
Phillips explains that no time limit is imposed under PTE 80-26.
    In view of the foregoing, Phillips represents that the extent to 
which PTE 80-26 would cover the proposed credit facility arrangement is 
unclear. Phillips believes that the inter-fund transfers and 
participant loans that would be initially funded by its proposed 
extension of credit may not be viewed as ordinary operating expenses of 
the Plan under PTE 80-26. Even if viewed as ordinary operating 
expenses, Phillips states that it is not clear whether the loans could 
be repaid within 3 days inasmuch as the Plan documents require the 
Trustee to spread sales of stock ratably over a Plan month to prevent 
sales from negatively impacting the market.
    10. Under its proposed credit facility arrangement, Phillips will 
extend an initial line of credit of $25 million. The line of credit may 
be renewed annually by Phillips and the Plan. Each loan made thereunder 
will be unsecured and no administrative fees or interest will be 
charged to the Plan in connection with any of the loans. Each loan will 
be repaid within 31 days of its making. Funds for repaying the loans 
will be derived from the Trustee's sale of stock held in Funds B and C. 
Assets held in the other investment Funds will not be utilized for such 
repayments. Further, Phillips will have no recourse against the Plan or 
against any participant in the event of a loan default or delinquency 
and it will also not charge any late fees.
    11. The Trustee will serve on behalf of the Plan as the independent 
fiduciary and, in such capacity, it will activate and administer the 
proposed credit facility arrangement. The Trustee represents that it is 
a leading provider of global financial services and that it has been 
providing services to employee benefit plans since 1927. As of March 
10, 1995, the Trustee represents that it had employee benefit plan 
assets under management of over $165 billion and serves as a trustee 
for more than $115 billion in defined contribution plan assets. As of 
December 31, 1994, the Trustee states that it provided trust/custody 
services to 575 clients with total assets under administration of 
approximately $394 billion.
    The Trustee represents that it is familiar with the Plan and its 
investment portfolios since it has access to information regarding Plan 
assets and can ascertain the extent to which the proposed credit 
facility arrangement will affect the Plan's investment needs. The 
Trustee also represents that it is independent of Phillips. In this 
regard, the Trustee states that during 1994, the fees paid to it by 
Phillips represented less than one percent of its total fiduciary and 
funds management revenues.
    The Trustee explains that the Plan and its trust document were 
amended in 1993 to permit the credit facility arrangement with 
NationsBank. In view of its experience in negotiating and monitoring 
the NationsBank credit facility on behalf of the Plan, the Trustee 
states that it is fully familiar with the terms and costs associated 
with such arrangements. The Trustee points out that it has had to 
resort to the NationsBank credit facility arrangement on only a small 
number of occasions in the past 18 months. However, the costs 
associated with using the facility and assuring its continued 
availability could be avoided if Phillips were permitted to make 
similar, short-term extensions of credit to the Plan on an interest-
free basis.
    Consistent with relevant Plan provisions, the Trustee states that 
it will be responsible for determining when and how much to borrow and 
to cause the Plan to repay each loan within a 31 day period. The 
Trustee represents that it will not receive an additional fee or other 
compensation from the Plan as the result of the proposed credit 
facility arrangement between the Phillips and the Plan.
    In view of the above, the Trustee concludes that the proposed 
interest-free loan program is in the best interest of the Plan and its 
participants and beneficiaries. The Trustee believes that such 
arrangement will result in cost savings to the Plan and enable the Plan 
to complete transactions in a timely manner. Further, the Trustee 
asserts that its ongoing, independent involvement in and oversight of 
the program will provide protection for the Plan and its participants 
and beneficiaries.
    12. In summary, it is represented that the proposed transactions 
will satisfy the statutory criteria for an exemption under section 
408(a) of the Act because:
    (a) Each loan executed under the proposed credit facility 
arrangement will provide short-term funds to the Plan in connection 
with inter-fund transfers, withdrawals and participant loans and it 
will permit the orderly disposal of Phillips common stock.
    (b) Each loan made under the proposed credit facility arrangement 
will be unsecured and no interest, commissions or expenses will be paid 
by the Plan.
    (c) In the event of a loan default or delinquency, Phillips will 
have no recourse against the Plan.
    (d) Each loan will be initiated, accounted for and administered by 
the Trustee, which will also monitor the terms and conditions of the 
exemption, if granted.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)
Universal Underwriters Group Thrift Plan (the Plan), Located in 
Overland Park, Kansas; Proposed Exemption

[Application No. D-09947]

    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 
[[Page 30110]] 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 (1) the 
proposed extensions of credit (the Loans) to the Plan from Universal 
Underwriters Insurance Company (the Employer), with respect to a 
guaranteed investment contract (the GIC) issued by Confederation Life 
Insurance Company (Confederation); (2) the Plan's potential repayment 
of the Loans upon the receipt by the Plan of payments under the GIC; 
and (3) the assignment by the Plan to the Employer of all claims or 
causes of action it may have against the Plan's former GIC placement 
advisor for recommending that the Plan purchase the GIC; provided the 
following conditions are satisfied:
    (A) All terms and conditions of such transaction are no less 
favorable to the Plan than those which the Plan could obtain in arm's-
length transactions with unrelated parties;
    (B) No interest or expenses are paid by the Plan in connection with 
the proposed transaction;
    (C) The Loans will be repaid only out of amounts paid to the Plan 
by Confederation, its successors, or any other responsible third party;
    (D) Repayment of the Loans will be waived to the extent that the 
Loans exceed GIC proceeds;
    (E) A qualified independent fiduciary will represent the interests 
of the Plan throughout the duration of the proposed transaction; and
    (F) The Employer's recovery resulting from a cause of action 
assigned to the Employer by the Plan will be limited to the amount 
necessary to pay for litigation expenses and to pay off the Plan's 
outstanding Loan balance and any excess recovery will be transferred 
back to the Plan.

Summary of Facts and Representations

    1. The Plan is a defined contribution 401(k) plan which provides 
for individual participant accounts and participant-directed 
investments. The Plan had approximately 1,100 participants as of 
December 30, 1993 and $45,924,914.96 in assets as of June 30, 1994. The 
Plan trustee is United Missouri Bank, N.A. (UMB), located in Kansas 
City, Missouri. The Employer is a Missouri corporation that provides 
insurance protection for automobile dealerships and other businesses. 
Under the terms of the Plan, participants have the option of investing 
in any of six investment funds, including the Stable Interest Fund, 
which invests primarily in interest-paying contracts with insurance 
companies. As of December 31, 1994, the Stable Interest Fund held ten 
guaranteed investment contracts and several other interest bearing 
contracts, as well as approximately $74,413 in a deposit account. The 
GIC, which was issued on February 10, 1994, is part of the Stable 
Interest Fund. The GIC is a single-deposit non-participating contract 
which allows the Plan to make benefit-responsive withdrawals to fund 
benefit payments, investment fund transfers, hardship withdrawals and 
participant loans (collectively, the Withdrawal Events). The terms of 
the GIC provide for interest on the $5,500,000 principal amount at a 
guaranteed interest rate of 6.12% over a period of 61 months. Interest 
payments are to be made annually to the Plan on April 1 (beginning 
April 1, 1995), up to the scheduled maturity date of April 1, 1999. As 
of June 30, 1994, the GIC had an accumulated book value of 
$5,615,769.50.
    2. Confederation is a Canadian corporation doing business in the 
United States through branches in Michigan and Georgia. The Employer 
represents that on August 11, 1994, the Canadian insurance regulatory 
authorities placed Confederation into a liquidation and winding-up 
process, and on August 12, 1994, the insurance authorities of the State 
of Michigan commenced legal action to place the U.S. operations of 
Confederation into a rehabilitation proceeding. As a result of these 
actions, Confederation suspended interest and maturity payments under 
the GIC and significantly limited the circumstances under which 
withdrawals may be obtained from the GIC. The Employer represents that 
it has established a separate fund to which the portion of the Stable 
Interest Fund attributable to the GIC has been transferred. This 
separate fund has been frozen so that no payments for Withdrawal Events 
are permitted.\7\

    \7\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 regard, the 
Department is not herein proposing relief for any violations of Part 
4 which may have arisen as a result of the acquisition and holding 
of the GIC issued by Confederation.
---------------------------------------------------------------------------

    3. The Employer proposes to advance interest free loans to the Plan 
at such times and in such amounts as required to fully realize the 
interest payments due the Plan under the GIC, but only to the extent 
that such amounts are not timely paid by or on behalf of Confederation. 
Consequently, each Loan will be reduced by any amounts actually 
received by the Plan, with respect to the particular interest payment 
due, from Confederation or any other party making payment with respect 
to Confederation's obligations under the GIC. In addition to the Loans 
required to guarantee interest payments, the Employer is also proposing 
a final Loan upon the GIC's final maturity date to the extent that 
Confederation fails to pay the full amount due. The amount of interest 
accrual and the final maturity payment due will be determined on the 
basis of the GIC's principal plus interest at the guaranteed rate, less 
previous withdrawals, as of the date of the Loan.
    4. The Loans and their repayments will be made pursuant to a 
written agreement (the Loan Agreement) between the Plan and the 
Employer. The Plan and the Employer will also enter into a separate 
agreement (the Assignment Agreement) under which the Plan will agree to 
assign to the Employer any and all claims or causes of action it may 
have as holder of the GIC against the Plan's former GIC placement 
adviser, Buck Pension Fund Services, Inc. and its employees, agents, 
and related entities (collectively referred to as Buck). The Employer's 
recovery under the Assignment Agreement will be limited to the amount 
necessary to pay for litigation expenses and to pay off the Plan's 
outstanding Loan balance. If, pursuant to a cause of action assigned by 
the Plan, the Employer recovers from Buck an amount exceeding such 
litigation expenses and the outstanding Loan balance, the excess 
recovery will be transferred back to the Plan.
    5. UMB (see section 1--above) has agreed to serve as independent 
fiduciary on behalf of the Plan throughout the duration of the 
transaction. UMB has acknowledged its duties, responsibilities and 
liabilities in acting as a fiduciary with respect to the proposed 
transaction. UMB represents that the Employee Benefit Division of its 
Trust Department has extensive experience as a provider of services to 
employee benefit plans. UMB maintains that less than 1% of its business 
is associated with the Employer. As independent fiduciary, UMB has 
concluded that the proposed transaction is in the best interests of, 
and protective of, the rights of the Plan's participants and 
beneficiaries. In this regard, UMB represents that the Loan Agreement 
will ensure that the Plan suffers no investment loss from its 
investment in the GIC, will make it possible for Plan Participants to 
gain access to their funds which have been frozen, and will allow the 
Plan to reinvest the funds that were previously invested in the GIC. In 
addition, UMB represents that the proposed transaction is protective of 
the [[Page 30111]] Plan in that it provides the Plan with the cash it 
needs to fund Withdrawal Events and permits the Employer to pursue any 
claims that the Plan may have against the Plan's former GIC placement 
advisor. UMB represents that, under this arrangement, the Employer, not 
the Plan bears the risk of an uncertain recovery on a claim that would 
be expensive and time consuming for the Plan to pursue. If the Employer 
does bring any claim or cause of action against Buck, UMB has agreed to 
monitor the division of any recovery obtained in such litigation to 
assure that the Plan receives the portion to which it is entitled.
    6. The Employer represents that it wishes to enter into the 
proposed transaction in order to protect the Plan participants from the 
effects of a prolonged rehabilitation process and from any potential 
loss resulting from Confederation's inability to meet its obligations 
under the GIC. In this regard, the Employer represents that the 
proposed transaction would ensure the availability of benefits 
equivalent to those anticipated by participants prior to the failure of 
Confederation, at no additional cost to participants. In addition, the 
Employer represents that the Loans will contribute to the Plan's 
ability to fund Withdrawal Events. The Employer also represents that 
the Loans will be non-interest-bearing and the Plan will not incur any 
expenses in connection with the proposed transaction.
    7. Repayment of the Loans under the Agreement is limited to 
payments made to the Plan by or on behalf of Confederation, or its 
successor, or any other responsible third parties. No other assets of 
the Plan will be available for repayment of the Loans. If the payments 
by or on behalf of Confederation are not sufficient to fully repay the 
Loans, the Loan 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 Loans, such additional 
amounts will be retained by the Plan and allocated among the accounts 
of the Plan's participants.
    8. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because: (1) The transaction will preserve the Plan's ability to timely 
fund participants' benefits; (2) The transaction will preserve any 
cause of action that may exist against the Plan's GIC placement 
advisor; (3) The Plan will not incur any expenses with respect to the 
transaction; (4) Repayment of the Loans will be made only from amounts 
paid to the Plan by Confederation, its successor, or any other third 
party; (5) If the payments by or on behalf of Confederation are not 
sufficient to fully repay the Loans, the Employer will have no recourse 
against the Plan, or against any participants or beneficiaries of the 
Plan, for the unpaid amount; and (6) Repayment of the Loans will be 
waived with respect to the amount by which the Loans exceed the amount 
the Plan receives from GIC proceeds.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department, 
telephone (202) 219-8971. (This is not a toll-free number.)
BlackRock Financial Management L.P. (BlackRock), Located in New York, 
New York; Proposed Exemption

[Application No. D-09963]

    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)(1)(A) 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) of the Code, shall 
not apply to the proposed cross-trading of equity or debt securities 
between various accounts managed by BlackRock (the Accounts) where at 
least one Account involved in any cross-trade is an employee benefit 
plan account (Plan Account) for which BlackRock acts as a fiduciary.

Conditions and Definitions

    This proposed exemption is subject to the following conditions:
    1. (a) A Plan's participation in the cross-trade program is subject 
to a written authorization executed in advance by a fiduciary with 
respect to each such Plan, the fiduciary of which is independent of 
BlackRock;
    (b) The authorization referred to in paragraph (a) is terminable at 
will without penalty to such Plan, upon receipt by BlackRock of written 
notice of termination; and
    (c) Before an authorization is made, the authorizing Plan fiduciary 
must be furnished with any reasonably available information necessary 
for the authorizing fiduciary to determine whether the authorization 
should be made, including (but not limited to) a copy of this exemption 
(if granted), an explanation of how the authorization may be 
terminated, a description of BlackRock's cross-trade practices, and any 
other reasonably available information regarding the matter that the 
authorizing fiduciary requests.
    2. (a) No more than three (3) business days prior to the execution 
of any cross-trade transaction, BlackRock must inform an independent 
fiduciary of each Plan involved in the cross-trade transaction: (i) 
That BlackRock proposes to buy or sell specified securities in a cross-
trade transaction if an appropriate opportunity is available; (ii) the 
current trading price for such securities; and (iii) the total number 
of shares to be acquired or sold by each such Plan;
    (b) Prior to each cross-trade transaction, the transaction must be 
authorized either orally or in writing by the independent fiduciary of 
each Plan involved in the cross-trade transaction;
    (c) If a cross-trade transaction is authorized orally by an 
independent fiduciary, BlackRock will provide written confirmation of 
such authorization in a manner reasonably calculated to be received by 
such independent fiduciary within one (1) business day from the date of 
such authorization;
    (d) The authorization referred to in this paragraph (2) will be 
effective for a period of three (3) business days; and
    (e) No more than ten (10) days after the completion of a cross-
trade transaction, the independent fiduciary authorizing the cross-
trade transaction must be provided a written confirmation of the 
transaction and the price at which the transaction was executed.
    3. (a) Each cross-trade transaction is effected at the current 
market value for the security on the date of the transaction, which 
shall be, for equity securities, the closing price for the security on 
the date of the transaction, and for debt securities, the fair market 
value for the security as determined in accordance with paragraph (b) 
of Rule 17a-7 issued by the Securities and Exchange Commission (SEC) 
under the Investment Company Act of 1940 (the 1940 Act);
    (b) The cross-trade transaction is effected at a price that: (1) In 
the case of any equity security, is within 10 percent of the closing 
price for the security on the day before the date on which BlackRock 
receives authorization from the independent Plan fiduciary to engage in 
the cross-trade transaction; and (2) in the case of any debt security, 
is within 10 percent of the fair market value of the security on the 
last valuation date preceding the date on which BlackRock receives 
authorization by the independent Plan fiduciary to engage in the cross-
trade transaction as [[Page 30112]] determined in accordance with SEC 
Rule 17a-7(b) of the 1940 Act;
    (c) The securities involved in the cross-trade transaction are 
those for which there is a generally recognized market;
    (d) The cross-trade transaction is effected only where the trade 
involves less than five (5) percent of the aggregate average daily 
trading volume of the securities which are the subject of the 
transaction for the week immediately preceding the authorization of the 
transaction. A cross-trade transaction may exceed this limit only by 
express authorization of independent fiduciaries on behalf of Plans 
affected by the transaction, prior to the execution of the cross-trade.
    4. For all accounts participating in the cross-trading program, if 
the number of units of a particular security which any accounts need to 
sell on a given day is less than the number of units of such security 
which any accounts need to buy, or vice versa, the direct cross-trade 
opportunity must be allocated among the buying or selling accounts on a 
pro rata basis.
    5. (a) BlackRock furnishes the authorizing Plan fiduciary at least 
once every three months, and not later than 45 days following the 
period to which it relates, a report disclosing: (i) a list of all 
cross-trade transactions engaged in on behalf of the Plan; and (ii) 
with respect to each cross-trade transaction, the prices at which the 
securities involved in the transaction were traded on the date of such 
transaction; and
    (b) The authorizing Plan fiduciary is furnished with a summary of 
the information required under this paragraph 4(a) at least once per 
year. The summary must be furnished within 45 days after the end of the 
period to which it relates, and must contain the following: (i) A 
description of the total amount of Plan assets involved in cross-trade 
transactions during the period; (ii) a description of BlackRock's 
cross-trade practices, if such practices have changed materially during 
the period covered by the summary; (iii) a statement that the Plan 
fiduciary's authorization of cross-trade transactions may be terminated 
upon receipt by BlackRock of the fiduciary's written notice to that 
effect; and (iv) a statement that the Plan fiduciary's authorization of 
the cross-trade transactions will continue in effect unless it is 
terminated.
    6. The cross-trade transaction does not involve assets of any Plan 
established or maintained by BlackRock or any of its affiliates.
    7. All Plans that participate in the cross-trade program have total 
assets of at least $25 million.
    8. BlackRock receives no fee or other compensation (other than its 
agreed upon investment management fee) with respect to any cross-trade 
transaction.
    9. BlackRock is a discretionary investment manager with respect to 
Plans participating in the cross-trade program.
    10. For purposes of this proposed exemption:
    (a) Cross-trade transaction means a purchase and sale of securities 
between accounts for which BlackRock or an affiliate is acting as an 
investment manager;
    (b) Affiliate means any person directly or indirectly through one 
or more intermediaries, controlling, controlled by, or under common 
control with BlackRock;
    (c) Plan Account means an account holding assets of one or more 
employee benefit plans that are subject to the Act, for which BlackRock 
acts as a fiduciary.

Summary of Facts and Representations

    1. BlackRock is a Delaware limited partnership with its principal 
office located in New York City. BlackRock Management Partners L.P. 
(BMP) is the general partner of BlackRock. The partners of BlackRock 
and BMP executed an agreement with PNC Bank on February 28, 1995, 
whereby all of the interests in BlackRock and BMP were sold to a 
wholly-owned subsidiary of PNC Bank, N.A. In this regard, BlackRock 
continues to conduct its business in the same manner as it did prior to 
the sale. BlackRock provides a broad range of financial services to a 
variety of clients, including corporations, financial institutions, 
registered investment companies and employee benefit plans. BlackRock 
serves as investment manager for a substantial number of qualified 
pension plans and currently has more than $24 billion of assets under 
management.
    2. With respect to the employee benefit plans that will participate 
in the proposed cross-trading program (the Plans), BlackRock will be 
acting as a discretionary investment manager. The Plan Accounts 
maintained by BlackRock are all considered ``managed accounts'' under 
which BlackRock and the sponsor or other named fiduciary of the 
underlying Plan have agreed that the investment of the assets in 
question will be managed actively at the discretion of BlackRock, 
pursuant to written guidelines as to which types of securities to buy 
or sell for the account.
    Under the investment guidelines for many of the Plan Accounts, 
BlackRock manages the assets in accordance with investment parameters 
that are designed to invest the assets in various types of fixed-income 
securities, such as mortgage-backed securities, U.S. Government 
securities or corporate debt securities. BlackRock primarily manages 
such Plan assets using duration management techniques with the 
performance and composition of the assets for the Plan Account measured 
against a specified benchmark, such as various Salomon Brothers, Lehman 
Brothers or Merrill Lynch indices that are selected by the Plan sponsor 
or other named fiduciary. The duration of the assets held by the Plan 
Account will be comparable to the portfolio specified by the referenced 
benchmark. BlackRock states that the objective factors contained in or 
required by these investment parameters may not be changed or otherwise 
altered without the prior written approval of the Plan sponsor or other 
named fiduciary. The types of securities held in these accounts are 
generally the same for each Plan Account that retains BlackRock for 
purposes of managing such an account, although the specific mix of 
securities varies depending on the investment objectives of the 
particular Plan Account.
    3. Securities sales and purchases for Plan Accounts may result from 
either: (a) The active decision-making by BlackRock's account manager 
relating to new investments for the Plan Account; or (b) a change in 
the overall level of investment as a result of investments and 
withdrawals made to the Plan Account by the Plan sponsor or other named 
fiduciary requiring a rebalancing of the account with transactions 
involving the Plan Account's existing securities. Under either of these 
circumstances, BlackRock's disposition of a particular security for one 
Plan Account may involve a security that is desirable for another Plan 
Account, presenting an opportunity to save substantial dealer markups 
for both the liquidating Plan Account and the acquiring Plan Account. 
This saving could be effected by a cross-trade transaction, which 
involves matching BlackRock's sell orders for a particular day with its 
buy orders for the same day in nondealer transactions.
    The execution of such cross-trades between various BlackRock 
accounts could involve trades between Plan Accounts, or between Plan 
Accounts and investment companies managed by BlackRock, or between Plan 
Accounts and private institutional accounts managed by BlackRock. In 
this regard, because BlackRock has special expertise in fixed-income 
securities, registered [[Page 30113]] investment companies and 
institutional accounts for which BlackRock or an affiliate serves as 
the investment advisor also hold the same types of securities as the 
Plan Accounts, although in different combinations based on their 
particular investment objectives.
    4. BlackRock proposes to take advantage of opportunities to 
eliminate unnecessary third-party dealer markups by cross-trading 
securities, whenever possible, directly between Plan Accounts or 
directly between Plan Accounts and other client accounts. BlackRock 
represents that comparable trades of such securities on the open market 
between unrelated parties often require dealer markups equal to between 
one-sixteenth to one percent of the price of the securities for each 
sale or purchase transaction. BlackRock proposes to execute cross-trade 
transactions on behalf of the Plan Accounts without charging any 
commissions or receiving any dealer markups.
    5. BlackRock represents that by participating in the cross-trading 
program, the Plan Accounts will benefit by not incurring the cost, in 
terms of price, of dealing with a person or firm acting as ``market-
maker'' for the particular security involved in the cross-trade 
transaction. This cost is generally measured by the spread between the 
bid and offer prices for the security which would be paid to the 
market-maker. The Plan Accounts will also benefit under the cross-
trading program by avoiding false pricing differentials that result in 
transactions with a market-maker where the securities in question are 
traded in odd-lot sizes. For example, in the case of debt securities, 
BlackRock states that both buyer and seller will benefit by cross-
trading because the securities involved will be priced either by 
reference to the last sale price for the securities on the date of the 
transaction or, if no transactions have occurred that day, by averaging 
the spread between the highest independent bid and lowest independent 
offer obtained from at least two independent dealers, in accordance 
with SEC Rule 17a-7(b) of the 1940 Act (see Paragraph 10 below). Thus, 
in situations where an average of the current bid/offer prices is used, 
the seller will receive a higher price than the dealers' bid price and 
the buyer will pay a lower price than the dealers' offer price, which 
would not, in all instances, be the case in an open market transaction 
or a transaction directly with a dealer. BlackRock states further that 
where trading of a particular debt or equity security is ``thin'' (i.e. 
limited number of securities available) or round lots are not 
available, participation in the cross- trading program may enable the 
Plan Accounts to obtain early opportunities to acquire or sell such 
securities at favorable prices. Therefore, by participating in the 
cross-trading program, BlackRock represents that the Plan Accounts will 
incur substantially lower expenses for the particular transactions and 
will be better able to effect purchase and sale transactions.
    6. BlackRock makes decisions regarding which securities to purchase 
or sell for client accounts considering all of the relevant facts and 
circumstances, including the composition of the portfolios and the 
liquidity requirements of the accounts. BlackRock states that such 
decisions will not be influenced by the fact that an opportunity for a 
cross-trade may be available. In this regard, BlackRock represents that 
the matching of sale and purchase orders for its accounts on any 
particular day will be largely automatic.
    With respect to the allocation of cross-trade opportunities among 
various accounts, including the Plan Accounts, BlackRock proposes to 
use a non-discretionary pro-rata allocation system. For example, if the 
number of units of a particular security that any accounts need to sell 
on a given day is less than the number of units of such security which 
other accounts need to buy on that date, the cross-trade opportunity 
would be allocated among the buying accounts on a pro-rata basis. The 
same procedure would apply where the number of units of a particular 
security to be sold by various accounts is more than the number of 
units of such security which other accounts need to buy on that date, 
so that in such instances the cross-trade opportunity would be 
allocated among the selling accounts on a pro-rata basis. Thus, all 
accounts participating in BlackRock's cross-trading program, including 
the Plan Accounts, will have opportunities to participate on a 
proportional basis in cross-trade transactions during the operation of 
the program. BlackRock represents that this aspect of the cross-trading 
program will be part of the information disclosed in writing to the 
fiduciaries of the Plan Accounts prior to their authorization for 
participation in the program (as discussed further below).
    7. Under the requested exemption, only Plans with at least $25 
million in total assets will be eligible to participate in the cross-
trading program. A Plan fiduciary that is independent of BlackRock must 
provide written authorization allowing the Plan's participation in the 
program before any specific cross-trade transactions can be executed 
for such Plan. This authorization will be terminable at will upon 
written notice by the appropriate independent Plan fiduciary. BlackRock 
will receive no fee or other compensation (other than its agreed upon 
investment management fee) with respect to any cross-trade transaction. 
Thus, a Plan will not pay any separate fees to BlackRock for cross-
trading services. No penalty or other charge will be made as a result 
of the termination of a Plan's participation in the cross-trading 
program. In addition, before any authorization is made by a Plan for 
participation in the cross-trading program, BlackRock must provide the 
authorizing Plan fiduciary with all materials necessary to permit an 
evaluation of the program. These materials will include a copy of the 
proposed exemption and final exemption, if granted, an explanation of 
how the authorization may be terminated, a description of BlackRock's 
cross-trading practices, and any other available information that the 
authorizing Plan fiduciary may reasonably request.
    8. In addition to requiring a general authorization of a Plan's 
participation in BlackRock's cross-trading program, an independent 
fiduciary of each Plan must specifically authorize each cross-trade 
transaction. Any such authorization will be effective only for a period 
of three (3) business days and will be subject to certain pricing 
limitations (as discussed below in Paragraph 10). The authorization to 
proceed with the transaction may be either oral or written. If a cross-
trade transaction is authorized orally by an independent fiduciary, 
BlackRock will provide a written confirmation of such authorization in 
a manner reasonably calculated to be received by the independent 
fiduciary within one (1) business day from the date of the 
authorization. The Plan fiduciary will be sent a written confirmation 
of the cross-trade, including the price at which it was executed, 
within ten (10) days of the completion of the transaction.
    9. BlackRock will provide the authorizing Plan fiduciary with a 
report, at least once every three (3) months and not later than forty-
five (45) days following the period to which it relates, that sets 
forth: (a) A list of all the cross-trade transactions conducted on 
behalf of the Plan Account during the previous period; and (b) with 
respect to each cross-trade transaction, the prices at which the 
subject securities were traded on the date of the transaction. Each 
Plan fiduciary will also be provided with a summary of the quarterly 
reports, at least once a year and not later than 45 days after the end 
of the period to which [[Page 30114]] it relates, that includes: (a) A 
description of the total amount of Plan assets involved in cross-trade 
transactions completed during the year; (b) a statement that the Plan 
fiduciary's authorization to participate in the cross-trading program 
can be terminated without penalty upon BlackRock's receipt of a written 
notice to that effect; (c) a statement that the fiduciary's 
authorization of the Plan's participation in the program will continue 
unless it is terminated; and (d) a description of any material change 
in BlackRock's cross-trade practices during the period covered by the 
summary. These reports will provide the Plan fiduciaries with a 
mechanism for monitoring the operation of the cross-trade program. The 
applicant represents that the authorization of each cross-trade will 
prevent BlackRock from favoring one account at the expense of another 
in the cross-trade transaction.
    10. The securities involved in any cross-trade transaction will be 
only those for which there is a generally recognized market. BlackRock 
represents that each cross-trade transaction will be effected at the 
current market value for the securities on the date of the transaction. 
For all equity securities, the current market value shall be the 
closing price for the security on the date of the transaction. For all 
debt securities, the current market value shall be the fair market 
value of the security as determined on the date of the transaction in 
accordance with SEC Rule 17a-7 under the 1940 Act. In this regard, SEC 
Rule 17a-7(b) contains four possible means of determining ``current 
market value'' depending on such factors as whether the security is a 
reported security and whether its principal market is an exchange. This 
Rule is also applicable to registered investment companies for which 
BlackRock acts as an investment advisor.
    In addition, BlackRock states that each cross-trade transaction 
will be effected at a price that: (a) In the case of any equity 
security, is within 10 percent of the closing price for the security on 
the day before the date on which BlackRock receives authorization from 
the independent Plan fiduciary to engage in the cross-trade 
transaction; and (b) in the case of any debt security, is within 10 
percent of the fair market value of the security on the last valuation 
date preceding the date on which BlackRock receives authorization by 
the independent Plan fiduciary to engage in the cross-trade 
transaction. This safeguard prevents BlackRock from effecting cross-
trades at prices that were not contemplated at the time the independent 
fiduciary authorized the transaction.
    Finally, each cross-trade transaction will be effected only where 
the trade involves less than five (5) percent of the aggregate average 
daily trading volume of the securities which are the subject of the 
transaction for the week immediately preceding the authorization of the 
transaction. BlackRock states that a particular cross-trade transaction 
may exceed this limit only by express authorization of independent 
fiduciaries on behalf of Plans affected by the transaction, prior to 
the execution of the cross-trade.
    11. In summary, the applicant represents that the proposed 
transactions will satisfy the statutory criteria of section 408(a) of 
the Act because, among other things: (a) An independent Plan fiduciary 
must provide written authorization, terminable at will and without 
penalty, for each Plan's participation in the cross-trading program; 
(b) oral or written authorization must be provided by the independent 
Plan fiduciary to BlackRock prior to each cross-trade transaction; (c) 
all cross-trades will be executed at the current market price for the 
security on the date of the transaction, as determined by an 
independent third party source; (d) a cross-trade transaction will be 
effected only if certain price requirements are satisfied; (e) all 
securities involved in cross-trades will be ones for which there is a 
generally recognized market; (f) BlackRock will receive no commissions 
or additional fees as a result of the proposed cross-trades; (g) 
BlackRock will provide periodic reporting on cross-trade transactions 
to the participating Plan's independent fiduciary; (h) Plans 
participating in the cross-trading program will realize savings on 
their transactions due to the elimination of brokerage commissions, 
transaction fees and dealer markups; (i) the Plans participating in the 
cross-trading program will have assets of at least $25 million; and (j) 
the Plans participating in the cross-trading program will not include 
any employee benefit plan established or maintained by BlackRock or its 
affiliates.

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department, 
telephone (202) 219-8194. (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.

    Signed at Washington, DC, this 2nd day of June, 1995.
Ivan Strasfeld,
Director of Exemption Determinations Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-13910 Filed 6-6-95; 8:45 am]
BILLING CODE 4510-29-P