[Federal Register Volume 63, Number 77 (Wednesday, April 22, 1998)]
[Notices]
[Pages 19955-19960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10693]



[[Page 19955]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-17; Exemption Application No. D-
10412, et al.]


Grant of Individual Exemptions; Metropolitan Life Insurance 
Company

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.

Metropolitan Life Insurance Company (MetLife) Located in New York, 
NY

[Prohibited Transaction Exemption 98-17; Exemption Application No. D-
10412]

Exemption

Section I. Covered 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 April 1, 1997, to (1) the purchase or 
retention by an employee benefit plan (the Plan); and (2) the sale or 
continuation by MetLife or an affiliate (collectively, MetLife) of a 
synthetic guaranteed investment contract (the MetLife Trust GIC) 
entered into between the Plan and MetLife under which MetLife 
guarantees (the Guarantee) certain amounts (the Guaranteed Value).
    This exemption is conditioned upon the following requirements as 
set forth below in Section II.

Section II. General Conditions

    (a) The decision to enter into a MetLife Trust GIC is made on 
behalf of a participating Plan in writing by a fiduciary of such Plan 
which is independent of MetLife.
    (b) Only Plans with total assets having an aggregate market value 
of at least $25 million are permitted to purchase MetLife Trust GICs; 
provided however that--
    (1) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization (the Related Plans), whose assets are commingled for 
investment purposes in a single master trust or any other entity the 
assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the Plan 
Asset Regulation), which entity has purchased a MetLife Trust GIC, the 
foregoing $25 million requirement is deemed satisfied if such trust or 
other entity has aggregate assets which are in excess of $25 million; 
provided that, if the fiduciary responsible for making the investment 
decision on behalf of such master trust or other entity is not the 
employer or an affiliate of the employer, such fiduciary has total 
assets under its management and control, exclusive of the $25 million 
threshold amount attributable to plan investment in the commingled 
entity, which are in excess of $50 million, or
    (2) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization (the Unrelated Plans), whose assets are commingled for 
investment purposes in a group trust or any other form of entity the 
assets of which are ``plan assets'' under the Plan Asset Regulation, 
which entity has purchased a MetLife Trust GIC, the foregoing $25 
million requirement is deemed satisfied if such trust or other entity 
has aggregate assets which are in excess of $25 million; provided that 
the fiduciary responsible for making the investment decision on behalf 
of such group trust or other entity--
    (i) Is neither the sponsoring employer, a member of the controlled 
group of corporations, the employee organization, nor an affiliate,
    (ii) Has full investment responsibility with respect to Plan assets 
invested therein, and
    (iii) Has total assets under its management and control, exclusive 
of the $25 million threshold amount attributable to Plan investment in 
the commingled entity, which are in excess of $50 million.
    (c) Prior to the execution of the MetLife Trust GIC, the Plan 
fiduciary receives a full and detailed written disclosure of all 
material features concerning the MetLife Trust GIC, including--
    (1) A Letter of Agreement between MetLife and the Plan fiduciary 
which stipulates the relevant provisions of the GIC, the applicable 
fees and the rights and obligations of the parties;
    (2) Investment Guidelines defining the manner in which an 
investment manager will manage a MetLife Trust GIC;
    (3) A copy of the Investment Management Agreement between MetLife 
and the Plan fiduciary;
    (4) Information explaining in a manner calculated to be understood 
by a Plan fiduciary that, if a MetLife affiliated manager underperforms 
or if adverse market conditions occur, the interest rate that is 
credited (the Credited Rate) to a MetLife Trust GIC account (the 
Account) may be as low as 0 percent;
    (5) The pertinent features of a MetLife conventional GIC (the 
MetLife Conventional GIC) that a Plan fiduciary may obtain upon the 
discontinuance of a MetLife Trust GIC, including an explanation that, 
although a MetLife Conventional GIC will offer a guarantee of 
principal, it may have a credited rate

[[Page 19956]]

as low as 0 percent for the duration of the contract; and
    (6) Copies of the proposed exemption and grant notice with respect 
to the exemptive relief provided herein.
    (d) Upon the selection by a Plan fiduciary of a MetLife Trust GIC, 
a participant in a Plan that provides for participant investment 
selection (the Section 404(c) Plan) is given a summary of the pertinent 
features of the documents listed above in paragraphs (c)(1), (c)(2) and 
(c)(5) of this Section II, which are deemed appropriate for 
distribution to such participant, including a disclosure that the 
MetLife Trust GIC may have a Credited Rate as low as 0 percent.
    (e) Subsequent to a Plan's investment in a MetLife Trust GIC, the 
Plan fiduciary and, if applicable, the Plan participant, upon such 
participant's request, receive the following ongoing disclosures 
regarding such investment:
    (1) A monthly report consisting of a Guaranteed Value Statement, 
which specifies the affected Plan's MetLife Trust GIC balance for the 
prior month, contributions, withdrawals, transfers, interest earned, 
the current month's ending balance for the MetLife Trust GIC, the 
current interest rate and a summary of transactions;
    (2) A quarterly report consisting of a Market Value Statement, 
which specifies the prior quarter's ending market value for a Plan's 
MetLife Trust GIC, contributions, withdrawals, the fees paid to 
MetLife, investment income, realized capital gains and/or losses from 
sales, changes in unrealized appreciation of assets, the current 
quarter's ending market value and rate of return, and a summary of 
transactions; and
    (3) An annual portfolio listing or letter describing key events, 
depending upon its arrangements with a Plan fiduciary.
    (f) As to each Plan, the combined total of all fees and charges 
imposed under a MetLife Trust GIC is not in excess of ``reasonable 
compensation'' within the meaning of section 408(b)(2) of the Act.
    (g) Each MetLife Trust GIC specifically provides an objective 
method for determining the fair market value of the securities owned by 
the Plan pursuant to such GIC.
    (h) Each MetLife Trust GIC has a predefined maturity date or dates 
selected by the Plan fiduciary and agreed to by MetLife. However, in no 
event does a MetLife Trust GIC have a maturity date exceeding five 
years. A Plan fiduciary may extend the maturity date for an additional 
year upon an affirmative written decision made annually by such 
fiduciary. Once a Plan fiduciary does not affirmatively extend the 
maturity date, no future extensions will occur.
    (i) Prior to a Plan fiduciary's decision regarding the extension of 
a maturity date for a MetLife Trust GIC for one additional year, 
MetLife informs such Plan fiduciary of the new reset rate for the 
Credited Rate.
    (j) MetLife maintains books and records of each MetLife Trust GIC 
transaction for a period of six years. Such books and records are 
subject to annual audit by independent, certified public accountants.

EFFECTIVE DATE: If granted, this exemption is effective as of April 1, 
1996.
    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) published on October 20, 
1997 at 62 FR 54471.

Written comments

    The Department received one written comment with respect to the 
Notice and no requests for a public hearing. The comment, which was 
submitted by MetLife, suggested modifications to the operative language 
of the Notice and recommended certain changes to the Summary of Facts 
and Representations (the Summary) of the Notice. Presented below are 
the modifications requested by MetLife and the Department's 
accompanying responses. Also presented are amendments to the Notice 
made by the Department.

1. Operative Language Changes

a. Exemptive Language
    MetLife notes that under the caption ``Proposed Exemption,'' the 
exemptive language of the Notice does not provide exemptive relief for 
any payment by MetLife to a Plan pursuant to MetLife's Guarantee. 
Because a Plan would be required to receive payment under a MetLife 
Trust GIC arrangement if certain conditions are met, MetLife assumes 
the Department would consider such payment as part of the exempted 
arrangement.
    The Department agrees that the payment by MetLife to a Plan 
pursuant to the Guarantee is subsumed under the transactions exempted. 
Therefore, the Department does not believe any modification to the 
exemptive language is warranted.
b. Condition (b)
    Condition (b) of the Notice requires a Plan investing in a MetLife 
Trust GIC to have assets that are in excess of $25 million.1 
MetLife states that in some situations, a Plan fiduciary may act on 
behalf of a trust in which a number of Plans participate. Although the 
trust may have assets in excess of $25 million, MetLife indicates that 
the individual Plans may not have total assets which would satisfy the 
minimum threshold amount.
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    \1\ MetLife represents that in instances of a start-up 
situation, a Plan might not have assets totaling $25 million. 
Nevertheless, MetLife explains that it would still allow the Plan to 
invest in a MetLife Trust GIC as long as the Plan reached the $25 
million threshold within the year.
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    Therefore, MetLife requests that the Department clarify that the 
scope of the Notice be expanded to include a fiduciary (e.g., an 
independent investment manager) acting on behalf of a trust with assets 
in excess of $25 million regardless of the asset totals of the 
individual Plans participating in the trust. In MetLife's view, such 
trust fiduciary would have the same level of sophistication as a 
fiduciary of a Plan with assets in excess of $25 million. If this 
change is made, MetLife also requests that various references in the 
Notice to Plan sponsors should be construed to include fiduciaries of 
trusts and references to Plans should be construed to include trusts.
    In response to these comments, the Department acknowledges that the 
use of the term ``Plan'' in the Notice should be construed to include 
trusts and other commingled investment vehicles which have assets 
(either individually or aggregated within the investment vehicle) in 
excess of $25 million. Further, the term ``Plan fiduciaries'' and 
``Plan sponsors'' should be construed to include fiduciaries of such 
trusts or commingled investment vehicles.
    In addition, in recognition of the fact that individual Plans 
investing in a commingled entity may not be able to meet the $25 
million threshold amount on their own in order to acquire a MetLife 
Trust GIC, the Department has decided to permit the aggregation of Plan 
assets within the pooled vehicle in order to satisfy the threshold 
amount. However, to ensure the sophistication of the fiduciary who is 
making the decision on behalf of Plans to invest in a MetLife Trust 
GIC, the Department has imposed certain additional requirements for 
pooled arrangements involving the assets of either related Plans (i.e., 
the Related Plans) or unrelated Plans (i.e., the Unrelated Plans). 
These additional requirements are described as follows:
    (1) Related Plans. With respect to two or more plans, which are 
maintained by the same employer, controlled group of corporations or 
employee organization,

[[Page 19957]]

whose assets are invested in a master trust or any other form of plan 
asset look-through entity, which entity has purchased a MetLife Trust 
GIC from MetLife, the Department notes that the $25 million threshold 
may be satisfied by aggregating the assets of the investing Plans 
within the pooled vehicle. In this regard, the Department also notes 
that an employer may retain an independent investment manager to manage 
all or a portion of plan assets invested in a master trust. Under these 
circumstances, the fiduciary must have total assets under its 
management and control, exclusive of the $25 million threshold amount 
attributable to plan investment in the commingled entity, which are in 
excess of $50 million.
    (2) Unrelated Plans. For two or more plans which are not maintained 
by the same employer, controlled group of corporations or employee 
organization, whose assets are invested in a group trust or other plan 
asset look-through entity, which entity has purchased a MetLife Trust 
GIC, the $25 million threshold will apply to the aggregate assets of 
such entity so long as the fiduciary responsible for making the 
investment decision on behalf of the group trust or other plan asset 
look-through entity is not the sponsoring employer, a member of the 
controlled group of corporations, the employee organization, or an 
affiliate, and such fiduciary has full investment responsibility 
2 with respect to the plan assets invested therein. Also, 
the fiduciary must have total assets under its management and control, 
exclusive of the $25 million threshold amount attributable to plan 
investment in the commingled entity, which are in excess of $50 
million.
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    \2\ For purposes of this exemption, the term ``full investment 
responsibility'' means that the fiduciary responsible for making the 
investment decision has and exercises discretionary management 
authority over all of the assets of the group trust or other plan 
assets look-through entity.
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    Accordingly, Condition (b) of Section II has been revised to read 
as follows:

    ``(b) Only Plans with total assets having an aggregate market 
value of at least $25 million are permitted to purchase MetLife 
Trust GICs; provided however that--
    (1) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization (the Related Plans), whose assets are commingled for 
investment purposes in a single master trust or any other entity the 
assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the 
Plan Asset Regulation), which entity has purchased a MetLife Trust 
GIC, the foregoing $25 million requirement is deemed satisfied if 
such trust or other entity has aggregate assets which are in excess 
of $25 million; provided that, if the fiduciary responsible for 
making the investment decision on behalf of such master trust or 
other entity is not the employer or an affiliate of the employer, 
such fiduciary has total assets under its management and control, 
exclusive of the $25 million threshold amount attributable to plan 
investment in the commingled entity, which are in excess of $50 
million, or
    (2) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization (the Unrelated Plans), whose assets are commingled for 
investment purposes in a group trust or any other form of entity the 
assets of which are ``plan assets'' under the Plan Asset Regulation, 
which entity has purchased a MetLife Trust GIC, the foregoing $25 
million requirement is deemed satisfied if such trust or other 
entity has aggregate assets which are in excess of $25 million; 
provided that the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (i) Is neither the sponsoring employer, a member of the 
controlled group of corporations, the employee organization, nor an 
affiliate,
    (ii) Has full investment responsibility with respect to Plan assets 
invested therein, and
    (iii) Has total assets under its management and control, 
exclusive of the $25 million threshold amount attributable to Plan 
investment in the commingled entity, which are in excess of $50 
million.''
c. Conditions (d) and (e)
    MetLife believes the disclosure requirements in the Notice for 
participants in Section 404(c) Plans go beyond the scope of the 
disclosure requirements of section 404(c) of the Act and the 
Department's accompanying regulation (the Section 404(c) 
Regulation).3 MetLife explains that funding vehicles, such 
as the MetLife Trust GIC, are typically part of a Plan's larger 
``stable value'' or ``fixed income'' funding option. MetLife believes 
that to mandate disclosure for one funding vehicle within a Plan's 
stable value portfolio may create an administrative hardship for a Plan 
fiduciary as well as present a competitive barrier for MetLife.
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    \3\ 29 CFR 2550.404(c)-1.
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    As an alternative, MetLife suggests that the existing provisions of 
the Section 404(c) Regulation govern the disclosure provided or made 
available to a Section 404(c) Plan if a MetLife GIC Trust is included 
in the Plan's offerings. According to MetLife, under the Section 404(c) 
Regulation, participants must be provided with descriptions of each 
designated investment alternative but not with descriptions of separate 
investments forming a part of the investment alternative. The documents 
a participant may obtain upon request pursuant to section 2550.404c-
1(b)(2)(i)(B)(2)(ii) of the Section 404(c) Regulation include financial 
statements and reports and any other materials relating to investment 
alternatives available under the Plan to the extent provided to the 
Plan. MetLife further explains that the Section 404(c) Regulation 
imposes no additional obligation on the administrator to furnish or 
make available materials relating to the companies in which the equity 
fund invests. Therefore, MetLife wishes to have the Notice amended to 
state that the disclosure required for participants in a Section 404(c) 
Plan which offers a MetLife Trust GIC as an investment option, 
particularly where the MetLife Trust GIC is one of a number of 
contracts within a designated investment alternative, is that required 
by the Section 404(c) Regulation and other existing regulations.
    The Department notes that when an investment option, such as a 
MetLife Trust GIC, is offered by a fiduciary under a Section 404(c) 
Plan to participants as part of the Plan's stable value portfolio and a 
party in interest to an investing Plan is providing the investment, the 
acquisition of the contract by the plan fiduciary is beyond the scope 
of the Section 404(c) Regulation. In providing exemption relief for 
this type of transaction in a participant-directed plan, the Department 
typically requires, among other things, that the Plan fiduciary provide 
the participant with full and complete disclosures regarding the nature 
of the investment. These disclosures will ensure that the directing 
Plan participant has given informed consent to the investment and 
continues to be apprised about the ramifications of the investment.
    After considering MetLife's comment, the Department has decided 
that a Section 404(c) Plan participant should, at a minimum, receive 
from the appropriate fiduciary, summaries of the pertinent features of: 
the Letter of Agreement between MetLife and the Plan fiduciary, 
particularly the disclosure that the MetLife Trust GIC may have a 
Credited Rate as low as 0 percent; the Investment Guidelines and the 
MetLife Conventional GIC. However, the Department has decided to delete 
paragraphs (2) and (3) of Condition (d) of the proposal relating to 
disclosure of the operative language of the proposed and/or final 
exemptions. Therefore, Condition (d), which has been redesignated 
herein as Section II(d), has been revised to read as follows:


[[Page 19958]]


    (d) Upon the selection by a Plan fiduciary of a MetLife Trust 
GIC, a participant in a Plan that provides for participant 
investment selection (the Section 404(c) Plan) is given a summary of 
the pertinent features of the documents listed above in paragraphs 
(c)(1), (c)(2) and (c)(5) of this Section II, which are deemed 
appropriate for distribution to such participant, including a 
disclosure that the MetLife Trust GIC may have a Credited Rate as 
low as 0 percent.4

    \4\ Paragraphs (c)(1), (c)(2) and (c)(5) of Section II pertain 
to the Letter of Agreement, the Investment Guidelines and the 
pertinent features of the MetLife Conventional GIC.
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    Condition (e) of the Notice pertains to ongoing disclosures that 
will be provided to a Plan fiduciary and, if applicable, Plan 
participants in a Section 404(c) Plan subsequent to a Plan's investment 
in a MetLife Trust GIC. Such written disclosures include monthly, 
quarterly, or annual reports. These documents may also be made 
available to a Plan participant upon such participant's request.
    However, after careful consideration of MetLife's comment, the 
Department has decided not to modify Condition (e). The Department 
believes that the condition, as proposed, provides flexibility to the 
Plan fiduciary by not requiring that mandatory disclosures 
automatically be provided to each participant. Rather, the participant 
may obtain copies of such reports at his or her request.
d. Condition (h)
    Condition (h) of the Notice provides that each MetLife Trust GIC 
will have a predefined maturity date or dates selected by a Plan 
fiduciary and agreed to by MetLife. Upon further consideration of 
Condition (h), the Department believes it is appropriate to restrict 
the maximum number of years that a MetLife Trust GIC may remain in 
effect before the Plan can realize the Guaranteed Value. Therefore, 
MetLife has agreed to cap the maturity date for a MetLife Trust GIC at 
five years. This, together with the ability of a fiduciary to annually 
affirmatively extend the maturity date for an additional year, should 
ensure that the Plan will have greater investment flexibility and will 
enable the utilization of third-party benchmark indices having 4-6 year 
durations. (For a discussion of the revised procedure for extending or 
locking in the maturity date for a MetLife Trust GIC under Condition 
(h), see Part 2.c. below of this grant notice).
    Thus, based upon the foregoing, the Department has revised 
Condition (h) of the Notice as follows:

    (h) Each MetLife Trust GIC has a predefined maturity date or 
dates selected by the Plan fiduciary and agreed to by MetLife. 
However, in no event does a MetLife Trust GIC have a maturity date 
exceeding five years. A Plan fiduciary may extend the maturity date 
for an additional year upon an affirmative written decision made 
annually by such fiduciary. Once a Plan fiduciary does not 
affirmatively extend the maturity date, no future extensions will 
occur.
e. Condition (i)
    Condition (i) of the Notice states that MetLife will inform a Plan 
fiduciary of the new reset rate for the Credited Rate prior to the 
fiduciary's affirmation of the maturity date. To reflect the fact that 
MetLife will inform a Plan fiduciary of the new reset rate for the 
Credited Rate prior to a Plan fiduciary's decision to extend a maturity 
date for a MetLife Trust GIC for one year or to decline such extension, 
the Department has revised Condition (i).

    (i) Prior to a Plan fiduciary's decision regarding the extension 
of a maturity date for a MetLife Trust GIC for one additional year, 
MetLife informs such Plan fiduciary of the new reset rate for the 
Credited Rate.

2. Changes to the Summary

    With the exception of MetLife's suggested change to the Credited 
Rate formula, which is discussed below in Part 2.b., the Department has 
made the following substantive modifications to the Summary.
a. Representation 7
    MetLife states a possible interpretation of the language of 
Representation 7 would not allow for the designation of an investment 
manager other than MetLife or an affiliated sub-manager other than 
State Street Research and Management Company (State Street Research). 
Because MetLife wishes to be able to designate other investment 
managers and affiliated sub-managers by mutual agreement with the Plan 
sponsor, even though there is presently no affiliate to designate as a 
sub-manager, MetLife requests that the second sentence in 
Representation 7 be redrafted as follows:

    However, by mutual agreement with the Plan sponsor, MetLife may 
designate State Street Research or another affiliated investment 
manager as investment manager or sub-manager with respect to some or 
all of the assets in an Account.

In addition, in the third sentence of Representation 7, MetLife 
requests that the words ``investment manager or'' be inserted before 
the word ``sub-manager.''
b. Representation 12
    MetLife requests that certain technical changes be made to the 
description of the Credited Rate because it believes the references to 
the duration and yield-to-maturity in the text imply that the source 
for these two inputs is the Account rather than a third-party benchmark 
index. Therefore, MetLife requests that in part (a) of the second 
sentence of the first paragraph of Representation 12, the words ``of 
assets in the Account'' be deleted and the following paragraphs be 
inserted after part (c) of the representation:

    If a Plan fiduciary has determined to extend a maturity date (as 
described in Representation 13), the Yield-to-Maturity component 
will be the yield-to-maturity of an external index (as described in 
Representation 8) unless specifically requested by the Plan with 
MetLife's consent. MetLife represents that it will not calculate the 
yield-to-maturity of the index. Rather, such calculation will be 
made by the index provider. Once a Plan fiduciary has determined not 
to extend a maturity date, the Yield-to-Maturity component will be 
the yield of a Treasury security with a comparable duration relative 
to the assets in the Account.
    The Credited Rate will not be affected by the length of time 
that MetLife has managed a MetLife Trust GIC Account.

    In addition, MetLife requests that the last sentence of the second 
paragraph of Representation 12 be deleted and replaced with the 
following language:

    The amortization period or Duration will be no longer than the 
period specified in the MetLife Trust GIC. If a Plan fiduciary has 
determined to extend a maturity date (as described in Representation 
13), it typically will be the duration of the index (as described in 
Representation 8) unless specifically requested by the Plan with 
MetLife's consent. MetLife further represents that the duration of 
the index will be calculated by the index provider. Once a Plan has 
determined not to extend a maturity date, the Duration is the period 
from the effective date of the Credited Rate reset until the 
maturity date or the average maturity date.
c. Representation 13
    Representation 13 of the Summary describes the manner in which the 
maturity date mechanism for a MetLife Trust GIC will operate. Under the 
procedure set forth in Representation 13, a MetLife Trust GIC may 
continue indefinitely since there are no restrictions placed on the 
number of years the instrument may remain in effect. Also, during an 
annual notification period, MetLife is required to afford the Plan 
fiduciary an opportunity to ``affirm'' the maturity date in writing. If 
the Plan fiduciary does nothing, the MetLife Trust GIC will continue 
for another year and the notification procedure will be repeated each 
year. Assuming, however, the Plan fiduciary ``affirms'' the maturity 
date, the MetLife Trust GIC will mature

[[Page 19959]]

within the prescribed time frame selected by the Plan fiduciary from 
the anniversary date of such MetLife Trust GIC.
    In order to provide additional safeguards, the Department has 
decided to revise this procedure in its entirety. Specifically, the 
Department has proposed that the Plan fiduciary make an affirmative 
decision to extend the maturity date for a MetLife Trust GIC. 
Additionally, the Department has determined that a MetLife Trust GIC 
will never have a maturity date that is in excess of five years. A 
MetLife Trust GIC may be extended, however, on an annual basis, for 
only one year as long as the Plan fiduciary provides advance written 
notice to MetLife agreeing to the extension. If, however, the Plan 
fiduciary does not inform MetLife, in writing, prior to the anniversary 
date of the intention to extend the maturity date, the date will not be 
extended by one year and the MetLife Trust GIC will mature within the 
maximum five year time frame. As noted above, MetLife will repeat the 
notification procedure over successive annual periods if the Plan 
fiduciary determines that each such extension is appropriate. Should 
the Plan fiduciary decide not to extend the maturity date on an 
anniversary date, no further annual notifications will be required of 
MetLife.
    Besides the foregoing changes, the Department emphasizes the fact 
that the Guaranteed Value for a MetLife Trust GIC will not always 
reflect the amount of the initial contribution but may be adjusted for 
contributions and withdrawals.
    Therefore, Representation 13 has been revised to read as follows:

    13. Although each MetLife Trust GIC will have a defined maturity 
date or dates selected by the Plan fiduciary and agreed to by 
MetLife, in no event will a MetLife Trust GIC have a maturity date 
exceeding five years. However, such date may be extended if 
specifically requested, in writing, by the Plan fiduciary. Each such 
extension of the maturity date will be subject to a one year 
limitation as described below.
    One month before the anniversary date of the MetLife Trust GIC, 
MetLife will notify the Plan fiduciary, in writing, of the impending 
anniversary of such MetLife Trust GIC, as well as the new reset rate 
for the Credited Rate, and afford the fiduciary the opportunity to 
notify MetLife that it will extend the maturity date. If the Plan 
fiduciary does not inform MetLife, in writing, prior to the 
anniversary date of the intention to extend the maturity date, the 
date will not be extended by one year and the original maturity date 
will remain in effect. If, on the other hand, the Plan fiduciary 
informs MetLife, in writing, prior to the anniversary date of the 
intention to extend the maturity date, the date will be extended for 
one additional year only. A Plan fiduciary which elects to extend 
the maturity date in this manner will be given another opportunity 
to do so one month before the next anniversary date of the MetLife 
Trust GIC.
    The notification procedure will be repeated, and the opportunity 
to extend the maturity date for one more year will be given prior to 
each subsequent anniversary date, provided the fiduciary has elected 
to extend the maturity date before the immediately preceding 
anniversary date. Each extension elected by the fiduciary will be 
for only one year beyond the maturity date, including any extensions 
previously in effect. Thus, at no time will a MetLife Trust GIC have 
a maturity date that is more than five years from the anniversary 
date.
    Upon the maturity of a MetLife Trust GIC, MetLife represents 
that if the Market Value of the assets invested in the MetLife Trust 
GIC is less than the Guaranteed Value (as described in 
Representation 11), it will make up the difference.9

    \9\ MetLife notes that the procedures governing the maturity 
date of a MetLife Trust GIC will not affect the ability of a Plan 
fiduciary to discontinue such investment as described in 
Representation 19.''
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    d. Representation 20(b). MetLife represents that although the 
conversion of a MetLife Trust GIC to a MetLife Conventional GIC has 
been discussed with the Department primarily in the context of 
Guaranteed Value exceeding Market Value, it wishes to clarify that the 
MetLife Conventional GIC may still be selected regardless of the 
relative levels of Guaranteed and Market Values. In some cases, MetLife 
notes that a Plan fiduciary holding a MetLife Trust GIC with Market 
Value in excess of Guaranteed Value may consider the MetLife 
Conventional GIC the most prudent alternative available. If this 
fiduciary believes that interest rates are about to decline, such 
fiduciary may decide to lock in the gain by selecting this investment 
option. Because ``any market value loss or gain * * * will be amortized 
over the period ending with the final maturity date of the MetLife 
Conventional GIC,'' MetLife explains that the Plan fiduciary will have 
secured an above market rate of return guaranteed for an extended fixed 
period.
    Therefore, to cover the full range of situations in which a MetLife 
Conventional GIC will be offered, MetLife requests that the words ``at 
a time when there are losses and'' be deleted in the first sentence of 
Representation 20(b). Similarly, and for clarification, MetLife 
requests that the following sentence be substituted for the first 
sentence of Footnote 16:

    The Department notes that the decision by a Plan fiduciary to 
convert a MetLife Trust GIC into a MetLife Conventional GIC is 
subject to the provisions of section 404 of the Act, as are all Plan 
investment decisions.

    Finally, the Department notes that MetLife's comments with respect 
to the Notice also contained certain minor clarifications to 
information included in the Summary. Rather than restate these 
modifications in this grant notice, the Department wishes to 
acknowledge all of the technical clarifications made by MetLife to the 
information in question.
    For further information regarding MetLife's comment letter or other 
matters discussed herein, interested persons are encouraged to obtain 
copies of the two exemption application files (Exemption Application 
No. D-10241 and Exemption Application No. D-10412) the Department is 
maintaining in this case. The complete application files, as well as 
all supplemental submissions received by the Department, are 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.
    Accordingly, after consideration of the entire record, including 
MetLife's comment letter, the Department has determined to grant the 
exemption as modified herein.

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

Consolidated Associations of Railroad Employees Health Care Plan 
(the Plan) Located in Topeka, Kansas

[Prohibited Transaction Exemption 98-18; Exemption Application No. L-
10527]

Exemption

    The restrictions of section 406(a) of the Act shall not apply, 
effective June 10, 1997 to: (1) the current leasing (the Lease) of 
certain real property (the Property) by the Plan to Century Health 
Solutions, Inc. (Century), a party in interest with respect to the 
Plan; (2) the proposed new leasing of substantially the same Property 
by the Plan to Century (or its successor in name) effective April 1, 
1998 (the New Lease); and (3) the possible future sale of the Property 
by the Plan to Century (or its successor in name) pursuant to a right 
of first refusal under the terms of the Lease, provided the following 
conditions are satisfied: (a) the Property represents no more than 25% 
of the value of the Plan's assets; (b) the terms of the Lease are, and 
will remain, at least as favorable to the Plan as those obtainable in 
an arm's-length transaction with an unrelated party; (c) the fair 
market rental value is

[[Page 19960]]

determined on an annual basis by a qualified, independent appraiser; 
(d) the Plan's independent fiduciary has determined that the 
transaction is appropriate for the Plan and in the best interests of 
the Plan's participants and beneficiaries; (e) the Plan's independent 
fiduciary will continue to monitor the transaction and the conditions 
of the exemption and take whatever action is necessary to enforce the 
Plan's rights under the Lease; and (f) the Plan's independent fiduciary 
acts to ensure that any sale of the Property by the Plan to Century is 
properly effected under the terms of the Lease, pursuant to Century's 
right of first refusal in the event the Plan receives a bona fide offer 
from a third party to purchase the Property, and Century is not in 
default on any of its obligations under the Lease.
    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 February 26, 1998 at 63 
FR 9867.

Written Comments

    The only written comments received by the Department with respect 
to the proposed exemption were submitted by the applicant, which sought 
clarification with respect to two points. First, the applicant 
represented that the New Lease would likely be for fewer square feet of 
the Property than under the Lease, and sought clarification that the 
exemption as proposed would still apply to the New Lease. With respect 
to the New Lease, the Department notes that the exemption would apply 
to a lease of fewer square feet in the same Property provided all 
conditions of the exemption are satisfied. Secondly, the applicant 
requested clarification that the exemption would still apply if Century 
reorganized as a for-profit corporation, or changed its name, or both. 
The applicant represented that this change in name will never occur in 
connection with a sale of the underlying assets of Century to an 
unrelated third party. The applicant requested that the operative 
language of the exemption be modified to extend relief to Century or 
its successor in name. The operative language of the exemption has been 
amended accordingly to reflect the possible name change.
    The Department has considered the entire record, including the 
comment submitted by the applicant, and has determined to grant the 
exemption as proposed, with the one change as described above.

EFFECTIVE DATE: This exemption is effective June 10, 1997.

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

Thornton, Hegg, Reif, Johnston & Dolan Profit Sharing Plan and 
Trust (the Plan) Located in Alexandria, Minnesota

[Prohibited Transaction Exemption No. 98-19; Application No. D-10563]

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 sale (the Sale) by the Plan of certain real 
property (the Property) to Robert M. Hegg, (Mr. Hegg), a party in 
interest with respect to the Plan; provided the following conditions 
are satisfied:
    (A) The terms and conditions of the transaction are no less 
favorable to the Plan than those which the Plan would receive in an 
arm's-length transaction with an unrelated party;
    (B) The Sale is a one-time transaction for cash;
    (C) The Plan incurs no expenses from the Sale; and
    (D) The Plan receives as consideration from the Sale the greater of 
either the fair market value of the Property as determined by a 
qualified, independent appraiser on the date of the Sale, or an amount 
equal to the funds expended by the Plan in acquiring and maintaining 
the Property, less any income produced by the Property.
    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 February 26, 1998, at 63 
FR 9868.

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 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 17th day of April, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 98-10693 Filed 4-21-98; 8:45 am]
BILLING CODE 4510-29-P