[Federal Register Volume 82, Number 71 (Friday, April 14, 2017)]
[Notices]
[Pages 18013-18018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07421]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11880]


Notice of Proposed Exemption Aon Pension Plan (the Plan) Located 
in Chicago, Illinois

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Notice of proposed exemption.

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
from certain 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 exemption: D-11880, Aon Pension Plan (the Plan).

DATES: All interested persons are invited to submit written comments 
and/or requests for a hearing on the pending exemption, unless 
otherwise stated in the Notice of Proposed Exemption, within 44 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, U.S. Department of Labor, 
200 Constitution Avenue NW., Suite 400, Washington, DC 20210. 
Attention: Application No. D-11880. 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) 693-8474 by the end of the 
scheduled comment period. The application for exemption and the 
comments received will be available for public inspection in the Public 
Disclosure Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1515, 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.

FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the 
Department, telephone (202) 693-8567. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: 

Notice to Interested Persons

    Notice of the proposed exemption will be provided to all interested 
persons in the manner agreed upon by the applicant and the Department 
within 44 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 exemption was requested in an application 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 application contains representations with regard to the 
proposed exemption which are summarized below. Interested persons are 
referred to the application on file with the Department for a complete 
statement of the facts and representations.

Proposed Exemption

Section I. Covered Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A), 406(a)(1)(D), 406(b)(1) and 406(b)(2) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1)(A), (D), and (E) of the Code,\2\ shall 
not apply to the proposed in-kind contribution (the Contribution) by 
Aon Corporation (Aon), to the Plan of a 3.5% limited partnership 
interest (the Partnership Interest) in the Trident V, L.P. Fund (the 
Fund).
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    \2\ For purposes of this proposed exemption, references to 
specific provisions of section 406 of Title I of the Act, unless 
otherwise specified, should be read to refer as well to the 
corresponding provisions of section 4975 of the Code.
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Section II. General Conditions

    (a) The Independent Fiduciary, as defined in Section IV(c) of this 
proposed exemption, negotiates the terms and conditions of the 
Contribution, and approves the Contribution as being in the interest of 
the Plan;
    (b) The Partnership Interest is contributed to the Plan by Aon at 
its current fair market value, as determined by the Independent 
Fiduciary, at the time of the Contribution;
    (c) On a date preceding the Contribution, Aon makes a cash 
contribution to the Plan of $7.5 million (the Additional Cash 
Contribution);
    (d) The Plan does not have any obligation to make future payments 
with respect to the Partnership Interest;
    (e) Aon contributes, on behalf of the Plan, cash amounts that are 
equal to the remaining capital calls that are requested by the general 
partner (the General Partner) of the Fund with respect to the 
Partnership Interest;
    (f) The Plan does not pay any fees, commissions, costs or other 
expenses in connection with the either the Contribution or the 
Additional Cash Contribution, except for fees that are paid by the Plan 
to the Independent Fiduciary; and

[[Page 18014]]

    (g) The terms and conditions of the Contribution and the Additional 
Cash Contribution are no less favorable to the Plan than those 
obtainable under similar circumstances when negotiated at arm's-length 
with unrelated third parties.

Section III. Independent Fiduciary

    (a) The Independent Fiduciary represents the interests of the Plan 
for all purposes with respect to the Contribution and the Additional 
Cash Contribution;
    (b) The Independent Fiduciary:
    (1) Reviews, negotiates (if applicable), and approves the terms and 
conditions of the Contribution and the Additional Cash Contribution, as 
evidenced in the Contribution Agreement;
    (2) Determines, in its sole discretion, that the reported value of 
the Partnership, as calculated by the General Partner, reflects the 
fair market value of the Partnership Interest;
    (3) Determines, at the time of the Contribution, that the terms of 
such transaction are no less favorable to the Plan than the terms 
negotiated at arm's-length under similar circumstances between 
unrelated third parties;
    (4) Ensures the Plan incurs no fees, costs or other charges (other 
than the fees and expenses of the Independent Fiduciary) as a result of 
the Contribution and the Additional Cash Contribution;
    (5) Acknowledges that the Partnership Interest may not be sold, 
assigned, transferred or otherwise disposed of without the prior 
written consent of the General Partner of the Fund, which must be given 
at least 30 days prior to such transfer;
    (6) Enforces the Plan's rights and interests with respect to the 
terms the Contribution and the Additional Cash Contribution; and
    (7) Takes all steps that are necessary and proper to protect the 
Plan under the terms of the Contribution Agreement.

Section IV. Definitions

    (a) The term ``Aon'' means Aon Corporation, and any of its 
affiliates.
    (b) The term ``affiliate'' means:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; or
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    For the purposes of clause (b)(1) above, 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 ``Independent Fiduciary'' means Evercore Trust Company 
(Evercore), to the extent Evercore is a fiduciary with respect to the 
Plan that is independent of or unrelated to Aon, and has the 
appropriate training, experience, and facilities to act on behalf of 
the Plan regarding the proposed transactions in accordance with the 
fiduciary duties and responsibilities prescribed by the Act (including, 
if necessary, the responsibility to seek the counsel of knowledgeable 
advisors to assist in its compliance with the Act). The Independent 
Fiduciary will not be deemed to be independent of and unrelated to Aon 
if: (1) Such Independent Fiduciary directly or indirectly controls, is 
controlled by or is under common control, with Aon; (2) such 
Independent Fiduciary directly or indirectly receives any compensation 
or other consideration in connection with any transaction described in 
this exemption other than for acting as Independent Fiduciary in 
connection with the transactions described herein, provided that the 
amount or payment of such compensation is not contingent upon, or in 
any way affected by, the Independent Fiduciary's ultimate decision; and 
(3) the annual gross revenue received by the Independent Fiduciary from 
Aon, during any year of its engagement, does not exceed one percent 
(1%) of such Independent Fiduciary's annual gross revenue from all 
sources (for federal income tax purposes) for its prior tax year.

Summary of Facts and Representations \3\
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    \3\ The Summary of Facts and Representations is based on Aon's 
representations, unless indicated otherwise.
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The Parties

    1. Aon, which is located in Chicago, Illinois, is the sponsor of 
the Plan. Aon is a provider of risk management services, insurance and 
reinsurance brokerage, and human resource consulting and outsourcing. 
As of December 31, 2015, Aon had total assets of approximately $22 
billion.
    2. The Plan is a defined benefit plan maintained by Aon in Chicago, 
Illinois. As of December 31, 2015, the Plan had approximately 33,016 
participants and beneficiaries.\4\ Also on that date, the Plan had 
$1.952 billion in assets. The Plan's assets were allocated 35.7% to 
fixed income investments, 44% to equity investments, 3.9% to real 
assets (real estate and commodities), 10.8% to hedge funds, 3.9% to 
private equity and 1.7% to cash. The Plan's current target asset 
allocation is 30% for fixed income, 50% for equities, 5% for real 
assets, 8% for hedge funds, and 7% for private equity.\5\
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    \4\ Although these are the most recent financial statements 
available for the Plan, Aon represents that as of September 30, 
2016, the Plan had total assets of $2.015 million based on reports 
retained by the Trustee.
    \5\ Aon represents that following the Contribution, the 7% 
target allocation for private equity investments will not be 
exceeded. Aon also represents that if the Plan is over this target 
allocation, it will amend the Plan's Statement of Investment Policy. 
However, if the Plan is within 1% of the target allocation, Aon 
explains that this would be well within an acceptable range.
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    The Plan trustee (the Trustee) is Northern Trust Company of 
Chicago, Illinois. Investment decisions for the Plan are made by the 
Aon Corporation Retirement Plan Governance and Investment Committee 
(the Plan Committee), which is the named fiduciary for the Plan. The 
Plan Committee is comprised of senior executives of Aon.
    3. Effective April 1, 2009, the Plan was frozen for future accrual 
of benefits. Employees hired on or after January 1, 2004 are not 
permitted to participate in the Plan. According to Aon, it is not 
anticipated that the Plan will be terminated assuming the proposed 
exemption is granted. Instead, Aon states that its de-risking strategy 
for the Plan is focused on reducing investment risk.
    As reported in the Plan's annual funding notice for the plan year 
ending December 31, 2015, the funding target attainment percentage for 
the Plan on a HAFTA/MAP-21 basis is 100.97%. On a non-HAFTA/MAP-21 
basis, according to Aon, the funding target attainment percentage for 
the Plan is 80.68%. Aon represents that, based on preliminary 
information as of December 12, 2016, it will be required to make a 
$30.5 million cash contribution to the Plan for the 2016 plan year, 
which will be due in September 2017.

The Partnership Interest

    4. Among Aon's assets is an approximately 3.5% interest in the 
Fund, a private equity fund that is designed to invest in shares of 
capital stock, limited partnership interests, limited liability company 
interests, options, bonds, debentures and other forms of equity and 
debt securities. The Fund, which is structured as a limited 
partnership, was formed by Stone Point Capital LLC (Stone Point), a 
private equity investment manager and an unrelated party with respect 
to the Plan. Stone Point is the General Partner of the Fund and an 
unrelated party. Stone

[[Page 18015]]

Point makes private equity investments in businesses within the 
financial services industry in the United States, the United Kingdom, 
Western Europe and Bermuda.
    5. In May 2010, Aon acquired the Partnership Interest in the Fund 
by making a capital commitment to the General Partner to contribute $75 
million during the life of the Fund. The capital commitment represented 
3.65% of the Fund's total capital commitments of $2 billion. As of 
December 31, 2015, $78.4 million of capital had been called from Aon to 
the Fund, and $11.3 million had been returned by the Fund to Aon.
    The Partnership Interest is non-voting and it generally does not 
provide for a limited partner's participation in the management of the 
Fund. However, in certain circumstances set forth in the Fund's 
Partnership Agreement (e.g., misconduct by the General Partner), a 
limited partner may vote for the election, removal or replacement of 
the Fund's General Partner.

Contribution of Partnership Interest to Plan

    6. Aon is requesting an administrative exemption from the 
Department in order to contribute the Partnership Interest to the Plan. 
Aon represents that the proposed contribution is permitted by the 
Plan's Statement of Investment Policy. By its terms, the Partnership 
Interest will not be transferred to the Plan without the full, written 
consent of Stone Point, which Aon will provide to the Department prior 
to any final determination by the Department to grant this exemption. 
In addition, the Plan will not have any obligation to make future 
payments with respect to the Partnership Interest. Further, Aon must 
contribute to the Plan amounts equal to any remaining capital calls 
that the General Partner of the Fund may require following the 
Contribution.
    If consummated, the Contribution will be a one-time transaction. 
The Plan will pay no fees, commissions, or other expenses in connection 
with the Contribution), with the exception of the fees that are charged 
by the Independent Fiduciary. Immediately following the Contribution, 
the aggregate fair market value of the Partnership Interest 
(approximately $79.2 million, as described below) will represent 
approximately four (4%) of the Plan's assets, based on a valuation as 
of December 31, 2015.

Additional Cash Contribution to Plan

    7. On December 29, 2016, Aon made a cash contribution to the Plan 
of $7.5 million.\6\ According to Aon, the Additional Cash Contribution 
represents an amount in excess of the aggregate value of: (a) A Put 
Option that would provide the Plan with the right to sell the 
Partnership Interest back to Aon at the fair market value of such 
Partnership Interest as of the date of the Contribution; and (b) a 
Guaranteed Investment Return of 6% for the life of the Fund, based on 
the value of the Partnership Interest, and adjusted for distributions.
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    \6\ Initially, Aon proposed to make an Additional Cash 
Contribution to the Plan of $7.4 million, which was consistent with 
the conclusions reached by Evercore, the Independent Fiduciary for 
the Plan in the Independent Fiduciary Report (see Representation 
18). Aon subsequently decided to increase the Additional Cash 
Contribution to $7.5 million.
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    Taken together, Aon represents that the estimated aggregate value 
of the Contribution ($79.2 million) and the Additional Cash 
Contribution ($7.5 million) is $86.7 million. Aon represents that this 
amount is in excess of Aon's funding obligation to the Plan.

Aon's Other Obligations

    8. Besides making the Contribution and the Additional Cash 
Contribution to the Plan, Aon is also solely responsible for: (a) 
Determining the proper treatment of the Partnership Interest with 
respect to distributions, or other payments, or any proceeds received 
from any redemption or conversion thereof for tax or financial 
accounting purposes; (b) any and all regulatory reporting or filings 
required in connection with or as a result of the Contribution or the 
Plan's ownership or disposition of the Partnership Interest; and (c) 
any transfer agency or similar fees or expenses relating to the 
issuance or transfer of the Partnership Interest.

Rationale for Exemptive Relief

    9. Aon represents that the proposed Contribution will allow Aon to 
enhance the funding to the Plan. In addition, Aon represents that the 
proposed Contribution will bring the Plan's investment portfolio closer 
in line with the asset allocation guidelines contained in the Plan's 
Statement of Investment Policy. In this regard, Aon states that the 
proposed Contribution will enhance the diversity of the Plan's 
investment portfolio and align the Plan's portfolio with the asset 
allocation strategy described in the Statement of Investment Policy.
    10. Aon further represents that the Contribution will enhance the 
Plan's cash flow because of the maturity of the underlying Fund. Aon 
states that funds that are nearly fully committed, such as the Fund, 
tend to generate cash distributions at a much higher rate. According to 
Aon, the Fund completed its investment period on June 30, 2014. 
Although remaining capital commitments may be called, no new 
investments in new portfolio companies have been or will be made. Also, 
because most of the full capital commitment of the Fund has been 
invested, Aon represents that the Fund has already started making 
distributions to limited partners. Therefore, according to Aon, the 
Partnership Interest will likely generate a significant cash flow to 
the Plan.

Legal Analysis

    11. The proposed Contribution by Aon of the Partnership Interest to 
the Plan would violate several provisions of the Act. In this regard, 
section 406(a)(1)(A) of the Act provides that a fiduciary with respect 
to a plan shall not cause the plan to engage in a transaction if the 
fiduciary knows or should know that such transaction constitutes a 
direct or indirect sale or exchange of any property between the plan 
and a party in interest. Section 406(a)(1)(D) of the Act provides that 
a fiduciary with respect to a plan shall not cause a plan to engage in 
a transaction if the fiduciary knows or has reason to know that such 
transaction constitutes a direct or indirect transfer to, or use by or 
for the benefit of, a party in interest, of any assets of a plan.
    In addition, section 406(b)(1) of the Act prohibits a fiduciary 
with respect to a plan from dealing with the assets of the plan in such 
fiduciary's own interest or for such fiduciary's own account. Further, 
section 406(b)(2) of the Act prohibits a fiduciary from acting in such 
fiduciary's individual or other capacity in any transaction involving 
the plan on behalf of a party (or representing a party) whose interests 
are adverse to the interests of the plan, or the interests of the plan 
participants and beneficiaries.
    The term ``party in interest'' is defined in section 3(14)(A) and 
(C) of the Act to include a fiduciary with respect to a plan, and an 
employer, any of whose employees are covered by such plan. As 
fiduciaries to the Plan, the Trustee and the Plan Committee are parties 
in interest under section 3(14)(A) of the Act. As an employer whose 
employees are covered under the Plan, Aon is a party in interest under 
section 3(14)(C) of the Act.
    12. Under Department Regulation 2509.94-3, an in-kind contribution 
of property to a defined benefit pension plan by a plan sponsor is a 
prohibited transaction under section 406(a)(1)(A) of the Act because it 
would constitute a

[[Page 18016]]

transfer that would reduce the obligation of the sponsor or employer to 
fund the plan. In effect, the Contribution would be treated as a 
prohibited ``sale or exchange'' between a party in interest and a plan 
because it would discharge the sponsor's legal obligation to make an 
annual cash contribution to the plan.
    In addition, because the Plan Committee is a fiduciary with respect 
to the Plan, the Contribution would violate section 406(b)(1) of the 
Act. Moreover, the Contribution would violate section 406(b)(2) of the 
Act inasmuch as the Plan Committee, as a Plan fiduciary, would be 
acting on be acting on behalf of Aon, whose interests are adverse to 
the interests of the Plan. Accordingly, Aon has requested exemptive 
relief from the foregoing violations.

The Independent Fiduciary

    13. Evercore, the Independent Fiduciary for the Plan, is a national 
trust bank chartered by the Office of the U.S. Comptroller of the 
Currency. In an engagement letter dated November 5, 2015 (the 
Engagement Letter), Evercore represents that it was appointed by the 
Plan Committee to: (a) Determine whether the proposed Contribution is 
in the interest of the Plan and its participants and beneficiaries, 
including the terms of the Contribution Agreement and other instruments 
which Evercore and its legal counsel deem necessary to proceed with the 
proposed transaction; (b) determine whether the terms of the proposed 
transaction between Aon and the Plan are no less favorable to the Plan 
than terms negotiated at arm's-length under similar circumstances 
between unrelated third parties; (c) determine the fair market value of 
the Partnership Interest; (d) determine whether the Additional Cash 
Contribution, equal to 9.33% of the fair market value of the 
Partnership Interest as of the date of the Contribution, is greater in 
amount than the aggregate value of the Put Option and the Guaranteed 
Investment Return; (e) determine whether the Plan should enter into the 
proposed transaction in accordance with the terms of the proposed 
exemption, if granted; and (f) report its initial and final 
determinations in a written report (the Independent Fiduciary Report) 
to the named Plan Fiduciary, suitable for submission to the Department 
in connection with the subject exemption request. Also, in the 
Engagement Letter, William E. Ryan III, Managing Director and Chief 
Fiduciary Officer of Evercore, agreed to undertake the duties and 
responsibilities of the Independent Fiduciary.
    In the Independent Fiduciary Report, dated May 16, 2016, Evercore 
represents that it is: (a) Independent of and unrelated to Aon, and (b) 
appointed to act pursuant to an Independent Fiduciary Agreement dated 
November 16, 2015. Evercore also represents that it does not directly 
or indirectly control, is not controlled by, and is not under common 
control with the Applicant and has warranted that neither it, nor any 
of its officers, directors, or employees is an officer, director, 
partner or employee of Aon (or a relative of such person). In addition, 
Evercore asserts that it will not directly or indirectly receive any 
compensation or other consideration from Aon in connection with the 
proposed transaction. In this regard, Evercore represents that the fees 
and expenses it has received or will receive for its services will be 
paid by the Plan, and that its compensation will not be contingent 
upon, or in any way affected by, the decisions or determinations it 
will make with respect to the value of the Partnership Interest, and 
the Additional Cash Contribution.
    In addition, Evercore represents that the fees it received from the 
Plan during 2015, as well as the fees it has received from the Plan 
during 2016, will represented less than one (1%) percent of its gross 
annual revenues. Further, Evercore states that it has not received any 
compensation from Aon or its affiliates during these years.
    14. In its role as Independent Fiduciary for the Plan, Evercore 
must: (a) Review, negotiate (to the extent applicable), and approve the 
terms and conditions of the Contribution and the Additional Cash 
Contribution, as evidenced in the Contribution Agreement; (b) 
determine, in its sole discretion, based primarily on its review of the 
Fund's audited financials and other qualitative and quantitative 
information provided by Aon, that the reported value of the 
Partnership, as calculated by the General Partner, reflects the fair 
market value of the Partnership Interest; (c) determine, at the time of 
the Contribution, that the terms of such transaction are no less 
favorable to the Plan than the terms negotiated at arm's-length under 
similar circumstances between unrelated third parties; (d) ensure the 
Plan incurs no fees, costs or other charges (other than the Independent 
Fiduciary fees and expenses it receives as a result of the 
Contribution; (e) acknowledge that the Partnership Interest may not be 
sold, assigned, transferred or otherwise disposed of without the prior 
written consent of the General Partner of the Fund, which must be given 
at least 30 days prior to such transfer; (f) enforce the Plan's rights 
and interests with respect to the terms the Contribution; and (g) take 
all steps that are necessary and proper to protect the Plan under the 
terms of the Contribution Agreement.
    15. As Independent Fiduciary, Evercore represents that it conducted 
a comprehensive due diligence process to evaluate the terms of the 
Contribution. Evercore states that this process involved: (a) Reviewing 
the Fund's audited financial statements and other information 
concerning the valuation of the Partnership Interest; (b) conducting 
numerous calls with Aon's personnel; and (c) holding meetings with 
professionals from Evercore Partners, Inc. with respect to: (i) 
Secondary private equity markets; and (ii) the investment performance 
of the General Partner. In addition, Evercore represents that it 
gathered and reviewed publicly-available information.
    16. In valuing the Partnership Interest, Evercore represents that 
there was no detailed, portfolio-level information available that could 
be used to perform portfolio-level valuation. Instead, Evercore 
represents that it used the audited financial statements for the Fund 
as of December 31, 2015 to provide a fair value estimate of the 
Partnership Interest, in its Independent Fiduciary Report dated May 16, 
2016. Evercore states that the fair value estimate could be adjusted 
for such factors as the track record and assessment of the General 
Partner/manager, the stage of the Fund, and the size of the Partnership 
Interest, in order to determine the fair market value of such 
Partnership Interest. Based on these assessments, Evercore represents 
that it applied a discount of 2.5% to its initial valuation of the 
Partnership Interest of $81.2 million. Based on this discount, Evercore 
concluded that the fair market value of the Partnership Interest was 
$79.2 million as of December 31, 2015. Evercore will update the fair 
market value of the Partnership Interest at the time of the 
Contribution.
    17. In addition, Evercore represents that it evaluated Aon's 
analysis of the Put Option and the Guaranteed Investment Return, as if 
these options were being provided to the Plan. Evercore explains that 
Aon had valued the Put Option and Guaranteed Investment Return, using 
methodologies that were based on a Monte Carlo simulation and a Black 
Scholes valuation model.\7\ Under these valuation

[[Page 18017]]

approaches, Evercore represents that Aon's combined range of values as 
of December 31, 2015 was $4.04-$4.17 million for the Put Option and 
$6.82-$6.95 million for the Guaranteed Investment Return. In Evercore's 
assessment, the range of values for the Put Option and the Guaranteed 
Investment Return was $4.0-$6.9 million as of December 31, 2015.
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    \7\ It is represented that the Monte Carlo methodology simulates 
over one thousand different investment return scenarios for the 
private equity fund. Using these different investment return 
scenarios, a value for the put option and the guaranteed investment 
return was calculated. It is also represented that the Black Scholes 
methodology is a model of price variations over time of financial 
instruments that is commonly used to determine the price of put and 
call options. The model incorporates the volatility of the financial 
instrument, the time value of money using the risk free rate, the 
option's strike price, and the time to the option's expiry.
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    18. Accordingly, Evercore concluded that, as of December 31, 2015, 
9.33% of the $79.2 million fair market value of the Partnership 
Interest, or approximately $7.4 million, was greater than the aggregate 
fair market value of the Put Option and the Guaranteed Investment 
Return, less fees, costs, or other charges incurred by the Plan as a 
result of the proposed transaction. Evercore will update the 
Independent Fiduciary Report and its valuations at the time of the 
Contribution.

Other Considerations Made by the Independent Fiduciary

    19. In the Independent Fiduciary Report, Evercore also considered 
the following factors in determining that the Contribution and the 
Additional Cash Contribution are appropriate and in the interests of 
the Plan:
    (a) Accelerated Contributions. Evercore represents that Aon is not 
required to make any minimum required contributions to the Plan until 
2017. If the exemption is approved, Aon will contribute the Partnership 
Interest to the Plan and also give the Plan an Additional Cash 
Contribution equal to 9.33% of the fair market value of Partnership 
Interest as of the date of such contribution. Absent the Additional 
Cash Contribution, Evercore represents that it would take until July 
2018 for the Plan to receive a similar amount in cash. Based on 
independent third party estimates, Evercore states that private equity 
investments are projected to return 10.2% per year. Also, with the 
Contribution, Evercore represents that the Plan could be earning the 
10.2% projected return and receiving all of the cash distributions. 
Evercore further represents that assuming the Contribution is made at 
the end of 2016 and using the 10.2% projected return, the timing of the 
investment returns could be worth over $5 million.
    (b) Cash Contribution in Lieu of Put Option. Evercore represents 
that the Additional Cash Contribution will be invested to provide 
additional returns to the Plan, whereas the Put Option will be an 
illiquid investment and will only benefit the Plan in the event that 
circumstances compelled to the Plan to exercise the Put Option, 
assuming this was an alternative for the Plan.

Statutory Findings

    20. Aon represents that the proposed exemption is administratively 
feasible because the Contribution will be a one-time transaction that 
will require no ongoing oversight by the Department. Administration of 
the transaction, according to Aon, will not result in any extraordinary 
burden or cost to the Plan.
    In addition, Aon represents that the proposed exemption is in the 
interests of the Plan and its participants and beneficiaries because 
the Plan and its participants and beneficiaries will benefit from the 
substantial, additional funding of the Plan. As described above, if the 
proposed exemption is granted, Aon will contribute the Partnership 
Interest to the Plan and will make the Additional Cash Contribution to 
the Plan. Moreover, Aon will make all remaining capital calls that the 
Fund's General Partner requests after the Partnership Interest is 
contributed to the Plan. According to Aon, the Contribution and the 
Additional Cash Contribution are in excess of the legally required cash 
contribution to the Plan for the 2016 plan year.
    21. Further, Aon represents that the enhanced funding provided by 
the Contribution adds protection to the rights of the participants and 
beneficiaries under the Plan to the timely receipt of benefits. 
Additionally, Aon states that the proposed exemption is conditioned on 
safeguards that will protect the rights of the Plan's participants and 
beneficiaries. These protections, according to Aon, include those that 
are afforded by the Additional Cash Contribution, which will safeguard 
the Plan's participants and beneficiaries in the event the Partnership 
Interest loses value after the Contribution is made, and retain the 
ability of such participants and beneficiaries to benefit from any 
increase in the Partnership Interest's value.

Summary

    22. Given the conditions described above, the Department has 
tentatively determined that the relief sought by Aon satisfies the 
statutory requirements for an exemption under section 408(a) of the 
Act.

Notice to Interested Persons

    The persons who may be interested in the publication in the Federal 
Register of the Notice of Proposed Exemption (the Notice) include the 
following:
    (a) For all currently active employees of Aon, former employees of 
Aon, Aon retirees, and Aon beneficiaries who participate in the Plan, 
who either: (a) Have email access as a part of performing their job 
duties; or (b) have consented to, and enrolled in, electronic delivery 
of benefits information. Aon will send to such interested persons, an 
email containing the Notice; a link to the Supplemental Statement 
(Supplemental Statement), as required pursuant to 29 CFR 2570.43(b)(2), 
which will advise interested persons of their right to comment on and/
or to request a hearing; a link to a summary of the Department's 
proposed exemption (the Summary Statement); and a link to the actual 
proposed exemption, as published in the Federal Register. The email 
system will notify Aon of any delivery failures (i) in the case of 
active employees with an Aon email address, on the day that the emails 
are sent, and (ii) in the case of individuals using an external email 
address, within three (3) calendar days after the emails are sent.
    (b) For active or former employees of Aon, Aon retirees or Aon 
beneficiaries whose email transmission fails. Aon will send the Notice 
by first-class U.S. mail to such interested person's home address. The 
Notice will contain a Web site address where interested persons can 
obtain the Supplemental Statement as required pursuant to 29 CFR 
2570.43(b)(2), which will advise interested persons of their right to 
comment on and/or to request a hearing; the Summary Statement; and a 
copy of the proposed exemption, as published in the Federal Register. 
Such interested persons will also be given instructions explaining how 
they may obtain paper copies of these documents upon request, and at no 
charge. The mailing will be sent: (i) In the case of active employees 
with an Aon email address, within four (4) calendar days, and (ii) in 
the case of interested persons using an external email address, within 
six (6) calendar days, after the failed email transmission.
    (c) For active or former employees of Aon, Aon retirees or Aon 
beneficiaries who participate in the Plan and who do not have email 
access as a part of performing their job or who have not consented to 
electronic delivery of benefits information. Aon will send the Notice 
by first-class U.S. mail to such interested person's home address. The 
Notice will contain a Web site address where such interested persons 
can

[[Page 18018]]

obtain the Supplemental Statement, as required pursuant to 29 CFR 
2570.43(b)(2), which will advise interested persons of their right to 
comment on and/or to request a hearing; the Summary Statement, and a 
copy of the proposed exemption, as published in the Federal Register. 
Interested persons will also be given instructions explaining how to 
obtain paper copies of these documents upon request, and at no charge.
    Aon will provide the Notice to interested persons within fourteen 
(14) calendar days from the date of publication of the proposed 
exemption in the Federal Register in order to provide the Notice in the 
manner described above. All written comments or hearing requests must 
be received by the Department within forty-four (44) calendar days of 
the publication of this proposed exemption 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.

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 exemption, 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 exemption, 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 4th day of April, 2017.
Lyssa E. Hall,
Director, Office of Exemption, Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2017-07421 Filed 4-13-17; 8:45 am]
 BILLING CODE 4510-29-P