[Federal Register Volume 86, Number 53 (Monday, March 22, 2021)]
[Notices]
[Pages 15258-15265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05843]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Exemption Application Nos. L-12000 & L-12001]


Proposed Exemption for Certain Prohibited Transaction 
Restrictions Involving the Electrical Insurance Trustees Insurance Fund 
and the Electrical Joint Apprenticeship and Training Trust (the Plans 
or the Applicants) Located in Alsip, IL

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemption.

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SUMMARY: This document provides notice of the pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
from certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or

[[Page 15259]]

the Act) and/or the Internal Revenue Code of 1986 (the Code).

DATES: If granted, the exemption will be effective as of the date the 
grant notice is published in the Federal Register. Written comments and 
requests for a public hearing on the proposed exemption should be 
submitted to the Department by May 6, 2021.

ADDRESSES: All written comments and requests for a hearing should be 
sent to the Employee Benefits Security Administration (EBSA), Office of 
Exemption Determinations, Attention: Application Nos. L-12000 and L-
12001 via email to [email protected] or online through the Federal 
eRulemaking Portal: http://www.regulations.gov. Any such comments or 
requests should be sent 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. See 
SUPPLEMENTARY INFORMATION below for additional information regarding 
comments.

FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department, 
telephone (202) 693-8456. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION:

Comments

    In light of the current circumstances surrounding the COVID-19 
pandemic caused by the novel coronavirus which may result in disruption 
to the receipt of comments by U.S. Mail or hand delivery/courier, 
persons are encouraged to submit all comments electronically and not to 
follow with paper copies. Comments should state the nature of the 
person's interest in the proposed exemption and the manner in which the 
person would be adversely affected by the exemption, if granted. Any 
person who may be adversely affected by an exemption can request a 
hearing on the exemption. A request for a hearing must state: (1) The 
name, address, telephone number, and email address of the person making 
the request; (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; and (3) a statement of the issues to be addressed and a 
general description of the evidence to be presented at the hearing. The 
Department will grant a request for a hearing made in accordance with 
the requirements above where a hearing is necessary to fully explore 
material factual issues identified by the person requesting the 
hearing. A notice of such hearing shall be published by the Department 
in the Federal Register. The Department may decline to hold a hearing 
if: (1) The request for the hearing does not meet the requirements 
above; (2) the only issues identified for exploration at the hearing 
are matters of law; or (3) the factual issues identified can be fully 
explored through the submission of evidence in written (including 
electronic) form. WARNING: All comments received will be included in 
the public record without change and may be made available online at 
http://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
confidential or other information whose disclosure is restricted by 
statute. If you submit a comment, EBSA recommends that you include your 
name and other contact information in the body of your comment, but DO 
NOT submit information that you consider to be confidential, or 
otherwise protected (such as Social Security number or an unlisted 
phone number) or confidential business information that you do not want 
publicly disclosed. However, if EBSA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EBSA 
might not be able to consider your comment. Additionally, the http://www.regulations.gov website is an ``anonymous access'' system, which 
means EBSA will not know your identity or contact information unless 
you provide it in the body of your comment. If you send an email 
directly to EBSA without going through http://www.regulations.gov, your 
email address will be automatically captured and included as part of 
the comment that is placed in the public record and made available on 
the internet.

Background

    The Department is considering granting an exemption under the 
authority of 408(a) of the Act (or ERISA), in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 46637, 
66644, October 27, 2011). If the exemption is granted, the restrictions 
of sections 406(a)(1)(A), 406(a)(1)(D) and 406(b)(1) and 406(b)(2) of 
the Act shall not apply to: (a) The sale (the Sale) by the Electrical 
Joint Apprenticeship and Training Trust (the EJAT Trust) of 5.11 acres 
of unimproved real property to the Electrical Insurance Trustees 
Insurance Fund (the EIT Fund), a party in interest with respect to the 
EJAT Trust; and (b) the EIT Fund's granting of a right of first offer 
(the Right of First Offer) to the EJAT Trust, for the purchase back of 
the Property by the EJAT Trust from the EIT Fund, provided certain 
conditions are met.\1\
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    \1\ As noted below, although this proposed exemption, if 
granted, would permit the granting of the Right of First Offer, any 
sale back of the Property by the EIT Fund to the EJAT Trust would 
constitute a prohibited transaction that is outside the scope of 
this exemption.
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Summary of Facts and Representations \2\
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    \2\ The Summary of Facts and Representations is based on the 
Applicants' representations, and does not reflect factual findings 
or opinions of the Department, unless indicated otherwise.
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Background

    1. The EIT Fund. The EIT Fund is a multiemployer employee benefit 
plan created pursuant to a collective bargaining agreement between the 
Electrical Contractors' Association of the City of Chicago (the ECA) 
and Local Union 134, I.B.E.W. (Local 134). The EIT Fund provides 
medical, dental, vision, and other welfare benefits to participants who 
are employees of participating employers. The EIT Fund is primarily 
funded by employer contributions, retiree contributions, and from 
participants electing COBRA coverage. The EIT Fund is administered by a 
joint board of trustees (the Trustees) that is comprised of five 
representatives of the ECA and five representatives of Local 134 (the 
EIT Fund Board). The EIT Fund Board has ultimate and exclusive 
investment discretion over the assets of the EIT Fund. As of June 30, 
2019, the EIT Fund covered 10,666 participants and held net assets 
totaling $523,878,790.
    2. The EJAT Trust. The EJAT Trust is a multiemployer benefit plan 
created pursuant to a collective bargaining agreement between the ECA 
and Local 134. The EJAT Trust provides training in electrical and other 
skills in the electrical construction industry through an 
apprenticeship program that consists of classroom instruction and on-
the-job training. The EJAT Trust currently operates a training facility 
located at 6201 West 115th Street, Alsip, Illinois (the EJAT Trust 
Training Facility), where full-time classroom instruction is provided 
to approximately 325 EJAT Trust apprentices at any given time. The EJAT 
Trust is financed by participating employer contributions and 
administered by a Board of Trustees comprised of ECA and Local 134 
representatives. The EJAT Trust is a tax-exempt educational labor 
organization under section 501(c)(5) of the Code. As of May 31, 2019, 
the EJAT Trust covered

[[Page 15260]]

6,815 participants and held $41,634,000 in total assets.
    The EJAT Trust employees and apprentices are eligible to 
participate in the EIT Fund and the Related Plans after meeting certain 
eligibility requirements. As a result, an estimated 95% of EJAT Trust 
apprentices, at any given time, are also participants in the EIT Fund 
and the Related Plans. Additionally, although the EIT Fund Board and 
EJAT Trust Board are distinct entities, they share one common member. 
The Applicants represent that this common board member will recuse 
himself from all aspects of the decision-making process relating to the 
Sale transaction described herein.
    3. The EIT Fund Current Lease. The EIT Fund currently leases office 
space located at 221 North LaSalle Street in Chicago, Illinois from an 
unrelated third party (the EIT Lease). The EIT Fund shares its current 
office space, equipment and staff with eight other related employee 
benefit plans administered by the Electrical Insurance Trustees (the 
Related Plans).\3\ Expenses, which are shared by the EIT Fund and the 
Related Plans, are initially paid by one of the Related Plans and then 
allocated between the EIT Fund and the Related Plans based upon an 
estimate of time spent, space utilized, and costs incurred. This 
allocation of expenses between the EIT Fund and the Related Plans is 
based on a formula that is reviewed biannually and adjusted, as 
necessary, by the auditor of the EIT Fund and the Related Plans. The 
EIT Fund's share of these allocated expenses was $2,994,430 and 
$2,884,618 for the years ended June 30, 2019 and 2018, respectively. 
The EIT Fund Lease, which was originally set to expire on September 30, 
2020, has been extended for eight months to May 31, 2021.
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    \3\ The Related Plans include: (a) The Electrical Contractors' 
Association of the City of Chicago and Local Union 134 I.B.E.W. 
Joint Pension Trust of Chicago Plan No. 2; (b) the Electrical 
Contractors' Association of the City of Chicago and Local Union 134 
I.B.E.W. Joint Pension Trust of Chicago Plan No. 5; (c) the 
Electrical Insurance Trustees Insurance Fund for Communication 
Employers; (d) the Electrical Insurance Trustees Insurance Fund for 
Other Participating Employers; (e) the Electrical Insurance Trustees 
Supplemental Unemployment Benefit Plan; (f) the Electrical Insurance 
Trustees Supplemental Unemployment Benefit Plan for Communication 
Participants; and (g) the Electrical Insurance Trustees Employees' 
Retirement Plan.
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    4. EIT Fund Relocation Study. The EIT Fund has determined that 
monthly lease payments under the EIT Lease are high, and that a future 
extension of the EIT Lease beyond May 31, 2021 would come with a higher 
rate that would be cost prohibitive to the EIT Fund and the Related 
Plans. In 2016, the EIT Fund's Board began to consider alternatives to 
the EIT Lease, including a possible relocation of the EIT Fund and the 
Related Plans. The EIT Fund Board also began to consider a possible 
expansion of future EIT Fund office space to include an on-site medical 
clinic as an additional benefit to participants and beneficiaries, and 
as a means of saving on healthcare costs. In 2016, the EIT Fund's Board 
engaged Savills Studley (Savills), a commercial real estate advisory 
firm and unrelated party with respect to the Plans, to explore the 
feasibility of these options.
    In February 2016, Savills issued an office space scenario analysis 
of office rental space in the downtown Chicago business district, which 
included the projected costs and expansion opportunities conducive to 
an on-site medical clinic. Based on Savills' analysis, the EIT Board 
concluded that the future cost of renting office space in downtown 
Chicago would be exceedingly expensive, offer limited opportunity for 
expansion, and be inconvenient and expensive to participants and 
beneficiaries. In April 2018, Savills conducted a follow-up study 
assessing possible buildings for sale in the area. Savills concluded 
that available buildings for sale in the area did not meet the EIT 
Fund's needs and that purchasing an existing building would be 
expensive because of the extensive work that would be required to 
customize any existing space to the EIT Fund's specific and unique 
needs for offices, as well as an onsite medical clinic.

The Property and the Proposed Transaction

    5. The Property. The subject Property consists of an unimproved 
5.105 acre parcel of land, that is a portion of a 23.66 acre parcel, 
located at as 6201 W 115th Street, Alsip, Illinois 60803 (the Whole 
Parcel). The EJAT Trust acquired the Whole Parcel in 1992, for 
$1,704,385.18, from an unrelated third party for the purpose of 
utilizing the building on the premises as the EJAT Training Facility. 
The Whole Parcel is subject to financing through Standard Bank and 
Trust Company, a third party financial institution that is unrelated to 
the EJAT Trust and the EIT Fund. At present, the Whole Parcel remains 
subject to a mortgage but, as a condition of the proposed Sale, the 
Property will be transferred to the EIT Fund free and clear from all 
liens and encumbrances.
    6. The Purchase Agreement. If this proposed exemption is granted, 
the EIT Fund will pay a cash price of $710,000 to acquire the Property 
from the EJAT Trust. The acquisition price was negotiated and agreed to 
by the qualified independent fiduciary for the EIT Fund (the EIT Fund 
Independent Fiduciary) and the qualified independent fiduciary for the 
EJAT Trust (the EJAT Trust Independent Fiduciary). As described in 
further detail below, this price was based on two, separate independent 
appraisals performed on the Property, with adjustments thereafter made 
for certain costs that the EIT Fund will incur in connection with the 
Sale, including the cost to construct an access road and necessary 
utilities, including water, electricity, and waste disposal.
    In connection with the proposed transaction, the Plans will enter 
into a Real Estate Purchase Agreement (the Purchase Agreement) that 
will govern the terms of the Sale. The Purchase Agreement provides that 
the EIT Fund is not obligated to close on the Sale unless, by the 
Closing Date, the EIT Fund has obtained all development approvals 
required to construct the EIT Fund Facility and the access road, 
including approval by the Village of Aslip of the proposed design of 
the EIT Fund Facility, and approval for the construction of an easement 
access road necessary to make the Property accessible to W 115th 
Street.
    The Purchase Agreement also provides that the EIT Fund Independent 
Fiduciary may exercise the EIT Fund's absolute unconditional right to 
terminate the Sale through the end of an ``inspection period,'' which 
ends 60 days after the Department's publication of a notice granting 
this exemption. Thereafter, until the closing of the Sale, the Purchase 
Agreement provides the EIT Fund with an absolute right to terminate the 
Sale if the EIT Fund is unable to obtain the development approvals 
necessary to construct the EIT Fund Facility and access road.
    7. Construction of the Facility for the EIT Fund. After acquiring 
the Property, the EIT Fund intends to construct an approximately 17,000 
square foot, one-story facility consisting of office space and an 
onsite medical clinic that will be used by the EIT Fund and the Related 
Plans (the EIT Fund Facility).\4\ The EIT Fund also intends to build an 
access road to connect the Property to W 115th Street. The EIT Fund 
estimates that the total cost to construct the EIT Fund Facility and 
the access road will be $10,248,350.
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    \4\ The Applicant's represent that the use of the Property by 
the EIT Fund and the Related Plans will adhere to the requirements 
of PTEs 76-1 and 77-10. Further, the exemptive relief provided 
herein is conditioned upon the EIT Fund and the Related Plans 
adhering to the terms of PTEs 76-1 and 77-10.

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[[Page 15261]]

    8. Easement and Construction of Public Road. Under the Purchase 
Agreement, the Boards of the EIT Fund and EJAT Trust are contractually 
bound to an easement agreement (the Easement Agreement), which provides 
terms and conditions governing the use, maintenance, and cost-sharing 
with respect to an easement for vehicular access to and from the 
Property. Under the Easement Agreement, the EIT Fund will bear the cost 
of constructing and maintaining the access road easement. The parties 
have adjusted the purchase price of the Property to account for the 
anticipated costs that the EIT Fund will incur in constructing the 
access road, and the necessary utilities, including water, electricity, 
and waste disposal.
    9. The Right of First Offer. The Purchase Agreement provides the 
EJAT Trust with a right of first offer (the Right of First Offer). 
Pursuant to the Right of First Offer, in the event that the EIT Fund 
desires to sell the Property, the EIT Fund must first provide notice to 
the EJAT Trust of its intent to do so (the Notice to Sell). Following 
its receipt of the Notice to Sell, the EJAT Trust will have 14 days to 
inform the EIT Fund that it will exercise its Right of First Offer (the 
Notice to Exercise). The EJAT Trust's failure to provide the Notice to 
Exercise within 14 days will be considered a rejection of the EJAT 
Trust's Right of First Offer. Then, the EIT Fund will be free to sell 
the Property to an unrelated, third party buyer. If the EJAT Trust does 
provide its Notice to Exercise in a timely manner, the EIT Fund and the 
EJAT Trust will have 21 days to use commercially reasonable and good 
faith efforts to enter into a Purchase and Sale Agreement. If the EIT 
Fund and the EJAT Trust cannot mutually agree upon a purchase price 
within this 21 day negotiation period, then the Right of First Offer 
will expire.
    The Department notes that the EJAT Trust's re-purchase of the 
Property would constitute a prohibited transaction that is outside the 
scope of this exemption. If the EJAT Trust seeks to re-purchase the 
Property, the parties may submit an exemption application, and the 
Department will assess the merits of the proposed transaction.

The Independent Fiduciaries

    10. Independent Fiduciary: EJAT Trust. The EJAT Trust retained 
Shumaker, Loop & Kendrick LLP of Toledo, OH (Shumaker or the EJAT Trust 
Independent Fiduciary) to serve as an Independent Fiduciary to the EJAT 
Trust with respect to the Sale. Shumaker represents that the duties and 
obligations as the EJAT Trust Independent Fiduciary are being carried 
out by Scott D. Newsom and Beth M. Eckel. Shumaker represents that Mr. 
Newsom has over 20 years of experience in employee benefits law and 
ERISA, primarily representing multiemployer benefit plans in all 
aspects of their maintenance and the fulfillment of fiduciary 
obligations. Shumaker further represents that Ms. Eckel has 10 years of 
experience as a real estate attorney focused on commercial real estate 
and financing matters.
    Shumaker states that it understands, acknowledges, and accepts its 
duties and responsibilities under ERISA in acting as the EJAT Trust 
Independent Fiduciary, and that it does not have any past or ongoing 
relationship with the EJAT Trust. Shumaker also states that the total 
revenue received from the EJAT Trust in connection with its engagement 
as Independent Fiduciary with respect to the Sale is less than 0.02% of 
Shumaker's gross revenue for the 2019 income tax year.
    As Independent Fiduciary to the EJAT Trust, Shumaker must 
prudently: (a) Represent the EJAT Trust's interests for all purposes 
with respect to the Sale; (b) determine that the Sale is in the 
interests of, and protective of, the EJAT Trust and its participants 
and beneficiaries; (c) review and approve the terms and conditions of 
the Sale; (d) engage a qualified independent appraiser (the EJAT Trust 
Independent Appraiser) for the purpose of valuing the Property in 
connection with the Sale, and ensure the independence of the appraiser; 
(e) review the independent appraisal report completed by the EJAT Trust 
Independent Appraiser (the EJAT Trust Independent Appraisal Report) to 
confirm that the underlying methodology is reasonable and accurate and 
that the valuation of the Property has been reasonably derived; (f) 
ensure that the EJAT Independent Appraiser renders an updated fair 
market valuation of the Property as of the date of the Sale; (g) 
determine whether it is prudent for the EJAT Trust to proceed with the 
Sale; and (h) ensure that it has not and will not enter into any 
agreement or instrument that violates section 410 of ERISA or section 
2509.75-4 of the Department's regulations.\5\ Additionally, not later 
than 90 days after the Sale is completed, Shumaker must submit a 
written statement to the Department documenting how the Sale has met 
all of the requirements of this exemption.
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    \5\ Section 410 of ERISA provides, in part, that ``except as 
provided in sections 405(b)(1) and 405(d) of ERISA, any provision in 
an agreement or instrument which purports to relieve a fiduciary 
from responsibility or liability for any responsibility, obligation, 
or duty under this part [meaning section 410(a) of ERISA] shall be 
void as against public policy.''
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    11. Independent Fiduciary: EIT Fund. The EIT Fund has retained the 
Wagner Law Group (Wagner or the EIT Fund Independent Fiduciary) to 
serve as an Independent Fiduciary to the EIT Fund with respect to the 
Sale. Wagner has served as the appointed independent fiduciary for 
various entities. Stephen Wilkes, Susan Rees, and Roberta Watson, all 
of whom are employed by Wagner, have agreed to undertake the duties of 
the EIT Fund Independent Fiduciary with respect to the Sale.
    Wagner states that it understands, acknowledges, and accepts its 
duties and responsibilities under ERISA in acting as the EIT Fund 
Independent Fiduciary, and that it does not have any past or ongoing 
relationship with the EIT Fund. Wagner also states that the percentage 
of its current revenue that is derived from any party in interest 
involved in the Sale is 0.55%.
    As the EIT Fund Independent Fiduciary, Wagner must prudently: (a) 
Represent the EIT Fund's interests for all purposes with respect to the 
Sale; (b) determine that the Sale is in the interests of, and 
protective of, the EIT Fund and its participants and beneficiaries; (c) 
review and approve the terms and conditions of the Sale; (d) engage a 
qualified independent appraiser (the EIT Independent Appraiser) for the 
purpose of valuing the Property in connection with the Sale, and ensure 
the independence of the appraiser; (e) review the independent appraisal 
report completed by the EIT Fund Independent Appraiser (the EIT Fund 
Independent Appraisal Report) to confirm that the underlying 
methodology is reasonable and accurate and that the valuation of the 
Property has been reasonably derived; (f) ensure that the EIT Fund 
Independent Appraiser renders an updated fair market valuation of the 
Property as of the date of the Sale; (g) determine whether it is 
prudent for the EIT Fund to proceed with the Sale; and (h) ensure that 
it has not and will not enter into any agreement or instrument that 
violates section 410 of ERISA or section 2509.75-4 of the Department's 
regulations. Additionally, not later than 90 days after the Sale is 
completed, Wagner must submit a written statement to the Department 
documenting that the Sale has met all of the requirements of this 
exemption.

The Independent Appraisers

    12. Independent Appraiser: EJAT Trust. In its role as the EJAT 
Trust Independent Fiduciary, Shumaker

[[Page 15262]]

retained Realty Value Consultants, Inc. of Berwyn, Illinois (Realty or 
the EJAT Trust Independent Appraiser) to assess the fair market value 
of the Property. With respect to this engagement, Elizabeth A. 
Ritzenthaler and John H. Urubek undertook the specific duties required 
of Realty as the EJAT Trust Independent Appraiser. Ms. Ritzenthaler is 
a Certified General Real Estate Appraiser in the State of Illinois with 
over 25 years of experience in commercial and industrial real estate 
appraisal and consulting. Mr. Urubek is a Certified General Real Estate 
Appraiser in the State of Illinois with over 40 years of experience in 
real estate appraisal and consulting.
    Realty states that its fee for appraisal services provided in 
connection with the Sale represents less than 0.5% of its annual 
revenues for 2014 and 2015. Realty represents that it has no present or 
prospective interest in the Property, that it has no personal interest 
with respect to the parties involved in the Sale, and that its 
engagement as EJAT Independent Appraiser is not contingent upon 
developing or reporting predetermined results. Realty further 
represents that the compensation it receives as the EJAT Trust 
Independent Appraiser is not contingent upon reporting a predetermined 
value, a direction in value that favors the cause of the client, the 
amount of the value opinion, the attainment of a stipulated result, or 
the occurrence of a subsequent event directly related to the intended 
use of the appraisal.
    Using the Sales Comparison Approach to valuation, Realty valued the 
Property at $725,000, as of February 14, 2020. In preparing the EJAT 
Trust Independent Appraisal Report, Realty represents that it 
physically inspected the Property and researched appropriate market 
data, and that its appraisal was conducted in full conformity with 
professional appraisal standards and USPAP.
    13. Independent Appraiser: EIT Fund. In its role as the EIT Fund 
Independent Fiduciary, Wagner engaged Colliers International Valuation 
& Advisory Services, LLC (Colliers or the EIT Fund Independent 
Appraiser) to assess the fair market value of the Property for the 
purposes of the Sale. With respect to this engagement, Cathrine 
Chimhandamba and Nancy S. Meyers of Colliers undertook the specific 
duties required as the EIT Fund Independent Appraiser. Ms. Chimhandamba 
is a Certified General Real Estate Appraiser in the State of Illinois 
and a Valuation Specialist with experience in the valuation of 
commercial properties. Ms. Myers is a Certified General Real Estate 
Appraiser in the State of Illinois and serves as the Managing Director 
for Colliers International Valuation & Advisory Services in Chicago, 
Illinois.
    Colliers represents that it has no present or prospective interest 
in the Property, and no personal interest with respect to the parties 
involved. Colliers further represents that it is not biased with 
respect to the Property or to the parties involved with this 
assignment, and that its engagement and compensation was not contingent 
upon developing or reporting predetermined results. Colliers represents 
that its fee for appraisal services provided in connection with the 
Sale represents less than 0.5% of its annual revenues for 2014 and 
2015.
    Colliers states that it conducted an on-site physical inspection of 
the Property and analyzed regional and local area economic profiles 
including employment, population, household income, and real estate 
trends. Colliers represents that it assessed the general quality and 
condition, and emerging development trends for the real estate market. 
Colliers further represents that it conducted a Highest and Best Use 
analysis and considered legal, locational, physical and financial 
feasibility characteristics of the Property. Colliers states that it 
confirmed and analyzed financial features of the Property, including 
potential entitlement issues, and tax and assessment records. Colliers 
represents that its selection of valuation methods was based on the 
identifications required in USPAP relating to the intended use, 
intended users, definition and date of value, relevant property 
characteristics and assignment conditions. On July 15, 2020, Colliers 
completed an addendum to its appraisal report (the Addendum) in which 
it waived its rights under a liability cap that was previously included 
in its engagement agreement with the EIT Fund. In the Addendum, Collier 
affirmed that the value of the Property is at least $710,000, and that 
its appraisal was prepared in full conformity with professional 
appraisal standards and USPAP.
    14. Determining the Sale Price for the Property. During 
negotiations, the Independent Fiduciaries represent that they 
considered certain additional factors that affected the appropriate 
Sale price for the Property. In this regard, the Independent 
Fiduciaries considered the fact that the EIT Fund would be bearing the 
expense of developing and maintaining the vehicular and utility access 
to the Property, and that the EIT Fund would incur extra costs 
associated with obtaining building plans necessary to avoid disruption 
of the protected wetlands area on the Property. The Independent 
Fiduciaries also represent that they considered the fact that the EIT 
Fund's development of the Property represents enhanced value for the 
EJAT Trust Property, and that the EJAT Trust participants will enjoy 
the ease and accessibility of an integrated campus arrangement in which 
they will have access to the EIT Fund offices, and a possible on-site 
medical clinic.

The Independent Fiduciary Reports

    15. Independent Fiduciary Report: EJAT Trust. In the Independent 
Fiduciary Report for the EJAT Trust, Shumaker concludes that the Sale 
at a price of $710,000 would be in the best interests of, and 
protective of, the EJAT Trust and its participants and beneficiaries. 
Shumaker also concludes that the terms and conditions of the Sale are 
at least as favorable to the EJAT Trust as those it could have obtained 
in an arm's length transaction with an unrelated and independent party.
    Shumaker states that the proximity of the Property to the EJAT 
Trust Training Facility will allow for the creation of an electrical 
industry campus which will benefit the EJAT Trust's participants and 
beneficiaries. In this regard, EJAT Trust participants will benefit 
from the ease and accessibility of a campus arrangement in which they 
will have access to the EIT Fund offices, and a possible on-site 
medical clinic, while pursuing their training and education. Shumaker 
notes that presently the EIT Fund offices are located in downtown 
Chicago, which imposes inconvenience and unnecessary costs on the EJAT 
Trust participants and beneficiaries.
    Shumaker states that the Fund will receive $710,000 for the 
Property, which in Shumaker's judgement represents that the transaction 
is as favorable to the EJAT Trust as the transaction that would have 
occurred in an arm's length transaction between independent and 
unrelated parties, each of whom had full knowledge of the relevant 
facts and were under no compulsion to buy or sell. Shumaker further 
states that the Sale presents an opportunity for the EJAT Trust to 
diversify its assets through the sale of an unused parcel of real 
estate for cash. Shumaker notes that the Property is a nonworking 
asset, and that the EJAT Trust does not consider it to be a long-term 
investment or strategic reserve necessary for future expansion. 
Shumaker states that the Sale provides the EJAT Trust with the ability 
to use the cash proceeds from the Sale to enhance the value of the EJAT 
Trust Training Facility, for the benefit of the

[[Page 15263]]

participants and beneficiaries of the EJAT Trust.
    Shumaker notes that because the Property is zoned for general 
manufacturing and processing activities, the marketing of the Property 
to unrelated buyers for an unknown purpose may be detrimental to the 
value of the Whole Parcel, and may interfere with the EJAT Trust's use 
and enjoyment of the Whole Parcel in the future.
    Shumaker states that, to further ensure the protection of the EJAT 
Trust and its participants and beneficiaries, it will continue to 
monitor the Sale, enforce the final terms of the Sale, and take 
whatever actions are necessary to protect the interests of the EJAT 
Trust's participants and beneficiaries through the closing of the Sale.
    Finally, as a condition of the exemption, Shumaker may not enter 
into, and has not entered into, any agreement, arrangement or 
understanding in connection with the Sale that indemnifies Shumaker, in 
whole or in part, or waives any liability for negligence by Shumaker or 
for failing to adhere to state or federal law. In addition, Realty may 
not enter into, and has not entered into, any agreement, arrangement or 
understanding in connection with the Sale that indemnifies Realty, in 
whole or in part, or waives any liability for negligence by Realty or 
for failure to adhere to professional appraisal standards.
    16. Independent Fiduciary Report: EIT Fund. In the EIT Fund 
Independent Fiduciary Report, Wagner concludes that a Sale at the price 
of $710,000 would be in the best interests of, and protective of, the 
EIT Fund and the EIT Fund participants and beneficiaries. Wagner 
represents that it considered many factors in its analysis, including 
the EIT Fund's financial position, the acquisition and development 
costs associated with the Sale, and the benefits to the EIT Fund of 
purchasing the Property and constructing the EIT Fund Facility as 
opposed to entering into a commercial lease of existing property with 
an unrelated party. Wagner represents that it reviewed all the 
particulars of the Property, including: (a) The appraisals; (b) the 
location and characteristics of the Property; (c) the existing zoning 
of the Property; (d) the need for, and expense of, an easement; and (e) 
environmental concerns associated with the Property, including the 
presence of wetlands.
    Wagner states that the Property functionally meets the EIT Fund's 
needs, as it is large enough to construct an EIT Fund Office with 
sufficient space for a Board Room, conference room, large reception 
areas, and an onsite medical clinic. Wagner further states that the 
Property is accessible for a significant number of EIT Fund 
participants and beneficiaries. In this regard, Wagner notes that the 
EIT Fund conducted a proximity analysis in October of 2019 which found 
that over 42% of current EIT Fund participants and beneficiaries live 
within a 15-mile radius of the Property.
    Wagner states that relocating the EIT Fund's office to the Property 
is cost-effective and creates synergy by establishing a campus of 
related services for EIT Fund participants. In this regard, Wagner 
notes that an estimated 95% of apprentices in the EJAT Trust, at any 
given time, are also participants in the EIT Fund and the Related 
Plans. In addition, Wagner states that locating the EIT Fund Office on 
the Property would promote the visibility and publicity of the EIT Fund 
Office's services, as well as the EJAT Trust's training programs. 
Wagner further notes that the Property is sufficient in size to provide 
ample free parking for EIT Fund employees and EIT Fund participants and 
beneficiaries, and is conveniently located close to major highways.
    With respect to the Property, Wagner states that, the location 
adjacent to the EJAT Trust Training Facility will provide enhanced 
value for the EIT Fund's participants and beneficiaries. Wagner further 
states that the suburban location of the Property will be convenient 
for the participants and beneficiaries of the EIT Fund, as well as the 
EIT Fund staff, who will benefit from affordable housing available in 
close proximity to the Property. In addition, Wagner states that the 
EIT Fund's purchase of the Property and construction of the EIT Fund 
Facility will further the EIT Fund's longterm goals of stabilizing its 
expenses with an updated, modernized, and fully-owned facility, and 
expanding its service offerings to include the medical clinic.
    Wagner represents that it reviewed the methodology used by the 
Independent Appraiser to ensure that the methodology adhered to sound 
principles of valuation. Wagner states that it reached its conclusion 
as to an appropriate purchase price for the Property based, not on a 
mechanical mathematical averaging process, but by relying upon a strong 
framework to determine a purchase price that represents a prudent 
judgment as to a fair market value that is in the best interest of the 
EIT Fund participants, given the intended use of the Property and the 
value of the transaction to the EIT Fund. In reliance on this analysis, 
Wagner affirms that the Sale is at least as favorable to the EIT Fund 
as the transaction that would have occurred in an arm's length 
transaction between independent and unrelated parties, each of whom had 
full knowledge of the relevant facts and neither of whom was under any 
compulsion to buy or sell.
    Wagner also considered the financial condition of the EIT Fund in 
its analysis. In this regard, Wagner notes that, as of June 30, 2018, 
the EIT Fund's financial position included assets totaling 
$456,536,340, which represents a 9% increase over the previous year. 
Wagner states that the $710,000 purchase price will involve 0.16% of 
the Fund's total assets, and that the $10,248,350 to construct the EIT 
Fund Facility and access road will involve about 2.24% of the EIT 
Fund's total assets. Thus, according to Wagner, the total cost to the 
EIT Fund with respect to the Sale will involve about 2.40% of the EIT 
Fund's total assets.
    In addition, Wagner represents that the EIT Fund will not require a 
loan or other financing to acquire the Property and construct the EIT 
Fund Facility and access road. Wagner notes that the EIT Fund has 
represented that it will be able to meet its obligations to pay 
benefits under the Fund and will not need to obtain financing to 
support its acquisition of the Property. Wagner concludes that the 
purchase of the Property and construction of the EIT Fund Facility is 
in the best interest of the EIT Fund participants and will not 
negatively affect the EIT Fund's overall financial health.
    Moreover, Wagner notes that the EIT Fund, its engineers, design 
consultants, and professional advisors have met with the Village of 
Alsip regarding the purchase of the Property, the subdivision and 
easement, the Fund's intended use of the Property, and various 
necessary zoning, building, and easement construction permits. 
According to the EIT Fund representatives, all indications from the 
Village of Alsip are that development approvals will be granted once 
the EIT Fund's formal applications are filed.
    Wagner states that, to further ensure the protection of the EIT 
Fund and its participants and beneficiaries, it will continue to 
monitor the process, enforce the final terms of the Sale, and take 
whatever actions are necessary to protect the interests of the EIT Fund 
participants and beneficiaries up to and coincident with the closing 
date of the Sale.
    Finally, Wagner may not enter into, and has not entered into, any 
agreement, arrangement or understanding in connection with the Sale 
that indemnifies Wagner, in whole or in

[[Page 15264]]

part, or waives any liability for negligence by Wagner or for failing 
to adhere to state or federal law. In addition, Colliers may not enter 
into, and has not entered into, any agreement, arrangement or 
understanding in connection with the Sale that indemnifies Colliers, in 
whole or in part, or waives any liability for negligence by Colliers or 
for failing to adhere to state or federal law.

The EIT Fund's Environmental Study of Property

    17. Phase I Environmental Study. To further examine the 
appropriateness of the Property as a site for the EIT Fund Facility, 
the EIT Fund engaged Pioneer Engineering & Environmental Services, LLC 
of Chicago, Illinois (Pioneer) to conduct a Phase I Environmental Site 
Assessment of the Property. On October 18, 2019, Pioneer completed its 
assessment (the Environmental Assessment) which revealed no evidence of 
any Recognized Environmental Conditions in connection with the 
Property. Pioneer will update its Environmental Assessment of the 
Property prior to the Closing Date of the Sale.

Exemptive Relief

    18. Exemptive Relief Requested and Analysis. Section 406(a)(1)(A) 
of the Act prohibits a plan fiduciary from causing a plan to engage in 
a transaction if the fiduciary knows or should know that such 
transaction constitutes a direct or indirect sale of any property 
between a plan and a party in interest. The EJAT Trust Board and the 
EIT Fund Board are fiduciaries under section 3(14)(A) of the Act. The 
EIT Fund is a party in interest with respect to the EJAT Trust under 
section 3(14)(C) of the Act because it is an employer whose employees 
participate in the EIT Fund. Therefore, the Sale would violate section 
406(a)(1)(A) of the Act.
    In addition, section 406(a)(1)(D) of the Act prohibits a plan 
fiduciary from causing a plan to engage in a transaction if the 
fiduciary knows or should know that such transaction constitutes a 
direct or indirect transfer to, or use by or for the benefit of, a 
party in interest, of the income or assets of the plan. The EJAT 
Trust's sale of the Property to the EIT Fund, and the EIT Fund's 
corresponding purchase of the Property from the EJAT Trust, and the 
granting of the right of first offer, constitute a prohibited transfer 
of assets (i.e., the exchange of the Property for cash between the 
Plans) in violation of section 406(a)(1)(D) of the Act.
    Section 406(b)(1) of the Act prohibits a plan fiduciary from 
dealing with the assets of the plan in his or her own interest or for 
his or her own account. Section 406(b)(2) of the Act prohibits a plan 
fiduciary, in his or her individual or in any other capacity, from 
acting in any transaction involving the plan on behalf of a party whose 
interests are adverse to the interests of the plan or the interests of 
the plan's participants or beneficiaries.
    The EJAT Trust Board and the EIT Fund Board share one trustee, Mr. 
Donald Finn, who is the business manager and financial secretary with 
respect to the Local 134. Mr. Finn will recuse himself with respect to 
the transactions described in this proposal. However, in the 
Department's view, Mr. Finn remains in a position of influence with 
respect to the Local 134 Trustees. The EJAT Trust Board and the EIT 
Fund Board may be deemed as engaging in a prohibited act of self-
dealing in violation of section 406(b)(1) of the Act with respect to 
the Sale and the granting of the right of first offer. In addition, 
each Board may have divided loyalties regarding the Sale and the 
granting of the right of first offer, in violation of section 406(b)(2) 
of the Act.

Statutory Findings

    19. ``Administratively Feasible.'' The Department has tentatively 
determined that the Sale is administratively feasible because it is a 
one-time transaction for cash overseen Independent Fiduciaries. 
Furthermore, Independent Fiduciaries will represent the interests of 
the Plans for all purposes with respect to the Sale, and ensure that 
the Property is sold for fair market value.
    20. ``In the Interests of.'' The Department has tentatively 
determined that the proposed exemption is in the interest of each Plan. 
With regard to the EIT Fund, relocating the EIT Fund's office to the 
Property may stabilize the EIT Fund's expenses and create synergies by 
establishing a campus of related services between the EIT Fund and EJAT 
Trust. With regard to the EJAT Trust, the Sale presents an opportunity 
for the EJAT Trust to diversity its assets through the sale of an 
unused parcel of real estate. The Sale will allow the EJAT Trust to use 
the cash to enhance the value of the EJAT Trust Training Facility for 
the benefit of the participants and beneficiaries of the EJAT Trust.
    21. ``Protective of.'' The Department has tentatively determined 
that the proposed exemption is protective of the rights of the Plans' 
participants and beneficiaries. In this regard, an Independent 
Fiduciary will represent its respective Plans for all purposes with 
respect to the Sale. Among other things, the Independent Fiduciaries 
will review and confirm that the methodologies used by the Independent 
Appraisers adhere to sound principles of valuation, and affirm that the 
terms of the Sale are at least as favorable as would be obtainable in 
an arm's length transaction with unrelated and independent parties, 
each of whom who had full knowledge of the relevant facts, and neither 
of whom was under any compulsion to buy or sell.

Notice to Interested Persons

    Those persons who may be interested in the publication in the 
Federal Register of the notice of proposed exemption (the Notice) 
include participants and beneficiaries of the EJAT Trust and 
participants and beneficiaries of the EIT Fund. The Applicants will 
provide notification to interested persons by electronic mail, and 
first-class mail within fifteen (15) calendar days of the date of the 
publication of the Notice in the Federal Register. The mailing 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(b)(2), which will advise the 
interested persons of their right to comment and to request a hearing.
    The Department must receive all written comments and requests for a 
hearing no later than forty-five (45) days from the date of the 
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.

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

[[Page 15265]]

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.

Proposed Exemption

Section I. Proposed Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A) and (D), and 406(b)(1) and (b)(2) of the Act shall not 
apply to: (a) the sale (the Sale) by the Electrical Joint 
Apprenticeship and Training Trust (the EJAT Trust) of 5.11 acres of 
unimproved real property to the Electrical Insurance Trustees Insurance 
Fund (the EIT Fund), a party in interest with respect to the EJAT 
Trust; and (b) the EIT Fund's granting of a right of first offer (the 
Right of First Offer) to the EJAT Trust, for the purchase back of the 
Property by the EJAT Trust from the EIT Fund, provided the conditions 
in Section II are met.

Section II. Conditions

    (a) The Sale is a one-time transaction for cash;
    (b) The terms and conditions of the Sale are at least as favorable 
to the EJAT Trust and the EIT Fund as the terms and conditions they 
would have received in an arm's length transaction between unrelated 
and independent parties, each of whom had full knowledge of the 
relevant facts, and neither of whom were under any compulsion to buy or 
sell;
    (c) The EJAT Trust Independent Fiduciary prudently:
    (1) Represents the EJAT Trust's interests for all purposes with 
respect to the Sale;
    (2) Determines that the Sale is in the interest of, and protective 
of, the EJAT Trust and the participants of the EJAT Trust;
    (3) Reviews and approves the terms and conditions of the Sale;
    (4) Engaged the EJAT Trust Independent Appraiser and ensured the 
Appraiser's independence;
    (5) Reviews the EJAT Independent Appraisal Report, confirms that 
the underlying methodology is reasonable and accurate, and confirms 
that the valuation of the Property was reasonably derived;
    (6) Ensures that the EJAT Trust Independent Appraiser renders an 
updated fair market valuation of the Property as of the date of the 
Sale;
    (7) Determines whether it is prudent for the EJAT Trust to proceed 
with the Sale; and
    (8) Ensures that it has not and will not enter into any agreement 
or instrument that violates section 410 of ERISA.
    (d) The EIT Fund Independent Fiduciary prudently:
    (1) Represents the EIT Fund's interests for all purposes with 
respect to the Sale;
    (2) Determines that the Sale is in the interest of, and protective 
of, the EIT Fund and the participants of the EIT Fund;
    (3) Reviews and approves the terms and conditions of the Sale;
    (4) Engaged the EIT Fund Independent Appraiser for the Sale and 
ensured the Appraiser's Independence;
    (5) Reviews the EIT Fund Independent Appraisal Report, confirms 
that the underlying methodology is reasonable and accurate, and 
confirms that the valuation of the Property was reasonably derived;
    (6) Ensures that the EIT Fund Independent Appraiser renders an 
updated fair market valuation of the Property as of the date of the 
Sale;
    (7) Determines whether it is prudent for the EIT Fund to proceed 
with the Sale; and
    (8) Ensures that it has not and will not enter into any agreement 
or instrument that violates section 410 of ERISA.
    (e) The Sale is not part of an agreement, arrangement, or 
understanding designed to benefit any party other than the EJAT Trust 
and the EIT Fund;
    (f) Any use of the Property by the EIT Fund and the Related Plans 
that is described in PTEs 76-1 and 77-10 complies with the conditions 
of those exemptions;
    (g) Not later than 90 days after the Sale is completed, the EJAT 
Trust Independent Fiduciary and the EIT Fund Independent Fiduciary each 
submit a written statement to the Department documenting that the Sale 
has met all of the requirements of this the exemption;
    (h) The EIT Fund Independent Fiduciary may not enter, and has not 
entered, into any agreement, arrangement or understanding regarding the 
Sale that indemnifies the EIT Fund Independent Fiduciary, in whole or 
in part, or waives any liability for negligence or for violation of 
state or federal law by the EIT Fund Independent Fiduciary;
    (i) The Independent Appraiser selected by the EIT Fund Independent 
Fiduciary may not enter, and has not entered, into any agreement, 
arrangement or understanding regarding the Sale that indemnifies the 
EIT Fund Independent Appraiser, in whole or in part, or waives any 
liability for negligence or for any violation of state or federal law 
by the Independent Appraiser;
    (j) The EJAT Trust Independent Fiduciary may not enter, and has not 
entered, into any agreement, arrangement or understanding regarding the 
Sale that indemnifies the EJAT Trust Independent Fiduciary, in whole or 
in part, or waives any liability for negligence or for any violation of 
state or federal law by the EJAT Trust Independent Fiduciary;
    (k) The Independent Appraiser that is selected by the EJAT Trust 
Independent Fiduciary may not enter, and has not entered, into any 
agreement, arrangement or understanding regarding the Sale that 
indemnifies the Independent Appraiser, in whole or in part, for 
negligence or for any violation of state or federal law by the 
Independent Appraiser; and
    (l) The EJAT Trust may not re-purchase the Property from the EIT 
Fund absent an individual exemption granted by the Department.
    Effective Date: If granted, the exemption will be effective as of 
the date the grant notice is published in the Federal Register.

    Signed at Washington, DC, this 15th day of March 2021.
Christopher Motta,
Chief, Division of Individual Exemptions, Office of Exemption 
Determinations, Employee Benefits Security Administration, U.S. 
Department Of Labor.
[FR Doc. 2021-05843 Filed 3-19-21; 8:45 am]
BILLING CODE 4510-29-P