[Federal Register Volume 63, Number 60 (Monday, March 30, 1998)]
[Notices]
[Pages 15228-15231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8198]
[[Page 15228]]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10546]
Notice of Proposed Individual Exemption To Amend and Replace
Prohibited Transaction Exemption (PTE) 97-35 Involving Amalgamated Bank
of New York (the Bank) Located in New York, NY
AGENCY: Pension and Welfare Benefits Administration, U.S. Department of
Labor.
ACTION: Notice of proposed individual exemption to modify andreplace
PTE 97-35.
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SUMMARY: This document contains a notice of pendency before the
Department of Labor (the Department) of a proposed individual exemption
which, if granted, would amend and replace PTE 97-35 (62 FR 41088, July
31, 1997). PTE 97-35 permits, among other things, the provision of
banking services by the Bank to 22 employee benefit plans (the Plans)
listed in the exemption, all of which are affiliated with the Union of
Needletrades, Industrial and Textile Employees (UNITE), which is the
majority and controlling shareholder in the Bank. PTE 97-35 is
effective as of July 1, 1995, except for Plan investments in a fund
maintained by the Bank designated as the LEI Fund, for which the
effective date is January 3, 1998.
If granted, the proposed exemption would replace PTE 97-35 but
would incorporate by reference the facts, representations and all of
the conditions that are contained in the notice and the final
exemption.
DATES: Written comments and requests for a public hearing should be
received by the Department on or before May 29, 1998.
ADDRESSES: All written comments and requests for a public hearing
(preferably, three copies) should be sent to the Office of Exemption
Determinations, Pension and Welfare Benefits Administration, Room N-
5649, U.S. Department of Labor, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210, Attention: Application No. D-10546. The
application pertaining to the proposed exemption and the comments
received will be available for public inspection in the Public
Documents Room of the Pension and Welfare Benefits Administration, U.S.
Department of Labor, Room N-5638, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210.
FOR FURTHER INFORMATION CONTACT: Ronald Willett, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S.
Department of Labor, telephone (202) 219-8881. (This is not a toll-free
number.)
SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency
before the Department of a proposal to amend and replace PTE 97-35. PTE
97-35 provides relief, effective July 1, 1995, from 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. The request to amend
and replace PTE 97-35 was set forth in an exemption application dated
December 4, 1997, filed on behalf of the Bank. The Department is
proposing the exemption to amend and replace PTE 97-35 pursuant to
section 408(a) of the Act and section 4975(c)(2) of the Code and in
accordance with the procedures set forth in 29 CFR Part 2570, subpart B
(55 FR 32836, August 10, 1990).
The applicant requested modifications to sections IV(C) and IV(E)
of the exemption. Section IV(C) of PTE 97-35 provides that:
Banking Services means (1) custodial, safekeeping, checking
account, trustee services, and (2) investment management services
involving (a) fixed income securities (either directly or through a
collective investment fund maintained by the Bank), (b) the LongView
Fund maintained by the Bank, and, (c) effective January 3, 1998, the
LEI Fund maintained by the Bank.
The Bank has requested that this definition be modified to add another
investment fund to those covered by PTE 97-35. The Banking Services
covered by the exemption include investments by the Plans in the
LongView Fund maintained by the Bank. As described in the Written
Comments in PTE 97-35, the LongView Fund is a bank collective
investment fund that is designed to mirror the S&P 500 Index. The
LongView Fund is established and maintained pursuant to Revenue Ruling
81-100 and, accordingly, investments therein are restricted to tax
qualified plans. The Bank represents that in response to expressions of
interest from several investors, it has developed an additional fund,
the LongView 500 Index Fund (the 500 Index Fund), designed to mirror
the S&P 500 Index, for investment by tax-qualified plan investors and
investors other than tax qualified plans. The Bank represents that
except for the fact that the investors will include entities other than
tax-qualified plans, the 500 Index Fund will be managed and
restructured in a manner identical to the LongView Fund. The proposed
addition of the 500 Index Fund to the definition of Banking Services
under the exemption and the potential investments by the Plans in the
500 Index Fund have been analyzed and evaluated by U.S. Trust, which is
the Independent Fiduciary representing the interests of the Plans under
PTE 97-35. Consistent with the approach taken under PTE 97-35, the Bank
directed an analysis of the 500 Index Fund by the commercial management
consulting firm of Towers Perrin. Utilizing a report by Towers Perrin,
the Independent Fiduciary determined that the addition of the 500 Index
Fund as an available investment under the exemption would be in the
best interests of the Plans. Accordingly, the Bank requests that
Section IV(C) of the exemption be amended by adding the LongView 500
Index Fund to the definition of Banking Services.
Section IV(E) of PTE 97-35 identifies the 22 plans which are
covered by the exemption. The Bank states that since PTE 97-35 was
issued, a new employee benefit plan, the UNITE Staff Retirement Plan,
ILGWU Unit (the New Plan), has expressed an interest in using the
Bank's services under the exemption. The New Plan covers UNITE
employees formerly employed by ILGWU prior to the merger which created
UNITE. The Bank represents that the New Plan has no prior investment or
other servicing relationship with the Bank but has expressed an
interest in investing in the LongView Fund, which is among the Banking
Services covered by the exemption. The Independent Fiduciary represents
that it has reviewed the proposed provision of Banking Services to the
New Plan by the Bank and the addition of the New Plan to those covered
by the exemption. The Independent Fiduciary states that it has
determined that inclusion of the New Plan under the exemption would be
appropriate. Accordingly, the Bank requests that Section IV(E) of the
exemption be amended to add the UNITE Staff Retirement Plan, ILGWU Unit
to the list of plans covered by the exemption.
The proposed exemption would affect participants and beneficiaries
of, and fiduciaries with respect to, plans affiliated with UNITE for
which the Bank provides Banking Services.
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Notice to Interested Persons
Notice of the proposed exemption will be mailed by first class mail
to each of the Plans, including the New Plan, within 30 days of the
publication of the notice of pendency in the Federal Register. The
notice will contain a copy of the notice of proposed exemption as
published in the Federal Register and a supplemental statement, as
required pursuant to 29 CFR 2570.43(b)(2). The supplemental statement
will inform interested persons of their right to comment on and/or to
request a hearing with respect to the pending exemption. Written
comments and hearing requests are due within 60 days of the publication
of the proposed exemption in the Federal Register.
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 Employee Retirement Income Security Act of
1974, as amended (the Act), and section 4975(c)(2) of the Internal
Revenue Code of 1986 (the Code) does not relieve a fiduciary or other
party in interest or disqualified person from certain other provisions
of the Act and 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
require, among other things, a fiduciary to discharge his or her 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 requirements of
section 401(a) of the Code that the plan operate for the exclusive
benefit of the employees of the employer maintaining the plan and their
beneficiaries;
(2) The proposed exemption, if granted, will not extend to
transactions prohibited under section 406(b)(3) of the Act and section
4975(c)(1)(F) of the Code;
(3) Before an exemption can be granted under section 408(a) of the
Act and section 4975(c)(2) of the Code, the Department must find that
the exemption is administratively feasible, in the interest of the plan
and of its participants and beneficiaries and protective of the rights
of participants and beneficiaries of the plan;
(4) This proposed exemption, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and the Code,
including statutory or administrative exemptions. 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
(5) This proposed exemption, if granted, is subject to the express
condition that the Summary of Facts and Representations set forth in
the notice of proposed exemption relating to PTE 97-35, as amended by
this notice, accurately describe, where relevant, the material terms of
the transactions to be consummated pursuant to this exemption.
Written Comments and Hearing Requests
All interested persons are invited to submit written comments or
requests for a hearing on the pending exemption to the address above,
within 30 days after the publication of this proposed exemption in the
Federal Register. All comments will be made a part of the record.
Comments received will be available for public inspection with the
referenced applications at the address set forth above.
Proposed Exemption
Based on the facts and representations set forth in the
application, the Department is considering granting the requested
exemption under the authority of section 408(a) of the Act and section
4975(c)(2) of the Code and in accordance with the procedures set forth
in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990).
Section I--Transactions
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, effective July 1, 1995, to--
(A) the provision of banking services (Banking Services, as defined
in section IV(C)) by the Amalgamated Bank of New York (the Bank) to
certain employee benefit plans (the Plans, as defined in section
IV(E)), which are maintained on behalf of members of the former
International Ladies Garment Workers Union (ILGWU), which merged on
July 1, 1995 with the Amalgamated Clothing and Textile Workers Union to
form the Union of Needletrades, Industrial and Textile Employees
(UNITE);
(B) the purchase by the Plans of certificates of deposit (CDs)
issued by the Bank; and
(C) the deposit of Plans' assets in money market or other deposit
accounts established by the Bank;
provided that the applicable conditions of Section II and Section III
are met.
Section II--Conditions
(A) The terms under which the Banking Services are provided by the
Bank to the Plans, and those under which the Plans purchase CDs from
the Bank or maintain deposit accounts with the Bank, are at least as
favorable to the Plans as those which the Plans could obtain in arm's-
length transactions with unrelated parties.
(B) The interests of each of the Plans with respect to the Bank's
provision of Banking Services to the Plans, the purchase of CDs from
the Bank by any of the Plans, and the deposit of Plan assets in deposit
accounts established by the Bank, are represented by an Independent
Fiduciary (as defined in section IV(D)).
(C) On a periodic basis, not less frequently than annually, an
Authorizing Plan Fiduciary (as defined below in section IV(A)) with
respect to each Plan authorizes the representation of the Plan's
interests by the Independent Fiduciary and determines that the Banking
Services and any CDs and depository accounts utilized by the Plan are
necessary and appropriate for the establishment or operation of the
Plan.
(D) With respect to the purchase by any of the Plans of
certificates of deposit (CDs) issued by the Bank or the deposit of Plan
assets in a money market account or other deposit account established
at the Bank: (1) Such transaction complies with the conditions of
section 408(b)(4) of the Act; (2) Any CD offered to the Plans by the
Bank is also offered by the Bank in the ordinary course of its business
with unrelated customers; and (3) Each CD purchased from the Bank by a
Plan pays the maximum rate of interest for CDs of the same size and
maturity being offered by the Bank to unrelated customers at the time
of the transaction.
(E) The compensation received by the Bank for the provision of
Banking Services to the Plan is not in excess of reasonable
compensation within the meaning of section 408(b)(2) of the Act.
(F) Following the merger of the ILGWU into UNITE, the Independent
Fiduciary made an initial written determination that (1) the Bank's
provision of Banking Services to the Plans, (2) the deposit of Plan
assets in depository accounts maintained by the Bank, and (3) the
purchase by the Plans of CDs from the Bank, are in the best interests
and protective of the participants and beneficiaries of each of the
Plans.
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(G) On a periodic basis, not less frequently than quarterly, the
Bank provides the Independent Fiduciary with a written report (the
Periodic Report) which includes the following items with respect to the
period since the previous Periodic Report: (1) a listing of Banking
Services provided to, all outstanding CDs purchased by, and deposit
accounts maintained for each Plan; (2) a listing of all fees paid by
the Plans to the Bank for the Banking Services, (3) the performance of
the Bank with respect to all investment management services, (4) a
description of any changes in the Banking Services, (5) an explanation
of any problems experienced by the Bank in providing the Banking
Services, (6) a description of any material adverse events affecting
the Bank, and (7) any additional information requested by the
Independent Fiduciary in the discharge of its obligations under this
exemption.
(H) On a periodic basis, not less frequently than annually, the
Independent Fiduciary reviews the Banking Services provided to each
Plan by the Bank, the compensation received by the Bank for such
services, any purchases by the Plan of CDs from the Bank, and any
deposits of assets in deposit accounts maintained by the Bank, and
makes the following written determinations:
(1) The continuation of the Bank's provision of Banking Services to
the Plan for compensation is in the best interests and protective of
the participants and beneficiaries of the Plan;
(2) The Bank is a solvent financial institution and has the
capability to perform the services;
(3) The fees charged by the Bank are reasonable and appropriate;
(4) The services, the depository accounts, and the CDs are offered
to the Plan on the same terms under which the Bank offers the services
to unrelated Bank customers in the ordinary course of business; and
(5) Where the Banking Services include an investment management
service, that the rate of return is not less favorable to the Plan than
the rates on comparable investments involving unrelated parties.
(I) Copies of the Bank's periodic reports to the Independent
Fiduciary are furnished to the Authorizing Plan Fiduciaries on a
periodic basis, not less frequently than annually and not later than 90
days after the period to which they apply.
(J) The Independent Fiduciary is authorized to continue, amend, or
terminate, without any penalty to any Plan (other than the payment of
penalties required under federal or state banking regulations upon
premature redemption of a CD), any arrangement involving: (1) the
provision of Banking Services by the Bank to any of the Plans, (2) the
deposit of Plan assets in a deposit account maintained by the Bank, or
(3) any purchases by a Plan of CDs from the Bank;
(K) The Authorizing Plan Fiduciary may terminate, without penalty
to the Plan (other than the payment of penalties required under federal
or state banking regulations upon premature redemption of a CD), the
Plan's participation in any arrangement involving: (1) the
representation of the Plan's interests by the Independent Fiduciary,
(2) the provision of Banking Services by the Bank to the Plan, (3) the
deposit of Plan assets in a deposit account maintained by the Bank, or
(4) the purchase by the Plan of CDs from the Bank.
Section III--Recordkeeping
(A) For a period of six years, the Bank and the Independent
Fiduciary will maintain or cause to be maintained all written reports
and other memoranda evidencing analyses and determinations made in
satisfaction of conditions of this exemption, except that: (a) a
prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of the Independent Fiduciary and
the Bank, the records are lost or destroyed before the end of the six-
year period; and (b) no party in interest other than the Bank and the
Independent Fiduciary 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 section (2) of this paragraph (B) and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to in paragraph (A) of this
Section III shall be unconditionally available at their customary
location during normal business hours for inspection by: (a) any duly
authorized employee or representative of the U.S. Department of Labor
or the Internal Revenue Service, (b) any employer participating in the
Plans or any duly authorized employee or representative of such
employer, and (c) any participant or beneficiary of the Plans or any
duly authorized representative of such participant or beneficiary.
(2) None of the persons described in subsections (b) and (c) of
section (1) above shall be authorized to examine trade secrets of the
Independent Fiduciary or the Bank, or any of their affiliates, or any
commercial, financial, or other information that is privileged or
confidential.
Section IV--Definitions
(A) Authorizing Plan Fiduciary means, with respect to each Plan,
the board of trustees of the Plan or other appropriate plan fiduciary
with discretionary authority to make decisions with respect to the
investment of Plan assets;
(B) Bank means the Amalgamated Bank of New York;
(C) Banking Services means (1) custodial, safekeeping, checking
account, trustee services, and (2) investment management services
involving (a) fixed income securities (either directly or through a
collective investment fund maintained by the Bank), (b) the LongView
Fund maintained by the Bank, (c) the LongView 500 Index Fund, and (d)
effective January 3, 1998, the LEI Fund maintained by the Bank.
(D) Independent Fiduciary means a person, within the meaning of
section 3(9) of the Act, who (1) is not an affiliate of the Union of
Needletrades, Industrial & Textile Employees (UNITE) and any successor
organization thereto by merger, consolidation or otherwise, (2) is not
an officer, director, employee or partner of UNITE, (3) is not an
entity in which UNITE has an ownership interest, (4) has no
relationship with the Bank other than as Independent Fiduciary under
this exemption, and (5) has acknowledged in writing that it is acting
as a fiduciary under the Act. No person may serve as an Independent
Fiduciary for the Plans for any fiscal year in which the gross income
(other than fixed, non-discretionary retirement income) received by
such person (or any partnership or corporation of which such person is
an officer, director, or ten percent or more partner or shareholder)
from UNITE and the Plans for that fiscal year exceed five (5) percent
of such person's annual gross income from all sources for the prior
fiscal year. An affiliate of a person is any person directly or
indirectly, through one or more intermediaries, controlling, controlled
by, or under common control with the person. The term ``control'' means
the power to exercise a controlling influence over the management or
policies of a person other than an individual. Initially, the
Independent Fiduciary is U.S. Trust Company of California, N.A.
(E) Plans means any of the following employee benefit plans, and
their
[[Page 15231]]
successors by reason of merger, spin-off or otherwise:
International Ladies Garment Workers Union Nation Retirement Fund;
International Ladies Garment Workers Union Death Benefit Fund;
Health Fund of New York Coat, Suit, Dress, Rainwear & Allied Workers
Union, ILGWU;
Health & Vacation Fund, Amalgamated Ladies Garment Cutters Union, Local
10;
ILGWU Eastern States Health & Welfare Fund; ILGWU Office, Clerical &
Misc. Employee Retirement Fund;
ILGWU Retirement Fund, Local 102; Union Health Center Staff Retirement
Fund;
Unity House 134 HREBIU Plan Fund;
Puerto Rican Health & Welfare Fund;
Health & Welfare Fund of Local 99, ILGWU;
Local 99 Exquisite Form Industries, Inc. Severance Fund;
Local 99 K-Mart Severance Fund;
Local 99 Kenwin Severance Fund;
Local 99 Lechters Severance Fund;
Local 99 Eleanor Shops Severance Fund;
Local 99 Monette Severance Fund;
Local 99 Moray, Inc. Severance Fund;
Local 99 Petri Stores, Inc. Severance Fund;
Local 99 Netco, Inc. Severance Fund;
Local 99 Misty Valley, Inc. Severance Fund;
Local 99 Norstan Apparel Shops, Inc. Severance Fund; and
UNITE Staff Retirement Plan, ILGWU Unit.
(F) UNITE means the Union of Needletrades, Industrial & Textile
Employees and any successor organization thereto by merger,
consolidation or otherwise.
EFFECTIVE DATE: This exemption will be effective as of July 1, 1995,
except for: (1) Plan investments in the LEI Fund, for which the
effective date will be January 3, 1998; (2) Plan investments in the
LongView 500 Index Fund, for which the effective date will be the date
on which the final amended exemption, if granted, is published in the
Federal Register; and (3) transactions involving the UNITE Staff
Retirement Plan, for which the effective date will be the date on which
the final amended exemption, if granted, is published in the Federal
Register.
The availability of this proposed exemption is subject to the
express condition that the material facts and representations contained
in the application for exemption are true and complete and accurately
describe all material terms of the transactions. In the case of
continuing transactions, if any of the material facts or
representations described in the applications change, the exemption
will cease to apply as of the date of such change. In the event of any
such change, an application for a new exemption must be made to the
Department.
For a more complete statement of the facts and representations
supporting the Department's decision to grant PTE 97-35, refer to the
proposed exemption and grant notice which are cited above.
Signed at Washington, D.C., this 25th day of March, 1998.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 98-8198 Filed 3-27-98; 8:45 am]
BILLING CODE 4510-29-P