[Federal Register Volume 67, Number 163 (Thursday, August 22, 2002)]
[Notices]
[Pages 54486-54487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21433]


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2002-40; Exemption Application No. D-
11038]


Grant of Individual Exemption To Amend and Replace Prohibited 
Transaction Exemption (PTE) 90-15, Involving the Watkins Master Trust 
(the Trust), Located in Atlanta, GA

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of 
Labor.

ACTION: Grant of individual exemption to modify and replace PTE 90-15.

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SUMMARY: This document contains a final exemption before the Department 
of Labor (the Department) that amends and replaces PTE 90-15 (55 FR 
12967, April 6, 1990). PTE 90-15 is an individual exemption providing 
relief, since September 20, 1989, for (1) the leasing of office space 
in a commercial office building (the Building) by the Trust to Wilwat 
Properties, Inc. (Wilwat), a party in interest with respect to the 
plans (the Plans) participating in the Trust under the provisions of a 
written lease (the New Lease); and (2) the possible cash purchase of 
the Trust's interest in the property by Wilwat.
    The final exemption modifies an option to purchase provision in the 
New Lease by allowing Wilwat to acquire the Trust's leasehold interests 
in the Building, including the improvements constructed thereon, and 
the Trust's interest in a ground lease on May 8, 2002, instead of at 
any time during the final six months of the New Lease renewal term 
ending on December 31, 2008. In addition, the exemption replaces PTE 
90-15, which expired by operation of law upon the consummation of the 
sale. The exemption affects participants and beneficiaries of, and 
fiduciaries with respect to the Trust.

EFFECTIVE DATE: This exemption is effective as of May 8, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, telephone (202) 693-8556. (This is not a toll-free 
number.)

SUPPLEMENTARY INFORMATION: On June 18, 2002, the Department published a 
notice of proposed exemption in the Federal Register at 67 FR 41521 
that would amend and replace PTE 90-15. PTE 90-15 provides an exemption 
from certain prohibited transaction restrictions of section 406 of the 
Employee Retirement Income Security Act of 1974 (the Act) and from the 
sanctions resulting from the application of section 4975 of the 
Internal Revenue Code of 1986 (the Code), as amended, by reason of 
section 4975(c)(1) of the Code.
    The proposed exemption was requested in an application filed on 
behalf of the Trust and Wilwat,\*\ pursuant to section 408(a) of the 
Act and section 4975(c)(2) of the Code, and in accordance with the 
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 
August 10, 1990). 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. 
Accordingly, this exemption is being issued solely by the Department.
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    \*\ The Department also has under consideration a similar 
exemption request (D-11036) that was filed on behalf of Watkins 
Associated Industries, Inc., the sponsor of the Trust and a party in 
interest with respect to the Plans partcipating in the Trust.
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    The proposed exemption gave interested persons an opportunity to 
comment and to request a hearing. In this regard, all interested 
persons were invited to submit written comments or requests for a 
hearing on the pending exemption on or before August 2, 2002. All 
comments were to be made a part of the record.
    During the comment period, the Department received one written 
comment from a participant in the Watkins Associated Industries, Inc., 
Profit Sharing Plan, who objected to the exemption and requested that 
no changes be made to his individual account in this Plan. The 
Department received no requests for a public hearing.
    For further information regarding the comment or other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application file (Exemption Application No. D-11038) 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 comment received, the Department has decided to 
grant the exemption.

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 section 4975(c)(2) of the Code does 
not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of section 404 of 
the Act, which require, among other things, a fiduciary to discharge 
his or her duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirements of section 401(a) of the Code that the plan operate for 
the exclusive benefit of the employees of the employer maintaining the 
plan and their beneficiaries;
    (2) The exemption does not extend to transactions prohibited under 
section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;
    (3) In accordance with section 408(a) of the Act, section 
4975(c)(2) of the Code, and the procedures set forth in 29 CFR 2570, 
Subpart B (55 FR 32836, August 10, 1990), the Department finds that the 
exemption is administratively feasible, in the interest of the plan and 
of its participants and beneficiaries and protective of the rights of 
participants and beneficiaries of the plan;
    (4) The exemption is supplemental to, and not in derogation of, any 
other provisions of the Act and the Code, including administrative 
exemptions. Furthermore, the fact that a transaction is subject to an 
administrative exemption is not dispositive of whether the transaction 
is in fact a prohibited transaction; and
    (5) This exemption is subject to the express condition that the 
facts and representations set forth in the notice of proposed exemption 
relating to PTE 90-15 and this notice, accurately describe, where 
relevant, the material terms of the transactions to be consummated 
pursuant to this exemption.

[[Page 54487]]

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), the 
Department hereby amends and replaces PTE 90-15. Accordingly, 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 May 8, 2002, to the sale by the Watkins Master 
Trust (the Trust) of its leasehold interests in certain improved real 
property, consisting of a building (the Building), the improvements 
constructed thereon (the Improvements), and ground lease (the Ground 
Lease), to Wilwat Properties, Inc. (Wilwat), a party in interest with 
respect to the Trust, in connection with an amendment to an option to 
purchase provision contained in a written lease between the Trust and 
Wilwat, as described in Prohibited Transaction Exemption 90-15 (55 FR 
12967, April 6, 1990).
    This exemption is subject to the following conditions:
    (a) All terms and conditions of the sale were at least as favorable 
to the Trust as those obtainable in an arm's length transaction with an 
unrelated party;
    (b) The sale was a one-time transaction for cash;
    (c) The fair market value of the Trust's leasehold interests in the 
Building, the Improvements and the Ground Lease was determined by 
qualified, independent appraisers in initial and updated appraisal 
reports;
    (d) The Trust did not pay any real estate fees, commissions, costs 
or other expenses in connection with the sale;
    (e) The Trust received, as consideration for the sale, an amount 
that was no less than the greater of (1) the fair market value of the 
Trust's leasehold interests in the Building, the Improvements and the 
Ground Lease; or (2) the Trust's total investment in such property, as 
of the date of the sale;
    (f) In the event the Trust could not obtain a release from the 
owner of the Ground Lease from its obligations thereunder upon the 
completion of the sale, Wilwat agreed to assume all liabilities under 
such lease and would indemnify the Trust against any liability to the 
owner of the Ground Lease; and
    (g) The Trustee, as the independent fiduciary for the Trust with 
respect to the sale, determined that such transaction was in the best 
interest of the Trust and was protective of the participants and 
beneficiaries of the Trust, and monitored such transaction on behalf of 
the Trust.

EFFECTIVE DATE: This exemption is effective as of May 8, 2002.
    The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application for exemption are true and complete and accurately describe 
all material terms of the transactions. In the case of continuing 
transactions, if any of the material facts or representations described 
in the applications change, the exemption will cease to apply as of the 
date of such change. In the event of any such change, an application 
for a new exemption must be made to the Department.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant PTE 90-15 and this final 
exemption, refer to the proposed exemptions and the grant notice which 
are cited above.

    Signed at Washington, DC, this 19th day of August 2002.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 02-21433 Filed 8-21-02; 8:45 am]
BILLING CODE 4510-29-P