[Federal Register Volume 61, Number 202 (Thursday, October 17, 1996)]
[Notices]
[Pages 54229-54237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26601]
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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 96-76; Exemption Application No. D-
09915, et al.]
Grant of Individual Exemptions; Teachers Insurance and Annuity
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
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SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
Notices were published in the Federal Register of the pendency
before the Department of proposals to grant such exemptions. The
notices set forth a summary of facts and representations contained in
each application for exemption and referred interested persons to the
respective applications for a complete statement of the facts and
representations. The applications have been available for public
inspection at the Department in Washington, D.C. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are being granted solely by the Department because, 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 proposed to the Secretary
of Labor.
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon
the entire record, the Department makes the following findings:
(a) The exemptions are administratively feasible;
(b) They are in the interests of the plans and their participants
and beneficiaries; and
(c) They are protective of the rights of the participants and
beneficiaries of the plans.
Teachers Insurance and Annuity Association of America (TIAA) Located in
New York, New York
[Prohibited Transaction Exemption 96-76 Exemption Application No. D-
09915]
Exemption
Section I--Exemption for Certain Transactions Involving the Purchase
and Sale of Certain Units in a Real Estate Separate Account by TIAA
The restrictions of sections 406(a), 406(b)(1) and 406(b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code
shall not apply, effective October 2, 1995, to the transactions
described below, if each of the conditions set forth in Section III
have been satisfied:
(a) The purchase by TIAA of certain units (the Liquidity Units), as
defined in Section IV(g) below, in a real estate separate account
established and operated by TIAA (the Separate Account), as defined in
Section IV(l) below, in the event of net withdrawals from the Separate
Account; and
(b) The sale of Liquidity Units of the Separate Account by TIAA in
the event of net contributions to the Separate Account.
Section II--Exemption for the Purchase of Liquidity Units Owned by TIAA
in the Separate Account in Connection With a Decrease in TIAA's
Participation in the Separate Account Under Certain Circumstances
The restrictions of section 406(a), 406(b)(1) and 406(b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code
shall not apply, effective October 2, 1995, to: (a) The use of cash
flow from the Separate Account (the Cash Flow), as defined in Section
IV(d) below; (b) the use of liquid investments in the Separate Account;
or (c) the use of the proceeds from the sale of certain properties (the
Properties), as defined in Section IV(i) below, owned by the Separate
Account, for the purpose of purchasing Liquidity Units in the Separate
Account from TIAA in connection with a decrease in the participation by
TIAA in the Separate Account after the trigger point (the Trigger
Point), as defined in Section IV(o) below, has been reached or during
the wind down period of the Separate Account (the Wind Down), as
defined in Section IV(q) below, provided that the conditions set forth
in Section III have been satisfied.*
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* For purposes of this exemption references to specific
provisions of Title I of the Act, unless otherwise specified, refer
also to the corresponding provisions of the Code.
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Section III--General Conditions
This exemption is conditioned upon the adherence by TIAA to the
material facts and representations described in the notice of proposed
exemption (the Notice) and upon satisfaction of the following
requirements:
(a) The decision to elect to add the Separate Account as an
additional pension funding option for employee benefit plans (the Plan
or Plans), as defined in Section IV(h) below, which invest in the
Separate Account has been and is made by the fiduciaries of such Plans
(the Fiduciary or Fiduciaries), as defined in Section IV(e) below, or
in the case of a TIAA supplemental retirement annuity contract (SRA) or
a TIAA individual retirement annuity contract (IRA), the decision to
elect to add the Separate Account as an additional pension funding
option to a TIAA SRA or a TIAA IRA, has been and is made by the
participant in such TIAA SRA or TIAA IRA, if the Fiduciaries of the
Plans, and the TIAA SRA and TIAA IRA participants are unrelated to TIAA
and its affiliates (the Affiliates or Affiliate), as defined in Section
IV(b) below (other than the fiduciaries of any TIAA Pension Plans, as
defined in Section IV(n) below);
(b) Each of the Properties in the Separate Account has been and is
valued at least annually by an independent, qualified appraiser;
(c) Except as otherwise specified below in paragraph (c)(10) of
this Section III, prior to investment of funds in the Separate Account
by any participants in a Plan (the Participant or Participants) (and,
if applicable, by any of the Plans) which participate in the Separate
Account, TIAA has furnished and will furnish to the Fiduciaries of such
Plans, to the sponsors of any TIAA SRA, and to the participants in any
TIAA IRA, the following information:
(1) A copy of the most recent prospectus for the Separate Account;
(2) Full disclosure concerning the investment guidelines,
structure, manner of operation, and administration of the Separate
Account; the method of
[[Page 54230]]
valuation applicable to accumulation units (the Accumulation Units), as
defined in Section IV(a) below, and the method of valuation of the
Properties, and all other assets owned by the Separate Account;
(3) A written description of potential conflicts of interest that
may result from TIAA's acquisition, purchase, retention, redemption, or
sale of Accumulation Units in the Separate Account;
(4) The rules and procedures for withdrawal, transfer, redemption,
distribution, and payout applicable throughout the term of the Separate
Account to TIAA, to individual Participants (and, if applicable, to
Plans) which participate in the Separate Account;
(5) The expense and fee provisions of the Separate Account
(including but not limited to a description of any services rendered by
TIAA, a schedule of fees for such services, and an estimate of the
amount of fees to be paid by the Separate Account annually);
(6) A list of all assets in the Separate Account, as of the end of
the most recent fiscal period of the Separate Account, and a list of
the Properties which the Separate Account acquired or sold within
twelve months prior to the end of the most recent fiscal period of the
Separate Account;
(7) The appropriate financial statements pertaining to the Separate
Account (including but not limited to the most recent audited annual
report, income statement, and balance sheet on the Separate Account);
(8) The toll-free telephone number by which information relating to
the value of the units in the Separate Account (the Units) and
information concerning the quarterly return of the Separate Account is
made available daily;
(9) Any reasonably available information (including but not limited
to, a copy of the most recent quarterly and other financial reports for
the Separate Account filed with the Securities and Exchange Commission
(SEC), and the most recent copy of any supplemental schedules of
information, publications, or ancillary materials which have been made
available to the Fiduciaries of the Plans or to the sponsors of the
plans (the Plan Sponsor or the Plan Sponsors) or to Participants
invested in the Separate Account) which TIAA believes to be necessary,
or which any fiduciary of a plan or any sponsor of a plan reasonably
requests in order to determine whether such plan should elect to add
the Separate Account as an additional pension funding option for the
benefit of participants (or, if applicable, for such plan), or, in the
case of a TIAA SRA or a TIAA IRA, which the participant in such TIAA
SRA or TIAA IRA reasonably requests in order to determine if he or she
should elect to add the Separate Account as an additional pension
funding option under such SRA or IRA contract with TIAA; and
(10) A copy of the Notice, as it appeared in the Federal Register,
has been provided to the Fiduciaries of the Plans, to the sponsors of
the Plans, to the sponsors of any TIAA SRA, and to the participants in
any TIAA IRA which prior to or after the publication of the Notice
elected to add the Separate Account as an additional pension funding
option. In addition, a copy of the granted exemption (the Grant), as it
appeared in the Federal Register, is provided to the Fiduciaries of the
Plans, to the sponsors of the Plans, to the sponsors of any TIAA SRA,
and to the participants in any TIAA IRA which are invested in the
Separate Account at the time of the publication of the Grant. If
subsequent to the publication of the Grant, any fiduciaries of plans,
any sponsors of plans, the sponsors of any SRA, or the participants in
any TIAA IRA choose to elect to add the Separate Account as an
additional pension funding option to enable such plans to invest in the
Separate Account, the fiduciaries of such plans, the sponsors of such
plans, the sponsors of such SRA, and the participants in any such IRA
shall be provided, prior to investment in the Separate Account, with a
copy of both the Notice and the Grant, as such documents appeared upon
publication in the Federal Register.
(d) TIAA has made and will make available, within the time periods
specified below in subparagraphs (1) through (5) of this paragraph (d),
to the Fiduciaries of the Plans, or in the case of a TIAA SRA or a TIAA
IRA, to the participant in such SRA or IRA:
(1) Information relating to the value of the Units in the Separate
Account to be available daily over a toll-free telephone number and/or
to be distributed in writing to Participants (or, if applicable, to the
Plans) in the Separate Account in quarterly confirmation statements
within five (5) to ten (10) days after the end of each calendar
quarter;
(2) Information concerning the quarterly return of the Separate
Account to be available daily over a toll-free telephone number and/or
to be distributed in writing to Participants (or, if applicable, to the
Plans) in the Separate Account in quarterly confirmation statements
within five (5) to ten (10) days after the end of each calendar
quarter;
(3) A prospectus for the Separate Account to be distributed
annually;
(4) Any information or TIAA publication, to be distributed from
time to time, which TIAA reasonably believes to be necessary or which
the Fiduciaries request, or in the case of a TIAA SRA or a TIAA IRA,
which the participant in such SRA or IRA requests (including but not
limited to quarterly financial reports filed with the SEC) in order to
determine whether any Participant in such Plan, or participant in such
SRA or IRA should buy, sell, or continue to hold the Units in the
Separate Account, as defined in Section IV(p) below; and
(5) A written notification that quarterly financial reports
(including the list of Properties and their current values) are
available upon request and a written disclosure of the toll-free
telephone number by which Plan Fiduciaries and Plan Sponsors may
request delivery of such quarterly financial reports will be provided
by TIAA in a publication sent to all Plan Fiduciaries and all Plan
Sponsors of the Plans, beginning after the end of the first calendar
quarter after the Grant is published in the Federal Register and
continuing at least quarterly thereafter.
(e) An independent, qualified fiduciary (the Independent
Fiduciary), as defined in Section IV(f) below, has been appointed prior
to or coincident with the start of operations of the Separate Account
(and is subject to renewal and removal described herein) whose
responsibilities include, but are not limited to:
(1) Reviewing and approving the written investment guidelines of
the Separate Account as established by TIAA, and approving any changes
to such investment guidelines;
(2) Monitoring whether the Properties acquired by the Separate
Account conform with the requirements of such investment guidelines;
(3) Reviewing and approving valuation procedures for the Separate
Account and approving changes in those procedures;
(4) Reviewing and approving the valuation of Units in the Separate
Account and the valuation of Properties held in the Separate Account,
as described in the Summary of Facts and Representations in the Notice;
(5) Approving the appointment of all independent, qualified
appraisers retained by TIAA to perform periodic valuations of the
Properties in the Separate Account;
(6) Requiring appraisals in addition to those normally conducted,
whenever, the Independent Fiduciary believes that the characteristics
of any of the Properties have changed materially, or with respect to
any of the Properties,
[[Page 54231]]
whenever the Independent Fiduciary deems an additional appraisal to be
necessary or appropriate in order to assure the correct valuation of
the Separate Account;
(7) Reviewing the purchases and sales of Units in the Separate
Account by TIAA and the Participants (and, if applicable, by the Plans)
which participate in the Separate Account to assure that the correct
values of the Units and of the Separate Account are applied; reviewing
the fixed repayment schedule applicable to the redemption of certain
seed money units (the Seed Money Units), as defined in Section IV(k)
below, as approved by the State of New York Insurance Department;
reviewing any exercise of discretion by TIAA to accelerate the fixed
repayment schedule applicable to the redemption of Seed Money Units;
and, approving TIAA's exercise of discretion only if such acceleration
would benefit the Participants in the Separate Account;
(8) After (and, if necessary, during) the start up period (the
Start Up Period), as defined in Section IV(m) below, determining the
appropriate Trigger Point, with respect to the ongoing ownership by
TIAA of Liquidity Units; establishing a method to implement any changes
to the Trigger Point; adjusting the percentage which serves as the
Trigger Point; approving or requiring any reduction of TIAA's interest
in the Separate Account; and, approving the manner in which such
reduction of TIAA's participation in the Separate Account in excess of
the Trigger Point is to be effected;
(9) In the event the Trigger Point is reached, participating in and
planning any program of sales of the assets of the Separate Account,
which would include the selection of the Properties to be sold, the
guidelines to be followed in making such sales, and the approval of
such sales, if in the opinion of the Independent Fiduciary, such sales
are desirable at the Trigger Point in order to reduce the ownership by
TIAA of Liquidity Units in the Separate Account or to facilitate the
Wind Down;
(10) Supervising the operation of the Separate Account during the
Wind Down of such Separate Account;
(11) During the Wind Down, planning any program of sales of the
assets of the Separate Account, including the selection of the
Properties to be sold, determining the guidelines to be followed in
making such sales, and approving the sale of the Properties in the
Separate Account, in the event of the termination of the Separate
Account, if in the opinion of the Independent Fiduciary, such sales are
desirable to facilitate the Wind Down; and
(12) Reviewing any other transactions or matters involving the
Separate Account that are submitted to the Independent Fiduciary by
TIAA and determining whether such transactions or other matters are
fair to the Separate Account and in the best interest of the Separate
Account.
(f) The exemption is also subject to the condition that the
following transactions involving the Separate Account have not occurred
and will not occur:
(1) Participation by the Independent Fiduciary, TIAA, any Affiliate
of TIAA, TIAA's general account (the General Account), or any other
separate account over which TIAA or its Affiliates has any investment
control in any joint venture with the Separate Account, or in the
ownership of the Properties of the Separate Account either alone or
together with a joint venture partner;
(2) The borrowing of funds from the Separate Account by the
Independent Fiduciary, TIAA, any Affiliate of TIAA, TIAA's General
Account, or any other separate account over which TIAA or its
Affiliates has investment control, or the lending of funds to the
Separate Account by the Independent Fiduciary, TIAA, any Affiliate of
TIAA, TIAA's General Account, or any other separate account over which
TIAA or its Affiliates has investment control in order to leverage any
purchase by the Separate Account of any of the Properties, or
otherwise; and
(3) The acquisition by the Separate Account of any Properties from
or the sale by the Separate Account of any Properties to the
Independent Fiduciary, TIAA, any Affiliate of TIAA, TIAA's General
Account, or any other separate account over which TIAA or its
Affiliates has investment control.
(g) The liquidation of any Accumulation Units held by a Participant
or participating Plan, for which a withdrawal request is pending, has
not been and will not be delayed by reason of the redemption of Seed
Money Units held by TIAA, and TIAA will always advance funds by
purchasing Liquidity Units to fund the withdrawal requests of
Participants or Plans on a timely basis;
(h) TIAA must maintain for a period of six (6) years from the date
of any transaction, the records necessary to enable the persons
described in paragraph (i) of this Section III to determine whether the
conditions of this exemption have been met. However, a prohibited
transaction will not be considered to have occurred if, due to
circumstances beyond the control of TIAA and its Affiliates, the
records are lost or destroyed prior to the end of the six-year period,
and no parties in interest, other than TIAA or its Affiliates, shall be
subject to a civil penalty that may be assessed under section 502(i) of
the Act, or to taxes imposed by section 4975 (a) and (b) of the Code,
if the records are not maintained, or are not available for examination
as required by paragraph (i) below.
(i)(1) Except as provided in subparagraph (2) of this paragraph (i)
and notwithstanding any provision of subsection (a)(2) and (b) of
section 504 of the Act, the records referred to in paragraph (h) of
this Section III are unconditionally available at their customary
location for examination during normal business hours by:
(A) Any duly authorized employee or representative of the
Department of Labor (The Department) or the Internal Revenue Service;
(B) Any Fiduciary of a Plan which participates in the Separate
Account, or in the case of a TIAA SRA or a TIAA IRA, any participant in
such SRA or IRA, who has authority to acquire or dispose of the
interests of such SRA or IRA contract, or any duly authorized employee
or representative of such Fiduciary of a Plan or participant in such
SRA or IRA;
(C) Any contributing employer to any Plan participating in the
Separate Account, or any duly authorized employee or representative of
such employer; and
(D) Any Participant or beneficiary of any Plan participating in the
Separate Account, or any duly authorized employee or representative of
such Participant or beneficiary.
(2) None of the persons described in subparagraphs (1) (B) through
(D) of this paragraph (i) shall be authorized to examine the trade
secrets of TIAA or any of its Affiliates, or any of its commercial or
financial information which is privileged or confidential.
Section IV--Definitions
For the purpose of this exemption:
(a) ``Accumulation Units'' mean the units of interest into which
equity participation in the Separate Account is divided during the
accumulation phase of the annuity contracts prior to retirement by a
Participant. Seed Money Units, as defined in Section IV(k) below, and
Liquidity Units, as defined in Section IV(g) below, are Accumulation
Units.
(b) ``Affiliate'' or ``Affiliates'' of TIAA include(s):
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
TIAA.
[[Page 54232]]
(2) Any officer, director, or employee of TIAA, or of a person
described in paragraph (b)(1) of Section IV, and
(3) Any partnership in which TIAA is a partner.
(c) ``Control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.
(d) ``Cash Flow'' means: (1) The sum of: (a) Income received by the
Separate Account from investments (including dividends and/or interest
from non-real estate investments, and net operating income, less
payment of capital expenditures and changes in reserves for capital
expenditures, from equity real estate investments); and (b) Participant
and Plan contributions (including transfers to the Separate Account)
MINUS (2) the sum of: (a) Separate Account expense charges (including
investment and administrative expenses for mortality and expense
guarantees); and (b) any redemption of Seed Money Units at fair market
value.
(e) ``Fiduciary'' or ``Fiduciaries'' mean(s) the individual
fiduciary or fiduciaries acting on behalf of each of the Plans that
invest in the Separate Account.
(f) ``Independent Fiduciary''--
(1) For purposes of this definition, an Independent Fiduciary means
a person who:
(A) Is not an Affiliate of TIAA;
(B) Does not have an ownership interest in TIAA or its Affiliates;
(C) Is not a corporation or partnership in which TIAA or any of its
Affiliates has an ownership interest;
(D) Is not a Fiduciary with respect to any Plan which participates
in the Separate Account;
(E) Has acknowledged in writing acceptance of fiduciary
responsibility; and
(F) Is either:
(i) A business organization which has at least five (5) years of
experience with respect to commercial real estate investments or other
appropriate experience;
(ii) A committee comprised of three to five individuals who each
have had at least five (5) years of experience with respect to
commercial real estate investments or other appropriate experience; or
(iii) A committee comprised both of a business organization or
organizations and individuals having the qualifications described in
paragraphs (f)(1) (A) through (E) of Section IV above.
(2) For the purposes of the definition of Independent Fiduciary, no
organization or individual may serve as Independent Fiduciary for the
Separate Account for any fiscal year, if the gross income received from
TIAA or its Affiliates by such organization or individual (or by any
partnership or corporation of which such organization or individual is
an officer, director, or 10 percent (10%) or more partner or
shareholder) for that fiscal year exceeds 5 percent (5%) of its or his
annual gross income from all sources for the prior fiscal year. If such
organization or individual had no income for the prior fiscal year, the
5 percent (5%) limitation is applied with reference to the fiscal year
in which such organization or individual serves as an Independent
Fiduciary. The income limitation includes services rendered to the
Separate Account as Independent Fiduciary, as described in this
exemption.
(3) No organization or individual who is an Independent Fiduciary,
and no partnership or corporation of which such organization or
individual is an officer, director, or 10 percent (10%) or more partner
or shareholder, during the period that such organization or individual
serves as an Independent Fiduciary and continuing for a period of six
(6) months after such organization or individual ceases to be an
Independent Fiduciary, may
(A) Acquire any property from or sell any property to TIAA, its
Affiliates, TIAA's General Account, or any separate account maintained
by TIAA or its Affiliates, including the Separate Account;
(B) Borrow any funds from, or lend any funds to TIAA, its
Affiliates, TIAA's General Account, or any separate account maintained
by TIAA or its Affiliates, including the Separate Account;
(C) Participate in any joint venture with TIAA, its Affiliates,
TIAA's General Account, or any separate account maintained by TIAA or
its Affiliates, including the Separate Account, or participate, either
alone or together with a joint venture partner, in the ownership of the
Properties with TIAA, its Affiliates, TIAA's General Account, or any
separate account maintained by TIAA or its Affiliates, including the
Separate Account; or
(D) Negotiate any such transactions, described above in paragraph
(f)(3) (A) through (C) of Section IV.
(4) No Fiduciary of a Plan or Plan Sponsor which participates in
the Separate Account or a designee of such Fiduciary, Plan Sponsor, or
Plan may serve as the Independent Fiduciary with respect to the
Separate Account.
(g) ``Liquidity Units'' mean Accumulation Units, as defined in
Section IV(a) above, that are purchased from Participants (or, if
applicable, from the Plans) who participate in the Separate Account by
TIAA's General Account, when the Cash Flow of the Separate Account, as
defined above in Section IV(d), and liquid investments of the Separate
Account are insufficient, in order to guarantee liquidity for such
Participants (or, if applicable, for such Plans) who wish to withdraw
or transfer funds from the Separate Account.
(h) ``Plan or Plans'' mean(s) an employee benefit plan or employee
benefit plans (primarily participant-directed defined contribution
plans, but also some defined benefit plans), qualified pursuant to
sections 401(a), 403(a), 403(b), 414(d) and 457(b) of the Code, as well
as any TIAA IRA and TIAA SRA, as described, respectively, under section
408 and section 403(b) of the Code, which may participate in ownerships
of Units in the Separate Account and which are subject to section 406
of the Act and/or section 4975 of the Code.
(i) ``Properties'' mean the geographically dispersed retail and
office buildings, light industrial facilities, and residential
apartment space with good operating income (and such other Properties
that may be acquired pursuant to changes in the investment guidelines
for the Separate Account that are approved by the Independent
Fiduciary) which TIAA has acquired on behalf of the Participants (and,
if applicable, the Plans) that invest in the Separate Account.
(j) ``Seed Money'' means the total amount (not to exceed $100
million) actually contributed by TIAA's General Account to the Separate
Account for the purpose of acquiring Properties for the Separate
Account. Seed Money will be applied to purchase Accumulation Units at
the fair market value of those Units at the time of purchase.
(k) ``Seed Money Units'' mean the Accumulation Units, as defined in
Section IV(a) above, that are issued by the Separate Account to TIAA's
General Account in exchange for Seed Money, as defined above in Section
IV(j), during the Start Up Period of the Separate Account.
(l) ``Separate Account'' means the real estate equity pooled
separate account invested in by Participants (and, if applicable by
Plans), as described herein.
(m) ``Start Up Period'' means the period during which repayment of
TIAA's General Account of Seed Money, as defined in Section IV(j)
above, must be made on a fixed repayment schedule as approved by the
State of New York
[[Page 54233]]
Insurance Department (NYID). In this regard, the redemption of Seed
Money Units by TIAA will begin on the earlier to occur of:
(1) Two (2) years from the date on which TIAA first opened the
Separate Account to Participants (and, if applicable, to Plans) for
paying premiums to the Separate Account, or
(2) The date on which the value of the Separate Account first
reaches $200 million. Thereafter, at least 20 percent (20%) of the
original number of Seed Money Units acquired by TIAA's General Account
from the contribution of Seed Money to the Separate Account are to be
redeemed on predetermined dates in each year, as established by TIAA,
for a period of five (5) years (at fair market value based on the value
of Accumulation Units on the date of each redemption). The exercise of
any discretion by TIAA to accelerate the fixed repayment schedule
applicable to the redemption of Seed Money Units is subject to the
advance review and approval of the Independent Fiduciary, and any such
acceleration will not be applied so as to prevent a redemption of Seed
Money Units scheduled to occur on any of the predetermined dates during
any year. The Start Up Period will expire when all the Seed Money Units
originally acquired by TIAA's General Account from the contribution of
Seed Money to the Separate Account have been redeemed by TIAA.
(n) ``TIAA Pension Plans'' mean certain defined benefit and certain
defined contribution plans maintained by TIAA. Among the defined
contribution plans maintained by TIAA are the TIAA Retirement Plan,
which is tax-qualified under the Code, and the TIAA Tax-Deferred
Annuity Plan, which is a salary reduction annuity plan, pursuant to
section 403(b) of the Code. Participants in the TIAA Retirement Plan
and the TIAA Tax-Deferred Annuity Plan are permitted to invest in the
Separate Account.
(o) ``Trigger Point'' means the point, as established by the
Independent Fiduciary, at which TIAA's participation in the Separate
Account through the ownership of Liquidity Units is decreased with the
approval of or as required by the Independent Fiduciary, acting on
behalf of the Participants (and, if applicable, the Plans).
(p) ``Units'' mean the units of interest into which equity
participation in the Separate Account is divided.
(q) ``Wind Down'' means the period which begins on the date on
which TIAA notifies all Participants (and, if applicable, all Plans
invested in the Separate Account) that TIAA has decided to terminate
the Separate Account and concludes on the date on which no Accumulation
Units are held by Participants (or, if applicable, by Plans).
EFFECTIVE DATE: The exemption is effective, as of October 2, 1995, the
date the Separate Account was first opened to Participants and Plans
for investment.
Written Comments
In the Notice, the Department invited all interested persons to
submit written comments and requests for a hearing on the proposed
exemption within 45 days of the date of the publication of the Notice
in the Federal Register on April 4, 1996. All comments and requests for
hearing were due by May 20, 1996.
During the comment period, the Department received no requests for
hearing. However, the Department did receive a comment letter from the
applicant, TIAA, dated May 17, 1996. The comments from TIAA requested
certain changes and clarifications to the conditions of the exemption
as proposed in the Notice, and certain amendments which, according to
TIAA, should have been reflected in the SFR, as published in the Notice
in the Federal Register. TIAA's comments on the conditions of the
exemption and the SFR are discussed below in an order that corresponds
to the appearance of the relevant language in the Notice.
1. In its comment TIAA points out that throughout the Notice the
phrase, ``in the case of a contract between TIAA and a supplemental
retirement account (SRA) or an individual retirement account (IRA),''
is used to describe the relationship between TIAA and any SRA or IRA.
To reflect the fact that TIAA provides annuity products to
contractholders who are participants in such an SRA or an IRA, TIAA
requests that the phrase, ``in the case of a TIAA supplemental
retirement annuity contract (SRA) or TIAA individual retirement annuity
contract (IRA),'' be substituted for all references throughout the
final exemption to the phrase quoted above which appeared throughout
the Notice.
The Department concurs with TIAA's requested change. Accordingly,
the Department has modified the final exemption to reflect the change
in the first instance where the phrase occurred in the operant language
of the exemption; but, in order to avoid repeating the entire phrase,
the Department has instead substituted the following abbreviated
phrase, ``in the case of a TIAA SRA or a TIAA IRA,'' subsequently. In
addition, the Department has made changes in the language of the
conditions of the exemption in order to be consistent, so that any
reference therein to an SRA or an IRA will now be to a TIAA SRA or a
TIAA IRA.
2. TIAA believes that a modification to Section III(a) of the
exemption is necessary to take into account the fact that TIAA's own
plans have been and will be invested in the Separate Account. TIAA
appears to be concerned that the obligation of TIAA to purchase
Liquidity Units may amount to an extension of credit between TIAA and
its own plans and that such transaction would not be permitted under
the terms of condition III(a), as it appeared in the Notice. As a
result, TIAA requests that at the end of Section III(a) on page 15128
of the Notice, the parenthetical phrase, ``(other than the fiduciaries
of any TIAA Pension Plans, as defined in Section IV(n) below),'' be
inserted before the semi-colon. TIAA also requests that a similar
change should have been made to the SFR at the end of the second
sentence of the first paragraph of representation 14 on page 15138 of
the Notice.
The Department concurs with TIAA's request for changes in the
language of the conditions of Section III(a) of the exemption.
Accordingly, the language of Section III(a) has been amended to read as
follows:
The decision to elect to add the Separate Account as an
additional pension funding option for employee benefit plans (the
Plan or Plans), as defined in Section IV(h) below, which invest in
the Separate Account has been and is made by the fiduciaries of such
Plans (the Fiduciary or Fiduciaries), as defined in Section IV(e)
below, or in the case of a contract between TIAA and a supplemental
retirement annuity contract (SRA) or an individual retirement
annuity contract (IRA), the decision to elect to add the Separate
Account as an additional pension funding option to a TIAA SRA or a
TIAA IRA has been and is made by the participant in such TIAA SRA or
TIAA IRA, if the Fiduciaries of the Plans and the TIAA IRA and TIAA
SRA participants are unrelated to TIAA and its affiliates (the
Affiliates or Affiliate), as defined in Section IV(b) below, (other
than the fiduciaries of any TIAA Pension Plans, as defined in
Section IV(n) below).
However, the Department wishes to note that as indicated in
footnote 9 on page 15132 of the Notice, TIAA represented in its
application for exemption that any acquisition of Units in the Separate
Account by employee benefit plans sponsored by TIAA would not violate
section 406(a) or 406(b) of the Act by reason of the statutory
exemption contained in section 408(b)(5) of the Act. To the extent that
the acquisition of Units in the Separate Account by plans sponsored by
TIAA
[[Page 54234]]
does not satisfy the requirements of section 408(b)(5) of the Act, no
relief has been provided by the exemption for the participation by such
plans in the Separate Account.
3. TIAA has requested a modification to the language of Section
III(c) of the exemption. In this regard, Section III(c), as set forth
on page 15128, column 2 of the Notice read, in part,
Except as otherwise specified below in paragraph (c)(10) of this
Section III, prior to investment of funds in the Separate Account by
any participant in a Plan (the Participant or Participants) (and, if
applicable, by any of the Plans) which participate in the Separate
Account, TIAA has furnished and will furnish to the Fiduciaries of
such Plans and, in the case of a contract between TIAA and a SRA or
an IRA, to the participant in such SRA or IRA, the following
information.
TIAA requests that the phrase, ``or immediately following,'' be
inserted after the words, ``prior to,'' and before the word,
``investment,'' in the language of Section III(c) above. TIAA asserts
that, as it has 1.8 million existing contractholders, it cannot provide
the information required in Section III(c), prior to a participant's
decision to invest in the Separate Account. In this regard, TIAA states
that, with some exceptions, the information the Department requires
TIAA to disclose, pursuant to Section III(c), is included in the
prospectus for the Separate Account. In the event the prospectus is not
provided prior to investment of funds in the Separate Account, TIAA
represents that it will provide this information immediately following
such investment in accordance with the Federal securities rules
governing prospectus delivery. However, in the event this proposal was
not satisfactory to the Department, TIAA suggested as an alternative
that the introductory language of Section III(c) be amended to conform
to the language, as set forth in Section III(c)(10). As such, the
introductory language of Section III(c), as proposed in the alternative
by TIAA, would read as follows:
Except as otherwise specified below in paragraph (c)(10) of this
Section III, prior to investment of funds in the Separate Account by
any participant in a Plan (the Participant or Participants) (and, if
applicable, by any of the Plans) which participate in the Separate
Account, TIAA has furnished and will furnish to the Fiduciaries of
such Plans to the sponsors of any TIAA SRA, and to the participants
in any TIAA IRA, the following information:
With respect to the timing of disclosures, the Department believes
that the information required to be provided by TIAA, pursuant to
Section III(c) of the exemption, is fundamental to the making of
informed investment decisions and should be furnished to certain
parties by TIAA prior to investment of funds in the Separate Account by
investors. In this regard, the Department points out that TIAA on page
30 of its application for exemption and again on page 2 of Exhibit A to
such application, represented that the timing of disclosures to
Fiduciaries of the Plans, Plan Sponsors, and in the case of a TIAA SRA
or TIAA IRA to the Participants of such TIAA SRA and TIAA IRA would
occur prior to the investment of funds in the Separate Account by any
participants (and, if applicable, by any plans).
The Department concurs with the alternative language proposed by
TIAA. Accordingly, the language of Section III(c) has been amended to
read as above.
4. As discussed in paragraph three (3) above, pursuant to Section
III(c), TIAA must provide certain disclosures about the Separate
Account to certain investors prior to their investing in the Separate
Account. In this regard, the Department required in Section III(c)(1),
as set forth on page 15128, column 2 of the Notice, that TIAA provide
to such parties, among other information, the following items:
a copy of the most recent prospectus for the Separate Account, the
most recent quarterly and other financial reports for the Separate
Account filed with the Securities and Exchange Commission (SEC), and
the most recent copy of any supplemental schedule of information,
publications, or ancillary materials which have been made available
to Plan Sponsors or Participants invested in the Separate Account.
Further, pursuant to Section III(c)(8), as set forth on page 15128,
column 2 of the Notice, the Department required TIAA to provide such
parties with:
copies of the most recent reports on the Separate Account, including
but not limited to information relating [sic.] the value of units in
the Separate Account (the Units), as defined in Section IV(p) below;
and the quarterly return for the Separate Account, and the most
recent quarterly updates of the valuation of the Separate Account
(including a list of the holdings of the Separate Account during the
period).
TIAA requests that Section III(c)(1) be amended such that only a
copy of the most recent prospectus for the Separate Account be required
to be disclosed. In this regard, TIAA represents that, as required by
the amended introductory language in Section III(c), it has provided
and will continue to provide a copy of the prospectus for the Separate
Account to the Fiduciaries of Plans, to the sponsors of any TIAA SRA,
and to the participants in any TIAA IRA which invest in the Separate
Account. TIAA represents that the prospectus is updated annually and
contains detailed audited financial information concerning the Separate
Account and detailed disclosure concerning its operations and
investment objectives. Further, TIAA represents that it has made and
will make available unit value information and quarterly return
information for the Separate Account via a toll-free telephone number
that can be accessed at any time. In addition, TIAA represents that,
upon request, it has provided and will provide copies of quarterly and
other financial reports filed with the SEC. TIAA believes that its
approach provides superior disclosure at a substantial cost savings
which benefits the Participants (and, if applicable, the Plans) which
participate in the Separate Account, and is essential for the Separate
Account to be cost-effective.
The Department concurs, in part, with TIAA's requested
modifications to the disclosure requirements of Section III(c)(1) and
(c)(8), as set forth in the Notice. However, the Department believes
that, any prospective investor who wishes to receive the information
which was described in the deleted portion of Section III(c)(1) should
be able to request that TIAA provide such information, pursuant to
Section III(c)(9) of the exemption. Further, the Department believes
that any investor interested in investing in the Separate Account
should be able to request additional information from TIAA which is
reasonably available. This is consistent with the provisions of Section
III(d)(4) which permit a Fiduciary of a Plan which is invested in the
Separate Account and a participant in a TIAA SRA or an TIAA IRA which
is invested in the Separate Account to request similar information from
TIAA. In this regard, the Department wishes to make clear that the
phrase, ``any other reasonably available information,'' as set forth in
Section III(c)(9), includes, but is not limited to, copies of the most
recent quarterly and other financial reports for the Separate Account
filed with the SEC, or the supplemental schedules of information,
publications, or ancillary materials which have been made available to
Fiduciaries of the Plan, to Plan Sponsors, or to Participants who are
invested in the Separate Account. Accordingly, the Department has
modified the language in Section III(c)(9) by inserting between the
word, ``information,'' and the word, ``which,'' the following
parenthetical phrase,
(including but not limited to, a copy of the most recent quarterly
and other financial reports for the Separate Account filed with
[[Page 54235]]
the Securities and Exchange Commission (SEC), and the most recent
copy of any supplemental schedules of information, publications, or
ancillary materials which have been made available to Fiduciaries of
the Plan or to the sponsors of the plans (the Plan Sponsor or the
Plan Sponsors) or to Participants invested in the Separate Account).
With respect to Section III(c)(8), the Department concurs with
TIAA's request to delete Section III(c)(8), as set forth on page 15128,
column 2 of the Notice. However, the Department notes that TIAA has
already agreed to make such information available daily via a toll-free
telephone number to any Fiduciary of a Plan and to any participant in a
TIAA SRA or a TIAA IRA who is already invested in the Separate Account,
pursuant to Section III(d)(1) and (d)(2), as set forth in the Notice on
page 15129, columns 1-2. Accordingly, the Department has modified
Section III(c)(8) to read as follows, ``the toll-free telephone number
by which information relating to the value of the units in the Separate
Account (the Units) and information concerning the quarterly return of
the Separate Account is made available daily.''
5. TIAA submitted comments with respect to Section III(c)(10).
Section III(c)(10) requires that TIAA provide copies of the Notice and
copies of the granted final exemption (the Grant) to certain parties
within a prescribed period of time. TIAA requested modification of the
requirements of Section III(c)(10), such that the Notice and Grant need
not be supplied to prospective investors in the Separate Account 30
days prior to their investment. TIAA believes that requiring the
prospective investors to wait 30 days after receiving a copy of the
Notice and Grant would unduly interrupt investment in the Separate
Account. Further, TIAA maintains that it would be impractical and
costly for TIAA to administer a 30 day waiting period, particularly
with respect to participants in TIAA IRAs who are allowed to select
other allocation options immediately upon enrollment.
Although the Department notes that TIAA on page 31 of its
application for exemption, represented that it would provide a copy of
the Notice and a copy of the Grant to Plan Fiduciaries and Plan
Sponsors, at least 30 days prior to investment in the Separate Account,
the Department concurs with TIAA's request, and accordingly, has
deleted the 30 day requirement from Section III(c)(10) for those
investors who invest in the Separate Account after the date of the
Grant.
In addition, with respect to the requirements imposed by Section
III(c)(10), TIAA was concerned that investors who invested after
publication of the Notice but before publication of the Grant received
inconsistent treatment with respect to the receipt of a copy of the
Notice. In this regard, Section III(c)(10), as proposed, required
delivery of a copy of the Notice, upon publication of the Notice, to
certain parties who were at that time invested in the Separate Account;
but, did not specify, when or if, those parties who invested in the
Separate Account subsequent to the publication of the Notice had to
receive a copy of the Notice. TIAA requested that the Department modify
Section III(c)(10), such that investors who invested after the
publication of the Notice but before the publication of the Grant,
receive a copy of the Notice immediately following their investment,
and receive a copy of the Grant, upon publication of the Grant in the
Federal Register. The Department concurs and has modified the language
of Section III(c)(10) accordingly.
6. In Section III(d)(1) on page 15129 of the Notice, in the line 5,
after the word, ``Participants,'' TIAA suggests that the parenthetical
phrase, ``(or, if applicable, to the Plans),'' be added to the sentence
which should read, as follows:
information relating to the value of the Units in the Separate
Account to be available daily over a toll-free telephone number and/
or to be distributed in writing to Participants (or, if applicable,
to the Plans) in the Separate Account in quarterly confirmation
statements within five (5) to ten (10) days after the end of each
calendar quarter.
Further, TIAA suggests that the same parenthetical phrase should be
inserted after the word, ``Participants,'' in line 5, in Section
III(d)(2) on page 15129 of the Notice, such that the sentence should
read as follows:
information concerning the quarterly return of the Separate Account
to be available daily over a toll-free telephone number and/or to be
distributed in writing to Participants (or, if applicable, to the
Plans) in the Separate Account in quarterly confirmation statements
within five (5) to ten (10) days after the end of each calendar
quarter.
The Department concurs.
7. In Section III(g), as set forth in the Notice on page 15130,
column 1, lines 7 and 8, TIAA requests that the Department delete the
italicized phrase ``has advanced and'' from the following sentence:
The liquidation of any Accumulation Units held by a Participant
or participating Plan, for which a withdrawal request is pending,
has not been and will not be delayed by reason of the redemption of
Seed Money Units held by TIAA, and TIAA has advanced and [emphasis
added] will always advance funds by purchasing Liquidity Units to
fund the withdrawal requests of Participants or Plans on a timely
basis.
TIAA believes that this change is necessary, because to date TIAA has
not had to advance funds by purchasing Liquidity Units. The Department
concurs.
8. TIAA requests that representation 12, as it appeared in the SFR,
should have been stated differently. In this regard, in representation
12, as set forth on page 15137 of the Notice, column 3, the first
sentence of the last full paragraph, reads as follows:
Prior to investing in the Separate Account, it is represented
that each prospective participant (and, if applicable, each
fiduciary of prospective participating plans) has been and will be
provided with information regarding the role of the Independent
Fiduciary with respect to the Separate Account and has been and will
be advised of the identity of the party appointed to serve as the
Independent Fiduciary.
TIAA requests that the phrase, ``[P]rior to investing in the Separate
Account,'' at the beginning of this paragraph should have been deleted,
and the word, ``it,'' should have been capitalized as the beginning of
the sentence. In addition, TIAA requests that on line 5 and on line 9
of the same paragraph, the word, ``and'' should have been deleted, and
the word, ``or,'' should have been substituted following the words,
``has been.''
The Department does not concur with TIAA in the changes that have
been requested to representation 12 of the SFR. In the opinion of the
Department, investors who are interested in investing in the Separate
Account must be provided, prior to investing in such account, with
disclosure of the identity of the Independent Fiduciary and the role of
such fiduciary with respect to the Separate Account. In this regard,
the Department notes that on page 15 of its application for exemption
TIAA made the following representation:
Each Participant (and, as applicable, each Participating Plan)
will be informed of the appointment of the Independent Fiduciary. A
decision by a Plan fiduciary or a Plan Sponsor on behalf of a Plan
to elect to add the Real Estate Separate Account as an additional
pension funding option, and to participate in the Account, after
full disclosure by TIAA, will constitute approval and acceptance by
the Plan fiduciary or Plan sponsor of the Independent Fiduciary.
Similarly, a decision by a TIAA SRA contractholder or by a TIAA IRA
contractholder to elect to add the Real Estate Separate Account as
an additional pension funding option, after full disclosure by TIAA,
[[Page 54236]]
will constitute approval and acceptance by such a contractholder of
the Independent Fiduciary. (A decision by a Participant in such a
Plan to invest in the Account, after full disclosure by TIAA, will
constitute approval and acceptance by the Participant of the
Independent Fiduciary.)
Accordingly, the Department does not agree that changes to the SFR, as
requested by TIAA are merited.
9. TIAA has requested that representation 14, as set forth in the
SFR at page 15138, column 3 of the Notice, should have been stated
differently. In this regard, TIAA requests that the italicized phrase
in the quotation below should have been deleted from representation 14.
The language of the first paragraph of representation 14 reads as
follows:
It is represented that during the operation of the Separate
Account, no member of the Board of Trustees of TIAA or of CREF has
had or will have a role in the selection of the Separate Account as
a funding vehicle for any of the Plans or has served or will serve
as a Fiduciary to any Plan participating in TIAA investment funding
options [emphasis added]. In this regard, Fiduciaries of the Plans
unrelated to TIAA, or in the case of an SRA or an IRA, participants
unrelated to TIAA who participate in such SRA or IRA, have made and
will make the decision to invest in the Separate Account.
Specifically, TIAA does not wish any member of the Board of
Trustees of TIAA or of CREF to be prohibited, either currently or in
the future, from serving as a fiduciary to any of the Plans. The
Department concurs.
In the event a member of the Board of Trustees of TIAA or of CREF
does serve as a fiduciary to a Plan, TIAA represented in its comment
that such member will not play a role in such Plan's consideration and
selection of the Separate Account as a funding vehicle for the Plan. In
this regard, TIAA stated, on page 10 of Exhibit A of its application
for exemption, that:
In the event that any member of the TIAA Board or the CREF Board
also serves in a fiduciary capacity to an ERISA-covered plan, such
person will recuse himself or herself from any and all fiduciary
decisions related to the Real Estate Separate Account, including the
decision to add the Real Estate Separate Account as a funding option
to his or her plan.
The Department concurs.
10. TIAA has requested that representation 14, as set forth in the
SFR at the bottom of page 15139, column 1 in the Notice, should have
been stated differently. Specifically, TIAA requests that the
underlined phrase in the sentence quoted below should have been deleted
from the SFR. In this regard, the fourth line of representation 14,
reads as follows:
Further, TIAA has published and [emphasis added] will publish in
a TIAA publication, which is provided at least quarterly to all Plan
Sponsors and Fiduciaries of the Plans, a written notice that the
quarterly financial reports (including the list of Properties and
their current values) are available on request.
The Department concurs that TIAA's requested change should have
been reflected in the SFR. Further, in a letter dated October 5, 1995,
TIAA represented that it would also publish a toll-free telephone
number, which would enable Plan Sponsors and Fiduciaries of the Plans
to easily get prompt delivery of such quarterly financial reports. The
Department believes that it is necessary for Plan Sponsors and
Fiduciaries of the Plans to receive such periodic notification of the
availability of quarterly financial reports and to be reminded of the
toll-free telephone number, in order to request and receive copies of
such financial reports from TIAA. Accordingly, the Department has added
a new subparagraph five (5) to Section III(d). In this regard, Section
III(d)(5) reads, as follows,
a written notification that quarterly financial reports (including
the list of Properties and their current values) are available upon
request and a written disclosure of the toll-free telephone number
by which Plan Fiduciaries and Plan Sponsors may request delivery of
such quarterly financial reports will be provided by TIAA in a
publication sent to all Plan Fiduciaries and all Plan Sponsors of
the Plans, beginning after the end of the first calendar quarter
after the Grant is published in the Federal Register and continuing
at least quarterly thereafter.
In order to integrate this new Section III(d)(5) into the numbering
system of the exemption, the Department has deleted the word, ``and,''
after the semi-colon in Section III(d)(3) and has added the word,
``and,'' after the semi-colon at the end of Section III(d)(4).
11. The Department acknowledges and incorporates by reference such
other clarifications requested by the applicant to the information
contained in the SFR. For further discussion regarding the applicant's
comments, interested persons are encouraged to obtain a copy of the
exemption application file (D-9915) which is available in the Public
Documents Room of the Pension and Welfare Benefits Administration, U.S.
Department of Labor, Room N-5638, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210.
After full consideration and review of the entire record, including
the written comments filed by the applicant, the Department has
determined to grant the exemption, as modified and clarified above.
Comments submitted by the applicant to the Department have been
included as part of the public record of the exemption application. The
complete application file, including all supplemental submissions
received by the Department, is available for public inspection in the
Public Documents Room of the Pension Welfare Benefits Administration,
Room N-5638, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210.
For a complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the Notice published on Thursday, April 4, 1996, 60 FR 15128.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883. (This is not a toll-free number.)
Mewbourne Oil Company, Inc. Plan (the Plan) Located in Tyler, TX
[Prohibited Transaction Exemption 96-77; Exemption Application No. D-
10173]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code,
shall not apply to the past contribution by Mewbourne Oil Company (the
Employer) to the Plan of a U.S. Treasury Strip Bond (the Bond) and the
subsequent exchange by the Employer of the Bond for cash provided that:
(a) The contribution was a one-time transaction; (b) the Bond was
valued at fair market value as of the date of the contribution; (c) no
commissions were paid in connection with the transaction; (d) the Bond
represented less than 25% of the fair market value of the Plan's assets
at the time of the contribution; and (e) the Bond was returned to the
Employer in exchange for cash in the amount of $173,759 plus interest.
EFFECTIVE DATE: This exemption is effective February 11, 1994.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on July 22, 1996 at 61 FR
37925.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
[[Page 54237]]
Zerhusen and Ghazi, M.D. Inc. Profit Sharing Plan (the Plan) Located in
Cincinnati, Ohio
[Prohibited Transaction Exemption 96-78 Exemption Application No. D-
10224]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code,
shall not apply to the sale (the Sale) by Dr. J. Robert Zerhusen's
individual, self-directed account within the Plan (the Account) of a
parcel of real property (the Property) to his spouse, Marilyn E.
Zerhusen (Mrs. Zerhusen), a participant in the Plan and a party in
interest with respect to the Plan, provided that the following
conditions are satisfied: (a) The Sale is a one time transaction for a
lump sum cash payment; (b) the purchase price is the fair market value
of the Property as of the date of the Sale; (c) the Property has been
appraised by a qualified, independent real estate appraiser; and (d)
the Account will pay no commissions or other expenses relating to the
Sale.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on August 27, 1996 at 61 FR
44085.
FOR FURTHER INFORMATION CONTACT: Wendy McColough of the Department,
telephone (202) 219-8971. (This is not a toll-free number.)
Huggler & Silverang Profit Sharing Plan (the Plan) Located In
Philadelphia, Pennsylvania
[Prohibited Transaction Exemption 96-79; Exemption Application No. D-
10238]
Exemption
The restrictions of sections 406(a) and 406(b)(1) and (b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code,
shall not apply to the cash sale (the Sale) by the Plan of two 5
percent limited partnership interests (collectively, the Interests) in
Rosemont Square Associates, L.P. (the Partnership), one to Mr. David H.
Huggler and the second to Mr. Kevin J. Silverang, respectively, parties
in interest with respect to the Plan; provided (1) the Sale is a one-
time transaction for cash, (2) the Plan pays no commissions nor incurs
any expenses in connection with the transaction, and (3) the Plan
receives as consideration for the Sale no less than the fair market
value of the Interests as of the date of the Sale.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on September 6, 1996, at 61
FR 47203.
FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemptions 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) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional 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
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 11th day of October, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 96-26601 Filed 10-16-96; 8:45 am]
BILLING CODE 4510-29-P
