[Federal Register Volume 64, Number 216 (Tuesday, November 9, 1999)]
[Notices]
[Pages 61132-61136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29267]


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10676, et al.]


Proposed Exemptions; Anvil Construction Company, Inc. Employee's 
Money Purchase Pension Plan (the Money Purchase Plan), Anvil 
Construction Co., Employee Profit Sharing Plan (the Profit Sharing 
Plan), William Andreassi, Mark Andreassi, Michael Andreassi, and Wayne 
Campbell

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of

[[Page 61133]]

proposed exemptions 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).

Written Comments and Hearing Requests

    Unless otherwise stated in the Notice of Proposed Exemption, all 
interested persons are invited to submit written comments, and with 
respect to exemptions involving the fiduciary prohibitions of section 
406(b) of the Act, requests for hearing within 45 days from the date of 
publication of this Federal Register Notice. Comments and requests for 
a hearing should state: (1) the name, address, and telephone number of 
the person making the comment or request, and (2) the nature of the 
person's interest in the exemption and the manner in which the person 
would be adversely affected by the exemption. A request for a hearing 
must also state the issues to be addressed and include a general 
description of the evidence to be presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210. 
Attention: Application No. stated in each Notice of Proposed Exemption. 
The applications for exemption and the comments received will be 
available for public inspection in the Public Documents Room of Pension 
and Welfare Benefits Administration, U.S. Department of Labor, Room N-
5507, 200 Constitution Avenue, NW, Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
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 requested 
to the Secretary of Labor. Therefore, these notices of proposed 
exemption are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Anvil Construction Company, Inc. Employee's Money Purchase Pension 
Plan (the Money Purchase Plan), Anvil Construction Co., Employee 
Profit Sharing Plan (the Profit Sharing Plan), William Andreassi, 
Mark Andreassi, Michael Andreassi, and Wayne Campbell Located in 
Philadelphia, Pennsylvania; Proposed Exemption

[Exemption Application No. D-10676 and D-10677]

    The Department is considering granting an 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 32826, 32847, August 10, 1990). If the exemption 
is granted, 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 proposed sale (the Sale) of a certain 
parcel of unimproved real property (the Property) from certain accounts 
(the Accounts) in the Money Purchase Plan and the Profit Sharing Plan 
(collectively, the Plans) to the Anvil Construction Company, Inc. 
(Anvil), a party in interest and disqualified person with respect to 
the Accounts, provided that the following conditions are met:
    (a) The terms and conditions of the Sale will be at least as 
favorable to the Accounts as those obtainable in an arm's length 
transaction with an unrelated party;
    (b) Anvil will purchase the Property from the Accounts for 
$433,531, an amount comprised of the Property's current $397,000 fair 
market value (the Fair Market Value) as determined by a qualified, 
independent appraiser plus $36,531 which represents the excess of the 
Property's holding costs over appreciation from time of acquisition;
    (c) The Sale will be a one-time transaction for cash; and
    (d) The Accounts will pay no fees or commissions in connection with 
the Sale.

Summary of Facts and Representations

    1. Anvil is a company engaged in commercial and industrial 
construction and is located in Philadelphia, Pennsylvania. Anvil is the 
sponsor of the Plans. The Plans are comprised of the Money Purchase 
Plan and the Profit Sharing Plan, both of which are individually-
directed, defined contribution plans. The Money Purchase Plan has 5 
participants and approximately $455,846 in total assets as of March 8, 
1999. The Profit Sharing Plan has 5 participants and approximately 
$470,374 in total assets as of March 8, 1999.
    2. In 1988, the Plans' participants were given the option of 
investing their respective Money Purchase Plan Account assets and 
Profit Sharing Account assets in the purchase of the Property from USR 
Realty Development. USR Realty Development is a division of the U.S. 
Diversified Group of the US Steel Corporation, an unrelated party. The 
Property is a rectangularly-shaped lot of unimproved real property 
comprising approximately 7.4 acres located in Bucks County, 
Pennsylvania. The Property is situated in the USX Industrial Park and 
is zoned for heavy industrial use.
    Four of the Plans' participants; William Andreassi, Mark Andreassi, 
Michael Andreassi, and Wayne Campbell (collectively, the Participants); 
elected to have their respective Money Purchase Plan Account and Profit 
Sharing Account (collectively, the Accounts) participate in the 
purchase of the Property.
    3. On July 8, 1988, the Participants directed their respective 
Money Purchase Plan Account and Profit Sharing Plan Account to purchase 
the Property (the Purchase). The sale of the Property to the Accounts 
was for $331,515. The Participants represent that the Purchase was for 
investment purposes.
    The applicants represent that each Participant's respective Money 
Purchase Plan Account contributed an equal share (the Money Purchase 
Plan Share) to the Property's purchase price in relation to the other 
Participants' Money Purchase Plan Accounts. The Applicants additionally 
represent that each Participant's respective Profit Sharing Plan 
Account contributed an equal share (the Profit Sharing Plan Share) to 
the Property's purchase price in relation to the other Participants' 
Profit Sharing Plan Accounts. As a result, the applicants represent 
that,

[[Page 61134]]

after the Purchase, each Participant's respective Share equaled 25%, or 
approximately $82,880, of the Property's $331,515 purchase price.
    The applicants represent that with respect to the purchase each 
Participant allocated a portion of the Participant's respective Share 
between the Participant's respective Money Purchase Plan Account and 
the Participant's respective Profit Sharing Plan Account. In this 
regard, the applicants represent that each Participant's Profit Sharing 
Account allocated approximately $11,035 of the Share's $82,880 value 
and each Participant's Money Purchase Plan Account allocated 
approximately $71,845 of the Share's $82,880 value.
    4. The Accounts incurred certain holding costs (the Holding Costs) 
with the Accounts' ownership of the Property. These Holding Costs 
include: $93,313 in real estate taxes; $1,600 in general liability 
insurance; $5,987 in acquisition fees; and $1,116 in real estate 
marketing charges. The applicants represent that the Property's total 
Holding Costs of $102,016 were paid for with the assets of each 
Participant's Accounts. In this regard, the applicants represent that 
each Participant paid an equal amount of the Holding Costs. As a 
result, the Accounts of each Participant have incurred an expense 
totaling approximately $25,504 as a result of their ownership interest 
in the Property.
    5. The Property was appraised on December 9, 1998 by William Bott 
and Anna Hageman (collectively, the Appraisers) for the Equity 
Appraisal Company, Inc., an appraisal company independent of Anvil. The 
Appraisers, both Pennsylvania certified real estate appraisers, used 
the sales comparison approach in their valuation of the Property and 
compared the Property to 5 parcels of land located near the Property 
and the subject of recent sales. Based on these comparisons, the 
Appraisers determined the Fair Market Value of the Property, as of 
December 9, 1998, to be $397,000.
    6. The applicants represent that the Property's Holding Costs 
exceed the Property's net appreciation (the Net Appreciation). In this 
regard, the applicants represent that the Property's acquisition price 
of $331,515 and the Property's Fair Market Value of $397,000 results in 
a Net Appreciation totaling $65,485. The applicants represent that this 
Net Appreciation of $65,485 is less than the Property's Holding Costs 
of $102,016. As a result, the applicants represent that any sale of the 
Property for a price equal to the Appraised Value will result in a net 
loss to the Accounts totaling $36,531 (the Excess Costs), or a net loss 
of $9,132.75 to each Account.1
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    \1\ The Department notes that the decision to invest in the 
Property is governed by the fiduciary responsibility requirements of 
Part 4, Subtitle B, Title I of the Act. In this regard, the 
Department is not proposing relief for any violations of Part 4 
which may have arisen as a result of the acquisition and holding of 
the Property.
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    7. The applicants propose the Sale of the Property from the 
Accounts to Anvil for a price equal to the sum of the Property's Fair 
Market Value of $397,000, as determined by a qualified, independent 
appraiser, and the Property's Excess Costs of $36,531. As a result, 
Anvil proposes to purchase the Property from the Accounts for $433,531. 
The Applicants represent that if the proposed transaction is granted, 
the Accounts of each Participant will receive 25% or $108,382.75 of the 
Property's $433,531 total sale price which will include $9,123.75 for 
the Property's Excess Costs. The Applicants represent that the 
$108,382.75 will be allocated to each Participant's respective Money 
Purchase Plan Account and Profit Sharing Plan Account according to the 
same percentage of total assets which the Property currently comprises 
in each Account. As a result, the applicants represent that if the 
proposed transaction is granted, each Participant's respective Money 
Purchase Plan Account will receive approximately $93,953.09 and each 
Participant's respective Profit Sharing Account will receive 
approximately $14,429.66.
    The applicants represent that the Sale is administratively feasible 
in that it will be a one-time transaction for cash and that the 
Accounts will pay no fees or commissions. The applicants additionally 
represent that the proposed Sale is in the best interests of the 
Accounts' Participants and beneficiaries since the Property has not 
appreciated at a rate which is satisfactory to the Participants. In 
this regard, the applicants represent that the Sale, if granted, would 
provide the Accounts with cash which the Accounts could invest in 
assets providing a greater rate of return than that of the Property. 
The applicants represent further that the abundance of available 
undeveloped real property similar to the Property has reduced the 
ability of the Accounts' to sell the Property to unrelated third 
parties.
    The applicants additionally represent that the proposed transaction 
is protective of the Accounts' participants and beneficiaries since the 
Sale, if granted, will provide the Accounts with a cash amount equal to 
the sum of the Property's acquisition price and the Property's holding 
costs. As a result, the applicants represent that the proposed Sale 
will enable the Accounts to recover all of the Holding Costs associated 
with the Accounts' ownership of the Property. The applicants also 
represent that the Sale, if granted, will provide cash to the Accounts 
which the Accounts could invest in assets providing a greater rate of 
return than that of the Property.
    8. In summary, the applicant represent that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because:
    (a) The terms and conditions of the Sale will be at least as 
favorable to the Accounts as those obtainable in an arm's length 
transaction with an unrelated party;
    (b) Anvil will purchase the Property from the Accounts for 
$433,531, an amount comprised of the Property's current $397,000 fair 
market value (the Fair Market Value) as determined by a qualified, 
independent appraiser and the Property's excess holding costs of 
$36,531;
    (c) The Sale will be a one-time transaction for cash; and
    (d) The Accounts will pay no fees or commissions in connection with 
the Sale.

Notice to Interested Persons

    Notice of the proposed exemption shall be given to all interested 
persons in the manner agreed upon by the applicant and the Department 
within 10 days of the date of publication in the Federal Register. 
Comments and requests for a hearing are due thirty (30) days after 
publication of the Notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Christopher J. Motta of the 
Department, telephone (202) 219-8883 (this is not a toll free number).

Cassano's Inc. 401(k) Plan and Trust (the Plan) Located in Dayton, 
Ohio, Proposed Exemption

[Exemption Application Number D-10734]

    The Department is considering granting an 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). If the proposed 
exemption is granted, 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 sale (the Sale) of an improved 
parcel of real property (the

[[Page 61135]]

Property) by the Plan to Cassano's, Inc. (Cassano's), a party in 
interest and disqualified person with respect to the Plan, provided 
that the following conditions are met:
    (a) The Sale is a one-time transaction for cash;
    (b) The terms and conditions of the Sale are at least as favorable 
to the Plan as those obtainable in an arm's length transaction with an 
unrelated party;
    (c) The Plan receives the greater of $155,500 or the fair market 
value of the Property as of the date of the Sale;
    (d) The Plan is not required to pay any commissions, costs or other 
expenses in connection with the Sale; and
    (e) Cassano's files Form 5330 with the Internal Revenue Service 
(the Service) and pays certain excise taxes with respect to the past 
prohibited leasing of the Property within 90 days of the date that a 
notice granting this proposed exemption is published in the Federal 
Register.

Summary of Facts and Representations

    1. The Plan is a profit sharing plan located in Dayton, Ohio. The 
Plan had approximately 75 participants and $450,621.83 in assets as of 
September 30, 1998. The Plan is sponsored by Cassano's, a pizza company 
having its principal place of business located in Dayton, Ohio.
    2. The assets of the Plan include the Property which was acquired 
by the Plan for $155,500 in 1973. The Property is located at 2418 East 
Third Street, Dayton, Ohio and is comprised of four contiguous lots 
totaling 22,438 square feet and improved by two buildings. One of these 
buildings is a one-story restaurant having 2,640 square feet in 
rentable space and occupying two of the lots. The other building is a 
storage facility occupying the rear portion of the remaining two lots. 
The balance of the Property is comprised of a paved parking lot and a 
small grass-covered plot fronting the restaurant. The Property 
currently comprises approximately 29.3% of the assets of the Plan.
    3. The applicant represents that, on June 15, 1973, Cassano's 
leased the Property from the Plan (the First Lease). The applicant 
represents that the First Lease was entered into pursuant to section 
414(c)(2) of the Act.2 On August 10, 1984, Cassano's 
received an individual exemption, PTE 84-114, 49 FR 32132 (Aug. 10, 
1984) (PTE 84-114) to enter into a new leasing arrangement with the 
Plan. PTE 84-114 authorized: (1) A new leasing agreement between 
Cassano's and the Plan (the Second Lease) provided that certain 
conditions were met; and (2) an option held by Cassano's for the sale 
of the Property to Cassano's provided that certain conditions were met.
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    \2\ The Department is expressing no opinion herein as to the 
application of section 414(c)(2) of the Act to this transaction.
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    The applicant represents that, between December, 1994 and March, 
1995, Cassano's missed four rent payments due under the Second 
Lease.3 As a result, the exemptive relief provided to 
Cassano's through PTE 84-114 was no longer available. Despite this, 
Cassano's continued to lease the Property from the Plan and thus 
engaged in a transaction which violated section 406 of the Act. The 
applicant estimates that the continuation of the Second Lease without 
the exemptive relief provided for by PTE 84-114 has resulted in 
approximately $1,662 in excise taxes (the Excise Taxes) due under 
section 4975 of the Code. In this regard, the applicant represents that 
Cassano's will correct its violation of PTE 84-114 by paying the Excise 
Taxes, after filing Form 5330 with the Service, within 90 days of the 
date that a notice granting this proposed exemption is published in the 
Federal Register.
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    \3\ The applicant represents that Cassano's filed for Chapter 11 
bankruptcy protection in 1995. The applicant represents that the 
rent delinquency (ultimately totaling $7,669.36), has been repaid by 
Cassano's to the Plan pursuant to Cassano's U.S. Bankruptcy Court-
approved plan of reorganization.
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    4. The applicant now proposes to purchase the Property from the 
Plan. The Property was appraised by Chester A. Brewer (Mr. Brewer) and 
Timothy N. Dunham (Mr. Dunham; collectively, the Appraisers) of the 
Dunham Company, a real estate appraisal company located in Dayton, 
Ohio. The Appraisers represent that they are certified in the State of 
Ohio and are independent of the Plan and Cassano's. The Appraisers used 
the sales comparison approach and compared the Property to three 
properties similar to the Property and the subject of recent sales. The 
Appraisers represent that, based on these comparisons, the fair market 
value of the Property was $132,000 as of July 29, 1999.
    5. The applicant represents that the Plan has incurred certain 
costs and has received certain income due to the Plan's ownership of 
the Property. In this regard, the applicant represents that, since its 
acquisition by the Plan, the Property has been assessed a total of 
approximately $100,000 in real estate taxes. Additionally, the 
applicants represent that, since its acquisition by the Plan, the 
Property has generated a total of approximately $559,250 in rental 
income for the Plan.
    6. The applicant proposes the sale of the Property to Cassano's 
(i.e., the Sale) for the greater of $155,500 or the fair market value 
of the Property as of the date of the Sale.4 The Sale would 
allow the Plan to recover the original acquisition cost to the Plan of 
the Property. The applicant represents that the proposed transaction is 
feasible since it involves a one-time transaction for cash. 
Furthermore, the applicant represents that the proposed transaction is 
protective of the rights of participants and beneficiaries since the 
Sale would enable the trustees of the Plan to diversify the Plan's 
assets. Finally, the applicant represents that the proposed transaction 
is in the best interests of the Plan and its participants and 
beneficiaries since the Sale will ensure that the Plan receives for the 
Property a price not less than the price the Plan paid to acquire the 
Property. As a result, the applicant represents that the terms of the 
proposed sale guarantee that the Plan will recover the Property's full 
acquisition price.
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    \4\ The applicant represents that any payment by Cassano's to 
the Plan which is in excess of the Property's fair market value will 
not exceed the limitations set forth in section 415 of the Internal 
Revenue Code.
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    7. In summary, the applicant represents that the proposed 
transaction satisfies the statutory criteria for an exemption under 
section 408(a) of the Act and section 4975(c)(2) of the Code because:
    (a) The Sale is a one-time transaction for cash;
    (b) The terms and conditions of the Sale are at least as favorable 
to the Plan as those obtainable in an arm's length transaction with an 
unrelated party;
    (c) The Plan receives the greater of $155,500 or the fair market 
value of the Property as of the date of the Sale;
    (d) The Plan is not required to pay any commissions, costs or other 
expenses in connection with the Sale; and
    (e) Cassano's files Form 5330 with the Service and pays certain 
excise taxes with respect to the past prohibited leasing of the 
Property within 90 days of the date that a notice granting this 
proposed exemption is published in the Federal Register.

Notice to Interested Persons

    Notice of the proposed exemption shall be given to all interested 
persons in the manner agreed upon by the applicant and the Department 
within 10 days of the date of publication in the Federal Register. 
Comments and requests for a hearing are due thirty (30)

[[Page 61136]]

days after publication of the Notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Christopher Motta, 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 of disqualified 
person from certain other provisions of the Act and/or 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 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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
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
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete and accurately describe all 
material terms of the transaction which is the subject of the 
exemption. In the case of continuing exemption transactions, if any of 
the material facts or representations described in the application 
change after the exemption is granted, the exemption will cease to 
apply as of the date of such change. In the event of any such change, 
application for a new exemption may be made to the Department.

    Signed at Washington, DC, this 4th day of November, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 99-29267 Filed 11-8-99; 8:45 am]
BILLING CODE 4510-29-P