[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Notices]
[Pages 64763-64767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31108]


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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 96-87; Exemption Application No. D-
09990, et al.]


Grant of Individual Exemptions; Blue Cross and Blue Shield of 
Virginia

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.

Blue Cross and Blue Shield of Virginia (the Company) Located in 
Richmond, VA; Exemption

[Prohibited Transaction Exemption 96-87; Exemption Application No. D-
09990]

Section I. Covered Transactions

    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) through (D) of the Code, shall not apply to 
the proposed receipt of cash and/or common stock (the Stock) of Trigon 
Healthcare, Inc. (Trigon), the Company's sole owner, by any employee 
benefit plan policyholder of the Company (the Plan), other than an 
employee benefit plan sponsored by the Company or its affiliates, in 
exchange for such policyholder's membership interest in the Company, in 
accordance with the terms of a plan of reorganization (the 
Demutualization; the Demutualization Plan) adopted by the Company and 
implemented pursuant to the insurance laws of the State of Virginia.
    This exemption is subject to the conditions set forth below in 
Section II.

Section II. General Conditions

    (a) The Demutalization Plan is implemented in accordance with 
procedural and substantive safeguards that are imposed under Virginia 
law and is subject to the review and supervision by the Virginia State 
Corporation Commission (the Commission).
    (b) The Commission reviews the terms of the options that are 
provided to certain policyholders of the Company (the Eligible 
Members), as part of such Commission's review of the Demutualization 
Plan, and the Commission only approves the Demutualization Plan 
following a determination that such Demutualization Plan is fair and 
equitable to the policyholders.
    (c) Each Eligible Member has an opportunity to comment on the 
Demutualization Plan and each Member on the Record Date can decide 
whether to vote to approve such Demutualization Plan after full written 
disclosure is given such Member by the Company, of the terms of the 
Demutualization Plan.
    (d) Any election by an Eligible Member to receive cash and/or 
Trigon Stock pursuant to the terms of the Demutualization Plan is made 
by one or more independent fiduciaries of such Plan and neither the 
Company nor any of its affiliates exercises any discretion or provides 
investment advice with respect to such election.
    (e) After an Eligible Member entitled to receive stock is allocated 
a fixed number of shares of Trigon Stock for each vote, additional 
consideration is allocated to an Eligible Member who owns a 
participating policy based on actuarial formulas that take into account 
each participating policy's contribution to the surplus (the Surplus or 
the Surplus Contribution) of the Company which formulas have been 
approved by the Commission.
    (f) All Eligible Members participate in the transactions on the 
same basis within their class groupings as other Eligible Members that 
are not Plans.
    (g) No Eligible Member pays any brokerage commissions or fees in 
connection with their receipt of Trigon Stock or in connection with the 
implementation of the commission-free sales program.
    (h) All of the Company's policyholder obligations remain in force 
and are not affected by the Demutualization Plan.

Section III. Definitions

    For purposes of this exemption:
    (a) The term ``Company'' means Blue Cross and Blue Shield of 
Virginia and any affiliate of the Company as defined in paragraph (b) 
of this Section III.
    (b) An ``affiliate'' of the Company includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the Company. (For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the management 
or policies of a person other than an individual.)

[[Page 64764]]

    (2) Any officer, director or partner in such person, and
    (3) Any corporation or partnership of which such person is an 
officer, director or a 5 percent partner or owner.
    (c) The term ``Effective Date'' means the date on which the 
certificate of merger is issued by the Commission and the 
Demutualization occurs.
    (d) The term ``Eligible Member'' means a member which will receive 
a distribution of Trigon Stock in the Demutualization. A ``Member'' is 
a policyholder which has a policy of insurance directly from the 
Company, which policy entitles the policyholder to vote. To be eligible 
for a distribution of Trigon Stock, the Member must have had a policy 
in effect as of December 31, 1995.
    (e) The term ``Record Date'' is the date on which the determination 
of a policyholder's status for voting on the Demutualization is made.
    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 (the Notice) on May 23, 1996 at 61 FR 
25900.

Written Comments

    The Department received five written comments with respect to the 
Notice. Four comments, which objected to different aspects of the 
Demutualization, were submitted by policyholders of the Company. Of 
these policyholder comments, two were submitted by the same individual. 
The fifth comment was submitted by the Company and is intended to 
clarify and update the Notice. Following is a discussion of the 
comments received.

Policyholder Comments

    Of the policyholder comments received, one commenter has objected 
to the Demutualization but does not cite the specific reasons for his 
opposition. The second commenter is of the view that the 
Demutualization will diminish benefits and increase premium costs for 
policyholders. This commenter is also opposed to the exemption because 
he believes it will facilitate the Demutualization.
    In response to the second commenter, the Company notes that as a 
policyholder, the holder of the group policy that covers the commenter 
would have the opportunity to vote on the approval or disapproval of 
the Demutualization Plan with all other policyholders. The Company also 
states that the commenter's specific concerns about benefits and 
premium costs would be addressed in the Demutualization process which 
requires that the terms and conditions of the plan be fair and 
equitable to the policyholders of the issuer. The Company further notes 
that the Demutualization would not affect the premiums or other terms 
of insurance.
    The third commenter, who submitted two comments, is an individual 
policyholder of the Company. The commenter proposes that the exemption 
permit the Company to allocate cash or shares of Trigon Stock directly 
to employees covered under group policies of insurance. In response, 
the Company notes that under Title I of the Act, the Plan administrator 
is given the primary duty to make decisions regarding the operation of 
the Plan including the use and disposition of Plan assets. According to 
the Company, distribution of cash or Trigon Stock directly to employees 
in the Demutualization is inconsistent with its responsibilities since 
the Company is not the Plan administrator of any Plans associated with 
its group policies. Therefore, the Company asserts that it cannot 
dictate to the Plan administrator the manner in which cash or shares of 
Trigon Stock should be used under the Plan. Rather, the Plan 
administrator must make this decision based on the individual facts 
concerning the Plan.
    The Company is also of the view that the commenter's proposal would 
be untenable because of the various situations that might affect the 
Plan. In this regard, the Company explains that under the 
Demutualization Plan, the Surplus is allocated to each policyholder for 
each year from 1988 through 1995. During that time period, group 
policyholders may have had substantial changes (e.g., constant 
participant turnover, changes in allocation costs between the employer 
and the participants, changes in elections of health care providers by 
employers, etc.) in their Plans which could affect the manner in which 
the Plans would treat their participants. The only party who would 
possess this information and have the authority to determine the 
appropriate treatment of the employees would be the Plan administrator, 
who is permitted under the Demutualization Plan to decide how shares of 
Trigon Stock will be used to benefit employees. Therefore, the Company 
does not believe it is feasible to make these decisions for the 
thousands of groups that will receive Trigon Stock.
    In addition, the commenter states that the Company's allocation 
formula should consider allocating shares to the Surplus Contribution 
made by self-funded Plans which are not insured Plans. In response, the 
Company represents that the allocation formula in the Demutualization 
Plan does not take into account contributions to Surplus from its non-
insurance lines of business as such action would be inconsistent with 
the purpose of the allocation formula. The Company explains that the 
purpose of the allocation formula is to allocate, in a fair and 
equitable manner, shares of Trigon Stock among the Company's 
policyholders. Therefore, the Company states that the formula should 
only take into account the Surplus Contributions for the policyholders 
who will receive the shares. Moreover, the Company states that the 
customers of its non-insurance lines of business are not policyholders 
and revenue from these customers should play no part in the allocation 
formula.
    Further, the commenter is of the view that there may be litigation 
if allocations are not made by the Company to individual employees 
covered under group policies. However, the Company notes that 
litigation on this issue has never occurred in prior Demutualizations.
    Finally, the commenter has remarked on a provision of the Notice 
relating to the Company's in-house health Plans. In response, the 
Company states that this portion of the Notice has been withdrawn. With 
respect to its in-house health Plans, the Company indicates that it has 
determined that such Plans are not ``policies of insurance'' for 
purposes of eligibility under the Demutualization Plan. Therefore, no 
Trigon Stock will be distributed to the Company or its employees under 
the Demutualization Plan.
    It should be noted that this commenter made comments to the 
Commission that are similar to the foregoing but he did not appear at 
the hearing on the Demutualization Plan which occurred on September 9-
11, 1996. It is represented that the commenter withdrew as a protestant 
during the hearing and that the Commission did not require the Company 
to amend the Demutualization Plan in response to the commenter's 
remarks.

The Company's Comment

    In its comment, the Company has noted various changes in the 
details of the Demutualization Plan. Although the basic structure of 
the Demutualization has remained the same, the Company indicates that a 
revised Demutualization Plan incorporating these changes was filed with 
the Commission on May 31, 1996. On October 28, 1996, the Commission 
issued a preliminary order and requested that a revised

[[Page 64765]]

Demutualization Plan be filed that incorporated its recommended 
modifications. On October 31, 1996, the Company filed a revised 
Demutualization Plan which contained two amendments that do not affect 
matters that were included in the Notice or in the subsequent revisions 
to the description of the Demutualization Plan as described below. 
Specifically, the time periods for certain restrictions on stock 
acquisitions that might affect control of the Company have been reduced 
from 5 years to 30 months. In addition, limitations have been placed on 
stock-based compensation awards until three months after the end of the 
Lockup Period. On November 5, 1996, the Commission issued its final 
order approving the Demutualization of the Company.
    In order to clarify and update the Notice, the Company has 
requested that the Department make revisions in the following areas:
    (1) Number of Shares of Trigon Stock to be Allocated for Voting 
Rights. Section II(e), Representations 8 and 15(e) of the Notice state 
that an Eligible Member entitled to receive Trigon Stock will be 
allocated at least 16 shares for each vote. However, the Company points 
out that under the revised Demutualization Plan, the current estimate 
for the number of shares to be allocated for each vote is 13.7 shares 
rather than 16 shares. The Company further explains that the exact 
number of shares for each vote may be subject to change depending on 
the number of votes which is presently estimated at 700,730.
    (2) Eligible Member Effective Date. Section III(d) of the Notice 
states, in part, that to be eligible to receive a distribution of 
Trigon Stock, a member must have had a policy in effect on (a) May 31, 
1995, (b) on the Effective Date, and (c) at all times between those 
dates. To reflect the revised Demutualization Plan, the Company states 
that in order to be eligible for a distribution, an eligible policy 
must have been in effect on December 31, 1995 (rather than May 31, 
1995) and does not have to remain in effect after that date.
    (3) Special Member Hearing and Hearing. In Representation 4 of the 
Notice, the dates for the special Member hearing and the hearing had 
not been established. The Company represents that the special Member 
hearing was held on September 6, 1996, at which time eligible 
policyholders of the Company approved the Demutualization Plan by 
approximately 92.5 percent of the votes cast in favor of the 
conversion. On September 9-11, 1996, the Company states that the 
Commission held hearings on the Demutualization Plan.
    (4) Allocation of Trigon Stock. Representation 8 of the Notice 
states that the allocation of Trigon Stock will be based on two 
components--voting rights (Voting Rights) and the equity contribution 
(the Equity Contribution) by the policies. The Company wishes to 
clarify that the Voting Rights Allocation is referred to as the ``Fixed 
Component'' or the ``Aggregate Fixed Component'' and the Equity 
Contribution Allocation is referred to as the ``Surplus Contribution,'' 
the ``Variable Component'' or the ``Aggregate Variable Component.''
    In addition, Representation 8 of the Notice states, in part, that 
the Demutualization Plan assigns each policy to a strategic business 
unit (SBU) and a major product line (MPL) under the SBU. It is also 
represented that the Demutualization Plan divides the Eligible Members 
into 4 SBUs and 11 MPLs that could receive an allocation of Trigon 
Stock. Under the amended Demutualization Plan, the Company notes that 
all policies will be allocated to one of fourteen MPLs and that the 
MPLs will not be further divided among any SBUs.
    (5) Changes to Hypothetical Example. Representation 9 of the Notice 
sets forth a hypothetical example, provided by the Company, which 
describes the manner in which shares of Trigon Stock would be 
calculated for an Eligible Member. To update the Notice, the Company 
requests that references to the Equity Contribution Allocation be 
changed to the ``Aggregate Variable Component Allocation'' or the 
``Variable Component Allocation'' and the Equity Contribution Factor be 
changed to the ``Surplus Contribution Factor.'' The Company also notes 
that the Surplus Contribution Factor (the SCF) will be applied for the 
years 1988 through 1995 and future years through 2015 rather than pre-
1989 as stated in the Notice.
    To reflect these changes, the example has been revised as follows:

    Assume that an Eligible Member's group policy was in force from 
1985 until 1995. Thus, the first step in the allocation methodology 
is to compute the Voting Rights allocation. The second step in the 
allocation methodology is to determine the Surplus Contribution 
allocation.
    Fixed Component Allocation. Assume that the policy has a total 
of 30 votes as of the Record Date. At a rate of 13.7 shares per 
vote, the Fixed Component allocation would be 411 shares of Trigon 
Stock.
    30 votes  x  13.7 shares of Trigon Stock = 411 shares of Trigon 
Stock.
    Variable Component Allocation. The following table represents 
the number of covered lives and the Surplus Contribution Factor (the 
SCF) 1 derived for the Eligible Member's MPL for each year.
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    \1\ The SCF is determined by dividing the Surplus Contribution 
of the MPL by the total number of covered lives. For example, assume 
that in 1988, an MPL had a Surplus Contribution of $10 million and 
50,000 covered lives. The 1988 SCF for that MPL would be $200 (i.e., 
$10 million divided by 50,000).

------------------------------------------------------------------------
                                       Covered                 Surplus  
                Period                  lives    x    SCF   contribution
------------------------------------------------------------------------
Pre-1988.............................       22   x     $60      $1,320  
1989.................................       22   x      60       1,320  
1990.................................       30   x      60       1,800  
1991.................................       28   x      40       1,120  
1992.................................       35   x      70       2,450  
1993.................................       35   x      60       2,100  
1994.................................       40   x      80       3,200  
1995.................................       40   x      60       2,400  
Future...............................       40   x      70       2,800  
                                                           -------------
    Total surplus contribution.......                          $18,510  
------------------------------------------------------------------------

    Assume that the Surplus Contribution for all Eligible Members is 
$18,510/$650,000,000 x 54,400,000 shares = 1,545 Surplus 
Contribution Shares.
    The total number of shares of Trigon Stock that will be received 
by the Eligible Member is the sum of the Voting Rights Shares and 
the Surplus Contribution Shares.
    411 + 1,545 = 1,956 Total Shares Received.

    (6) Criteria for Being Considered a Mandatory Cash Member. Footnote 
7 of the Notice states, in pertinent part, that a Mandatory Cash Member 
is--

    .....(c) an Eligible Member with a mailing address within a 
state in which there are fewer than 10 Eligible Members and the 
total stock allocated to such Eligible Members is less than 2,000 
shares, if the Company determines that issuance of shares to these 
Eligible Members would result in unreasonable delay or excessive 
hardship or delay.

    Under the revised Demutualization Plan, the Company explains that 
there are two different criteria for these Members. The first category 
is having a mailing address in a state with 30 or fewer Eligible 
Members. The second category is having a mailing address in a state in 
which issuance of shares would result in unreasonable delay or be 
excessively burdensome. Therefore, the Company requests that the 
Department revise the affected portions of this footnote to read as 
follows:

    .....(c) an Eligible Member with a mailing address within a 
state in which there are fewer than 30 Eligible Members and (d) an 
Eligible Member with a mailing address in a state in which it is 
determined that the issuance of shares to these Eligible Members 
would result in unreasonable delay, be excessively burdensome or 
expensive.


[[Page 64766]]


    (7) Reduction in Lockup Periods. Representation 13 of the Notice 
states that all shares of Trigon Stock that are issued by the Company 
to Eligible Members will be subject to two Lockup Periods. The Company 
wishes to clarify that under the revised Demutualization Plan, the 
number of Lockup Periods has been reduced from two to one. The Company 
states that the single Lockup Period will have a duration of six 
months, after which time, all shares of Trigon Stock held by the 
Company, will be released. Otherwise, the Company explains that the 
Lockup will operate as under the prior Demutualization Plan. Therefore, 
the Company suggests that all references to the second Lockup Period be 
deleted.
    Thus, after giving full consideration to the entire record, 
including the written comments, the Department has made the 
aforementioned changes and has decided to grant the exemption subject 
to the modifications or clarifications described above. The comment 
letters have been included as part of the public record of the 
exemption application. The complete application file, as well as 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, N.W., Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

First National Bank of Anchorage Common Trust Fund (the Fund) 
Located in Anchorage, Alaska; Exemption

[Prohibited Transaction Exemption 96-88; Exemption Application No. D-
10117]
    The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, 
shall not apply to the sales of certain defaulted real estate mortgages 
(the Mortgages) by the First National Bank of Anchorage Common Trust 
Fund (the Fund) to the First National Bank of Anchorage (the Bank), a 
party in interest with respect to the Fund, provided that the following 
conditions are satisfied:
    (1) The sales will be one-time cash transactions;
    (2) the Fund will incur no costs in connection with the sales;
    (3) the Fund will sell each Mortgage for the greater of fair market 
value, or its outstanding principal balance plus accrued, but unpaid 
interest, and penalty charges at the time of the sale;
    (4) the independent fiduciaries (the Independent Fiduciaries) 
appointed to act on behalf of the Fund in these transactions will 
review and determine that a Mortgage is in default, has been properly 
declared to be in default by the Bank in accordance with the 
Comptroller of Currency regulations, and that the prospective sale of a 
Mortgage is in the best interest of the Fund;
    (5) neither of the Independent Fiduciaries will derive more than 5% 
of his gross annual income from the Bank for each fiscal year that he 
serves in an independent fiduciary capacity with respect to the 
transactions described herein;
    (6) the Mortgages will be purchased, rather than segregated, by the 
Bank;
    (7) the borrowers on the Mortgages will be unrelated third parties;
    (8) the conditions of the Prohibited Transaction Exemption 90-60 
(PTE 90-60) have been met. PTE 90-60, which expired September 12, 1995, 
provided retroactive and prospective relief for sales of the Mortgages 
by the Fund to the Bank;
    (9) the Bank maintains for a period of six years, the records 
necessary to enable persons described in (10) below to determine 
whether the conditions of this exemption have been met, except that a 
prohibited transaction will not be considered to have occurred if, due 
to the circumstances beyond the control of the Bank or its affiliates, 
the records are lost or destroyed prior to the end of the six-year 
period; and
    (10) (i) Except as provided in paragraph (ii) of this subsection 
(10) and notwithstanding any provisions of subsections (a)(2) and (b) 
of section 504 of the Act, the records referred to in subsection (9) 
above are unconditionally available at their customary location for 
examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service,
    (B) Any fiduciary of a plan participating in the 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 to any plan participating in the 
Fund, or any duly authorized employee or representative of such 
employer, and
    (D) Any participant or beneficiary of any plan participating in the 
Fund, or any duly authorized employee or representative of such 
participant or beneficiary.
    (ii) None of the persons described in subparagraphs (B) through (D) 
of this subsection (10) shall be authorized to examine trade secrets of 
the Bank, any of its affiliates, or commercial or financial information 
which is privileged or confidential.
    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 September 18, 1996 at 61 
FR 49160/49162.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan, U.S. Department 
of Labor, telephone (202) 219-8883. (This is not a toll-free number.)

John A. Colglazier Self Employment Retirement Plan (the Plan) 
Located in San Antonio, TX; Exemption and Replacement of Existing 
Exemption

[Prohibited Transaction Exemption (PTE) 96-89; Exemption Application 
No. D-10291]
    The Department hereby grants a temporary new exemption that will 
replace PTE 86-95 (51 FR 26077, July 18, 1986). Under the new 
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, will not apply to the cash sale by the Plan, for $74,250, of a 
parcel of unimproved real property (the Property) to John A. 
Colglazier, a sole proprietor and a disqualified person with respect to 
the Plan.\2\
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    \2\ Because Mr. Colglazier is a sole proprietor and the only 
participant in the Plan, there is no jurisdiction under Title I of 
the Employee Retirement Income Security Act of 1974 (the Act). 
However, there is jurisdiction under Title II of the Act pursuant to 
section 4975 of the Code.
---------------------------------------------------------------------------

    This exemption is subject to the following conditions:
    (a) The sale is a one-time transaction for cash that is entered 
into within 90 days following the publication, in the Federal Register, 
of the notice granting the proposed exemption.
    (b) The Plan does not pay any real estate fees or commissions in 
connection with the sale.
    (c) The Property is appraised by a qualified, independent 
appraiser.
    (d) The Plan receives, as consideration, an amount that is equal to 
the greater of $74,250 or the fair market value of the Property as of 
the date of the sale, including any special value attributed to the 
Property by reason of its proximity to other real property owned by Mr. 
Colglazier.
    (e) All terms and conditions of the sale remain at least as 
favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party at the time of the sale.


[[Page 64767]]


TEMPORARY NATURE OF EXEMPTION/EFFECTIVE DATE: This exemption will be 
effective for a period of 90 days subsequent to the date the grant 
notice is published in the Federal Register.
    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 October 17, 1996 at 61 FR 
54227.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady 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 accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, D.C., this 3rd day of December, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 96-31108 Filed 12-5-96; 8:45 am]
BILLING CODE 4510-29-P