[Federal Register Volume 66, Number 188 (Thursday, September 27, 2001)]
[Notices]
[Pages 49418-49424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24150]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2001-34; Exemption Application No. D-
10911, et al.]


Grant of Individual Exemptions; Derrerred Profit Sharing Plan of 
the Penske Corporation (the Plan) et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

-----------------------------------------------------------------------

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, DC. 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, 5 U.S.C. 
App. 1 (1996), 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.

Deferred Profit Sharing Plan of the Penske Corporation (the Plan) 
Located in Charlotte, North Carolina

[Prohibited Transaction Exemption No. 2001-34; Exemption Application 
No. D-10911]

Exemption

    The restrictions of sections 406(a) and 406(b)(1) and (b)(2) and 
section 407(a) of the Act and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) of the Code, shall not apply, (1) effective 
June 15, 2000, to the acquisition and holding by the Plan of interests 
(the Interests) in the Penske Company, LLC (the LLC), a wholly owned 
subsidiary of the Plan sponsor, the Penske Corporation (Penske), which 
were distributed (the Distribution) as dividends to the Plan as a 
shareholder of Penske common stock (Penske Stock); and (2) the proposed 
redemption, by the LLC, of the Interests held by the Plan for the 
greater of $3.37 per-unit or their fair market value at the date of the 
redemption, provided that the following conditions were or will be met:
    (a) The Interests were acquired by the Plan pursuant to Plan 
provisions for individually-directed investment of participant 
accounts;

[[Page 49419]]

    (b) The Plan's receipt and holding of the Interests occurred in 
connection with the Distribution;
    (c) The Plan's acquisition of the Interests as a dividend paid to 
all holders of Penske Stock resulted from an independent act of Penske 
as a corporate entity, such that all holders of the Penske Stock, 
including the Plan, were treated in the same manner;
    (d) Within 15 business days after the date the notice granting the 
final exemption is published in the Federal Register, the LLC will 
redeem the Interests held by the Plan for not less than $3.37 per unit;
    (e) The price received by the Plan for the Interests is not less 
than the fair market value of the Interests on the date that the 
redemption occurs; and
    (f) The Plan paid no fees or commissions in connection with the 
acquisition and holding of the Interests nor will it pay any fees or 
commissions in connection with the redemption of the Interests.

EFFECTIVE DATE: This exemption is effective as of June 15, 2000 with 
respect to the acquisition and holding by the Plan of the Interests. In 
addition, this exemption is effective as of the date the final 
exemption is granted with respect to the LLC's redemption of the 
Interests held by the Plan.
    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 July 10, 
2001 at 66 FR 36002.

Written Comments

    The only written comments received by the Department were submitted 
by the applicant, Penske. These comments sought several changes to the 
Notice, each of which is discussed below.
    In Representation 1 of the Summary of Facts and Representations 
(the Summary), the applicant requests that the first two sentences of 
the second paragraph be revised to read as follows for technical 
accuracy:

    As of December 31, 2000, the Plan had a total of 1,174 
participants. The Plan had assets, as of March 31, 2000, with an 
approximate aggregate fair market value of $35,477,000. Also as of 
March 31, 2000, 49.8% (or $17,674,629) of the fair market value of 
the total assets of the Plan was invested in Penske Stock.

    In addition, the applicant requests that the phrase ``qualifying 
employer security'' as used in footnote 2 of the Summary be revised to 
read ``employer security''. Further, in Representation 5 of the 
Summary, the applicant represents that the word ``Code'' in the next to 
the last line of the first paragraph should be revised to the word 
``Act''. The Department concurs in these changes submitted by the 
applicant.
    Finally, the applicant requests that Representation 11(a) of the 
Notice and its corresponding condition (a) be revised to read as 
follows: ``The Interests were acquired by the Plan as the result of a 
dividend paid to all holders of Penske Stock'' to remove any 
implication that the Plan participants directed their accounts to 
invest in the Interests. In response to this comment, the Department 
notes the suggested modification to Representation 11(a) but has 
determined to leave the language in condition (a) unchanged and to 
modify condition (c) to read as the follows: ``The Plan's acquisition 
of the Interests as a dividend paid to all holders of Penske Stock 
resulted from an independent act of Penske as a corporate entity, such 
that all holders of the Penske Stock, including the Plan, were treated 
in the same manner''.
    Accordingly, after giving full consideration to the entire record, 
including the comments by the applicant, the Department has determined 
to grant the exemption as modified. In this regard, the comments 
submitted to the Department have been included as part of the public 
record of the exemption application. The complete application file, 
including all supplemental submissions received by the Department, is 
made available for public inspection in the Public Disclosure Room of 
the Pension and Welfare Benefits Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue. NW, Washington, D.C. 
20210.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

Riggs Bank N.A., Located in Washington, DC

[Prohibited Transaction Exemption 2001-35; Exemption Application No. D-
10928]

Exemption

Section I--Transactions
    The restrictions of section 406(a) of the Act, and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (D) of the Code, shall not apply to: 
(a) the extension of credit (the Advance or Advances) by Riggs Bank 
N.A. (Riggs) to a participant-directed individual account plan (Plan); 
and (b) the Plan's repayment of an Advance or Advances, plus accrued 
interest.
Section II--Conditions
    The relief provided under Section I is available only if the 
following conditions are met:
    (a) Each Advance is made in connection with the administration of a 
portion of the Plan's assets by Riggs as a unitized fund (Unitized 
Fund) in order to facilitate redemptions from the Unitized Fund.
    (b) Each Advance is made in accordance with the terms of a written 
agreement (the Agreement) that describes terms and procedures for the 
Advances, including standing instructions addressing the initiation, 
amount, repayment and formula or method for determining the interest 
rate payable with respect to each Advance and is approved in writing by 
a fiduciary of the Plan who is independent of and not an affiliate of 
Riggs (Independent Plan Fiduciary).
    (c) Interest payable by the Plan on each Advance is determined in 
accordance with an objective formula or method described in the 
Agreement.
    (d) The Plan repays each Advance and accrued interest in accordance 
with the terms of the Agreement within ten (10) business days after the 
initiation of the Advance.
    (e) Each Advance is unsecured.
    (f) The aggregate amount advanced on any business day that an 
Advance is initiated does not, after the Advance is made, exceed 25% of 
the total market value of the Unitized Fund.
    (g) On the date that an Advance is initiated, Riggs provides the 
Independent Plan Fiduciary with notice of the amount of the Advance and 
the actual interest rate to be applied.
    (h) Within ten (10) days after an Advance is fully repaid, Riggs 
provides the Independent Plan Fiduciary with a confirmation statement 
which includes the date of repayment, the amount of the Advance, the 
actual interest rate applied, and the total amount of interest paid by 
the Plan.
    (i) The Agreement may be terminated by the Independent Plan 
Fiduciary at any time, subject to the Plan's repayment of any 
outstanding Advances.
    (j) The Advances are made on terms at least as favorable to the 
Plan as those the Plan could obtain in an arm's-length transaction with 
an unrelated party.
    (k) Neither Riggs nor its affiliate has or exercises any 
discretionary authority or control with respect to the initiation of an 
Advance, the amount of an Advance, the interest rate payable on an 
Advance, or the repayment of the Advance.
    (l) The fair market value of the assets in the Unitized Fund is 
determined by

[[Page 49420]]

an objective method specified in the Agreement. In the case of employer 
stock, such stock must be stock for which market quotations are readily 
available from independent sources.
    (m) Riggs or its affiliate is not (i) a trustee of the Plan (other 
than a nondiscretionary trustee who does not render investment advice 
with respect to the assets of the Unitized Fund), (ii) a plan 
administrator (within the meaning of section 3(16)(A) of the Act and 
Code section 414(g)), (iii) a fiduciary who is expressly authorized in 
writing to manage, acquire or dispose of on a discretionary basis any 
assets of the Unitized Fund, or (iv) an employer any of whose employees 
are covered by the Plan.
    (n) (a) Riggs will maintain or cause to be maintained for a period 
of six years from the date of the granting of the exemption the records 
necessary to enable the persons described in paragraph (b) to determine 
whether the conditions of this exemption have been met, except that:
    (1) A prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of Riggs, the 
records are lost or destroyed prior to the end of the six-year period; 
and
    (2) No party in interest, other than Riggs, 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); and
    (b)(1) Except as provided in paragraph (b)(2) and notwithstanding 
any provisions of subsections (a)(2) and (b) of section 504 of the Act, 
the records referred to in paragraph (a) are unconditionally available 
at their customary location for examination during normal business 
hours by: (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service; (B) Any fiduciary of the 
Plan, or any duly authorized employee or representative of such 
fiduciary; and (C) Any participant or beneficiary of the Plan or duly 
authorized representative of such participant or beneficiary.
    (2) None of the persons described in paragraph (b)(1)(B) and 
(b)(1)(C) shall be authorized to examine trade secrets of Riggs or 
commercial or financial information which is privileged or 
confidential.
Section III--Definitions
    (a) The term ``affiliate'' means (i) any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person; (ii) any officer, 
director, or partner, employee or relative (as defined in section 3(15) 
of the Act) of such other person; and (iii) any corporation or 
partnership of which such other person is an officer, director or 
partner.
    (b) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.

EFFECTIVE DATE: The exemption is effective as of September 11, 2000.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the proposed exemption published on July 30, 2001, at 66 FR 39351.

FOR FURTHER INFORMATION CONTACT: Karen Lloyd of the Department, 
telephone (202) 219-8194. (This is not a toll-free number).
    Principal Mutual Holding Company (PMHC), Located in Des Moines, 
IA

[Prohibited Transaction Exemption 2001-36; Exemption Application No. D-
10940]

Exemption

Section I. Covered Transactions
    The restrictions of section 406(a) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (D) of the Code, shall not apply to 
(1) the receipt of shares of common stock (Common Stock) issued by 
Principal Financial Group, Inc. (PFG), the successor entity to PMHC,\1\ 
or (2) the receipt of cash (Cash) or policy credits (Policy Credits) by 
any eligible policyholder (the Eligible Policyholder) of Principal Life 
Insurance Company (Principal), a subsidiary of PMHC, which is an 
employee benefit plan (the Plan), including a Plan sponsored by 
Principal and its affiliates (the Principal Plan), in exchange for such 
Eligible Policyholder's mutual membership interest in PMHC, pursuant to 
a plan of conversion (the Plan of Conversion) adopted by PMHC and 
implemented in accordance with Iowa Insurance Law.
---------------------------------------------------------------------------

    \1\ For purposes of this exemption, references to PMHC will 
generally include references to PFG unless noted, or unless the 
context requires otherwise.
---------------------------------------------------------------------------

    In addition, the restrictions of section 406(a)(1)(E) and (a)(2) 
and section 407(a)(2) of the Act shall not apply to the receipt and 
holding, by a Principal Plan, of Common Stock, whose fair market value 
exceeds 10 percent of the value of the total assets held by such Plan.
    This exemption is subject to the general conditions set forth below 
in Section II.
Section II. General Conditions
    (a) The Plan of Conversion is implemented in accordance with 
procedural and substantive safeguards that are imposed under Iowa 
Insurance Law and is subject to review and approval by the Iowa 
Commissioner of Insurance (the Commissioner).
    (b) The Commissioner reviews the terms of the options that are 
provided to Eligible Policyholders of PMHC as part of such 
Commissioner's review of the Plan of Conversion, and only approves the 
Plan following a determination that such Plan is fair and equitable to 
all Eligible Policyholders. The New York Superintendent of Insurance 
(the Superintendent) may object to the Plan of Conversion if he or she 
finds that such Plan of Conversion is not fair and equitable to New 
York policyholders.
    (c) As part of their separate determinations, both the Commissioner 
and the Superintendent concur on the terms of the Plan of Conversion.
    (d) Each Eligible Policyholder has an opportunity to vote at a 
special meeting to approve the Plan of Conversion after receiving full 
written disclosure from PMHC and/or Principal.
    (e) One or more independent fiduciaries of a Plan that is an 
Eligible Policyholder elects to receive Common Stock, Cash or Policy 
Credits pursuant to the terms of the Plan of Conversion and neither 
PMHC nor any of its affiliates exercises any discretion or provides 
``investment advice,'' within the meaning of 29 CFR 2510.3-21(c) with 
respect to such acquisition.
    (f) If Policy Credits are elected by a Plan policyholder holding a 
group annuity contract, the policyholder may elect to have the policy 
value increased by the amount of compensation allocated or to have the 
policy enhanced with an interest in a separate account (the Separate 
Account), which is maintained by Principal.
    (1) If no election is made by a Plan policyholder, the ``default'' 
consideration for the policyholder is Policy Credits (in the form of an 
interest in the Separate Account), unless the contract or regulatory 
concerns preclude this form of compensation.
    (2) Where applicable, Principal allocates the Policy Credit 
compensation received, on a pro rata basis, among the participants of 
the Plan

[[Page 49421]]

that is invested in the Separate Account, in accordance with their 
account balances, unless the policyholder directs otherwise, and 
neither PMHC nor its affiliates provides investment advice or 
recommendations to the policyholder on which option to choose or with 
respect to the default consideration, in the event no choice is made.
    (3) No purchases or sales of assets are made between Principal or 
its affiliates and the Separate Account.
    (4) Upon receiving a notice of withdrawal from a Plan policyholder, 
Northern Trust Company (NTC), the custodian for shares of Common Stock 
that are held in the Separate Account, may sell such shares of Common 
Stock on the open market at fair market value.
    (5) The shares of Common Stock held in the Separate Account are 
voted in accordance with the procedures contained in Section 8.9 of the 
Plan of Conversion.
    (g) In the case of a Principal Plan, U.S. Trust, N.A., the 
independent fiduciary appointed to represent the Principal Plans,
    (1) Votes on whether to approve or not to approve the proposed 
demutualization;
    (2) Elects between consideration in the form of Common Stock, Cash 
or Policy Credits on behalf of such Plans;
    (3) Determines how to apply the Common Stock, Cash or Policy 
Credits received for the benefit of the participants and beneficiaries 
of the Principal Plans;
    (4) Votes on shares of Common Stock that are held by the Principal 
Plans and disposes of such stock held by a Plan exceeding the 
limitation of section 407(a)(2) of the Act as soon as it is reasonably 
practicable, but in no event later than six months after the Effective 
Date of the Plan of Conversion;
    (5) Provides the Department with a complete and detailed final 
report as it relates to the Principal Plans prior to the Effective Date 
of the demutualization; and
    (6) Takes all actions that are necessary and appropriate to 
safeguard the interests of the Principal Plans and their participants 
and beneficiaries.
    (h) Each Eligible Policyholder entitled to receive Common Stock is 
allocated at least 100 shares and additional consideration is allocated 
to Eligible Policyholders based on actuarial formulas that take into 
account each policy's contribution to the surplus of Principal, which 
formulas have been reviewed by the Commissioner.
    (i) All Eligible Policyholders that are Plans participate in the 
demutualization on the same basis and within their class groupings as 
other Eligible Policyholders that are not Plans.
    (j) No Eligible Policyholder pays any brokerage commissions or fees 
in connection with the receipt of the demutualization consideration.
    (k) All of Principal's policyholder obligations remain in force and 
are not affected by the Plan of Conversion.
    (l) The terms of the transactions are at least as favorable to the 
Plans as an arm's length transaction with an unrelated party.
Section III. Definitions
    For purposes of this exemption:
    (a) The term ``PMHC'' means Principal Mutual Holding Company, its 
successor in interest, Principal Financial Group, Inc. and any of their 
affiliates as defined in paragraph (b) of this Section III, unless 
noted, or unless the context requires otherwise.
    (b) An ``affiliate'' of PMHC includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with PMHC (For purposes of this paragraph, the term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual.); and
    (2) Any officer, director or partner in such person.
    (c) The ``Effective Date'' refers to the date on which the closing 
of the initial public offering (the IPO) occurs, which will be a date 
occurring after the approval of the Plan of Conversion by voting 
policyholders and the Commissioner, provided that in no event will the 
Effective Date be more than 12 months after the date on which the 
Commissioner has approved or has conditionally approved the Plan of 
Conversion, unless such period is extended by the Commissioner. The 
Plan of Conversion will be deemed to become effective at 12:01 a.m., 
Central Time, on the Effective Date.
    (d) The term ``Record Date'' means the date that is one year prior 
to the Adoption Date.
    (e) The ``Adoption Date'' refers to the date that PMHC's Board of 
Directors adopted the Plan of Conversion. This date was March 31, 2001.
    (f) The term ``Eligible Policyholder'' means a person who, on the 
Record Date, is the owner of one or more policies and who, as reflected 
in PMHC's or Principal's records, has a continuous membership interest 
in PMHC through ownership of one or more policies from the Record Date 
until and on the Effective Date. Members of PMHC who were issued 
policies on or before April 8, 1980 and transferred ownership rights of 
such policies on or before April 8, 1980 are Eligible Policyholders so 
long as such policies remain in force through the Effective Date.
    (g) The term ``Policy Credit'' means consideration to be paid in 
the form of an increase in cash value, account value, dividend 
accumulations, face amount, extended term period or benefit payment, as 
appropriate, depending upon the policy. If the policy is owned by a 
qualified plan customer (the Qualified Plan Customer) [i.e., an owner 
of a group annuity contract issued by Principal, which contract is 
designed to fund benefits under a retirement plan which is qualified 
under section 401(a) and section 403(a) of the Code (including a plan 
covering employees described in section 401(c) of the Code, provided 
such plan meets the requirements of Rule 180 promulgated under the 
Securities Exchange Act of 1933, as amended) or which is a governmental 
plan described in section 414(d) of the Code, excluding (1) group 
annuity contracts that fund only guaranteed deferred annuities or 
annuities in the course of payments and (2) group annuity contracts for 
which Principal does not perform retirement plan recordkeeping services 
and whose group annuity contracts do not provide for investments in 
Principal's pooled unregistered separate accounts], the Policy Credit 
may take the form of a Separate Account Policy Credit or an Account 
Value Policy Credit. If the policy is owned by a Non-Rule 180 Qualified 
Plan Customer, the Policy Credit will take the form of an Account Value 
Policy Credit.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on August 3, 2001 at 66 FR 
40736.

Written Comments

    The Department received five written comments with respect to the 
proposed exemption. Four comments were submitted by Plan policyholders 
of Principal while the fifth comment was submitted by PMHC. Of the 
policyholder comments received, three expressed opposition to the 
exemption for various reasons and were forwarded to PMHC for response. 
The fourth policyholder comment raised issues that were not relevant to 
PMHC's demutualization so it was not forwarded to PMHC for response.
    PMHC's comment letter expressed concerns in a number of areas. PMHC 
also requested that the Department make certain changes to the proposed

[[Page 49422]]

exemption and the Summary of Facts and Representations.
    Following is a discussion of the comments received.

Plan Policyholder Comments

    The first commenter states that he is opposed to PMHC's 
demutualization because he believes money invested in a Plan should be 
taken after the participant reaches retirement age and any dividends 
received thereunder should be reinvested in the Plan. Otherwise, the 
commenter explains that he would look for a different type of company 
in order to purchase stock.
    The second commenter indicates that he is opposed to the 
demutualization because it will expose the insurer to the ``abuse of 
stock options.'' The commenter also notes that there are ``millions of 
pensions (i.e., plans) relying on Principal'' which will be adversely 
affected by such abuse.
    The third commenter states that he is generally opposed to the 
demutualization process because he believes it will allow an insurer to 
``play the mergers and acquisitions game'' to the detriment of 
policyholders but to the benefit of the insurer's officers and 
directors. The commenter also explains that he cannot help but think 
that the prohibited transaction provisions of the Act from which PMHC 
has requested exemptive relief will protect the American public from 
the activities of such officers and directors.
    PMHC states that it has reviewed the aforementioned comments and 
has concluded that the issues raised therein are not germane to the 
requested exemption but merely reflect the commenters' opposition to 
the demutualization transaction. Therefore, PMHC has declined to 
respond specifically to each of the comment letters. In PMHC's view, 
the comment letters do not request additional information but instead 
express the opinions of the commenters. However, PMHC observes that the 
commenters had a sufficient opportunity to express their opposition to 
the demutualization at the public hearing held on July 25, 2001. On 
July 24, 2001, PMHC explains that approximately 92 percent of the 
Principal policyholders who voted, voted to approve the Plan of 
Conversion.

PMHC's Comment

    In its comment letter, PMHC has attempted to clarify the proposed 
exemption and the Summary of Facts and Representations in the following 
areas of specific concern:
    1. Superintendent's Findings. In pertinent part, Section II(b) of 
the proposed exemption states that the Superintendent may object to the 
Plan of Conversion if he or she finds that such Plan of Conversion is 
``not fair or equitable to all Eligible Policyholders.'' For purposes 
of clarification, PMHC states that the last sentence of this paragraph 
should end with the phrase ``not fair or equitable to New York 
policyholders.'' Accordingly, the Department has made the requested 
change in the final exemption.
    2. Allocation of Policy Credits by Principal. Section II(f)(2) of 
the proposed exemption states that Principal will allocate Policy 
Credit compensation received on a pro rata basis, among the 
participants of the Plan that is invested in the Separate Account, in 
accordance with their account balances, unless the policyholder directs 
otherwise and that neither PMHC nor its affiliates will provide 
investment advice or recommendations to the policyholder on which 
option to choose or with respect to the default consideration, in the 
event no choice is made. PMHC states that this paragraph should begin 
with the words ``Where applicable'' to reflect the fact that Principal 
only allocates with respect to those defined contribution plan 
customers for whom Principal is the recordkeeper.
    In response to this comment, the Department has made the requested 
change in the final exemption.
    3. Sale of Common Stock Held by the Separate Account. Section 
II(f)(4) of the proposed exemption states that upon receiving a notice 
of withdrawal from a Plan policyholder, NTC, the custodian for shares 
of Common Stock that are held in the Separate Account will sell such 
shares on the open market at fair market value. PMHC explains that the 
word ``sells'' should be replaced with the words ``may sell'' because 
there will be a small percentage of liquid assets held in the Separate 
Account in addition to the Common Stock. If a withdrawal request can be 
accommodated by using the liquid assets, PMHC further explains that a 
sale may not be necessary. In all cases, PMHC notes that distributions 
will be based on the fair market value of the Common Stock, and no 
sales or purchases will be made to or from PMHC.
    In response to this comment, the Department has made the requested 
change in the final exemption.
    4. Separate Account Voting Process. Section II(f)(5) of the 
proposed exemption describes, in part, the voting to be utilized for 
the Separate Account. PMHC states that the mechanics of the voting 
process would be clearer if section II(f)(5) were revised to read as 
follows:
    (5) The shares of Common Stock held in the Separate Account are 
voted in accordance with the procedures contained in Section 8.9 of the 
Plan of Conversion.
    The Department does not object to PMHC's revisions to this comment 
and has made the requested modification. The Department, however, notes 
that Section 8.9 of the Plan of Conversion, emphasizes the roles to be 
undertaken by Principal, its agent or Northern Trust Investments, Inc. 
(NTI), the independent trustee for the Separate Account in voting 
shares of Common Stock that are held in the Separate Account. 
Specifically, Section 8.9 of the Plan of Reorganization currently 
requires that Principal or its agent obtain specific instruction from a 
Qualified Plan Customer as to how such Qualified Plan Customer wishes 
to vote shares of Common Stock representing such Qualified Plan 
Customer's interest in the Separate Account. If specific instruction is 
not given to Principal or its agent by the Qualified Plan Customer, 
Principal (or, if applicable, its agent) will vote on routine matters 
(e.g., the appointment of accountants), shares of Common Stock held in 
the Separate Account representing the interest of the Qualified Plan 
Customer, in the same ratio as those shares of Common Stock that are 
held in the Separate Account for which instructions have been given by 
Qualified Plan Customers.
    In the event of a shareholder vote on a non-routine matter (e.g., 
proxies), Section 8.9 of the Plan of Conversion provides that shares of 
Common Stock held in the Separate Account will be voted in accordance 
with instructions provided by NTI. In this regard, NTI will instruct 
Principal or its agent that shares of Common Stock should be voted in a 
way that, in NTI's judgment, is in the best interest of the 
participants and beneficiaries of the Plans of Qualified Plan Customers 
in whose interest such Common Stock is held. In performing its 
fiduciary duties, as independent trustee of the Separate Account, NTI 
will act solely in the interest of the participants and beneficiaries 
of the Plans that have invested directly or indirectly in the Separate 
Account in accordance with section 404 of the Act and the provisions of 
Part 4 of Title I of the Act, and pursuant to an investment policy that 
seeks to maximize the long-term investment returns of the Separate 
Account.
    5. Common Stock Allocation. Section II(h) of the proposed exemption 
states that each Eligible Policyholder entitled

[[Page 49423]]

to receive Common Stock will be allocated at least 100 shares and that 
additional consideration will be allocated to such Eligible 
Policyholders who own participating policies based on actuarial 
formulas that take into account each participating policy's 
contribution to the surplus of Principal. In the first sentence of 
Section II(h), PMHC requests that the phrases, ``who own participating 
policies'' and the word, ``participating'' in the next line be deleted. 
The Department has made the suggested revisions in the grant notice.
    6. Eligible Policyholder Definition. Section III(f) of the proposed 
exemption defines the term ``Eligible Policyholder.'' The last sentence 
of Section III(f) states that ``Members of PMHC who were issued 
policies before April 8, 1980 and transferred ownership rights of such 
policies on or before April 8, 1980 are Eligible Policyholders so long 
as such policies remain in force on the Record Date.'' For purposes of 
clarification, PMHC suggests that this sentence be revised to read as 
follows: ``Members of PMHC who were issued policies on or before April 
8, 1980 and transferred ownership rights of such policies on or before 
April 8, 1980 are Eligible Policyholders so long as such policies 
remain in force through the Effective Date.''
    In response to this comment, the Department has made the requested 
change in the final exemption.
    7. PMHC's Restructuring Process. Representation 6 of the Summary of 
Facts and Representations describes PMHC's restructuring process. To 
reflect the steps that are entailed in its demutualization, PMHC 
suggests that the second, third and fourth sentences of Representation 
6 be replaced with the following text:

    Currently, PMHC owns Principal Financial Group, Inc., an Iowa 
business corporation (PFG Iowa), which owns all of the stock of 
Principal Financial Services, Inc., an Iowa business corporation, 
which, in turn, owns all of the stock of Principal. PMHC also 
currently owns Principal Financial Group, Inc. (PFG), a Delaware 
corporation, which owns all of the stock of Principal Iowa Newco, 
Inc. (PIN), an Iowa business corporation. PFG is a holding company 
the shares of which will be distributed to Eligible Policyholders 
and listed on the New York Stock Exchange. After PMHC is converted 
into a stock company, it will be merged with and into PIN. PFG Iowa 
will then merge with and into PIN. Principal Financial Services, 
Inc., will then merge with and into PIN and PIN will change its name 
to Principal Financial Services, Inc.

The Department notes the aforementioned revisions to Representation 6.
    8. Sale of Common Stock/Voting Process. Representation 13 of the 
Summary of Facts and Representations restates the provisions of 
Sections II(f)(4) and (5) of the proposed exemption. As noted above, 
these conditions relate to the sale of Common Stock in the Separate 
Account by NTC, the custodian, and the voting procedures that are 
currently established for the Separate Account. In referring to its two 
previous comments, PMHC states that a request for a withdrawal from the 
Separate Account may not require a sale of Common Stock if the 
withdrawal can be accommodated using available liquid assets held by 
the Separate Account. Also, PMHC points out that the fifth paragraph in 
Representation 13, attributes some mechanical tasks regarding the 
voting of shares of Common Stock to NTI, whereas such tasks should be 
attributed to Principal or its agent under Section 8.9 of the Plan of 
Conversion, as explained above. PMHC asserts that Principal or its 
agent will cause the undirected shares to be voted under the ``mirror 
voting'' procedure and it states that such action will not involve any 
discretionary act on the part of Principal.
    In response to this comment, the Department notes these 
clarifications made by PMHC.
    For further information regarding the comments and other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application file (Exemption Application No. D-10940) the 
Department is maintaining in this case. The complete application file, 
as well as all supplemental submissions received by the Department, are 
made available for public inspection in the Public Disclosure Room of 
the Pension and Welfare Benefits Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210.
    Accordingly, after giving full consideration to the entire record, 
including the written comments, the Department has decided to grant the 
exemption subject to the modifications and clarifications described 
above.

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

Miller International, Inc. Profit Sharing Plan (the Plan), Located 
in Denver, Colorado

[Prohibited Transaction Exemption 2001-37; Exemption Application No. D-
10980]

Exemption

    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 of a certain three-acre parcel of vacant 
land (the Property) by the Plan to Miller International, Inc., the 
sponsor of the Plan and a party in interest with respect to the Plan; 
provided that the following conditions are satisfied:
    (a) The sale is a one-time cash transaction;
    (b) The Plan receives the current fair market value for the 
Property, as established by an independent qualified appraiser at the 
time of the sale; and
    (c) The Plan pays no commissions or other expenses associated with 
the sale.
    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 July 30, 2001 at 66 FR 
39371.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 219-8883. (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

[[Page 49424]]

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, DC, this 24th day of September, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor
[FR Doc. 01-24150 Filed 9-26-01; 8:45 am]
BILLING CODE 4510-29-P