[Federal Register Volume 71, Number 106 (Friday, June 2, 2006)]
[Notices]
[Pages 32128-32134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8528]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. L-11258, et al.]


Proposed Exemptions; Retail Clerks Welfare Trust Health and 
Welfare Plan (the Plan)

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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

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

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, 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 requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. -------- , stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
[email protected], or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.

[[Page 32129]]

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

Retail Clerks Welfare Trust Health and Welfare Plan (the Plan) Located 
in Seattle, Washington

[Application No. L-11258]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
32847, August 10, 1990). If the exemption is granted, the restrictions 
of section 406(a), 406(b)(1) and (b)(2) of the Act shall not apply, 
effective July 1, 2005, to the purchase by Plan participants and 
beneficiaries of prescription drugs from pharmacies established and 
maintained by contributing employers to the Plan, or their affiliates 
(the Custom Network), which are parties in interest with respect to the 
Plan, provided the following conditions are satisfied:
    (a) The terms of each transaction are at least as favorable to the 
Plan as those the Plan could obtain in a similar arm's-length 
transaction with an unrelated third party;
    (b) All determinations regarding which party in interest 
pharmacies, if any, may participate in the Custom Network, will be made 
by the Plan's independent fiduciary based on objective standards 
developed by the independent fiduciary in reliance on information 
provided by NMHCrx, the Plan's Pharmacy Benefits Manager, an entity 
which is independent of any contributing employer to the Plan, and the 
Plan's independent actuarial consultants;
    (c) At least 50% of the providers participating in the Custom 
Network are pharmacies of contributing employers other than the 
employer of any individual Plan participant;
    (d) In the aggregate, on an on-going basis, the costs for each plan 
year for the Plan from participants using the Custom Network pharmacies 
will be at least one percentage point less than would be the costs 
through the use of NMHCrx's preferred provider network pharmacies (the 
PPN pharmacies);
    (e) In the aggregate, on an on-going basis, the costs for each plan 
year for the Plan from participants using the PPN pharmacies will be 
significantly less than costs for the retail purchase of prescription 
drugs from non-participating pharmacies;
    (f) The Plan's independent fiduciary will monitor the subject 
transactions to ensure that all conditions of the exemption, including 
conditions (d) and (e) regarding pricing, continue to be satisfied 
during each plan year; and
    (g) All future updated summary plan descriptions, furnished to 
participants, will state that the purchase price of a particular 
prescription drug at Custom Network pharmacies may be less than the 
purchase price that is available either through the use of the PPN 
pharmacies or through retail non-participating pharmacies, and that the 
cost of prescription drugs in the aggregate over the course of a 12-
month plan year will be: (i) Lower at Custom Network pharmacies than at 
the PPN pharmacies and (ii) Significantly lower at the Custom Network 
pharmacies than at non-participating retail pharmacies.
    Effective Date: If the proposed exemption is granted, it will be 
effective July 1, 2005.

Summary of Facts and Representations

    1. The Plan is a multi-employer welfare benefit plan, which has 
been in existence since June 18, 1957. The Plan was established to 
provide health and welfare benefits, including life, sickness, accident 
and other benefits for Plan participants and their beneficiaries. The 
Plan is directed by a twelve-person Board of Trustees (the Trustees). 
The six Trustees representing labor are appointed by the United Food 
and Commercial Workers Local Union 1105 (the Union). The six employer 
Trustees are appointed by Allied Employers, Inc., a trade association 
of which the Plan's contributing employers are members. The Plan 
currently has approximately 27,600 participants, and it covers 
approximately 30,700 beneficiaries as well, so that the total number of 
participants and related family members affected by the subject 
transactions is approximately 58,300.
    2. The applicant represents that the Plan has a long established 
and on-going relationship with a third-party administrator, Zenith 
Administrators, Inc. (Zenith). Prior to October 1, 1999, Zenith 
processed all pharmacy benefit claims for the Plan. Participants paid 
the total prescription cost and then submitted claim forms to Zenith 
for reimbursement of the portion in excess of the required co-payment.
    3. In 1999, the Plan's Board of Trustees asked the Plan's 
consultants, Mercer Human Resource Consulting (Mercer) and The Segal 
Company (together, the Consultants) \1\ to conduct a search for a 
Pharmacy Benefits Manager (PBM) to take over as primary processor for 
pharmacy benefit claims. Pursuant to that search, Pharmaceutical Care 
Network (PCN) was selected as the entity most able to fill the needs of 
the Plan. Effective October 1, 1999, PCN became the PBM for the Plan. 
Effective September 1, 2003, National Medical Health Card Systems, Inc. 
(NMHCrx) became the PBM for the Plan, replacing PCN. NMHCrx is not 
affiliated with Zenith, the Plan or any contributing employer. The 
agreement with NMHCrx includes a 90-day termination clause which 
permits the Plan to terminate the contract, without cause, and without 
penalty, upon 90 days advance written notice.
---------------------------------------------------------------------------

    \1\ In 2003, The Segal Corporation was replaced as one of the 
Consultants by Cheiron, a firm of financial consultants and 
actuaries with offices in Washington, DC, McLean, Virginia and 
Charlotte, North Carolina. Cheiron and Mercer continue to provide 
financial, acturial and general consulting to the Plan.
---------------------------------------------------------------------------

    4. NMHCrx, headquartered at Port Washington, New York, has been 
managing prescription drug programs since 1981 and has a nationwide 
network of over 53,000 pharmacies. It manages the prescription benefits 
of more than 1.5 million participants in governmental, single employer 
and multiemployer plans. NMHCrx is a public company with its shares 
trading on NASDAQ. NMHCrx is an independent organization not related to 
Zenith, the Plan or the employers

[[Page 32130]]

maintaining the Plan. The applicant represents that the transactions 
described herein are not part of an agreement, arrangement or 
understanding designed to benefit a party in interest.
    5. NMHCrx maintains an extensive system of participating pharmacies 
in its preferred provider network (i.e., the PPN pharmacies). In 
addition, NMHCrx maintains a Custom Network consisting of pharmacies 
that are, or are owned by, the Plan's participating employers or their 
affiliates. Thus, some of the pharmacies in the Custom Network are part 
of corporations that are employers of employees covered by the Plan; 
the other pharmacies in the Custom Network are wholly-owned by 
corporations that have affiliates whose employees are covered by the 
Plan.
    6. NMHCrx also receives rebates from the drug manufacturers and, 
pursuant to the agreement with the Plan, pays over a portion of such 
rebates to the Plan. The parties have also memorialized agreed-upon 
terms regarding rebates due to the Plan from NHMCrx. The pricing and 
rebates are disclosed by NMHCrx to the Plan as part of its mandatory 
periodic reporting to the Plan. The records are open to examination 
pursuant to the audit provisions of the contract. The Plan and NMHCrx 
have agreed to specific dispensing fees and drug pricing. These terms 
are stated in the contract. For purchases made at NMHCrx PPN 
pharmacies, the Plan will pay the lower of (i) an agreed discount from 
average wholesale price (brand) or maximum allowable cost (generic) and 
(ii) the ``usual and customary'' charge for the drug. NMHCrx is 
obligated to maintain records needed to establish the cost the Plan 
pays for each drug. These records, which are to be maintained for the 
year that the Plan pays for the drugs and the following seven years, 
will be available for inspection or audit by the Plan at the offices of 
NMHCrx on reasonable notice during regular business hours.\2\
---------------------------------------------------------------------------

    \2\ The Department is expressing no opinion herein as to whether 
the pricing and rebate arrangements between NMHCrx and the Plan, and 
the disclosures thereof, are in compliance with part 4 of title I of 
the Act.
---------------------------------------------------------------------------

    7. Plan participants and beneficiaries may acquire their 
prescription drugs through the regular PPN or the Custom Network 
established by NMHCrx. This choice is described in the Plan's summary 
plan description and other communication materials. NMHCrx adjudicates 
prescription claims that have been submitted and performs claims-
related processing functions, not limited to determining the validity 
and the accuracy of the claims submitted. NMHCrx receives a fee which 
is paid by the Plan.\3\ The applicant represents that all Plan 
fiduciaries are aware of fees and compensation to be paid by the Plan. 
NMHCrx's performance and competitiveness are monitored by the Plan's 
third party administrator, Zenith, and the Consultants.
---------------------------------------------------------------------------

    \3\ The provisions of services to a plan by a party in interest 
with respect to the plan is a separate prohibited transaction under 
section 406(a)(1)(C) of the Act. However, the provision of services 
to a plan by a party in interest, which are necessary for the 
operation of the plan, are statutorily exempt under section 
408(b)(2) of the Act, if the conditions required therein are met. 
The regulation, which defines the scope of the statutory exemption 
contained in section 408(b)(2) of the Act, states that no relief is 
provided for any arrangement for services which would violate 
section 406(b) of the Act (see 29 CFR section 2550.408b-2).
    Therefore, it should be noted that in this proposed exemption, 
the Department is providing no relief beyond that provided by 
section 408(b)(2) of the Act with respect to the provision of PBM 
services to the Plan by NMHCrx or some other entity. In addition, 
the Department is providing no opinion herein as to whether any 
service arrangements between NMHCrx or some other entity and the 
Plan would meet the conditions of section 408b(b)(2) of the Act and 
the regulations thereunder. However, interested persons should 
review DOL Adv. Op. 99-09A (May 21, 1999) for a discussion of issues 
relating to such service arrangements.
---------------------------------------------------------------------------

    8. Plan participants who utilize the Custom Network of employer 
pharmacies pay a co-payment and the pharmacies then submit their 
charges, based on an agreed schedule, to NMHCrx. These charges are paid 
by NMHCrx. NMHCrx, in turn, receives reimbursement from the Plan. The 
payments and reimbursements are completed electronically. The applicant 
represents that the cost of the prescription drugs through the Custom 
Network is deeply discounted. The Consultants and NMHCrx have advised 
that the discounts are greater than those for the PPN pharmacies and 
also greater than for other pharmacy networks with which they are 
familiar. The applicant represents that the difference in savings, when 
comparing aggregate costs for the Plan from participants using the 
Custom Network pharmacies and the NMHCrx's PPN pharmacies have been and 
are expected to continue at approximately one percentage point. For 
instance, during the period from September 1, 2003 through May 30, 
2005, pricing of claims through the PPN network pharmacies would have 
produced a discount of approximately 22% off retail prices, while 
pricing through the Custom Network pharmacies resulted in a discount of 
23% off retail prices. Actual Plan costs through the Custom Network for 
this period were $45,348,737.97. The applicant further represents that 
the retail price for drugs dispensed for Plan participants during this 
period would have totaled $59,121,641.71 for 633,064 paid prescription 
claims. NMHCrx estimates that had these claims been adjudicated through 
its PPN, the Plan cost would have been approximately $45,722,245.73. 
Thus, the applicant represents that not only is the Custom Network more 
convenient for participants, and administratively more efficient for 
the Plan, but it also results in savings for the Plan and its 
participants when compared to the NMHCrx PPN. NMHCrx calculated cost 
savings using actual Plan prescription utilization and comparing retail 
prices with charges through NMHCrx's PPN network pharmacies and the 
Custom Network pharmacies. Pharmacies eligible to do so were presented 
with the opportunity to participate in both NMHCrx's PPN and the Custom 
Network.
    9. The Department, following a routine investigation, raised 
concerns as to whether the employer pharmacy arrangements satisfy the 
requirements of section 406 of the Act. After discussions between Plan 
representatives and the Department, the Plan filed a request for the 
exemption proposed herein. Subsequently, the Department issued a 
closing letter, dated August 1, 2003, stating that no enforcement 
action would be taken with respect to the past transactions described 
herein.
    10. To address concerns raised by the Department, the applicant 
represents that on July 1, 2005, the Plan retained as an independent 
fiduciary Nicholas Saakvitne, Esq. (the I/F), an employee benefits 
attorney and professional ERISA fiduciary in Marina del Rey, 
California. The I/F has 26 years of experience in benefits law, and 
most of his current practice consists of serving as trustee, plan 
administrator, or other plan fiduciary in plan terminations and in 
other special ERISA plan situations, to assist in managing plan assets 
and overseeing the operation of on-going plans. The cumulative total of 
plan assets for which the I/F has had fiduciary responsibility exceeds 
$500 million. The I/F represents that the gross income he will receive 
from the Plan for his fiduciary services for each calendar year will 
not exceed 5% of his expected annual gross income from all sources for 
such year. Mr. Saakvitne does not receive any payment in connection 
with his I/F duties from any contributing employer to the Plan, and 
further represents that he is independent from any employer pharmacy or 
affiliate thereof. The I/F will establish minimum standards and 
objective criteria for selection of employer pharmacies and, based on

[[Page 32131]]

these standards and criteria, determine which pharmacies can 
participate in the Custom Network. The I/F will then have an on-going 
role for the Plan to periodically monitor the Custom Network pharmacies 
to confirm continued compliance with those minimum standards and 
objective criteria and the conditions of this proposed prohibited 
transaction exemption. The Plan's trustees would have no involvement or 
influence in the selection of pharmacies eligible to participate in the 
Custom Network. The I/F represents that he will receive and consider 
advice from the Plan's Consultants, as well as information from NMHCrx, 
the Plan's PBM.
    11. The I/F represents that he confirms the findings of NMHCrx that 
the Plan fees in the aggregate (taking into account discounts) using 
the NMHCrx PPN are less than total Plan fees in the aggregate would be 
at standard retail prices. In addition, the Custom Network used by the 
Plan creates a better overall discount than the PPN alone, providing 
the Plan with improved cost management. In its December 2005 report to 
the Trustees, NMHCrx advised that actual experience under the Custom 
Network for the 12-month period ending August 31, 2005 (the most recent 
period for which data was then available) produced an approximate 29% 
overall discount for prescription drugs from ``usual and customary'' 
pricing--mail (20.99% for brand and 49.01% for generic) and retail 
(15.32% for brand and 57.15% for generic). The estimated retail price 
for the 320,877 prescriptions dispensed for Plan participants was 
$32,529,495.97. Actual Plan costs through the Custom Network pharmacies 
were $23,116,008.57. These findings are based on the average 
reimbursement rates achieved through the negotiated discounts with the 
represented pharmacies in these networks.
    12. Minimum standards and objective criteria for the selection of 
the employer pharmacies in the Custom Network would be developed by the 
I/F, working with NMHCrx and the Plan's independent Consultants. The 
minimum standards and objective criteria would be set forth in writing, 
and would include: (a) The maximum average price of the prescription 
drugs (considering both brand and generic options) and cost comparisons 
with the PPN network pharmacies; (b) The quality and availability of 
the prescription drugs (e.g., is there a choice between generic and 
brand name drugs); (c) Geographic proximity of the pharmacy (e.g., 
pharmacies that are located closer to participants should be selected 
over pharmacies that are further away, all else being equal); and (d) 
Administrative efficiency (e.g., the length of time and the cost for 
the Plan to process claims with the particular pharmacy).
    13. There would be no restrictions, other than the minimum 
standards and objective criteria, on the pharmacies that could be 
selected for the Custom Network. Any such pharmacies would be, or would 
be owned by, the Plan's participating employers or their affiliates 
(see rep. 5, above). NMHCrx would screen applicant pharmacies for 
compliance with the established standards and criteria and send the 
qualifiers to the I/F. The I/F would not be required to select any of 
the pharmacies currently participating in the Custom Network, but could 
select the same participating employer pharmacies as long as they 
satisfy the minimum standards and objective criteria. Eligible employer 
pharmacies, as selected by the I/F, would negotiate Custom Network 
contracts with NMHCrx. While all pharmacies in the Custom Network have 
been asked to participate at specific rates and fees, some of these 
pharmacies have chosen at their own discretion to participate at rates 
and fees that are lower than the minimum pricing requirement.
    14. Plan participants were provided a summary of material 
modifications which explained the Custom Network pharmacy arrangement 
at the time the benefit was introduced. The participants have also 
received information about how to purchase their prescriptions through 
both NMHCrx's PPN and the Custom Network pharmacies in various news and 
``how to'' articles published in the Plan's newsletter, Benefits 
Update. The applicant represents that all future updated summary plan 
descriptions will inform participants that the purchase price of a 
particular prescription drug at Custom Network pharmacies may be less 
than the purchase price that is available either through the PPN 
network pharmacies or through retail non-participating pharmacies, and 
that the cost of prescription drugs in the aggregate over the course of 
a 12-month plan year will be lower at Custom Network pharmacies than at 
PPN pharmacies and significantly lower when compared to non-
participating retail pharmacies.
    15. The applicant represents that Plan participants benefit from 
the transactions described herein because: (a) Employees and their 
family members who participate in the Plan benefit from the discounts 
and convenience of the Custom Network through use of both their own 
employers' pharmacies and the pharmacies of all the other contributing 
employers with pharmacies in the network; and (b) Substantially more 
than 50% of the pharmacies in the Custom Network are pharmacies not 
affiliated with any particular participant's employer--that is, 
participants or beneficiaries have an ample choice to use a pharmacy 
unaffiliated with their employer to obtain the Custom Network benefits.
    16. In summary, the applicant represents that the subject 
transactions satisfy the criteria contained in section 408(a) of the 
Act because: (a) The terms of the transactions are at least as 
favorable to the Plan as those the Plan could obtain in similar arm's-
length transactions with an unrelated party; (b) All determinations 
regarding which party in interest pharmacies, if any, may participate 
in the Custom Network, will be made, by the Plan's independent 
fiduciary based on objective standards developed by the independent 
fiduciary in reliance on information provided by the Plan's Pharmacy 
Benefits Manager, an entity which is independent of any contributing 
employer to the Plan, and the Plan's independent actuarial consultants; 
(c) At least 50% of the providers participating in the Custom Network 
are pharmacies of contributing employers other than the employer of any 
individual Plan participant, so that a participant is assured of having 
an ample choice of pharmacies without loss of Custom Network benefits; 
(d) In the aggregate, costs during each plan year for the Plan from 
participants using the Custom Network pharmacies will be at least one 
percent less than costs through the use of NMHCrx's PPN pharmacies, 
which will in turn in the aggregate be significantly less than costs 
for the retail purchase of such prescription drugs; (e) The Plan's 
independent fiduciary will monitor the subject transactions to 
determine that all conditions of the exemption, including conditions 
(d) and (e) regarding pricing, continue to be satisfied; and (f) All 
future updated summary plan descriptions furnished to participants will 
state that the purchase price of a particular prescription drug at 
Custom Network pharmacies may be less than the purchase price that is 
available either through the PPN network pharmacies or through retail 
non-participating pharmacies, and that the cost of prescription drugs 
in the aggregate over the course of a 12-month plan year will be lower 
at Custom Network pharmacies than at PPN pharmacies and significantly 
lower when compared to non-participating retail pharmacies.

[[Page 32132]]


FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 693-8546. (This is not a toll-free number.)

The Revlon Employees Savings, Investment and Profit Sharing Plan (the 
Plan) Located in New York, New York

[Application No. D-11355]

Proposed Exemption

    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 exemption is 
granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) and 
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, effective February 17, 2006, to (1) 
the acquisition of certain stock rights (Stock Right(s)) by the Plan in 
connection with a Stock Rights offering by Revlon, Inc. (Revlon), a 
holding company that wholly owns Revlon Consumer Products Corporation 
(RCPC), a party in interest with respect to the Plan; (2) the holding 
of the Stock Rights by the Plan during the subscription period of the 
Stock Rights offering; and (3) the disposition or exercise of the Stock 
Rights by the Plan, provided that the following conditions were met:
    (a) The Stock Rights were acquired pursuant to Plan provisions for 
individually-directed investment of such accounts;
    (b) The Plan's receipt of the Stock Rights occurred in connection 
with a Stock Rights offering made available on the same terms to all 
shareholders of common stock of Revlon;
    (c) All decisions regarding the holding and disposition of the 
Stock Rights by the Plan were made, in accordance with the Plan 
provisions for individually-directed investment of participant 
accounts, by the individual Plan participants whose accounts in the 
Plan received Stock Rights in connection with the Stock Rights 
offering;
    (d) The Plan's acquisition of the Stock Rights resulted from an 
independent act of Revlon as a corporate entity, and all holders of the 
Stock Rights, including the Plan, were treated in the same manner with 
respect to the acquisition; and
    (e) The price received by the Plan for the Stock Rights was no less 
than the fair market value of the Stock Rights on the date of the Stock 
Rights offering.
    Effective Date: This exemption, if granted, will be effective as of 
February 17, 2006.

Summary of Facts and Representations

    RCPC is the sponsor of the Plan. The Plan is a tax-qualified, 
defined contribution profit sharing plan that incorporates a cash or 
deferred (i.e., 401(k)) arrangement. The trustee of the trust 
established under the Plan is Fidelity Management Trust Company (the 
Trustee).\4\
---------------------------------------------------------------------------

    \4\ Fidelity Management Trust Company became the trustee 
effective January 3, 2006, at which time it replaced Putnam 
Fiduciary Trust Company as trustee.
---------------------------------------------------------------------------

    Revlon is a world leader in cosmetics, skin care, fragrance and 
personal care. MacAndrews & Forbes Holdings Inc. (together with its 
affiliates, MacAndrews & Forbes), which is wholly owned by Ronald O. 
Perelman, beneficially owns 190,160,641 shares of the Class A Common 
Stock (including 32,599,374 shares of the Class A Common Stock 
beneficially owned by a family member, with respect to which shares 
MacAndrews & Forbes holds a voting proxy). Mr. Perelman, through 
MacAndrews & Forbes, also beneficially owns all of the outstanding 
31,250,000 shares of the Class B Common Stock, which, together with the 
Class A Common Stock referenced above, represents approximately 60% of 
the total outstanding shares of Revlon's outstanding Common Stock. 
Based on the shares referenced above, Mr. Perelman, as of December 31, 
2005, had approximately 77% of the combined voting power of the 
outstanding shares of the Class A and the Class B Common Stock.\5\
---------------------------------------------------------------------------

    \5\ The 221,410,641 shares of Revlon's combined Class A common 
stock and Class B common stock beneficially owned by Mr. Perelman 
represented approximately 60% of the total 371,720,324 shares of 
Revlon's combined Class A and Class B common stock that was issued 
and outstanding.
---------------------------------------------------------------------------

    Class A common stock and Class B common stock are in all respects 
identical except that (i) each share of Class A common stock entitles 
the holder to one vote and each share of Class B common stock entitles 
the holder to ten votes on all matters being voted on by Revlon's 
stockholders, (ii) Class A common stock is publicly traded and held in 
the Plan whereas Class B common stock is not publicly traded and not 
held in the Plan, and (iii) certain transfer restrictions apply to 
Class B common stock that do not apply to Class A common stock. These 
restrictions provide that the Class B common stock (all of which is 
currently held by MacAndrews & Forbes) can only be transferred to 
affiliates of the current holder of Class B common stock.
    The Plan provides for a variety of contributions in addition to 
401(k) contributions, including after-tax employee contributions, 
company-matching contributions, rollover contributions and profit-
sharing contributions. The Plan permits individual participants to 
direct the investment of their entire account balance under the Plan to 
the extent described below and is intended to satisfy the requirements 
of section 404(c) of ERISA with respect to all such participant 
investment directions.
    One of the investments available under the Plan is Class A Common 
Stock (the Common Stock Fund).\6\ Participants may allocate all 
contributions made on their behalf (and any earnings thereon) among the 
Common Stock Fund and all of the other investments available under the 
Plan.\7\
---------------------------------------------------------------------------

    \6\ No other ``employer security,'' within the meaning of 
section 407 of ERISA, is presently available as an investment under 
the Plan.
    \7\ Plan participants are effectively free to designate the 
extent to which their Plan accounts will be invested in Class A 
Common Stock.
---------------------------------------------------------------------------

    As of January 3, 2006, there were approximately 3,598 participants 
in the Plan. The Plan's assets totaled approximately $136,435,045.12. 
Approximately 1,560 Plan participants and beneficiaries held shares of 
Class A Common Stock. The Plan holds approximately 940,004 shares of 
Class A Common Stock, or approximately 0.28% of the then outstanding 
shares of Class A Common Stock, with a value of approximately 
$2,914,291.40 (based on the $3.10 opening price on the New York Stock 
Exchange of Class A Common Stock on January 3, 2006), or approximately 
2.1% of Plan assets.
    Because the Plan holds Class A Common Stock, Stock Rights will be 
allocated to Plan participants in proportion to their holdings of Class 
A Common Stock under the Plan, and Plan participants will be entitled 
to dispose of those Stock Rights on the terms and conditions described 
more fully below. Participants in the Plan will receive the same 
information regarding the Stock Rights offering as is provided to all 
stockholders. In addition, participants will be provided a special 
notice that describes some features of the Stock Rights offering in 
easily understood language, together with additional information that 
is peculiar to their status as holders of Class A Common Stock under 
the Plan (for example, special rules relating to the payment of the 
purchase price for shares under the Stock Rights offering).
    If the Plan were denied participation in the Stock Rights offering, 
Plan

[[Page 32133]]

participants would not receive the benefit of the Stock Rights which 
other stockholders will receive, including the ability to realize value 
by selling Stock Rights. Revlon is requesting this exemption so that 
Plan participants may be eligible to participate in the Stock Rights 
offering on the same basis as other stockholders.\8\
---------------------------------------------------------------------------

    \8\ The distribution of the Rights will be accomplished as a 
dividend under Delaware corporate law. Accordingly, Revlon will be 
required to distribute the Rights to all stockholders on a pro rata 
basis. In exercising their fiduciary duties to all stockholders, the 
Board of Directors of Revlon is required to treat all stockholders 
(including the Plan) the same and cannot pay a dividend to some, but 
not all, stockholders.
---------------------------------------------------------------------------

    Revlon launched the Stock Rights offering on February 17, 2006. The 
Stock Rights will expire at 5 p.m., New York, New York local time on 
the date that is approximately 30 days later (on/or about March 20, 
2006). The amount of the Stock Rights offering will be $110 million 
(the Maximum Amount). Each Stock Right entitles its holder to purchase 
a number of shares of Class A Common Stock such that the aggregate 
number of shares of Class A Common Stock to be offered in the Stock 
Rights offering, multiplied by the Subscription Price, will equal the 
Maximum Amount.\9\
---------------------------------------------------------------------------

    \9\ Revlon is required under its credit agreement to use the 
proceeds of a $110 million equity issuance by Revlon, to be 
completed on or before March 31, 2006, to promptly reduce its 
indebtedness. Revlon has determined that a rights offering such as 
the Stock Rights offering is the most appropriate way for it to 
fulfill the capital commitment while providing an opportunity for 
all stock holders of Revlon, including the Plan participants, to 
retain their pro rata ownership in Revlon. Revlon will not be able 
to timely fulfill its credit agreement commitment if the Stock 
Rights offering is delayed until prospective exemptive relief is 
provided.
---------------------------------------------------------------------------

    Revlon will pay all of the fees and expenses attributable to the 
Stock Rights offering (other than any fees that may be charged by 
brokers or nominees). For any Stock Rights sold by the Plan, a 
commission of 2.9 cents per Stock Right is being charged to the Plan 
account from which the Stock Right was sold. The commission was 
disclosed to participants in the materials provided explaining the 
Stock Rights Offering. The commission was not paid to Revlon but to the 
broker-dealer, National Financial Services (NFS) of New York City, New 
York, for the sale transaction. NFS is an affiliate of the Trustee and 
is wholly owned by Fidelity Global Brokerage Group, Inc.
    The Plan's investment committee established under the Plan (the 
Investment Committee) considered whether it was appropriate and in the 
best interests of the Plan to permit Fidelity to effect sales of Rights 
under the Plan through NFS. The Investment Committee took the following 
considerations into account, among others: (a) Brokerage services 
required to effect the sales transactions are necessary services for 
the operation of the Plan; (b) the reputation of NFS as a reputable 
broker; (c) the already established procedures between Fidelity and NFS 
for the prompt execution of sales transactions under the Plan; (d) the 
ability of NFS to accept the engagement upon very short notice (i.e., 
the short notice provided by Revlon); (e) the reasonable price charged 
for the brokerage services when compared with other unrelated brokers; 
and (f) the short-term nature of the arrangement. Following discussion, 
the Investment Committee authorized the use of NFS as broker for 
effecting sales of Stock Rights under the Plan, subject to an attempt 
being made to negotiate a more favorable commission rate. Although 
Fidelity is affiliated with NFS, Fidelity did not use any discretion to 
select NFS as broker for the Rights. Plan participants paid commissions 
on the sale of their Stock Rights in the same manner as any other 
similarly situated shareholder paid commissions on the sale of their 
Rights.\10\
---------------------------------------------------------------------------

    \10\ The Department provides no opinion as to whether the 
selection of the broker dealer meets the conditions set forth under 
section 408(b)(2) of the Act.
---------------------------------------------------------------------------

    Each Stock Right carries with it a basic subscription privilege and 
an over-subscription privilege. The basic subscription privilege 
entitles a Stock Rights holder to subscribe for its pro rata share of 
Class A Common Stock offered in the Stock Rights offering. MacAndrews & 
Forbes has agreed, upon the consummation of the Stock Rights offering 
and at the Subscription Price, to acquire the number of shares of Class 
A Common Stock as equals the number of shares of Class A Common Stock 
that MacAndrews & Forbes would otherwise have been entitled to purchase 
in the Stock Rights offering pursuant to its basic subscription 
privilege. Except for MacAndrews & Forbes, all holders of Common Stock 
who elect to exercise their Stock Rights in full may also subscribe for 
the remaining shares at the same Subscription Price per share, to the 
extent that other shareholders do not exercise all of their Stock 
Rights in full. Although MacAndrews & Forbes, as a holder of Common 
Stock, would otherwise be entitled to such over-subscription privilege, 
MacAndrews & Forbes has agreed to subordinate such Stock Rights in 
order to enhance the over-subscription privilege of other stockholders.
    If an insufficient number of shares is available to fully satisfy 
the over-subscription privilege requests, the available shares will be 
sold pro rata among Stock Rights holders who exercised their over-
subscription privilege based on the number of shares each Stock Rights 
holder subscribed for under the basic subscription privilege. Any 
excess subscription payments will be returned without interest or 
deduction promptly after the expiration of the Stock Rights offering.
    MacAndrews & Forbes has agreed to ``back-stop'' the Stock Rights 
offering by purchasing, on the same terms as the Stock Rights offering, 
such number of shares of Class A Common Stock as equals all of the 
shares that are not otherwise subscribed for by the other holders of 
Stock Rights under either their basic subscription privilege or their 
over-subscription privilege. This will ensure that Revlon will receive 
the Maximum Amount in the Stock Rights offering.
    Any election to exercise a Stock Right (whether made with respect 
to Stock Rights held under the Plan or otherwise) will be irrevocable 
once made. Plan participants who want to exercise some or all of their 
Stock Rights will be required to notify the Trustee on or before the 
date that is approximately seven (7) calendar days before the 
expiration of the Stock Rights offering (the Plan Election Date).\11\ 
Participants will also be entitled to direct the Trustee to sell the 
Stock Rights allocated to them on the open market (to the extent a 
trading market develops) by notifying the Trustee of such election on 
or before the Plan Election Date; any such election will be irrevocable 
once made and will be executed as soon as practicable after it is 
received. To the extent that a participant does not elect to either 
exercise or sell the Stock Rights credited to his or her account on or 
before the Plan Election Date, the Investment Committee will instruct 
the Trustee to sell such Stock Rights on the open market in the same 
manner as if the participant had directed such a sale. The Investment 
Committee will instruct the Trustee not to exercise Stock Rights where 
the Subscription Price exceeds the per share public trading price of

[[Page 32134]]

Class A Common Stock at the time for exercise (in which case an attempt 
will be made to sell the Stock Rights instead, although the Stock 
Rights likely will have no value in such a case and thus would expire 
without value).
---------------------------------------------------------------------------

    \11\ This date is before the expiration date of the Offering in 
order to enable the Trustee to review and implement participant 
directions (including the liquidation of individual account balances 
necessary to fund each participant's exercise price) and provide 
such aggregate instructions to the subscription agent under the 
Offering within the time constraints imposed generally with respect 
to the Offering. Because it is expected that the Offering will 
extend for at least thirty (30) calendar days, Revlon does not 
anticipate that this requirement will be unduly restrictive for Plan 
participants.
---------------------------------------------------------------------------

    Approximately three (3) calendar days before the expiration of the 
Stock Rights offering, the Trustee will liquidate an amount sufficient 
to pay a Plan participant's exercise price by selling a pro-rata 
portion of the amounts held in such participant's various investment 
funds (other than the Common Stock Fund) and transfer such funds to the 
subscription agent in order to participate in the Stock Rights offering 
on behalf of Plan participants who elect to exercise some or all of 
their Stock Rights. No Stock Rights under the Plan will be exercised 
before this date. The shares of Class A Common Stock purchased upon the 
consummation of the Stock Rights offering will be allocated to the 
accounts of Plan participants as soon as practicable thereafter.
    8. In summary, it is represented that the proposed transaction 
meets the statutory criteria of section 408(a) of the Act because: (a) 
The Stock Rights were acquired pursuant to Plan provisions for 
individually-directed investment of such accounts; (b) The Plan's 
receipt of the Stock Rights occurred in connection with a Stock Rights 
offering made available on the same terms available to all shareholders 
of common stock of Revlon; (c) All decisions regarding the holding and 
disposition of the Stock Rights by the Plan were made, in accordance 
with the Plan provisions for individually-directed investment of 
participant accounts, by the individual Plan participants whose 
accounts in the Plan received Stock Rights in connection with the Stock 
Rights offering; (d) The Plan's acquisition of the Stock Rights 
resulted from an independent act of Revlon as a corporate entity; and 
(e) The price received by the Plan for the Stock Rights was no less 
than the fair market value of the Stock Rights on the date of the Stock 
Rights offering.
    Notice to Interested Persons: Notice of the proposed exemption 
shall be given to all interested persons in the manner agreed upon by 
the Employer and Department within 15 days of the date of publication 
in the Federal Register. Comments and requests for a hearing are due 
forty-five (45) days after publication of the notice in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 693-8540 (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 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 that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E6-8528 Filed 6-1-06; 8:45 am]
BILLING CODE 4510-29-P