[Federal Register Volume 60, Number 172 (Wednesday, September 6, 1995)]
[Notices]
[Pages 46308-46311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22042]



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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-76; Exemption Application No. D-
09819, et al.]


Grant of Individual Exemptions; John B. Toomey Rollover IRA (the 
IRA), 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.

John B. Toomey Rollover IRA (the IRA), Located in Lorton, Virginia

[Prohibited Transaction Exemption 95-76 Exemption Application No. D-
09819]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1) (A) through (E) of the Code shall 
not apply to the installment sale of 36.2 shares of common stock (the 
Stock) in JBT Holding Corporation (JBT) by the IRA 1 to JBT, a 
disqualified person with respect to the IRA; provided that: (a) The 
purchase price JBT pays for the Stock is the greater of $410,146 or the 
fair market value of the Stock on the date of the sale; (b) the fair 
market value of the Stock is determined by a qualified independent 
appraiser, as of the date of the sale; (c) the terms of the transaction 
are no less favorable to the IRA than those negotiated at arm's length 
with unrelated third parties in similar circumstances; (d) the trustee 
of the IRA 

[[Page 46309]]
monitors compliance with the terms of the transaction throughout the 
duration of the installment sale; (e) the IRA receives a cash 
downpayment of no less than $210,146 on the date of the sale and 
thereafter receives three (3) equal annual installment payments of 
$66,667, the first of which is due and payable December 31, 1995, plus 
interest at the fair market rate of interest, as determined by an 
independent, qualified third party, as of the date of the transaction, 
on the outstanding balance of the installment payments, payable 
annually until all the installment payments have been made by JBT on or 
before December 31, 1997; (f) the outstanding balance of the 
installment payments at no time exceeds 25 percent (25%) of the value 
of the assets of the IRA; (g) the outstanding balance on the 
installment payments is secured by a recorded first mortgage interest 
in real property pledged by JBT in favor of the IRA; (h) the collateral 
which secures the installment payments has a value, as determined by an 
independent, qualified appraiser, which at all times is no less than 
150 percent (150%) of the outstanding balance of the installment 
payments; and (i) the IRA pays no commissions, fees, or other expenses 
in connection with the transaction.

     1 Pursuant to 29 CFR 2510.3-2(d), the IRA is not within 
the jurisdiction of Title I of the Act. However, there is 
jurisdiction under Title II of the Act, pursuant to section 4975 of 
the Code.
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    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption published on July 21, 1995, at 58 FR 
37682.

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

Phillips Petroleum Company (Phillips) Located in Bartlesville, OK

[Prohibited Transaction Exemption 95-77; Exemption Application No. D-
09907]

Exemption

    The restrictions of sections 406(a), 406(b) (1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code by reason of section 4975(c)(1) (A) through (E) of the Code, 
shall not apply to (1) the 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 repayment of such loans by the Plan to Phillips.
    This 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.

Written Comments

    The Department received six written comments with respect to the 
notice of proposed exemption and no requests for a public hearing. Of 
the written comments received, five commenters recommended that the 
Department grant the proposed exemption. The sixth commenter questioned 
whether the proposed credit facility arrangement would be in the best 
interest of the Plan since it would allow no recourse against Plan 
assets. The commenter also raised several questions about the Plan's 
participant loan program.
    In response to the sixth commenter, Bankers Trust Company (BTC), 
the Plan trustee and independent fiduciary with respect to the proposed 
transactions, notes that the purpose of the credit facility arrangement 
is to facilitate participant directions regarding their account 
balances on a more timely basis. According to BTC, receiving the loans 
on an interest-free basis from Phillips meets this purpose and it 
allows the Plan to avoid the expense of its current credit facility 
arrangement with NationsBank of Dallas, Texas. BTC further represents 
that by requiring that the loans be on a non-recourse basis provides an 
additional safeguard to the Plan and ensures that participant account 
balances will not be impacted adversely.
    With respect to the Plan's participant loan program, the commenter 
has inquired about the (a) number of participants in the Plan having 
outstanding participant loans, (b) the frequency of loan repayments, 
(c) the percentage of such loans that are in arrears or default, and 
(d) what safeguards can and should be implemented to prevent 
depreciation in the value of Phillips common stock.
    Phillips has responded to each of the commenter's concerns on these 
matters. In this regard, Phillips represents that as of July 17, 1995, 
approximately 2,000 participants had outstanding participant loans with 
the Plan. Phillips notes that for these loans, repayment schedules 
range from three months to 180 months in duration depending upon the 
election of the participant. Phillips further explains that virtually 
none of the loans are in arrears or default since the Plan requires 
that loan repayments be made by payroll deduction or repaid in full. 
However, should a participant loan be in default, Phillips states that 
there will be no impact on Plan participants since the participant's 
account will serve as security for the loan and the event of default 
will become a taxable distribution to the participant. Finally, 
Phillips notes that neither the Plan nor BTC can control the value of 
Phillips common stock that is held by the Plan and that the intent of 
the exemption is to allow participants the flexibility of moving into 
or out of stock funds with the value of the stock established as of the 
transaction valuation date.

Technical Correction

    The Department notes that the correct application number for the 
subject request is ``D-09907'' and not ``D-09909'' as it appeared in 
the proposed exemption. Therefore, the Department has incorporated this 
revision into the grant notice.
    After giving full consideration to the entire record, including the 
written comment that was submitted and the responses made by BTC and 
Phillips, the Department has decided to grant the exemption as 
described and revised above. The comment letter and responses 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-5638, 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, refer to 
the notice of proposed exemption published on June 7, 1995 at 60 FR 
30106.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)
KeyCorp 401(k) Savings Plan (the Plan), Located in Cleveland, Ohio

[Prohibited Transaction Exemption 95-78; Exemption Application No. D-
10023]

Exemption

    The restrictions of sections 406(a) and 406(b)(1) and 406(b)(2) of 
the Act and the sanctions resulting from the 

[[Page 46310]]
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 loan of 
funds (the Loan) to the Plan by KeyCorp the sponsor of the Plan, with 
respect to Guaranteed Investment Contract No. 62149 (the GIC) issued by 
Confederation Life Insurance Company of Canada (Confederation), and the 
potential repayment by the Plan of the Loan upon receipt of payments 
under the GIC; provided the following conditions are satisfied: (a) No 
interest and/or other expenses are paid by the Plan in connection with 
the Loan; (b) All of the terms and conditions of the Loan are no less 
favorable to the Plan than those which the Plan could obtain in an 
arm's-length transaction with an unrelated party; (c) The Loan will be 
no less than the amount described in paragraph 4 of the Notice of 
Proposed Exemption; (d) The repayment of the Loan will not exceed the 
total amount of the Loan; (e) The repayment of the Loan by the Plan 
will be restricted to funds paid to the Plan under the GIC by 
Confederation or other responsible third parties with respect to the 
GIC; and (f) The repayment of the Loan will be waived to the extent the 
amount of the Loan exceeds the proceeds the Plan receives from the GIC.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption published on June 29, 1995 at 60 FR 
33871.

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

The Bank of New York (the Bank) Located in New York, New York

[Prohibited Transaction Exemption 95-79; Application No. D-10030]

Exemption

Section I--Exemption for the Acquisition, Holding and Disposition of 
BNY Stock

    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 the acquisition, holding or disposition of the 
common stock of the Bank's parent corporation, The Bank of New York 
Company, Inc. (BNY Stock), by Index or Model-Driven Funds, if the 
following conditions and the General Conditions of Section II are met:
    (a) The Index or Model-Driven Fund is based on an index which 
represents the investment performance of a specific segment of the 
public market for equity securities in the United States and/or foreign 
countries. The organization creating and maintaining the index must be 
(1) engaged in the business of providing financial information, 
evaluation, advice or securities brokerage services to institutional 
clients, (2) a publisher of financial news or information, or (3) a 
public stock exchange or association of securities dealers. The index 
must be created and maintained by an organization independent of the 
Bank and its affiliates. The index must be a generally accepted 
standardized index of securities which is not specifically tailored for 
the use of the Bank or its affiliates.
    (b) The acquisition or disposition of the BNY Stock is for the sole 
purpose of maintaining strict quantitative conformity with the relevant 
index upon which the Index or Model-Driven Fund is based.
    (c) All acquisitions comply with Rule 10b-18 of the Securities and 
Exchange Commission, including the limitations regarding the price paid 
or received for such stock.
    (d) Aggregate daily purchases of BNY Stock constitute no more than 
the greater of: (1) 10 percent of the stock's average daily trading 
volume for the previous five days; or (2) 10 percent of the stock's 
trading volume on the date of the transaction.
    (e) If the necessary number of shares of BNY Stock cannot be 
acquired within 10 business days from the date of the event which 
causes the particular Index or Model-Driven Funds to require BNY Stock, 
the Bank appoints a fiduciary which is independent of the Bank and its 
affiliates to design acquisition procedures and monitor the Bank's 
compliance with such procedures.
    (f) All purchases and sales of BNY Stock are executed on the 
national exchange on which BNY Stock is primarily traded.
    (g) No transactions involve purchases from, or sales to, the Bank 
or any affiliate (including officers, directors and employees of the 
Bank, as defined in Section III(c) below), or any party in interest 
with respect to a plan which has invested in an Index or Model-Driven 
Fund.
    (h) No more than five (5) percent of the total amount of BNY Stock 
issued and outstanding at any time is held in the aggregate by the 
Index and Model-Driven Funds.
    (i) BNY Stock constitutes no more than two (2) percent of the value 
of any independent third-party index on which the investments of an 
Index or Model-Driven Fund are based.
    (j) A plan fiduciary independent of the Bank and its affiliates 
authorizes the investment of such plan's assets in an Index or Model-
Driven Fund which purchases and/or holds BNY Stock.
    (k) A fiduciary independent of the Bank and its affiliates directs 
the voting of the BNY Stock held by an Index or Model-Driven Fund on 
any matter in which shareholders of BNY Stock are required or permitted 
to vote.

Section II--General Conditions

    (a) The Bank maintains or causes to be maintained for a period of 
six years from the date of the transaction the records necessary to 
enable the persons described in paragraph (b) of this Section to 
determine whether the conditions of the exemption have been met, except 
that (1) a prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of the Bank, the 
records are lost or destroyed prior to the end of the six-year period, 
and (2) no party in interest other than the Bank shall be subject to 
the civil penalty that may be assessed under section 502(i) of the Act 
or to the taxes imposed by section 4975(a) and (b) of the Code if the 
records are not maintained or are not available for examination as 
required by paragraph (b) below.
    (b)(1) Except as provided in paragraph (b)(2) and notwithstanding 
any provisions of section 504 (a)(2) and (b) of the Act, the records 
referred to in paragraph (a) of this Section are available at their 
customary location for examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department of Labor or the Internal Revenue Service,
    (B) Any fiduciary of a plan participating in an Index or Model-
Driven Fund who has authority to acquire or dispose of the interests of 
the plan, or any duly authorized employee or representative of such 
fiduciary,
    (C) Any contributing employer with respect to any plan 
participating in an Index or Model-Driven Fund or any duly authorized 
employee or representative of such employer, and
    (D) Any participant or beneficiary of any plan participating in an 
Index or Model-Driven Fund, or any duly authorized employee or 
representative of such participant or beneficiary.
    (2) None of the persons described in paragraph (b)(1)(B) through 
(D) shall be authorized to examine trade secrets of the Bank, any of 
its affiliates, or commercial or financial information which is 
privileged or confidential. 

[[Page 46311]]


Section III--Definitions

    (a) Index Fund--Any investment fund, account or portfolio 
sponsored, maintained and/or trusteed by the Bank, or an affiliate of 
the Bank, in which one or more investors invest which is designed to 
replicate the capitalization-weighted composition of a stock index 
which satisfies the conditions of Section I(a) and (i).
    (b) Model-Driven Fund--Any investment fund, account or portfolio 
sponsored, maintained and/or trusteed by the Bank, or an affiliate of 
the Bank, in which one or more investors invest which is based on 
computer models using prescribed objective criteria to transform an 
independent third-party stock index which satisfies the conditions of 
Section I (a) and (i).
    (c) Affiliate--Any person directly or indirectly, through one or 
more intermediaries, controlling, controlled by, or under common 
control with such person; any officer, director, partner, employee, 
relative (as defined in section 3(15) of the Act), a brother, a sister, 
or a spouse of a brother or a sister of such person; and any 
corporation or partnership of which such person is an officer, 
director, or partner.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption published on July 12, 1995, at 60 FR 
35944.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)
Rollover Individual Retirement Accounts for Joseph Shepard, Located in 
Jacksonville, Florida; William Haspel, Located in Bethesda, Maryland; 
and Richard Geisendaffer, Paul Petryszak, William Kroh and Rolf Graage, 
Located in Baltimore, Maryland (Collectively, the IRAs)

[Prohibited Transaction Exemption 95-80; Exemption Application Nos. D-
10054-10059]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall 
not apply to the past sale by the IRAs of all the common stock (the 
Stock) of Purchase Port Services, Inc. (PPS) held by the IRAs to PPS, 
provided that the following conditions were satisfied: (1) The sale of 
Stock by each IRA was a one-time transaction for cash; (2) no 
commissions or other expenses were paid by the IRAs in connection with 
the sale; and (3) the IRAs received the greater of: (a) the fair market 
value of the Stock as determined by a qualified independent appraiser 
as of May 31, 1995, or (b) the fair market value of the Stock as of the 
time of the sale.2

     2 Pursuant to 29 CFR 2510.3-2(d), the IRAs are not within the 
jurisdiction of Title I of the Act. However, there is jurisdiction 
under Title II of the Act pursuant to section 4975 of the Code.
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    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on July 21, 1995 at 60 FR 
37688.

EFFECTIVE DATE: This exemption is effective July 28, 1995.

WRITTEN COMMENT: The Department received one written comment with 
respect to the proposed exemption, which was submitted by the 
applicants. The applicants had represented (see notice of proposed 
exemption, rep. 4) when they filed their exemption application that 
``Business and income tax considerations have compelled PPS to consider 
making an election to be treated as a `Subchapter S' Corporation under 
section 1362(a) of the Code.'' The applicants noted in their comment 
letter that subsequent to the filing of the exemption request, PPS 
determined that, rather than electing Subchapter S Corporation status 
itself, PPS would merge into its subsidiary, Hobelmann Port Services, 
Inc. (HPS), and that HPS would elect Subchapter S Corporation status. 
That merger was concluded effective July 31, 1995, and HPS elected 
Subchapter S Corporation status effective August 1, 1995. The 
applicants represent that the decision to make HPS rather than PPS the 
entity to elect Subchapter S status was made for business purposes 
unrelated to the redemption of the IRAs' shares, and is not material to 
the requested exemption.
    The applicants also requested that the exemption be made effective 
July 28, 1995, instead of July 31, 1995, as had been proposed. The sale 
of shares from the IRAs to PPS occurred on July 28, 1995 to allow 
sufficient time before July 31, 1995 to complete other steps relating 
to the Subchapter S Corporation election. The applicants represent that 
the sale was made in accordance with all of the conditions set forth in 
the proposed exemption.
    The Department has considered the entire record, including the 
comment submitted by the applicants, and has determined to grant the 
exemption effective July 28, 1995.

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

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest 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 are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, D.C., this 31st day of August, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-22042 Filed 9-5-95; 8:45 am]
BILLING CODE 4510-29-P