[Federal Register Volume 88, Number 163 (Thursday, August 24, 2023)]
[Notices]
[Pages 57970-57975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18231]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Exemption Application No. L-12016]


Proposed Exemption for Certain Prohibited Transaction 
Restrictions: United Automobile, Aerospace and Agricultural Implement 
Workers of America (the UAW or the Applicant) Located in Detroit, 
Michigan

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 the Act) and/or the 
Internal Revenue Code of 1986 (the Code). This proposed exemption would 
permit the receipt of a note by the UAW Retiree VEBA, as defined below, 
from the UAW, and the receipt of collateral on the note by the Retiree 
VEBA in connection with a court-approved settlement agreement.

DATES: Comments due: Written comments and requests for a public hearing 
on the proposed exemption should be submitted to the Department by 
October 10, 2023.
    Exemption date: If granted, this proposed exemption will be in 
effect on the date that the grant notice is published in the Federal 
Register.

ADDRESSES: All written comments and requests for a hearing should be 
submitted to the Employee Benefits Security Administration (EBSA), 
Office of Exemption Determinations, Attention: Application No. L-12016 
via email to [email protected] or online through 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.

FOR FURTHER INFORMATION CONTACT: Ms. Anna Vaughan of the Department, 
telephone (202) 693-8565. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: 
    Comments: 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 
how 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 a 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.

Proposed Exemption

    The Department is proposing to grant an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974 (ERISA) as amended. As described in more detail below, the 
UAW is required to make certain contributions to the UAW Retirees 
Health Care Plan (the Retiree Plan) pursuant to a court-approved 
settlement agreement. The Retiree Plan is funded through the UAW 
Retirees Health Care Trust (together with the Retiree Plan, the Retiree 
VEBA). The exemption would permit

[[Page 57971]]

the receipt of a Note by the Retiree VEBA from the UAW, and the receipt 
of collateral on the Note by the Retiree VEBA from the UAW. The 
collateralized Note is intended to help ensure that the Retiree VEBA 
receives all the contributions it is due from the UAW pursuant to the 
settlement agreement. This proposed exemption would not affect or 
reduce the amount or types of benefits offered under the Retiree VEBA.

Summary of Facts and Representations 1
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    \1\ The Department notes that availability of this exemption, is 
subject to the express condition that the material facts and 
representations contained in application L-12016 are true and 
complete, and accurately describe all material terms of the 
transactions covered by the exemption. If there is any material 
change in a transaction covered by the exemption, or in a material 
fact or representation described in the application, the exemption 
will cease to apply as of the date of such change.
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The UAW

    1. The UAW is a labor union with approximately 669 active 
employees, as of November 1, 2021. As of December 31, 2022, the UAW had 
total assets of $1,129,835,327.

The Union Supporting Parties

    2. The UAW represents that to control the steadily increasing 
financial burden of certain UAW-sponsored retiree health programs (the 
UAW Retiree Health Programs), the UAW engaged in discussions with the 
Office of Professional Employees International Union Local 494 (OPEIU 
Local 494), the UAW Staff Council of International Representatives (UAW 
Staff Council), and other unions (together, the Union Supporting 
Parties) before 2013. These discussions led to negotiated changes 
regarding future benefits for then-current employees, future retirees, 
and new hires. The UAW represents that these negotiated changes were 
inadequate to resolve the serious financial difficulties posed by the 
increasing cost of providing retiree health care. Therefore, in 2013, 
the UAW announced additional unilateral modifications to the UAW 
Retiree Health Programs that were implemented without agreement with 
current retirees or the unions that represented those retirees.
    3. According to the UAW, the Union Supporting Parties ultimately 
objected to these unilateral modifications and subsequently entered 
into extensive negotiations with the UAW. The negotiations led to a 
June 2014 Memorandum of Understanding (the MOU) that set out detailed 
terms and conditions for the creation and funding of a Retiree VEBA and 
the payment of retiree health benefits to the participants and 
beneficiaries previously covered under the UAW Retiree Health Programs. 
The MOU was conditioned upon the negotiation and court approval of a 
final settlement agreement.

Court-Approved Settlement Agreement

    4. In May 2014, the Union Supporting Parties and three individuals 
who were seeking to represent the UAW's retirees and current and former 
unrepresented employees eligible for current and future benefits from 
the UAW Retiree Health Programs filed a class action challenging the 
UAW's 2013 unilateral modifications to the UAW Retiree Health 
Programs.\2\ Subsequent negotiations among all the parties resulted in 
a settlement agreement (the Settlement Agreement), which refined and 
amplified the basic agreements set out in the June 2014 MOU. The Court 
issued a final order approving the Settlement Agreement on November 6, 
2015, and the UAW Retiree Health Programs were subsequently terminated 
on or about December 17, 2015.\3\
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    \2\ This case was filed on December 22, 2014, in the United 
States District Court for the Eastern District of Michigan (the 
Court). See Office and Professional Employees International Union 
Local 494, et al v. United Automobile, Aerospace, and Agricultural 
Implement Workers of America, Civil Action No. 2:14-cv-14868-DPH-EAS 
(E.D. Michigan).
    \3\ The UAW Retiree Health Programs included all UAW-sponsored 
programs that provided eligible retirees with post-employment 
medical benefits (including hospital, surgical, medical, 
prescription drugs, vision, dental, hearing, Medicare Part B 
reimbursement, and any other reimbursement or expenditure with 
respect to such benefits) under the terms of applicable collective 
bargaining agreements, benefit plans and programs, pension plan 
documents, letters of agreement and understandings, and documents 
reflecting terms of employment with the UAW.
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Funding the Retiree VEBA

    5. Pursuant to the Settlement Agreement, the UAW committed to 
contributing approximately $354.5 million to the Retiree VEBA.\4\ On 
December 17 and December 23, 2015, the UAW contributed a total of 
$240,730,693.06 to the Retiree VEBA. Under the terms of the Settlement 
Agreement, the UAW thereafter owed $134,720,000 to the Retiree VEBA.\5\
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    \4\ Specifically, the payment obligation of the UAW to the VEBA 
equals: (1) $346,000,000, adjusted to reflect the final number of 
participants and their coverage code and claims paid by the UAW from 
January 1, 2013, through the implementation date of the Settlement 
Agreement, plus interest on that adjusted amount, and (2) $8,500,000 
to fund administrative expenses.
    \5\ This amount reflected the difference between the UAW's 
initial contribution amount and the UAW's final total contribution 
commitment (adjusted as set forth in footnote 4).
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The Note

    6. The parties to the Settlement Agreement negotiated certain 
protections for the participants and beneficiaries of the Retiree 
VEBA.\6\ The protections include a note (the Note), to be issued by the 
UAW in favor of the Retiree VEBA if this exemption is granted. The Note 
will have a principal amount of $134,720,000, a 15-year term, an 
interest rate of 5.5% per year, and require the UAW to make sixty (60) 
equal quarterly installment payments to the Retiree VEBA according to 
the amortization schedule provided by UAW's actuary.
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    \6\ The Applicant notes that the protections that are the 
subject of this exemption do not become an enforceable part of the 
Settlement Agreement unless the Department grants this proposed 
exemption.
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    7. The Note must reflect all of the terms set forth in the 
Settlement Agreement regarding the UAW's contribution obligations, 
including the conditions and rights regarding ``acceleration'' and 
``default.'' \7\ If the UAW defaults in making any installment payment, 
or upon a reorganization of the UAW, or upon the sale of any real 
estate of the UAW or of its closed locals (or its or their building 
corporations), the Retiree VEBA will have the right to declare an 
acceleration of all, or a portion of, the UAW's unpaid contribution 
commitment.\8\ In addition, if the UAW violates the debt limitation 
and/or subordination requirements of the Settlement Agreement,\9\ the 
Retiree

[[Page 57972]]

VEBA will have the right to declare the full outstanding principal 
amount of the UAW's contribution commitment immediately due and 
payable, with interest.
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    \7\ Under the terms of the Settlement Agreement, a default 
occurs when a failure to make payment of any installment when due 
under the Installment Payment Obligation, as defined below, is not 
cured on or within sixty (60) days after the scheduled due date.
    \8\ With respect to the term ``close affiliates,'' the Applicant 
states that Section 6(d) of the Settlement agreement provides that 
the acceleration provision applies upon the sale of ``any real 
estate formerly owned by closed UAW Locals or their building 
corporations'' (in addition to upon the sale of any real estate 
formerly owned by the UAW or its building corporation).
    \9\ Limitations on new debt: The UAW shall not incur new 
indebtedness for borrowed money (except for debt subordinated to 
that of the New VEBA) while the Installment Payment Obligation 
remains outstanding, except for: (a) short-term (12 months or less) 
lines of credit or similar credit facilities, in amounts consistent 
with past UAW practice, incurred for the purpose of strike support; 
(b) debt incurred in a cumulative amount not to exceed $10 million, 
escalated at five percent annually from the Final Effective Date; 
(c) debt incurred to pay minimum required contributions under 
Section 430 of the Internal Revenue Code, contributions required to 
prevent the application of limits on benefits and benefit accruals 
under Section 436 of the Internal Revenue Code, or contributions 
required to avoid the filing requirements (``4010 filings'') as 
specified by ERISA section 4010. The UAW shall notify the New VEBA 
in writing in the event that the UAW incurs any new indebtedness 
which exceeds the limitations described in this paragraph.
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The Mortgage

    8. The Note is collateralized by a mortgage lien (the Mortgage 
Lien), which is a first priority security interest on the Black Lake 
Property (including any present or future rents or securities deposited 
thereunder).\10\ The Black Lake Property is located in Onaway, MI 
49765, and consists of nine improved parcels of real property. As 
reported on the UAW's Form LM-2, the value of the Black Lake Property 
for the year 2022 was $107,015,388.
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    \10\ All persons or entities who have or may acquire an interest 
in the Black Lake Property must have notice of, and be bound by, the 
terms of the Note. No party will be entitled to any rights 
thereunder without the written consent of the Retiree VEBA.
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    9. Under the terms of the Settlement Agreement, the UAW is 
responsible for paying all taxes levied or assessed with respect to the 
Black Lake Property through its wholly owned subsidiary, the Union 
Building Corporation (the UBC), and the UAW must maintain property 
insurance on the Black Lake Property. If the UAW, through the UBC, 
seeks to sell the Black Lake Property, or any portion thereof: (a) the 
sale must be for a purchase price not less than the appraised value 
established by an independent professional real estate valuation 
firm,\11\ within 30 days of a purchase agreement for the sale of such 
homesite and surrounding land; and (b) the Independent Members may not 
release the Retiree VEBA's Mortgage Lien on the Black Lake Property 
unless and until the UAW makes all the commitments necessary to allow 
the Independent Members to conclude, consistent with their duties under 
ERISA section 404(a), that the sale of such property does not 
materially increase the risk borne by the Retiree VEBA. Such 
commitments may include the pre-payment of a portion of the installment 
payment obligation or the provision of alternative collateral.
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    \11\ As noted below, the exemption requires a valuation of the 
Black Lake Property by a Qualified Independent Appraiser if and when 
the Black Lake Property is transferred to the Retiree VEBA.
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    10. The UAW must contribute 100% of the net proceeds from the sale 
of all or any portion of the Black Lake Property, to the Retiree VEBA 
(i.e., the amount of proceeds from the sale of the property that 
exceeds the costs associated with the property).\12\
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    \12\ The Applicant represents that Cabin No. 4 at the Black Lake 
Property, along with an immediately adjacent parcel, were listed by 
Thomas Duke Realtors and sold in 2021 for $1,100,000, to a party 
independent of the UAW. No amount was due to the Retiree VEBA 
because there were no net proceeds from the sale.
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The Royalty Security

    11. The Note is further collateralized by the Royalty Security set 
forth in a security agreement between the UAW and the Retiree VEBA, 
dated December 8, 2014 (the Security Agreement). Under the Security 
Agreement, the UAW must immediately assign a first priority security 
interest to the Retiree VEBA equal to 30% of the Royalty Security 
received or receivable from time to time from the UAW's member credit 
card program, upon an uncured default on the UAW's installment payment 
obligation.
    As reported on the UAW's Form LM-2, the value of the credit card 
royalty payments for the year 2022 was $405,732.
    12. The terms of the Note, Mortgage Lien, and Royalty Security may 
not be modified during the duration of the UAW's obligation to the 
Retiree VEBA.

The Committee

    13. The Retiree VEBA is controlled by an eight-member committee 
(the Committee) that acts as the named fiduciary of the Retiree VEBA 
and has the authority to determine the retiree health benefits that are 
provided under the Retiree VEBA. The Committee is composed of: four 
Independent Members; \13\ one member appointed by the UAW; and three 
members appointed by Unions whose eligible retirees have, or will have, 
health care benefits through the Retiree VEBA (the Union-Appointed 
Members).\14\ With respect to the Committee's Union-appointed Members, 
two are appointed by UAW Staff Council and one is appointed by OPEIU 
Local 494. The Committee Chair is (i) chosen by the Committee members 
and required to be one of the Independent Members and (ii) given two 
votes (except with respect to the selection of a successor Chair).\15\
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    \13\ Section 1.07 of the UAW Retirees Health Care Trust 
agreement (the Trust Agreement) defines an Independent Member as 
``[a]n individual person who serves as a member of the Committee and 
is not an officer or employee of the UAW or the Unions and does not 
have any other relationship with the UAW or the Unions that would 
compromise his or her independence, who satisfies the requirements 
of Section 9.01 of the Trust Agreement, and whose experience in such 
fields, without limitation, as health care, employee benefits, asset 
management, human resources, labor relations, economics, law, 
accounting or actuarial science indicates a capacity to fulfill the 
powers and duties of Article IX in the manner described in Section 
10.11, and wherever practicable, helps to provide a range of 
relevant experience to the Committee.''
    \14\ The Applicant states that, as of July 21, 2023, the current 
Independent Members of the Committee are Gary Petroni, Gary Mann, 
Jessica Gubing, and Francine Parker, (Committee Chair), and the non-
Independent Members are James King (appointed by Staff Council), 
Scott Andrews (appointed by Staff Council), Janice Caruso (appointed 
by OPEIU), and Renee Turner Baily (appointed by UAW).
    \15\ The initial Chair of the Committee was selected by the UAW 
and the Union Supporting Parties and designated in the final 
approval order entered by the Court. See the Settlement Agreement, 
Section 4(B), Doc. 19-1, Pg 20 of 82. Court Order, Doc. 38, Pg 33 of 
35.
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    14. Of the Committee's initial four Independent Members, three were 
previously approved by the Court in connection with the Settlement 
Agreement. The Committee's Independent Members are selected and 
thereafter retain their position after receiving a majority of the 
votes cast by the other Committee members. The votes are allocated 
three each to the other Independent Members (including the Chair) and 
the UAW-appointed member and one each to the OPEIU Local 494-appointed 
member and the two UAW Staff Council-appointed members.\16\ Therefore, 
the vote of the UAW-appointed member is not required for the selection 
of a successor Independent Member. In the event of a vacancy in an 
Independent Member position, the other Independent Members, the UAW-
appointed member, and the other non-independent members (voting as 
described in Section 9.05(a) of the Trust Agreement), shall select the 
successor Independent Member.''
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    \16\ Trust Agreement, Section 9.05(a).
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    15. Each Independent Member serves a three-year term, and the terms 
are staggered. Because the terms are staggered, the Committee votes on 
at least one member position every year. Vacancies are filled by the 
Committee pursuant to the voting rules set forth in the Trust 
Agreement.
    16. The Independent Members have sole and exclusive control over 
the Note, the Mortgage Lien, and the Royalty Security, in order to 
foreclose or realize on the Black Lake Property and the Royalty 
Security upon an uncured default on the UAW's installment obligation.
    17. No one other than the Independent Members, or their delegate, 
may make any decisions with respect to the Collateral.
    18. The Department notes that the Independent Members must exercise 
their duties with respect to such instruments prudently and solely in 
the interests of the participants and beneficiaries of the Retiree 
VEBA, consistent with their fiduciary duties under ERISA section 404.

[[Page 57973]]

Exemption Request and ERISA Analysis

    19. The Applicant seeks an exemption so that the Retiree VEBA may: 
(1) acquire and hold the Note, Mortgage Lien, and Royalty Security; and 
(2) as needed, exercise its rights granted under the Note, Mortgage 
Lien, and Royalty Security. An exemption is necessary because these 
proposed transactions would violate various provisions of ERISA. 
Specifically, ERISA section 406(a)(1)(A) prohibits a plan fiduciary 
from engaging in any sale or exchange of property between the plan and 
a ``party in interest.'' ERISA section 3(14)(D) defines the term 
``party in interest'' to include an employee organization any of whose 
members are covered by such plan. Thus, the UAW is a party in interest 
with respect to the Retiree VEBA, because it is an employee 
organization whose members are covered by the Retiree VEBA.
    20. The acquisition of the Note by the Retirement VEBA from the UAW 
would constitute an exchange between the Retiree VEBA and a party in 
interest that would violate ERISA section 406(a)(1)(A).
    21. ERISA section 406(a)(1)(B) prohibits loans or extensions of 
credit between a plan and a party in interest. A Note issued by the UAW 
and held by the Retiree VEBA would represent an extension of credit 
that violates ERISA section 406(a)(1)(B).
    22. ERISA sections 406(a)(1)(E) and 407(a) prohibit a fiduciary 
from acquiring or holding on behalf of a plan an employer security or 
any employer real property that is not a ``qualifying employer 
security'' or ``qualifying employer real property,'' as defined by 
ERISA section 407(d)(5). The Note and Royalty Security may be 
characterized as a ``security'' issued by the UAW that is not stock, a 
marketable obligation, or an interest in a publicly traded partnership, 
and the Mortgage Lien might be characterized as an interest in 
``employer real property'' that does not satisfy the requirements of 
ERISA section 407(d)(4) (geographic dispersion, suitable for more than 
one use, etc.). Therefore, the acquisition of the Note and the Royalty 
Security by the Retiree VEBA from the UAW may violate ERISA sections 
406(a)(1)(E) and 407(a).

Conditions of the Proposed Exemption

    23. The requirements of this proposed exemption include all of the 
material terms of the Note and the Collateral, as embedded in the 
Settlement Agreement, which were approved by the Court. The Independent 
Members must represent the Retiree VEBA for all purposes with respect 
to the Covered Transactions and ensure that each exemption condition is 
met, consistent with their fiduciary duties under ERISA section 404.
    24. The Retiree VEBA must develop written policies and procedures 
designed to ensure that the Independent Members prudently monitor the 
UAW's payment obligation to the Retiree VEBA and the UAW's marketing 
and/or sale of all or a portion of the Black Lake Property. In 
addition, as soon as reasonably possible following any date the UAW 
defaults on its payment obligation (and also fails to correct such 
default), and as needed or as required thereafter, the Independent 
Members must engage a Qualified Independent Appraiser to value the 
Note, Mortgage Lien, and/or the Royalty Security, consistent with their 
fiduciary duties under ERISA section 404. The Independent Members must 
also ensure that the Retiree VEBA receives all that it is due under the 
terms of the Settlement Agreement from the sale of any of the 
Collateral, in a timely fashion, in order to offset the outstanding 
principal balance due under the Note.
    25. On an annual basis, beginning on the date this exemption is 
granted, the Committee Chairperson must provide the Department with a 
written certification that the Chairperson monitored the Note, the 
Collateral, the Security Agreement, and the terms of this exemption, 
consistent with their fiduciary duties under ERISA section 404. The 
certification must be provided within 30 days of the end of the period 
to which it relates.
    26. In the event the UAW defaults on the Installment Payment 
Obligation, the Committee Chairperson must submit a written report to 
the Department providing: (1) a certification that each condition of 
the exemption has been met; (2) a complete description of any 
foreclosure and liquidation transactions; (3) all documentation 
necessary to demonstrate that all relevant conditions applicable to the 
transaction(s) have been met; and (4) if the Retiree VEBA does not 
foreclose on the Collateral, a complete explanation of the Independent 
Members' rationale for not taking such action. The report must be 
submitted to the Department no later than 90 days following a default 
on the Installment Payment Obligation.

Statutory Findings

    27. The Proposed Exemption is ``Administratively Feasible.''
    The Department has tentatively determined that the proposed 
exemption is administratively feasible because, among other things, the 
exemption stems from, and is consistent with, a Settlement Agreement 
that was approved by the Court as being appropriate and fair. The 
exemption also requires oversight and monitoring by the Committee 
Chairperson, who is independent of the UAW, and a detailed report to 
the Department if the Retiree VEBA forecloses on the Collateral.
    28. The Proposed Exemption is ``In the Interest of the Retiree 
VEBA.''
    After reviewing the exemption application, as required by ERISA 
section 408(a), the Department has tentatively determined that the 
proposed exemption is in the interest of the Retiree VEBA because, 
among other things, the Covered Transactions would provide the Retiree 
VEBA with additional authority to enforce the UAW's contribution 
promises, increasing the likelihood that the Retiree VEBA's funding 
will be sufficient to achieve its intended purpose of providing 
lifetime retiree health benefits to its participants and beneficiaries. 
It is the Department's understanding that, if this exemption is not 
granted the sole consequence to the Retiree VEBA is that the Retiree 
VEBA will lose the security of the Note and the Collateral, and the 
Settlement Agreement would not otherwise be affected.
    29. The Proposed Exemption is ``Protective of the Retiree VEBA.'' 
The Department has tentatively determined that the proposed exemption 
is protective of the rights of the Retiree VEBA's participants and 
beneficiaries because, among other things, the Covered Transactions are 
limited in scope and tailored for the exclusive purposes of providing 
the Independent Members with direct legal rights to enforce the UAW's 
contribution promises under the Note, Mortgage Lien, and Royalty 
Security.

Notice to Interested Persons

    Notice of the proposed exemption will be provided to all interested 
persons within fifteen (15) days of the publication of the notice of 
proposed five-year exemption in the Federal Register. The notice will 
be provided to all interested persons in the manner approved by the 
Department and will contain the documents described therein and a 
supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2). 
The supplemental statement will inform interested persons of their 
right to comment on and to request a hearing with respect to the 
pending exemption. All written comments and/or requests for a hearing 
must be received by the Department within forty-five (45) days of the 
date of

[[Page 57974]]

publication of this proposed five-year exemption in the Federal 
Register. All comments will be made available to the public.
    Warning: 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. 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 ERISA section 408(a) and/or Code section 4975(c)(2) does not 
relieve a fiduciary or other party in interest or disqualified person 
from certain other provisions of ERISA and/or the Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of ERISA section 
404, which, among other things, require a fiduciary to discharge their 
duties respecting the plan solely in the interest of the participants 
and beneficiaries of the plan and in a prudent fashion in accordance 
with ERISA section 404(a)(1)(B); nor does it affect the requirement of 
Code section 401(a) 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 ERISA section 408(a) 
and/or Code section 4975(c)(2), 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 would be supplemental to, and not in 
derogation of, any other provisions of ERISA 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 would be subject to the express 
condition that the material facts and representations contained in the 
application are true and complete at all times and that the application 
accurately describes all material terms of the transactions which are 
the subject of the exemption.

Proposed Exemption

    Based on the facts and representations set forth in the 
application, the Department is proposing to grant an exemption under 
the authority of ERISA section 408(a) and in accordance with its 
exemption procedure regulation \17\ as follows:
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    \17\ 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 
27, 2011).
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Section I. Definitions

    (a) The term ``Black Lake Property'' means a parcel of real 
property owned by the UAW situated in the Township of Waverly, County 
of Cheboygan, State of Michigan, as described in detail in Exhibit A to 
the Mortgage Lien.
    (b) The term ``Committee'' means the eight-member committee that 
controls and acts as the named fiduciary of the Retiree VEBA. One 
Committee member is appointed by the UAW. The remaining Committee 
members are four Independent Members, and three members who are 
appointed by the Unions whose eligible retirees have, or will have, 
health care benefits through the Retiree VEBA (the Union-appointed 
Members). The Committee Chair: is chosen by the members of the 
Committee; is required to be one of the Independent Members; and is 
given two votes (except with respect to the selection of a successor 
Chair).
    (c) The term ``Court'' means the United States District Court for 
the Eastern District of Michigan.
    (d) The term ``Final Effective Date'' means the date on which any 
appeals from, or other challenges to (i) an order obtained from the 
Court approving and incorporating the Settlement Agreement in all 
respects on a class-wide basis as set forth in Section 15(b) of the 
Settlement Agreement and (ii) a final order entered by the Court 
certifying the Litigation as a non-opt out class action, with the class 
defined in Section 1 of the Settlement Agreement.
    (e) The term ``Independent Members'' means four individuals on the 
Committee designated as independent members. An Independent Member may 
not be an officer or employee of the UAW or the other Unions or have 
any other relationship with the UAW or the other Unions that would 
compromise his or her independence.
    (f) The term ``Implementation Date'' means the date that is ten 
days after the Final Effective Date.
    (g) The term ``Installment Payment Obligation'' means the payment 
of an amount, as described in Section 6(C)(iii) of the Settlement 
Agreement, to the Retiree VEBA in equal installment payments over a 
term of fifteen (15) years, at an interest rate of 5.5% per annum 
beginning on the Implementation Date, compounded quarterly, reduced by 
2 basis points for each $1 million in accelerated payments made by the 
UAW.
    (h) The term ``Litigation'' means Office and Professional Employees 
International Union Local 494, et al v. United Automobile, Aerospace, 
and Agricultural Implement Workers of America, Civil Action No. 2:14-
cv-14868-DPH-EAS (E.D. Michigan).
    (i) The term ``Mortgage Lien'' means a first mortgage lien granted 
by the UAW on the Black Lake Property to secure payment of the Note.
    (j) The term ``Note'' means a note issued by the UAW consistent 
with the terms of the Settlement Agreement.
    (k) The term ``Qualified Independent Appraiser'' means any 
individual or entity with appropriate training, experience, and 
facilities to provide a qualified appraisal report on behalf of the 
Retiree VEBA regarding the particular asset or property appraised in 
the report, that is independent of and unrelated to any party in 
interest engaging in the exemption transaction and its affiliates.\18\
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    \18\ The Qualified Independent Appraiser must meet the 
requirements described at 29 CFR 2570.31(i) at 76 FR 66645 (October 
27, 2011). Specialized statements from the Qualified Independent 
Appraiser must meet the requirements of 29 CFR 2570.34(c) at 76 FR 
66647 (October 27, 2011).
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    (l) The term ``Retiree Plan'' means UAW Retirees Health Care Plan.
    (m) The term ``Retiree VEBA'' means the UAW Retirees Health Care 
Trust together with the Retiree Plan.
    (n) The term ``Royalty Security'' means a first priority security 
interest in 30% of future credit card royalties and/or other fees or 
amounts payable to the UAW under various licensing agreements to which 
the UAW is a party in connection with its member credit card programs.
    (o) The term ``Settlement Agreement'' means the settlement 
agreement that followed the Litigation.
    (p) The term ``UAW'' means United Automobile, Aerospace and 
Agricultural Implement Workers of America.
    (q) The term ``UBC'' means the Union Building Corporation, a 
Michigan nonprofit corporation that is wholly owned by the UAW.
    (r) The term ``Unions'' means, collectively, the following unions: 
the

[[Page 57975]]

UAW; Staff Council of International Representatives; Office and 
Professional Employees International Union, Local Union 494; 
International Union, Security, Police and Fire Professionals of America 
Amalgamated Local 119; Staff Lawyers Union; and the Newspaper Guild/
Communications Workers of America Local 34022.

Section II. Covered Transactions

    If the proposed exemption is granted, the restrictions of ERISA 
sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(E), and 407(a) shall not 
apply effective as of the date a final exemption is published in the 
Federal Register, to:
    (a) The acquisition by the Retiree VEBA of: (1) the Note; (2) the 
Mortgage Lien; and (3) the Royalty Security to secure payment of the 
Note;
    (b) the holding by the Retiree VEBA of the Note, Mortgage Lien, and 
Royalty Security; and
    (c) the exercise by the Retiree VEBA of the rights granted under 
the Note, Mortgage Lien, and Royalty Security.

Section III. Conditions

    (a) The terms of the Note, the Mortgage Lien and the Royalty 
Security are consistent with the terms of the Settlement Agreement that 
was approved by the United States District Court for the Eastern 
District of Michigan on November 6, 2015, after the Court found the 
Settlement Agreement to be appropriate and fair to the Retiree VEBA.
    (b) The Independent Members represent the Retiree VEBA for all 
purposes with respect to the Covered Transactions and ensure that each 
exemption condition is met consistent with their fiduciary duties under 
ERISA section 404;
    (c) The Independent Members have sole and exclusive control over 
the Note, the Mortgage Lien, and the Royalty Security, in order to 
foreclose or realize on the Black Lake Property and the Royalty 
Security (collectively, the Collateral) upon an uncured default on the 
UAW's installment obligation.
    (d) The UAW immediately assigns a first priority security interest 
to the Retiree VEBA equal to 30% of the Royalty Security received or 
receivable from time to time from the UAW's member credit card program, 
upon an uncured default on the UAW's installment payment obligation.
    (e) If the UAW seeks to sell all or a portion of the Black Lake 
property, the Independent Members will not release the Retiree VEBA's 
Mortgage Lien on the Black Lake Property unless and until the UAW makes 
all the commitments necessary to allow the Independent Members to 
conclude, consistent with their duties under ERISA section 404(a), that 
the sale of such property does not materially increase the risk borne 
by the Retiree VEBA. Such commitments may include the pre-payment of a 
portion of the installment payment obligation or the provision of 
alternative collateral.
    (f) Any proceeds from the sale of the Black Lake Property by the 
UAW, or from the Royalty Security, as required by the Settlement 
Agreement and Security Agreement, during the period during which the 
UAW owes installment payments to the Retiree VEBA (and up to the total 
amount of indebtedness), must be immediately paid to the Retiree VEBA 
to offset the outstanding principal balance due under the Note.
    (g) The UAW, through the UBC, remains responsible for the payment 
of all taxes levied or assessed with respect to the Black Lake 
Property, and the UAW, through the UBC, must maintain property 
insurance on the Black Lake Property at all times.
    (h) All persons or entities who have or may acquire an interest in 
the Black Lake Property must have notice of and be bound by the terms 
of the Note. No party will be entitled to any rights thereunder without 
the written consent of the Retiree VEBA.
    (i) The terms of the Note, Mortgage Lien, and Royalty Security may 
not be modified during the duration of the UAW's obligation to the 
Retiree VEBA.
    (j) The Retiree VEBA must prudently develop written policies and 
procedures designed to ensure that the Independent Members prudently 
monitor the UAW's payment obligation to the Retiree VEBA, as well as 
the UAW's marketing and/or sale of all or a portion of the Black Lake 
Property.
    (k) The Independent Members must engage a Qualified Independent 
Appraiser to value the Note, Mortgage Lien, and Royalty Security as 
soon as reasonably possible following the date the UAW defaults on its 
payment obligation and fails to correct such default, and as needed or 
as required thereafter as determined by the Independent Members 
consistent with their fiduciary duties under ERISA, with the fees of 
such Qualified Independent Appraiser to be paid by the Retiree VEBA.
    (l) Annually on the first day after the date this exemption is 
granted, the Committee Chairperson must provide the Department with a 
signed certification attesting that the Independent Members monitored 
the Note, the Collateral, the Security Agreement, and the terms of this 
exemption consistent with their fiduciary duties under ERISA section 
404. The first certification must include the written policies 
described in condition (j). The certification must be provided within 
30 days after the end of the period to which it relates.
    (m) In the event the UAW defaults on the Installment Payment 
Obligation the Committee Chairperson must submit a written report to 
the Department providing: (1) a certification that each condition of 
the exemption has been met; (2) a complete description of any 
foreclosure and liquidation transactions; (3) all documentation 
necessary to demonstrate that all relevant conditions applicable to the 
transaction(s) have been met; and (4) if the Retiree VEBA does not 
foreclose on the Collateral, a complete explanation of the Independent 
Members' rationale for not taking such action. The report must be 
submitted no later than 90 days following the date the UAW defaults on 
its Installment Payment Obligation.
    Exemption date: If granted, this proposed exemption will be in 
effect on the date that the grant notice is published in the Federal 
Register.

    Signed at Washington, DC, this 17th day of August, 2023.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2023-18231 Filed 8-23-23; 8:45 am]
BILLING CODE 4510-29-P