[Federal Register Volume 61, Number 208 (Friday, October 25, 1996)]
[Notices]
[Pages 55325-55326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27442]
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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 96-80; Exemption Application No. D-
10255, et al.]
Grant of Individual Exemptions; Lehman Brothers, Inc.
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.
Lehman Brothers, Inc. (Lehman) Located in New York, New York
[Prohibited Transaction Exemption 96-80; Exemption Application No.
D-10255]
Exemption
The restrictions of section 406(a) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1) (A)
[[Page 55326]]
through (D) of the Code, shall not apply to the sales of collateralized
guaranteed investment contracts (CGICs) by Lehman to employee benefit
plans (the Plans), provided the following conditions are satisfied: (a)
The decision to purchase a CGIC will be made by a fiduciary of a Plan
who is independent of Lehman; (b) Lehman will provide the independent
fiduciary with audited and unaudited statements of its financial
condition at the time of the purchase of the CGIC and subsequently as
issued; (c) Lehman will transfer to a tri-party custodial account,
under the exclusive direction of a Plan's trustees, securities selected
by the Plan with a market value equal to at least 102% of the CGIC's
purchase price; (d) such securities will be marked to market on a daily
basis, and Lehman will be required to maintain the market value of the
securities at the agreed-upon level of at least 102% of the CGIC's
purchase price; (e) a Plan will receive daily reports describing the
securities on deposit and their market value, and monthly reports
describing all activity with respect to the CGIC, including accrued
interest; (f) a Plan will have full recourse against Lehman for all
obligations and expenses owed to it by Lehman; (g) Lehman will be
responsible for all legal fees and expenses associated with any failure
to fulfill its obligations under a CGIC; (h) a Plan will have an
unqualified right to the return of its principal and accrued interest
no later than the conclusion of the stated term of the CGIC; (i) if a
Plan requires a termination of a CGIC prior to maturity to pay benefit
responsive payments, no market value adjustment will be imposed; and
(j) Lehman will market CGICs only to Plans with assets having an
aggregate market value of at least $50 million.
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 August 27, 1996 at 61 FR
44087.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Rexam Retirement Savings Plan (the Plan) Located In Charlotte, North
Carolina
[Prohibited Transaction Exemption 96-81; Exemption Application No.
D-10294]
Exemption
The restrictions of sections 406(a) and 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 loan of $1,620,246.56 (the Loan) to the Plan
from Rexam, Inc. (the Employer) with respect to the Guaranteed
Investment Contract No. 63217 (the GIC) issued by Confederation Life
Insurance Company (Confederation) and the Plan's potential repayment of
the Loan upon the receipt by the Plan of payments under the GIC;
provided the following conditions are satisfied:
(A) All terms and conditions of the transactions are no less
favorable to the Plan than those that the Plan could obtain in arm's-
length transactions with unrelated parties;
(B) No interest payments or other expenses are paid by the Plan in
connection with the Loan and its repayment;
(C) The Loan will be repaid only from proceeds paid to the Plan by
Confederation, its successors, or by any other third-party;
(D) Repayment of the Loan will be waived to the extent that the
Loan exceeds the proceeds from the GIC;
(E) If total proceeds received by the Plan with respect to the GIC
exceed the amount of the Loan, the excess will be credited to the
respective accounts of the participants in proportion to the relative
investment of each account in the GIC on June 25, 1996; and
(F) A qualified, independent fiduciary represented the Plan at the
execution of the Loan and will continue to represent the interests of
the Plan throughout the duration and repayment of the Loan.
EFFECTIVE DATE: The exemption is effective as of June 25, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver 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 do 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, D.C., this 22nd day of October, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 96-27442 Filed 10-24-96; 8:45 am]
BILLING CODE 4510-29-P