[Federal Register Volume 59, Number 3 (Wednesday, January 5, 1994)]
[Notices]
[Pages 599-601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-116]
[[Page Unknown]]
[Federal Register: January 5, 1994]
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DEPARTMENT OF LABOR
[Application No. D-9470 through D-9473]
Proposed Exemptions; Avram A. Jacobson, M.D. Employee Profit
Sharing Plan; The Avram A. Jacobson, M.D. Employee Money Purchase
Pension Plan, Collectively
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Notice of proposed exemptions.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restriction of the Employee
Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).
Written Comments and Hearing Requests
All interested persons are invited to submit written comments or
request for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register Notice. Comments and
request for a hearing should state: (1) The name, address, and
telephone number of the person making the comment or request, and (2)
the nature of the person's interest in the exemption and the manner in
which the person would be adversely affected by the exemption. A
request for a hearing must also state the issues to be addressed and
include a general description of the evidence to be presented at the
hearing. A request for a hearing must also state the issues to be
addressed and include a general description of the evidence to be
presented at the hearing.
ADDRESSES: All written comments and request for a hearing (at least
three copies) should be sent to the Pension and Welfare Benefits
Administration, Office of Exemption Determinations, Room N-5649, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210. Attention: Application No. stated in each Notice of Proposed
Exemption. The applications for exemption and the comments received
will be available for public inspection in the Public Documents Room of
Pension and Welfare Benefits Administration, U.S. Department of Labor,
room N-5507, 200 Constitution Avenue, NW., Washington, DC 20210.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of
the Secretary of the Treasury to issue exemptions of the type requested
to the Secretary of Labor. Therefore, these notices of proposed
exemption are issued solely by the Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.
Avram A. Jacobson, M.D. Employee Profit Sharing Plan (the Profit
Sharing Plan) and the Avram A. Jacobson, M.D. Employee Money Purchase
Pension Plan (the Money Purchase Plan; Collectively, the Plans) Located
in Beverly Hills, California
[Application Nos. D-9470 through D-9473]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 4975(c)(2) of the Code and in accordance with the
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836,
32847, August 10, 1990). If the exemption is granted, the sanctions
resulting from the application of section 4975 of the Code by reason of
section 4975(c)(1)(A) through (E) of the Code, shall not apply to the
proposed cash sale (the Sale) of certain works of art (the Art Work) by
the Plans to Avram A. Jacobson, M.D., a sole proprietor and
disqualified person with respect to the Plans.\1\
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\1\Since Dr. Jacobson and his wife are the only participants in
the Plans, there is no jurisdiction under Title I of the Act
pursuant to 29 CFR 2510.3-3(b). However, there is jurisdiction under
the Act pursuant to section 4975 of the Code.
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This proposed exemption is conditioned upon the following
requirements: (1) The Sale is a one-time cash transaction; (2) the
Plans are not required to pay any commissions, costs or other expenses
in connection with this transaction; (3) the Art Work is appraised by
qualified, independent appraisers; (4) the sale price for the Art Work
reflects the greater of either: (a) The original amount paid by the
Plans at the time of acquisition; or (b) its fair market value on the
date of the Sale; and (5) within ninety days of the publication in the
Federal Register of the grant of this notice of proposed exemption, Dr.
Jacobson will file Forms 5330 with the Internal Revenue Service (the
Service) and pay all applicable excise taxes that are due by reason of
the past prohibited transactions.
Summary of Facts and Representations
1. The Plans are a profit sharing plan and a money purchase pension
plan, which as of December 31, 1992, had total assets of $1,642,180 and
$960,643 respectively. Dr. Jacobson is the 100 percent owner of Avram
A. Jacobson, M.D. (the Employer), a sole proprietorship and the
sponsoring employer of the Plans. Dr. Jacobson maintains a pathology
practice in Beverly Hills, California. The only participants in the
Plans are Dr. Jacobson and his wife. The Trustee of the Plans is Dr.
Jacobson, who has sole investment discretion with respect to the assets
of the Plans.
2.The Profit Sharing Plan owns three works of contemporary art and
the Money Purchase Pension Plan owns one work of mixed media art,
collectively known as the Art Work. The Art Work was purchased for a
cash amount of $685,000 by the Plans from unrelated parties with
respect to Dr. Jacobson, the Employer, or the Plans. To date, the Plans
have not incurred any costs associated with acquisition and holding of
the Art Work. A description of the Art Work is as follows:
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Date of
Plan Title Artist purchase Price
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PSP................... ``Untitled''............... M. Merz.................... 10/6/89 $135,000
PSP................... ``Grau''................... G. Richter................. 11/9/89 150,000
MPPP.................. ``Pau''.................... F. Stella.................. 5/1/86 180,000
PSP................... ``Fouffi Noutti in Hell''.. J. Schnabel................ 5/18/93 220,000
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Total............. ........................... ........................... .............. 685,000
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3. Following its acquisition, the Art Work has been in the
possession of Dr. Jacobson at his residence located at 630 N. Sierra
Drive, Beverly Hills, California. During a 1993 audit, the Service
determined that Dr. Jacobson had engaged in prohibited transactions
with the Plans by reason of his use of the Art Work for the years 1989
and 1990.\2\
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\2\The Department notes that in 1987 the Profit Sharing Plan
purchased a third party note for cash form the Norman L. Jacobson,
M.D., P.A. Profit Sharing plan, the sole participant and trustee of
which is Dr. Jacobson's brother, Norman L. Jacobson. In 1993, the
Profit Sharing Plan sold the note back to the Norman L. Jacobson,
M.D., P.A. Profit Sharing Plan for cash. The Department is not
granting an exemption for such purchase and sale and is expressing
no opinion as to whether the purchase and sale of such note
constitutes a violation of any provision of the Code.
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Dr. Jacobson represents that he will file Forms 5330 with the
Service and pay the applicable excise taxes associated the past
prohibited transactions within ninety days of the publication in the
Federal Register of the notice granting this proposed exemption. In
addition, Dr. Jacobson will pay the Plans the fair market rental value
in the amount of approximately $90,000 for his use of the Art Work for
years 1989 through 1993. Excise taxes will accrue for the period
between 1989 and 1993.
4. At present, the Art Work has produced no income for the Plans.
In order to enable the Plans to divest themselves of the Art Work and
to invest in income-producing, marketable securities, Dr. Jacobson
proposes to purchase the Art Work from the Plans for a cash amount
equal to the aggregate of the greater of either: (a) The original
amount paid by the Plan at the time of acquisition; or (b) its fair
market value on the date of the Sale. Accordingly, Dr. Jacobson
requests an administrative exemption from the Department to permit his
purchase of the Art Work from the Plans under the terms and conditions
described herein.
5. The Art Work has been valued by two separate, independent,
qualified appraisers, Arline Edelbaum and Jacqueline Silverman, both
the Los Angeles, California. Ms. Edelbaum is a senior member of the
American Society of Appraisers and has nineteen years experience in
appraising fine arts and personal property. Ms. Silverman is a
certified member of Appraisers Association of America and has fifteen
years experience in appraising modern and contemporary art. Both
appraisers represent that they are unrelated to and independent of Dr.
Jacobson. Ms. Edelbaum and Ms. Silverman's valuations of the Art Work
as of June 28, 1993 and June 22, 1993, respectively, are as follows:
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Plan Work Purchase price Edelbaum Silverman
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PSP.......................... ``Untitled''..................... $135,000 $135,000 $120,000
PSP.......................... ``Grau''......................... 150,000 165,000 150,000
MPPP......................... ``Pau''.......................... 180,000 275,000 275,000
PSP.......................... ``Fouffi Noutti in Hell''........ 220,000 165,000 175,000
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Because their fair market values are less than or equal to their
original purchase price, ``Untitled'' and ``Fouffi Noutti in Hell''
will be purchased by Dr. Jacobson for their original purchase prices of
$135,000 and $220,000, respectively. In addition, Dr. Jacobson will
purchase ``Grau for $165,000, which reflects its higher fair market
valuation as determined by Ms. Edelbaum. Finally, Dr. Jacobson will
purchase ``Pau'' for $275,000, which reflects its fair market value as
determined by both appraisers. Dr. Jacobson proposes to purchase the
Art Work for an aggregate cash purchase price of $795,000.
6. In summary, it is represented that the proposed transactions
will satisfy the statutory criteria for an exemption under section
4975(c)(2) of the Code because: (a) The Sale will be a one-time cash
transaction; (b) the Plan will not be required to pay any commissions,
costs or other expenses in connection with this transaction; (c) the
Art Work will be appraised by a qualified, independent appraiser; (d)
the sale price for the Art Work will reflect the greater of either: (1)
The original amount paid by the Plan at the time of acquisition; or (2)
its fair market value on the date of the Sale; and (e) within ninety
days of the publication in the Federal Register of the grant of this
notice of proposed exemption, Dr. Jacobson will file Forms 5330 with
the Service) and pay all applicable excise taxes that are due by reason
of the past prohibited transactions.
Notice to Interested Persons
Since Dr. Jacobson and his wife are the only participants in the
Plan, it has been determined that there is no need to distribute the
notice of the proposed exemption to interested persons. Comments are
due thirty days after publication of this notice in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: Ms. Kathryn Parr of the Department,
telephone (202) 219-8971. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest of disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(b) of the act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete and accurately describe all
material terms of the transaction which is the subject of the
exemption. In the case of continuing exemption transactions, if any of
the material facts or representations described in the application
change after the exemption is granted, the exemption will cease to
apply as of the date of such change. In the event of any such change,
application for a new exemption may be made to the Department.
Signed at Washington, DC, this 30th day of December, 1993.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 94-116 Filed 1-4-94; 8:45 am]
BILLING CODE 4510-29-P
