[Federal Register Volume 78, Number 215 (Wednesday, November 6, 2013)]
[Notices]
[Pages 66769-66778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-26506]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Proposed Exemptions From Certain Prohibited Transaction
Restrictions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemptions.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the
Internal Revenue Code of 1986 (the Code). This notice includes the
following proposed exemptions: D-11729, Bank of America Corporation;
and L-11760, Intel Corporation.
DATES: 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.
ADDRESSES: 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. 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 email or FAX. Any such
comments or requests should be sent either by email 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.
Warning: All comments will be made available to the public. Do not
include any personally identifiable information (such as Social
Security number, name, address, or other contact information) or
confidential business information that you do not want publicly
disclosed. All comments may be posted on the Internet and can be
retrieved by most Internet search engines.
SUPPLEMENTARY INFORMATION:
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).
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 (76 FR 66637, 66644, October 27, 2011).\1\ 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.
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\1\ The Department has considered exemption applications
received prior to December 27, 2011 under the exemption procedures
set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August
10, 1990).
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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.
Bank of America Corporation Located in Charlotte, NC
[Application No. D-11729]
Proposed Exemption
The Department is considering granting an exemption under the
authority of ERISA section 408(a) and Code section 4975(c)(2) in
accordance with the procedures set forth in 29 CFR Part 2570, subpart B
(76 FR 66637, 66644, October 27, 2011).
Section I: Covered Transactions
If this proposed exemption is granted, the restrictions of ERISA
sections 406(a)(1)(D) and 406(b) and the sanctions resulting from the
application of Code section 4975 (including the loss of exemption \2\
by reason of Code sections 4975(c)(1)(D), (E) and (F)) shall not apply
to the receipt of Relationship Benefits by an individual for whose
benefit a Covered Plan is established or maintained, or by his or her
Family Members, from BAC pursuant to an arrangement in which the
Account Value of, or the Fees incurred for services provided to, the
Covered Plan is taken into account for purposes of determining
eligibility to receive such Relationship Benefits, provided that each
condition of Section II of this proposed exemption is satisfied.
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\2\ Pursuant to Code section 408(e)(2)(A)(for an individual
retirement account or individual retirement annuity); Code section
530(e) (for a Coverdell education savings account); Code section
220(e)(2) (for an Archer medical savings account); or Code section
223(e)(2) (for a health savings account).
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[[Page 66770]]
Section II: Conditions
(a) The Covered Plan whose Account Value, or whose Fees paid, are
taken into account for purposes of determining eligibility to receive
Relationship Benefits under the arrangement must be established and
maintained for the exclusive benefit of the participant covered under
the Covered Plan, his or her spouse, or their beneficiaries.
(b) The Relationship Benefits offered under the arrangement must be
of a type that a Qualified Affiliate could offer consistent with all
applicable federal and state banking laws and all applicable federal
and state laws regulating Broker-Dealers.
(c) Where Account Values are taken into account for purposes of
determining eligibility to receive benefits under the arrangement, the
Account Values of Covered Plan accounts shall be treated as favorably,
for purposes of satisfying such eligibility requirements, as the
Account Values of other types of customer accounts.
(d) Where levels of Fees incurred are taken into account for
purposes of determining eligibility to receive benefits under the
arrangement, the levels of Fees incurred by Covered Plan accounts shall
be treated as favorably, for purposes of satisfying such eligibility
requirements, as the levels of Fees incurred by other types of customer
accounts.
(e) The Relationship Benefits offered under the arrangement must be
provided by a Qualified Affiliate in the ordinary course of its
business as a Bank or Broker-Dealer to customers who qualify for such
benefits, but who do not maintain Covered Plans with a Qualified
Affiliate.
(f) The combined total of fees for the provision of services to a
Covered Plan is not in excess of reasonable compensation within the
meaning of ERISA section 408(b)(2) and Code section 4975(d)(2).
(g) The investment performance of the investments made by the
Covered Plan is no less favorable than the investment performance of
identical investments that could have been made at the same time by a
customer of BAC who is not eligible for (or who does not receive)
Relationship Benefits.
(h) The Relationship Benefits offered under the arrangement to the
Covered Plan customer must be the same as are offered to non-Covered
Plan customers of Qualified Affiliates having the same aggregate
Account Value or the same amount of Fees generated.
Section III: Definitions
The following definitions apply to this proposed exemption:
(a) The term ``Account Value'' means investments in cash or
securities held in the account for which market quotations are readily
available. For purposes of the exemption, the term ``cash'' includes
savings accounts that are insured by a federal deposit insurance agency
and constitute deposits as that term is defined in 29 CFR 2550.408b-
4(c)(3). The term ``Account Value'' does not include investments that
are offered by BAC (or a Qualified Affiliate) exclusively to Covered
Plans.
(b) The term ``affiliate'' includes any person directly or
indirectly controlling, controlled by, or under common control with
Bank of America Corporation.
(c) The term ``Bank'' means a bank described in Code section
408(n).
(d) The term ``BAC'' means Bank of America Corporation and any of
its affiliates.
(e) The term ``Broker-Dealer'' means a broker-dealer registered
under the Securities Exchange Act of 1934, as amended.
(f) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(g) The term ``Covered Plan'' means an IRA or other savings account
described in section III(j) of this proposed exemption or a Keogh Plan
described in section III(k) of this proposed exemption that is
established with BAC as trustee or custodian.
(h) The term ``Family Members'' means beneficiaries of the
individual for whose benefit the Covered Plan is established or
maintained, who would be members of the family as that term is defined
in Code section 4975(e)(6), or a brother, a sister, or a spouse of a
brother or sister.
(i) The term ``Fees'' means commissions and other fees received by
a Broker-Dealer from the Covered Plan for the provision of services,
including but not limited to: Brokerage commissions, investment
management fees, investment advisory fees, custodial fees, and
administrative fees.
(j) The term ``IRA'' means an individual retirement account
described in Code section 408(a), an individual retirement annuity
described in Code section 408(b), a Coverdell education savings account
described in Code section 530, an Archer MSA described in Code section
220(d), or a health savings account described in Code section 223(d).
For purposes of this proposed exemption, the term ``IRA'' does not
include an employee benefit plan covered by Title I of ERISA, except
for a Simplified Employee Pension (SEP) described in Code section
408(k) and a Simple Retirement Account described in Code section 408(p)
that provides participants with the unrestricted authority to transfer
their balances to IRAs or Simple Retirement Accounts sponsored by
different financial institutions.
(k) The term ``Keogh Plan'' means a pension, profit-sharing, or
stock bonus plan qualified under Code section 401(a) and exempt from
taxation under Code section 501(a) under which some or all of the
participants are employees described in Code section 401(c). For
purposes of this proposed exemption, the term ``Keogh Plan'' does not
include an employee benefit plan covered by Title I of ERISA.
(l) The term ``Qualified Affiliate'' means any person directly or
indirectly controlling, controlled by, or under common control with BAC
that is a Bank or Broker-Dealer.
(m) The term ``Relationship Benefits'' means reduced or no cost
financial products and services, including premium rates of account or
investment interest, discounted rates of interest on loans, reductions
or waivers of otherwise applicable fees and charges, and/or
differentiated servicing.
Summary of Facts and Representations
1. Bank of America Corporation (the Applicant) is a bank holding
company and a financial holding company under the Gramm-Leach-Bliley
Act of 1999 (GLBA). As of December 31, 2011, Bank of America
Corporation and its subsidiaries had total consolidated assets of
approximately $2.1 trillion. The consumer and corporate banking
business of Bank of America Corporation and its affiliates (together,
BAC) is conducted primarily through Bank of America, National
Association (BANA). BANA is a national franchise that includes branch
and electronic banking, consumer lending services, and credit and debit
card services. BAC's brokerage business, conducted primarily through
Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch),
provides investment services, securities trading, research, and
brokerage services to consumer and corporate customers. Merrill Lynch
is a retail brokerage firm with approximately 17,000 financial advisors
and offices located in all 50 states and the District of Columbia.
Together, BANA and Merrill Lynch serve approximately 57 million
consumer and small business relationships and client accounts with more
than $2.2 trillion in net assets. In
[[Page 66771]]
the ordinary course of its business, BAC (including BANA and Merrill
Lynch) provide a range of financial products and services to
individuals including individual retirement accounts (IRAs) described
in Code section 408(a), individual retirement annuities described in
Code section 408(b), Coverdell education savings accounts described in
Code section 530, Archer MSAs described in Code section 220(d), health
savings accounts described in Code section 223(d) and Keogh plans
(i.e., pension, profit-sharing, or stock bonus plans qualified under
Code section 401(a) and exempt from taxation under Code section 501(a)
under which some or all of the participants are employees described in
Code section 401(c)) not covered by Title I of ERISA (each, a ``Covered
Plan'' as defined in the proposed exemption and collectively, the
``Covered Plans''). For purposes of this proposed exemption, the term
``Covered Plan'' includes Simplified Employee Pensions (SEP) described
in Code section 408(k) and Simple Retirement Accounts described in Code
section 408(p) that provide participants with the unrestricted
authority to transfer their balances to IRAs or Simple Retirement
Accounts sponsored by different financial institutions.
Reduced or No Cost Services in Prohibited Transaction Exemptions 93-33
and 97-11
2. The Applicant wishes to offer relationship banking and brokerage
benefits that are similar to the reduced or no cost services
contemplated by Prohibited Transaction Exemptions (PTEs) 93-33 and 97-
11. PTE 93-33 \3\ permits an individual for whose benefit an IRA or
Keogh Plan is established or maintained, or his or her family members,
to receive services at reduced or no cost from a bank under an
arrangement in which the account balance of the IRA or Keogh Plan is
considered when determining eligibility to receive such services. PTE
93-33 permits banks to offer their customers only those services
allowed under applicable federal and state banking laws.\4\ When an
affiliate of the bank offers the service, it must be a type of service
that the bank can offer its own customers.
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\3\ 58 FR 31053 (May 28, 1993), as amended at 59 FR 22686 (May
2, 1994), and as amended at 64 FR 11044 (March 8, 1999).
\4\ In the notice of proposed exemption for PTE 93-2 (PTE 93-33
subsequently amended PTE 93-2), the following examples of
relationship banking services were listed: free checking services,
discounted safe deposit box rents, or free loan closing costs. 56 FR
8365, 8366 (February 28, 1991). In addition, the Department notes
that a bank may offer other services or benefits to customers as
part of its relationship banking program. For example, under PTE 93-
33 a bank may offer its relationship banking customers a higher
interest rate on their investments, provided the conditions of the
exemption are met.
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3. PTE 97-11 \5\ permits an individual for whose benefit an IRA or
Keogh Plan is established or maintained, or his or her family members,
to receive services at reduced or no cost from a broker-dealer
registered under the Securities Exchange Act of 1934 under an
arrangement in which the account value or the fees incurred for
services provided to the IRA or Keogh Plan is considered when
determining eligibility to receive such services. PTE 97-11 limits the
services that broker-dealers may offer under a relationship brokerage
program to services that are permitted under federal and state laws
regulating broker-dealers.\6\ Furthermore, when an affiliate of the
broker-dealer offers the services, the services must be a type that the
broker-dealer can offer its own customers.
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\5\ 62 FR 5855 (February 7, 1997), as amended at 64 FR 11042
(March 8, 1999), and as amended at 67 FR 76425 (December 12, 2002).
\6\ In the notice of proposed exemption for PTE 97-11, the
following examples of relationship brokerage services were listed:
financial planning services, direct deposit/debit and automatic fund
transfer privileges, enhanced account statements, toll-free access
to client service centers, check writing privileges, debit/credit
cards, special newsletters, and reduced brokerage and asset
management fees. 61 FR 39996, 39997 (July 31, 1996). In addition,
the Department notes that a broker-dealer may offer its customers
additional services and benefits as part of its relationship
brokerage program. For example, under PTE 97-11, a broker-dealer may
offer its relationship brokerage customers a higher interest rate on
their investments, provided the conditions of the exemption are met.
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4. PTEs 93-33 and 97-11 provide relief from the restrictions of
ERISA sections 406(a)(1)(D) and 406(b) and the sanctions resulting from
the application of Code section 4975, including the loss of exemption
of an individual retirement account under Code section 408(e)(2) by
reason of Code section 4975(c)(1)(D), (E) and (F), for individuals for
whose benefit an IRA or Keogh Plan is established or maintained.
5. The Applicant states that BAC's decision to offer relationship
banking and brokerage benefits reflects the important changes that have
occurred in the financial industry since PTEs 93-33 and 97-11 were
issued. In this regard, the Applicant notes that PTEs 93-33 and 97-11
were granted by the Department prior to the enactment of the GLBA. The
Applicant represents that the GLBA altered the U.S. legal and
regulatory framework governing the operations of U.S. bank holding
companies such as Bank of America Corporation. The GLBA permits bank
holding companies that qualify as ``financial holding companies''--
including the Applicant--to affiliate broadly with various types of
financial services firms, including full service broker-dealers.
Furthermore, the enactment of the GLBA greatly facilitated financial
services integration in the United States and growth of bank-affiliated
securities operations.
6. According to the Applicant, another significant U.S. regulatory
development occurred in 1995 when the U.S. Federal Reserve Board (FRB)
adopted a rule regarding inter-affiliate ``combined-balance discount
service programs'' offered to individual customers of banks and bank
affiliates. In particular, the rule established a safe harbor from the
statutory restrictions on bank tying arrangements so that banks have
greater flexibility to package products with their affiliates. The
Applicant represents that the rule validated the ability of banks and
their broker-dealer affiliates to offer combined-balance discount
programs (that meet the safe harbor requirements) to their customers.
Furthermore, the Applicant represents that in 1997, the FRB reaffirmed
the safe harbor when it re-wrote its Regulation Y, which includes a
section dealing with anti-tying restrictions. The Applicant represents
that the relationship banking and brokerage benefits described in this
proposed exemption meet the safe harbor.
7. In 2008, the Department granted an individual exemption, PTE
2008-02,\7\ to Citigroup Inc. (Citigroup) that provides relief similar
to PTEs 93-33 and 97-11. Under the exemption, individuals for whose
benefit an IRA or Keogh Plan is established or maintained, and their
family members, can receive both banking and brokerage services at
reduced or no cost under an arrangement in which the account value of,
or the fees incurred for services provided to, the IRA or Keogh Plan is
taken into account for purposes of determining eligibility to receive
such services. As part of the arrangement, Citigroup contemplated
providing services such as: Reductions or waivers of fees for services
such as checking, ATM, investment advisory and account opening or
maintenance fees; preferred lending rates; premium interest crediting
rates; credit or debit cards providing services such as enhanced
mileage accumulation and reward point features; and the provision of
investment information and seminars
[[Page 66772]]
that are available on an invitation-only basis.
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\7\ 73 FR 3280 (January 17, 2008).
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Proposed Transactions
8. In 2009, the Applicant acquired Merrill Lynch, which operates a
significant retail securities business. As a result, BAC developed
programs that link retail banking services with retail brokerage
services. Under these programs, the Applicant's affiliates are able to
consider a customer's combined balance maintained with the Applicants's
affiliates to determine the customer's eligibility to receive various
benefits including bank and broker-dealer products and services at
reduced or no cost. The Applicant does not believe these arrangements
clearly fall within the relief provided by PTEs 93-33 and 97-11.
Therefore, the Applicant requests an exemption to permit the receipt of
certain benefits by an individual for whose benefit a Covered Plan is
established or maintained, or his or her family members, from BAC,
pursuant to an arrangement in which the account value of or the fees
incurred for services provided to the Covered Plan, is taken into
account for purposes of determining eligibility to receive such
products and services. The Applicant represents that these products and
services (Relationship Benefits) are defined as reduced or no cost
financial products and services, including premium rates of account or
investment interest, discounted rates of interest on loans, reductions
or waivers of otherwise applicable fees and charges, and/or
differentiated servicing. More specifically, the Relationship Benefits
will include: (1) Higher interest rates on products such as checking
accounts, savings accounts and certificates of deposit; (2) services
with reduced cost or value added features such as reductions or waivers
of fees on checking accounts and ATM access, reduced or waived
investment advisory and account opening or maintenance fees, reduced or
waived securities trading commissions, and preferred lending rates; (3)
credit or debit cards that provide services such as enhanced mileage
accumulation and reward points features; (4) access to enhanced
customer support services; and/or (5) investment information and
seminars that are available on an invitation-only basis. Differentiated
servicing refers to the provision of an enhanced level of customer
service relative to that which would otherwise be provided, such as
reduced customer service wait times, access to specialized customer
support representatives, specialized newsletters, and similar items.
9. The Applicant offers the following example of a Relationship
Benefits program that could be offered under the proposed exemption, if
granted:
An individual client of BAC is the beneficial owner of an IRA
with assets of $25,000 in a 12-month certificate of deposit, and BAC
is the IRA custodian. The client also maintains a savings account at
BANA with a balance of $10,000; a BANA checking account with a
balance of $5,000; and a brokerage account at Merrill Lynch with a
balance of $20,000. BAC makes a Relationship Benefits program
available to clients that maintain aggregate balances of $50,000 or
more in accounts eligible to participate in the program. Under the
Relationship Benefits program, certain account fees that might
otherwise apply are waived for the eligible accounts of qualifying
clients, and higher interest rates are paid on certain deposit
accounts. Without the exemption proposed herein, the client's IRA is
not an eligible account, so the client fails to qualify for the
program. Consequently, the client's checking account may be charged
a $10 fee for overdraft protection transfers, a $30 fee for stop
payment requests, and/or a $3 fee for receiving images of paid
checks. Additionally, the client's brokerage account will not be
eligible for the 30 free trades per month that would otherwise be
available through the program. Finally, if the client's IRA is not
eligible to participate, the interest rate paid on the savings
account will be 0.15% annual percentage yield (APY) rather than
0.20% APY, and the interest rate paid on the IRA's 12-month
certificate of deposit will be 0.35% APY rather than 0.45% APY. If
the proposed exemption is granted, the client will qualify for
program participation due to the IRA's inclusion as an eligible
account. Therefore, the client will receive more favorable interest
rates and waived fees under the program.
Statutory Findings
10. The Applicant represents that the statutory criteria needed to
grant an exemption under ERISA section 408(a) and Code section
4975(c)(2) will be satisfied. First, the proposed exemption is
administratively feasible because: (1) The conditions and relief of the
requested exemption are comparable to those described in PTEs 93-33,
97-11, and 2008-02; and (2) the requested exemption will not require
continued monitoring or other involvement on behalf of the Department.
Second, the Applicant claims that the proposed exemption is in the
interest of the Covered Plans because the plans will benefit from
access to better products and services available through the
Relationship Benefits program. Finally, the Applicant claims that the
proposed exemption is protective of the rights of the Covered Plan
participants and beneficiaries because:
(a) The Covered Plan whose account value, or whose fees paid, are
taken into account for purposes of determining eligibility to receive
Relationship Benefits under the arrangement will be established and
maintained for the exclusive benefit of the participant covered under
the Covered Plan, his or her spouse, or their beneficiaries.
(b) The Relationship Benefits offered under the arrangement will be
of a type that a qualified affiliate could offer consistent with all
applicable federal and state banking laws and all applicable federal
and state laws regulating broker-dealers.
(c) Where account values are taken into account for purposes of
determining eligibility to receive benefits under the arrangement, the
account values of Covered Plan accounts will be treated as favorably,
for purposes of satisfying such eligibility requirements, as the
account values of other types of customer accounts.
(d) Where levels of fees incurred are taken into account for
purposes of determining eligibility to receive benefits under the
arrangement, the levels of fees incurred by Covered Plan accounts will
be treated as favorably for purposes of satisfying such eligibility
requirements, as the levels of fees incurred by other types of customer
accounts.
(e) The Relationship Benefits offered under the arrangement will be
provided by a BAC affiliate in the ordinary course of its business as a
bank or broker-dealer to customers who qualify for such benefits, but
who do not maintain Covered Plans with a BAC affiliate.
(f) The combined total of fees for the provision of services to a
Covered Plan will not be in excess of reasonable compensation within
the meaning of ERISA section 408(b)(2) and Code section 4975(d)(2).
(g) The investment performance of the investments made by the
Covered Plan will be no less favorable than the investment performance
of identical investments that could have been made at the same time by
a customer of BAC who is not eligible for (or who does not receive)
Relationship Benefits.
(h) The Relationship Benefits offered under the arrangement to the
Covered Plan customer will be the same as are offered to non-Covered
Plan customers of BAC affiliates having the same aggregate account
value or the same amount of fees generated.
Notice to Interested Persons
The Applicant represents that since the number of interested
persons is very large, it will post notice of this proposed exemption
on its principal consumer banking and brokerage Web sites in addition
to publication of this notice in
[[Page 66773]]
the Federal Register. The Department must receive written comments and/
or requests for a public hearing no later than 45 days from the date
this notice is published in the Federal Register.
For Further Information Contact: Mr. Erin Hesse, U.S. Department of
Labor, telephone (202) 693-8546. (This is not a toll-free number.)
Intel Corporation (Intel or the Applicant) Located in Santa Clara, CA
[Application No. L-11760]
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 (76 FR 66637,
66644, October 27, 2011).
Section I. Transactions
If the proposed exemption is granted, the restrictions of sections
406(a)(1)(D) and 406(b) of the Act shall not apply to:
(a) The reinsurance of risks and the receipt of premiums therefrom
by Technology Assurance Limited (TAL), an affiliate of Intel, as the
term ``affiliate'' is defined in Section III(a) below, in connection
with basic and supplemental group term life insurance sold by the
Minnesota Life Insurance Company (MN Life), or any successor insurance
company which is unrelated to Intel (the Fronting Insurer), to the
Intel Group Life Insurance Plan (the Life Plan); and
(b) The reinsurance of risks and the receipt of premiums therefrom
by TAL, in connection with basic and supplemental accidental death and
dismemberment (AD&D) insurance sold by the Fronting Insurer to the
Intel Group Accidental Death and Dismemberment Plan (the AD&D Plan);
\8\ provided the conditions set forth in Section II, below, are
satisfied.
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\8\ The AD&D Plan and the Life Plan are together referred to
herein as the ``Plans.''
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Section II. Conditions
(a) TAL--
(1) Is a party in interest with respect to the Plans by reason of a
stock or partnership affiliation with Intel that is described in
section 3(14)(E) or 3(14)(G) of the Act;
(2) Is licensed to sell insurance or conduct reinsurance operations
in at least one ``State,'' as defined in section 3(10) of the Act;
(3) Has obtained a Certificate of Authority from the Hawaii
Department of Insurance (HIDOI), which has neither been revoked nor
suspended;
(4)(A) Will undergo an examination by an independent certified
public accountant for its last completed taxable year immediately prior
to the taxable year of the reinsurance transaction covered by this
proposed exemption, if granted; or
(B) Has undergone a financial examination by the HIDOI within five
(5) years prior to the end of the year preceding the year in which such
reinsurance transaction has occurred; and
(5) Is licensed to conduct reinsurance transactions by Hawaii,
whose law requires that an actuarial review of reserves be conducted
annually by an independent firm of actuaries and reported to the
appropriate regulatory authority.
(b) The Plans pay no more than adequate consideration for the
insurance contracts.
(c) No commissions are paid by the Plans with respect to the direct
sale of such contracts or the reinsurance thereof.
(d) In the initial year of every reinsurance contract involving TAL
and a Fronting Insurer, there is an immediate and objectively
determined benefit to participants and beneficiaries of the Plans in
the form of increased benefits, and such benefits continue in all
subsequent years of each such contract of reinsurance and in every
renewal of each such contract, and will at least approximate the
increase in benefits that will be effective as of the publication of
the final exemption in the Federal Register, as described in this
Notice of Proposed Exemption (the Notice).
(e) In the initial year and in subsequent years of coverage
provided by a Fronting Insurer, the formula used by the Fronting
Insurer to calculate premiums will be similar to formulae used by other
insurers providing comparable coverage under similar programs.
Furthermore, the premium charge calculated in accordance with the
formula will be reasonable and will be comparable to the premium
charged by the Fronting Insurer and its competitors with the same or a
better rating providing the same coverage under comparable programs.
(f) The Fronting Insurer has a financial strength rating of ``A''
or better from A. M. Best Company (A. M. Best). The reinsurance
arrangement between the Fronting Insurer and TAL will be indemnity
insurance only, (i.e., the Fronting Insurer will not be relieved of
liability to the Plans should TAL be unable or unwilling to cover any
liability arising from the reinsurance arrangement).
(g) The Plans retain an independent, qualified fiduciary (the I/F)
or successor to such fiduciary, as defined in Section III(c), below, to
analyze the transactions and to render an opinion that the requirements
of Section II(a) through (f) and (h) of this proposed exemption have
been satisfied.
(h) Participants and beneficiaries in the Plans will receive in
subsequent years of every contract of reinsurance involving TAL and the
Fronting Insurer no less than the immediate and objectively determined
increased benefits such participants and beneficiaries received in the
initial year of each such contract involving TAL and the Fronting
Insurer.
(i) The I/F will: Monitor the transactions proposed herein on
behalf of the Plans on a continuing basis to ensure such transactions
remain in the interest of the Plans; take all appropriate actions to
safeguard the interests of the Plans; and enforce compliance with all
conditions and obligations imposed on any party dealing with the Plans.
(j) In connection with the provision to participants in the Plans
of the insurance coverage provided by the Fronting Insurer which is
reinsured by TAL, the I/F will review all contracts (and any renewal of
such contracts) of the reinsurance of risks and the receipt of premiums
therefrom by TAL and must determine that the requirements of this
exemption, if granted, and the terms of the increased benefits continue
to be satisfied.
Section III. Definitions
(a) The term ``affiliate'' of a person includes any person directly
or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with the person;
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(c) The term ``I/F'' describes a person, or a successor to such
person, who is not Intel or TAL or an affiliate of either entity; and:
(1) Does not have an ownership interest in Intel, in TAL, or in an
affiliate of either;
(2) Is not a fiduciary with respect to the Plans prior to its
appointment to serve as the I/F;
(3) Has acknowledged in writing acceptance of fiduciary
responsibility and has agreed not to participate in any decision with
respect to any transaction in which it has an interest that might
affect its best judgment as a fiduciary; and
[[Page 66774]]
(4) Has appropriate training, experience, and facilities to act on
behalf of the Plans regarding the subject transactions in accordance
with the fiduciary duties and responsibilities prescribed by the Act.
For purposes of this definition of an ``I/F,'' no organization or
individual may serve as an I/F for any fiscal year if the gross income
received by such organization or individual (or partnership or
corporation of which such individual is an officer, director, or 10
percent or more partner or shareholder) for that fiscal year exceeds
two percent (2%) of that organization's or individual's annual gross
income from all sources for the prior fiscal year from Intel or from
TAL, or from an affiliate of either (including amounts received for
services as I/F under any prohibited transaction exemption granted by
the Department).
In addition, no organization or individual who is an I/F, and no
partnership or corporation of which such organization or individual is
an officer, director, or 10 percent (10%) or more partner or
shareholder, may acquire any property from, sell any property to, or
borrow any funds from Intel or from TAL, or from any affiliate of
either during the period that such organization or individual serves as
an I/F, and continuing for a period of six (6) months after such
organization or individual ceases to be the I/F, or negotiates any such
transaction during the period that such organization or individual
serves as the I/F.
In the event a successor I/F is appointed to represent the
interests of the Plans with respect to the subject transactions, there
may be no lapse in time between the resignation or termination of the
former I/F and the appointment of the successor I/F.
Summary of Facts and Representations
1. Intel, which is headquartered in Santa Clara, California,
develops advanced integrated digital technology products (primarily
integrated circuits) for industries such as computing and
communications. Intel also designs and manufactures computing and
communications components, wireless and wired connectivity products, as
well as platforms that incorporate these components.
For the fiscal year ending December 31, 2012, Intel earned revenue
of $53.3 billion and net income of $11.0 billion. Intel reported a
global employee workforce of 101,671 as of December 31, 2011 (with
approximately 55,500 employees in the United States). Intel is a party
in interest with respect to the Plans, pursuant to section 3(14)(C) of
the Act, as an employer whose employees are covered by the Plans.
2. TAL is an insurance company that is wholly owned by Intel. TAL
was originally incorporated in Hawaii on August 5, 2004, and
subsequently licensed to commence business on September 1, 2004, for
the purpose of reinsuring property and casualty risks of Intel. TAL is
a party in interest with respect to the Plans pursuant to section
3(14)(G) of the Act because it is a corporation of which 50 percent
(50%) or more of the combined voting power of all classes of stock
entitled to vote is owned directly or indirectly held by Intel, an
employer any of whose employees are covered by the Plans, as described
in section 3(14)(C) of the Act.
3. TAL writes Intel's Terrorism Risk Insurance Act coverage to
Intel and its subsidiaries. For the period and year-to-date ended
December 31, 2012, TAL reported total assets of $9,570,558, gross
written premiums of $3,300,636, and earned premiums of $166,200. TAL is
subject to regulation by HIDOI, which requires that at least 100% of
TAL's reserves be in some combination of cash, letters of credit,
investments in approved investment policy, premiums in the course of
collection, or other forms approved by HIDOI.
4. The Plans are welfare benefit plans that provide basic and
supplemental group term life insurance and basic and supplemental AD&D
coverage to active full-time and part-time employees of Intel. The
Plans are funded through insurance.
Intel's general full-time employees, part-time employees, and
contract employees are automatically enrolled in the basic Life Plan
and the basic AD&D Plan. These employees are eligible to participate in
supplemental and dependent coverage, regardless of age, sex, salary or
position. The Life Plan had approximately 48,717 participants, as of
August 31, 2012. Basic group term life insurance is paid for by Intel
through employer premium contributions.
5. Under the terms of the Life Plan, basic group term life
insurance is available to active full-time and contract employees at
two times eligible annual earnings, multiplied by 100% and then rounded
to the next higher $1,000 if not already a multiple thereof, subject to
a maximum of $1,000,000 of coverage. For example, according to the
Summary Plan Description (SPD) for the Life Plan, an employee earning
$25,000 per year would have ``basic life amount'' coverage of $50,000,
an employee earning $50,000 per year would have ``basic life amount''
coverage of $100,000, and so forth up to the maximum of $1,000,000.
In addition, basic group term life insurance is available to active
part-time employees at two times full-time equivalent eligible annual
earnings, multiplied by 62.5% and then rounded to the next higher
$1,000 if not already a multiple thereof, subject to a maximum of
$1,000,000 of coverage. For example, an employee earning $25,000 per
year would have ``basic life amount'' coverage of $32,000, an employee
earning $50,000 per year would have ``basic life amount'' coverage of
$63,000, and so forth up to the maximum of $1,000,000.
6. The Life Plan also provides supplemental group term life
coverage to full-time and part-time employees of Intel, but not to
Intel contract employees. Under the current terms of the Life Plan,
basic supplemental life insurance is available to active full-time
employees at one to seven times annual earnings as elected by the
employee, multiplied by 100% and then rounded to the next higher $1,000
if not already a multiple thereof, subject to a maximum of $2,000,000.
Basic supplemental life insurance is available to active part-time
employees at one to seven times annual earnings as elected by the
employee, multiplied by 62.5% and then rounded to the next higher
$1,000, if not already a multiple thereof, subject to a maximum of
$2,000,000.
Supplemental insurance is paid for by Intel's employees through
premium contributions. All insurance terminates at retirement, except
as provided for under the portability provision found in the SPD of the
Life Plan.
7. The Life Plan further provides supplemental dependent term life
insurance to full-time and part-time employees of Intel. Contract
employees are not eligible for this coverage. Dependent term life
insurance for the spouses and domestic partners of Intel's employees is
available to active full-time and part-time employees in the following
amounts: $20,000, $50,000, $100,000, $150,000, $200,000 or $250,000, as
elected by the employee. Dependent term life insurance for the children
of Intel's employees is available to active full-time and part-time
employees in the following amounts: $5,000, $10,000, $15,000 or
$20,000, as elected by the employee.
Dependent term life insurance coverage is paid for by Intel's
employees through premium contributions. All dependent insurance
terminates upon the employee's retirement except as provided under the
portability provision found in the Plans' SPD.
[[Page 66775]]
8. Under the terms of the AD&D Plan, basic AD&D insurance is
available to active full-time and contract employees of Intel at two
times the employee's eligible annual earnings, multiplied by 100%, and
then rounded to the next higher $1,000, if not already a multiple
thereof. Such AD&D coverage is subject to a maximum of $1,000,000 of
coverage. In addition, basic AD&D insurance is available to active
part-time employees of Intel at two times the employee's annual
earnings, multiplied by 62.5% and then rounded to the next higher
$1,000, if not already a multiple thereof. Such AD&D coverage is also
subject to a maximum of $1,000,000. All basic AD&D insurance that is
available to Intel employees is non-contributory insurance, which means
that the employer is required to make premium contributions.
9. The AD&D Plan also provides supplemental AD&D insurance to full-
time and part-time employees of Intel, but not to Intel's contract
employees. AD&D supplemental coverage is available to an active full-
time employee at one to seven times the annual earnings as elected by
the employee, multiplied by 100% and then rounded to the next higher
$1,000 if not already a multiple thereof. The maximum amount of
coverage for an active full-time Intel employee is $1,000,000. AD&D
coverage is also available to an active part-time employee of Intel at
one to seven times the employee's full-time equivalent eligible annual
earnings, multiplied by 62.5% and then rounded to the next higher
$1,000, if not already a multiple thereof. The maximum amount of
coverage is capped at $1,000,000.
Under the current terms of the AD&D Plan, all supplemental AD&D
insurance is paid for by Intel's employees through premium
contributions. Therefore, supplemental AD&D insurance is contributory
insurance, which means that the employee is required to make premium
contributions. All AD&D insurance terminates at retirement, except as
provided for under the portability provision found in the SPD. There
are 48,437 participants in the basic AD&D Plan, of which 21,202
participants have elected supplemental AD&D coverage.
10. The AD&D Plan further provides insurance coverage to dependents
of full-time and part-time employees of Intel, but not to dependents of
Intel's contract employees. Dependent AD&D insurance for the spouses,
domestic partners and children of Intel's employees is available to
active full-time and part-time employees in the following amounts: (a)
Option 1: spouse/same sex domestic partner $50,000; child(ren) $10,000;
(b) Option 2: spouse/same sex domestic partner $100,000; child(ren)
$20,000; (c) Option 3: Spouse/same sex domestic partner $150,000;
child(ren) $30,000; (d) Option 4: Spouse/same sex domestic partner
$200,000; child(ren) $40,000; and (e) Option 5: spouse/same sex
domestic partner $250,000; child(ren) $50,000. Dependent AD&D insurance
coverage is paid for by Intel's employees through premium
contributions. Benefits will terminate at the end of the calendar month
in which the dependent is no longer eligible.
11. From January 1, 2007, until December 31, 2012, the Plans'
benefits were insured by the Metropolitan Life Insurance Company
(MetLife). Since January 1, 2013, MN Life has been providing direct
insurance for the basic and supplemental group term life insurance and
the basic and supplemental AD&D coverage offered under the Plans in
accordance with an agreement MN Life entered into with Intel. As of
September 30, 2012, MN Life had total assets of approximately $28.4
billion. MN Life has agreed to a rate guarantee for a 7 year period
beginning January 1, 2013, through December 31, 2019. It is represented
that Intel selected MN Life based upon consideration of relevant
factors to the arrangement, including the reasonableness of the fees
and the quality and quantity of the benefits offered. Both MN Life and
MetLife are rated ``A+'' by A. M. Best.
The Applicant states that the change in insurance carriers from
MetLife to MN Life has not reduced Intel's or the employees' overall
costs for insurance benefits. The costs remain the same for both Intel
and the employees. However, the Applicant represents that the change in
carriers has resulted in several increased benefits for Intel
employees, as described below.
12. Also, on January 1, 2013, MN Life entered into a reinsurance
agreement with TAL to reinsure up to 100% of the Plans' risks with TAL.
However, TAL will not receive any premiums from MN Life until this
proposed exemption is granted. MN Life's reinsurance agreement with TAL
(the Reinsurance Agreement) is ``indemnity only''--that is, MN Life
will not be relieved of its liability for benefits under the Plans if
TAL is unable or unwilling to satisfy the liabilities arising from the
reinsurance arrangement.
13. As TAL is a party in interest with respect to the Plans, the
reinsurance of the risks associated with the basic and supplemental
group term life insurance and basic and supplemental AD&D coverage
offered to the Plans by MN Life results in the indirect transfer to TAL
of the Plans' premium payments, which are plan assets. Section
406(a)(1)(D) of the Act prohibits the transfer to, or use by or for the
benefit of, a party in interest, of any assets of a plan. Accordingly,
this proposed exemption, if granted, would provide relief from the
prohibitions set forth in section 406(a)(1)(D) of the Act for the
reinsurance of risks and the receipt of premiums therefrom by TAL, in
connection with basic and supplemental group term life insurance and
basic and supplemental AD&D coverage.
In addition, because the reinsurance by TAL of such insurance
coverage was contemplated by Intel at the time that the Plans obtained
insurance coverage from MN Life, such transactions could constitute
violations by Intel of section 406(b) of the Act. In this regard,
section 406(b)(1) of the Act prohibits a fiduciary from dealing with
the assets of a plan in his own interest or for his own account.
Section 406(b)(2) of the Act prohibits a fiduciary from acting in a
transaction involving plan assets on behalf of a party whose interests
are adverse to those of the plan. Section 406(b)(3) of the Act
prohibits a fiduciary from receiving any consideration for his own
personal account from any party dealing with a plan in connection with
a transaction involving plan assets.
14. With respect to the Reinsurance Agreement between MN Life and
TAL, the Applicant represents that all eligible active full-time and
part-time employee participants in the Plans have been receiving
certain increases to their basic and supplemental group term life
insurance since January 1, 2013. In this regard, the supplemental group
term life and supplemental AD&D benefit coverage under the Plans has
been increased. According to the Applicant, as noted above, Intel
employees are currently eligible to elect up to seven times their
annual salary for supplemental group term life insurance and up to six
times or seven times their annual salaries for supplemental AD&D
benefits. Formerly, employees who elected supplemental group term life
insurance and supplemental AD&D coverage were eligible to elect up to
five times and six times their annual earnings, respectively. The
maximum amount of coverage for these benefits will remain the same
(capped at $2,000,000 for the supplemental group term life insurance,
and $1,000,000 for the supplemental AD&D insurance).
The Applicant represents that the insurance premiums employees pay
for these increases will not be raised unless the employees elect to
increase their
[[Page 66776]]
supplemental life and/or supplemental AD&D coverage. The Applicant also
explains that if Intel employees seek supplemental group term life
insurance or AD&D insurance outside of their respective Plans, they
would be doing so in the individual insurance market of the state in
which they live. In most states, the employee would be subjected to
individual underwriting, and would on average, pay higher premiums than
on a group basis.
15. Intel is providing all of its employees who are participants in
the Plans with access to Ceridian's Will Preparation and Legal Services
program. This benefit enhancement includes the following services: (a)
A free 30-minute initial consultation per legal issue with an attorney
in the Plan participant's state of residence; (b) the creation of
various legal documents, such as a will or a financial power of
attorney; (c) a referral to a local attorney, access to a variety of
legal forms, and access to an online legal library; and (d) a 25%
discount off an attorney's normal hourly rate should an employee retain
an attorney after an initial consultation. Intel is bearing the cost of
this benefit enhancement.
According to the Applicant, previously, only Intel employees who
were enrolled in the supplemental group term life insurance program had
access to the free will preparation service offered by Hyatt Legal
Plans.
16. Further, Intel is providing legacy planning services to
employees to assist them in their time of need. These services relate
to: (a) Asset distributions; (b) last wishes; (c) estate planning; (d)
last will and testament; (e) power of attorney; (f) healthcare
directives; (g) beneficiary designations; and (h) document locator.
Legacy planning services are provided to all active Intel employees
through secure Web site access. Intel is bearing the full cost of this
enhancement to the Plan.
17. Finally, Intel is providing new beneficiary financial
counseling services to beneficiaries of all active employees as part of
the Plan. In effect, eligible individuals are able to receive financial
services through PriceWaterhouseCoopers LLP. The beneficiary financial
counseling services (BFC Services) are available to all beneficiaries
receiving life benefits at no additional cost. The BFC Services provide
the following benefits to beneficiaries of Intel employees: (a) A
beneficiary guide giving information on estate issues, survivor
benefits, financial planning and non-financial issues; (b) eAdvisor, an
integrated planning tool giving beneficiaries access to online
financial calculators, life event guides and related services; (c)
access to the bi-monthly electronic financial planning newsletter,
``Your Money, Your Future;'' (d) a computer-generated personalized
financial analysis; (e) ConseLine, an unlimited toll-free telephone
access for one year on financial planning issues; and (f) six-months of
personal financial counseling.
Intel states that the benefit enhancements described above will
impose a financial burden on the sponsor of the Plans because, with the
exception of employees electing increased supplemental group term life
and AD&D coverage, Intel will be bearing the $94,000 annual costs.
18. In connection with this exemption request, Milliman,
Incorporated (Milliman) has been engaged to act as the I/F on behalf of
the Plans for the purpose of evaluating, and if appropriate, approving
the subject transactions. Specifically, William J. Thomson, FSA, MAAA,
Principal and Consulting Actuary with Milliman has been appointed to
undertake the duties of the independent fiduciary. In this regard,
Milliman is responsible for conducting a due diligence review and
analysis of the proposed transactions and for providing a written
opinion as to whether the arrangement complies with the Department's
requirements for an administrative exemption. Milliman certifies that
it is qualified to serve as the I/F and the personnel who comprise
Milliman are experienced in prohibited transaction exemptions issued by
the Department. Milliman represents that it is independent in that it
does not have and has not previously had, any relationship with any
party in interest (including any affiliates thereof) engaging in the
transactions described above. Further, Milliman represents that the
gross income it received from Intel, TAL or MN Life for its fiscal year
does not exceed two percent of its gross annual income from all
sources.
19. In connection with the transactions that are the subject of
this proposed exemption, Milliman, among other things: (a) Reviewed a
draft of Intel's request for an administrative exemption from the
Department; (b) conferred with Intel's representative to discuss the
transactions and the Plans; and (c) conducted such other due diligence
reviews as were deemed necessary. Milliman also considered the premiums
to be paid by the Plans for the proposed coverage, and determined that
the premiums were comparable to the premiums that would have been
charged by a competitor insurer. Milliman notes that the premium rate
agreed to with MN Life includes a percentage allocation for non-claims
expenses, which expenses here include fronting fees, expenses and
taxes.
20. Milliman has determined that the reinsurance arrangement will
result in an immediate and objectively determined benefit in the form
of increased supplemental life insurance and AD&D benefits, enhanced
will preparation and legal services, and new legacy planning and
beneficiary financial counseling services to all participants and
beneficiaries of the Plans. Milliman states that the benefit
enhancements provide a means of reducing personal financial risks that
may be unavailable to many of the Plans' participants as individuals,
which provides a value to these persons even if they never file a
claim.
21. The Applicant represents that the proposed exemption is
administratively feasible because the reinsurance of the Plans' risks
under the terms of the group term life insurance and AD&D coverage is,
among other things, subject to review by an I/F, which can be audited.
In addition, the Applicant notes that Intel has and will bear the cost
of the exemption application and of notifying the interested persons.
Further, the Applicant explains that the proposed exemption does not
require continued monitoring or other involvement by the Department.
The Applicant also represents that the proposed exemption is in the
interest of the Plans because the Plans will pay no more than adequate
consideration for the insurance contracts with MN Life. The Applicant
further represents that the proposed exemption is protective of the
rights of the participants and beneficiaries of the Plans because the
exemption requires the review and approval of an I/F, at Intel's
expense. Specifically, the proposed exemption, if granted, requires
that the I/F analyze the subject transactions and render an opinion
regarding whether certain of the conditions of the exemption were
satisfied, including that: (a) The Plans pay no more than adequate
consideration for the insurance contracts; (b) the Plans pay no
commissions with respect to the direct sale of such contracts or the
reinsurance thereof; (c) in the initial year of every contract
involving TAL and a Fronting Insurer, there is an immediate and
objectively determined benefit to participants and beneficiaries of the
Plans in the form of increased benefits approximating the increase in
benefits that is effective January 1, 2013, as described herein, and
such benefits continue in all subsequent years of each contract and in
every renewal of each contract; and (d) in the initial year and in
subsequent years of coverage
[[Page 66777]]
provided by a Fronting Insurer, the formula used by the Fronting
Insurer to calculate premiums is similar to formulae used by other
insurers providing comparable coverage under similar programs.
Furthermore, the premium charge calculated in accordance with the
formula will be reasonable and comparable to the premium charged by the
Fronting Insurer and its competitors with the same or a better rating
providing the same coverage under comparable programs.
The Applicant states that if exemptive relief is granted, any
Fronting Insurer will have a financial strength rating of ``A'' or
better from A. M. Best, and the reinsurance arrangement between the
Fronting Insurer and TAL will be indemnity insurance only.
Finally, the Applicant notes that participants and beneficiaries in
the Plans will receive in subsequent years of every contract of
reinsurance involving TAL and the Fronting Insurer no less than the
immediate and objectively determined increased benefits such
participant and beneficiary received in the initial year of each such
contract involving TAL and the Fronting Insurer.
22. In summary, the Applicant represents that the reinsurance
transactions will meet the criteria of section 408(a) of the Act since,
among other things:
(a) The Plans will pay no more than adequate consideration for the
insurance contracts;
(b) No commissions will be paid by the Plans with respect to the
direct sales of such contracts or the reinsurance thereof;
(c) In the initial year of every contract involving TAL and a
Fronting Insurer, there will be an immediate and objectively determined
benefit to participants and beneficiaries of the Plans in the form of
increased benefits, and such benefits will continue in all subsequent
years of each contract and in every renewal of each contract, and will
approximate the increase in benefits that are effective January 1,
2013, as described in the Notice;
(d) In the initial year and in subsequent years of coverage
provided by a Fronting Insurer, the formula used by the Fronting
Insurer to calculate premiums will be similar to formulae used by other
insurers providing comparable coverage under similar programs.
Furthermore, the premium charge calculated in accordance with the
formula will be reasonable and will be comparable to the premium
charged by the Fronting Insurer and its competitors with the same or a
better rating providing the same coverage under comparable programs;
(e) The Fronting Insurer will have a financial strength rating of
``A'' or better from A. M. Best. The reinsurance arrangement between
the Fronting Insurer and TAL will be indemnity insurance only;
(f) The Plans will retain an I/F or successor to such fiduciary to
analyze the transactions and to render an opinion that certain relevant
requirements of the proposed exemption, if granted, have been
satisfied;
(g) Participants and beneficiaries in the Plans will receive in
subsequent years of every contract of reinsurance involving TAL and the
Fronting Insurer no less than the immediate and objectively determined
increased benefits such participant and beneficiary received in the
initial year of each such contract involving TAL and the Fronting
Insurer;
(h) The I/F will: Monitor the transactions proposed herein on
behalf of the Plans on a continuing basis to ensure such transactions
remain in the interest of the Plans; take all appropriate actions to
safeguard the interests of the Plans; and enforce compliance with all
conditions and obligations imposed on any party dealing with the Plans;
and
(i) In connection with the provision to participants in the Plans
of the insurance coverage provided by the Fronting Insurer which is
reinsured by TAL, the I/F will review all contracts (and any renewal of
such contracts) of the reinsurance of risks and the receipt of premiums
therefrom by TAL and will determine that the requirements of this
exemption, if granted, and the terms of the benefit enhancements
continue to be satisfied.
Notice to Interested Persons
It is represented that Intel will notify interested persons of the
publication of the Notice in the Federal Register by email and then
first class mail to each such interested person's most recent address
maintained in the records of the administrator of the Plans, if the
email is undeliverable. The Notice will also be posted on Intel's
internal Web site. Such notification will contain a copy of the Notice,
as it appears in the Federal Register on the date of publication, plus
a copy of the Supplemental Statement, as required pursuant to 29 CFR
2570.43(a)(2) which will advise all interested persons of their right
to comment and to request a hearing. Intel will provide such
notification to all such interested persons within 10 days of the date
of publication of the Notice in the Federal Register. Intel will mail
the letters within 10 days of the undeliverable response being
received. All written comments and/or requests for a hearing must be
received by the Department from interested persons no later than 50
days after publication of the Notice in the Federal Register.
All comments will be made available to the public.
Warning: Do not include any personally identifiable information
(such as name, address, or other contact information) or confidential
business information that you do not want publicly disclosed. All
comments may be posted on the Internet and can be retrieved by most
Internet search engines.
For Further Information Contact: Blessed Chuksorji-Keefe of the
Department, telephone (202) 693-8567. (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
[[Page 66778]]
(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.
Signed at Washington, DC, this 31st day of October 2013.
Lyssa E. Hall,
Director Office of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2013-26506 Filed 11-5-13; 8:45 am]
BILLING CODE 4510-29-P