[Federal Register Volume 60, Number 194 (Friday, October 6, 1995)]
[Notices]
[Pages 52419-52425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24869]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10096, et al.]
Proposed Exemptions; Profit Sharing Plan of NEBCO, Inc.
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, N.W., Washington, D.C.
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, N.W., Washington, D.C. 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.
Profit Sharing Plan of NEBCO, Inc. (the Plan) Located in Lincoln,
Nebraska
[Application No. D-10096]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and 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 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 (1) the proposed extensions of credit in
the form of guarantees and advances of funds (the Advances) to the Plan
by NEBCO, Inc. (the Employer), the sponsor of the Plan, with respect to
the Guaranteed Investment Contract No. 64238 (the GIC) issued by
Confederation Life Insurance Company of Canada (Confederation);
[[Page 52420]]
and (2) the repayment of the Advances by the Plan to the Employer;
provided that the following conditions are satisfied: (a) All terms and
conditions of the transactions are no less favorable to the Plan than
those which the Plan would receive in arm's-length transactions; (b) No
interest payments or expenses will be incurred by the Plan with respect
to the transactions; (c) Repayment of the Advances will be restricted
to proceeds from the GIC (GIC Proceeds); (d) Repayment of Advances will
be waived by the Employer to the extent that Advances exceed the GIC
Proceeds; and (e) All unpaid principal and earned interest of the GIC
will be completely paid by the Advances to the Plan by March 15, 2000.
Summary of Facts and Representations
1. The Employer, which has been in business since 1910, is a
privately-owned Nebraska corporation. It is primarily engaged in the
production, manufacture, and sale and resale of construction materials.
These materials include, among other things, sand and gravel, pipe,
ready mixed concrete block, and other prestressed products. Its
principal place of business is Lincoln, Nebraska and it employs
approximately 500 individuals.
2. The Plan is a defined contribution profit sharing plan,
providing for individually-directed participant accounts, which
includes a cash or deferred arrangement that is intended to qualify
under sections 401(a) and 401(k) of the Code. As of December 31, 1994,
the Plan had 414 participants and total assets of $18,947,900.00.
The Employer is the administer and named fiduciary as prescribed by
the Act. Authority to administer and manage the Plan has been allocated
by the Employer to the Retirement Committee (the Committee), which is
appointed annually from the officers of the Employer by its Board of
Directors.1
1 Present members of the Committee are James W. Hewitt, Vice
President and General Counsel; Robert E. Miller, Vice President and
Director; Charles D. Meyer, Secretary/Treasurer; and Joyce A. Huff,
Corporate Benefits Manager.
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With the respect to the Plan, the duties of the Committee include,
inter alia, selecting trustees, portfolio managers, and the investment
options for the participants, as well as monitoring the investment
performance of the assets of the Plan. In performing its duties, the
Committee has selected four different funds for the participants to
direct the investment of assets in their respective Plan accounts,
which include the following: (a) The Bond Fund, (b) the Equity Fund,
(c) the International Equity Fund, and (d) the Stable Value Fund.
The Bond Fund is managed by FirsTier Financial, Inc., a regional
multi-bank holding company incorporated and headquartered in Nebraska.
The assets of the Equity Fund offers three different investment
options: the Washington Mutual Investors Fund; the American Mutual
Funds; and E.B. Growth Stock Fund. The first two options are registered
mutual funds and the third is a bank collective trust fund managed by
FirsTier Financial, Inc. The three options are invested primarily in
shares of common stocks of U.S. corporations.
The International Equity Fund has all its assets invested in the
Templeton Foreign Fund, a registered mutual fund with its investments
in shares of common stock issued by foreign corporations.
The Stable Value Fund is managed by two different portfolio
managers. One of these portfolio managers is Norwest Corporation, a
bank holding company headquartered in Minneapolis, Minnesota with bank
branches in Nebraska. Norwest Corporation manages a pooled fund
invested in Guaranteed Investment Contracts and other short term
instruments issued by insurance companies, banks, and corporations. The
other portfolio manager for the Stable Value Fund is the FirsTier
Financial, Inc., which selects and manages the investments in
individual Guaranteed Investment Contracts issued by insurance
companies. As of December 31, 1994, the Stable Value Fund had 199
participant accounts with a value of $4,067,446.98 equalling 21.5
percent of the total value of the Plan.
Wyoming Trust and Management Company, incorporated in Wyoming and a
subsidiary of FirsTier Financial, Inc., is the trustee of the Plan (the
Trustee), which provides the services as custodian of Plan assets and
as participant recordkeeper.
3. Among the Plan assets in the Stable Value Fund is the GIC issued
on March 15, 1991, by Confederation for the principal sum of
$500,000.00 to the nominee of FirsTier Financial, Inc. as contract
holder for various employee benefit plans.2 The applicant
represents that the GIC is a single-deposit non-benefit-responsive
contract, earning interest on the principal at the annual rate of 8.47
percent. The contract provides for annual interest payments, and has a
maturity date of March 14, 1996. As of December 31, 1994, the Plan's
allocated share of the principal and accumulated interest of the GIC
was $257,754.62, representing 6.3 percent of the value of the Stable
Value Fund.
\2\ The GIC was acquired as an investment by the Plan and 3
other employee benefit plans that are sponsored by the Employer and
2 other closely-held employers, respectively, all with some common
ownership. Each of the 4 employee benefit plans was allocated a
portion of the principal amount of the GIC with the Plan receiving
an allocation of $241,450.00 as its portion of the GIC.
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The applicant represents that on August 11, 1994, the insurance
regulators of Canada seized the assets of Confederation, and on the
following day, August 12, 1994, the Ingham County Circuit Court,
Lansing, Michigan placed the assets of Confederation located in the
United States in conservatorship and rehabilitation, causing
Confederation to suspend all payments on its contracts, including the
GIC.3 The applicant further represents that Confederation did not
make its scheduled interest payment on the GIC for March 14, 1995, and
that it appears unlikely that Confederation will make payment of the
principal and interest to the Plan when the GIC matures on March 14,
1996.
3 The Department notes that the decision to acquire and
hold the GIC is governed by the fiduciary responsibility provisions
of Part 4, Subtitle B of Title I of the Act. In this regard, the
Department is not herein proposing relief for any violation of Part
4 which may have arisen as a result of the acquisition and holding
of the GIC by the Plan.
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4. In order to protect the Plan and its participants and
beneficiaries, the Employer proposes to guarantee and advance funds for
the payment of the principal amount of the GIC plus interest at the
stated contract interest rate of 8.47 percent per annum through
December 31, 1994, and thereafter, at the quarterly interest rate
earned by the Plan's investment in a diversified Guaranteed Investment
Contract fund (the Stable Return Fund) managed by Norwest
Corporation.4 If the conservatorship and rehabilitation of
Confederation extends beyond March 14, 2000, the Employer represents
that it will make Advances on March 15, 2000, to satisfy any remaining
guaranteed amount so that the Plan has complete recovery of the
principal amount of the GIC and the earned interest as guaranteed by
the Employer.
4 The applicant represents that the quarterly return for
the Stable Return Fund for the calendar quarter ended March 31,
1995, and June 30, 1995, was 1.51 percent to 1.5 percent,
respectively or annually approximately 6.5 percent to 7 percent,
respectively.
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The applicant represents that Advances will be made only if and
when needed by the Plan to satisfy liquidity requirements created by
withdrawals such as benefit payments and hardship withdrawals, or
transfer
[[Page 52421]]
requests from participants.5 Repayment of Advances will be
restricted to GIC Proceeds, which are defined by the applicant to
consist of cash proceeds obtained by the Plan from Confederation or any
successor to Confederation, or from state guaranty funds, or any other
third-party making payments with respect to the obligations of
Confederation under the GIC. The final Advance will be made by the
Employer on March 15, 2000, to ensure that the Plan will have received
the principal amount of the GIC and the earned interest as guaranteed
by the Employer. The terms of the Advances will be evidenced in a
written agreement by and between the Plan and the Employer.
5 The determination as to when advances are needed will be
made by the Committee.
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The applicant represents that the proposed transactions will
protect the integrity of the Plan as well as protect the participants
and beneficiaries of the Plan from any losses that might arise from the
GIC if Confederation does not satisfy its obligations. The Employer
represents that the transactions will enable the participants and
beneficiaries of the Plan to avoid losing confidence in the purpose of
the Plan for providing their respective retirement benefits.
5. In summary, the applicant represents that the proposed
transaction will satisfy the criteria for an exemption under section
408(a) of the Act because (a) the transactions will enable the Plan to
recover all amounts due with respect to the GIC; (b) the Advances will
enable the Plan to fund benefit payments, hardship withdrawals, and
investment fund transfers within the Plan; (c) repayment of the
Advances will be restricted to the GIC Proceeds; (d) repayments will be
waived by the Employer to the extent the Advances exceed the GIC
Proceeds; and (e) no interest payments or expenses will be incurred by
the Plan with respect to the transactions.
FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,
telephone (202) 219-8881. (This is a toll-free number.)
Profit Sharing Plan of Constructors, Inc. (the Plan) Located in
Lincoln, Nebraska
[Application No. D-10097]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and 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 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 (1) the proposed extensions of credit in
the form of guarantees and advances of funds (the Advances) to the Plan
by Constructors, Inc. (the Employer), the sponsor of the Plan, with
respect to the Guaranteed Investment Contract No. 64238 (the GIC)
issued by Confederation Life Insurance Company of Canada
(Confederation); and (2) the repayment of the Advances by the Plan to
the Employer; provided that the following conditions are satisfied: (a)
All terms and conditions of the transactions are no less favorable to
the Plan than those which the Plan would receive in arm's-length
transactions; (b) No interest payments or expenses will be incurred by
the Plan with respect to the transactions; (c) Repayment of the
Advances will be restricted to proceeds from the GIC (GIC Proceeds);
(d) Repayment of Advances will be waived by the Employer to the extent
that Advances exceed the GIC Proceeds; and (e) All unpaid principal and
earned interest of the GIC will be completely paid by the Advances to
the Plan by March 15, 2000.
Summary of Facts and Representations
1. The Employer is privately-owned Nebraska corporation that was
established in 1948. Its principal place of business located in
Lincoln, Nebraska. Employing approximately 300 individuals, the
Employer is primarily engaged in the business of highway construction,
traffic control, and limestone mining.
2. The Plan is a defined contribution profit sharing plan,
providing for individually-directed participant accounts, which is
intended to qualify under section 401(a) of the Code. As of December
31, 1994, the Plan had 155 participants and total assets of
$4,223,729.49.
The Employer is the administer and named fiduciary as prescribed by
the Act. Authority to administer and manage the Plan has been allocated
by the Employer to the Retirement Committee (the Committee), which is
appointed annually from the officers of the Employer by its Board of
Directors.6 With the respect to the Plan, the duties of the
Committee include, inter alia, selecting trustees, portfolio managers,
and the investment options for the participants, as well as monitoring
the investment performance of the assets of the Plan. In performing its
duties, the Committee has selected four different funds for the
participants to direct the investment of assets in their respective
Plan accounts, which include the following: (a) The Bond Fund, (b) the
Equity Fund, (c) the International Equity Fund, and (d) the Stable
Value Fund.
6 Present members of the Committee are James W. Hewitt,
Vice President and General Counsel; Robert E. Miller, Vice President
and Director; Charles D. Meyer, Secretary/Treasurer; and Joyce A.
Huff, Corporate Benefits Manager.
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The Bond Fund is managed by FirsTier Financial, Inc., a regional
multi-bank holding company incorporated and headquartered in Nebraska.
The assets of the Equity Fund offers three different investment
options: the Washington Mutual Investors Fund; the American Mutual
Funds; and E.B. Growth Stock Fund. The first two options are registered
mutual funds and the third is a bank collective trust fund managed by
FirsTier Financial, Inc. The three options are invested primarily in
shares of common stocks of U.S. corporations.
The International Equity Fund has all its assets invested in the
Templeton Foreign Fund, a registered mutual fund with its investments
in shares of common stock issued by foreign corporations.
The Stable Value Fund is managed by two different portfolio
managers. One of these portfolio managers is Norwest Corporation, a
bank holding company headquartered in Minneapolis, Minnesota with bank
branches in Nebraska. Norwest Corporation manages a pooled fund
invested in Guaranteed Investment Contracts and other short term
instruments issued by insurance companies, banks, and corporations. The
other portfolio manager for the Stable Value Fund is the FirsTier
Financial, Inc., which selects and manages the investments in
individual Guaranteed Investment Contracts issued by insurance
companies. As of December 31, 1994, the Stable Value Fund had 14
participant accounts with a value of $1,536,392.46 equalling 36.4
percent of the total value of the Plan.
Wyoming Trust and Management Company, incorporated in Wyoming and a
subsidiary of FirsTier Financial, Inc., is the trustee of the Plan (the
Trustee), which provides the services as custodian of Plan assets and
as participant recordkeeper.
3. Among the Plan assets in the Stable Value Fund is the GIC issued
on March 15, 1991, by Confederation for the principal sum of
$500,000.00 to the nominee of FirsTier, Financial, Inc. as contract
holder for various employee
[[Page 52422]]
benefit plans.7 The applicant represents that the GIC is a single-
deposit non-benefit-responsive contract, earning interest on the
principal at the annual rate of 8.47 percent. The contract provides for
annual interest payments, and has a maturity date of March 14, 1996. As
of December 31, 1994, the Plan's allocated share of the principal and
accumulated interest of the GIC was $96,077.52, representing 6.25
percent of the value of the Stable Value Fund.
\7\ The GIC was acquired as an investment by the Plan and 3
other employee benefit plans that are sponsored by the Employer and
2 other closely-held employers, respectively, all with some common
ownership. Each of the 4 employee benefit plans was allocated a
portion of the principal amount of the GIC with the Plan receiving
an allocation of $90,000.00 as its portion of the GIC.
---------------------------------------------------------------------------
The applicant represents that on August 11, 1994, the insurance
regulators of Canada seized the assets of Confederation, and on the
following day, August 12, 1994, the Ingham County Circuit Court,
Lansing, Michigan placed the assets of Confederation located in the
United States in conservatorship and rehabilitation, causing
Confederation to suspend all payments on its contracts, including the
GIC.8 The applicant further represents that Confederation did not
make its scheduled interest payment on the GIC for March 14, 1995, and
that it appears unlikely that Confederation will make payment of the
principal and interest to the Plan when the GIC matures on March 14,
1996.
\8\ The Department notes that the decision to acquire and hold
the GIC is governed by the fiduciary responsibility provisions of
Part 4, Subtitle B of Title I of the Act. In this regard, the
Department is not herein proposing relief for any violation of Part
4 which may have arisen as a result of the acquisition and holding
of the GIC by the Plan.
---------------------------------------------------------------------------
4. In order to protect the Plan and its participants and
beneficiaries, the Employer proposes to guarantee and advance funds for
the payment of the principal amount of the GIC plus interest at the
stated contract interest rate of 8.47 percent per annum through
December 31, 1994, and thereafter, at the quarterly interest rate
earned by the Plan's investment in a diversified Guaranteed Investment
Contract fund (the Stable Return Fund) managed by Norwest
Corporation.9 If the conservatorship and rehabilitation of
Confederation extends beyond March 14, 2000, the Employer represents
that it will make Advances on March 15, 2000, to satisfy any remaining
guaranteed amount so that the Plan has complete recovery of the
principal amount of the GIC and the earned interest as guaranteed by
the Employer.
\9\ The applicant represents that the quarterly return for the
Stable Return Fund for the calendar quarter ended March 31, 1995,
and June 30, 1995, was 1.51 percent 1.5 percent, respectively or
annually approximately 6.5 percent to 7 percent, respectively.
---------------------------------------------------------------------------
The applicant represents that Advances will be made only if and
when needed by the Plan to satisfy liquidity requirements created by
withdrawals such as benefit payments and hardship withdrawals, or
transfer requests from participants.10 Repayment of Advances will
be restricted to GIC Proceeds, which are defined by the applicant to
consist of cash proceeds obtained by the Plan from Confederation or any
successor to Confederation, or from state guaranty funds, or any other
third-party making payments with respect to the obligations of
Confederation under the GIC. The final Advance will be made by the
Employer on March 15, 2000, to ensure that the Plan will have received
the principal amount of the GIC and the earned interest as guaranteed
by the Employer. The terms of the Advances will be evidenced in a
written agreement by and between the Plan and the Employer.
\10\ The determination as to when advances are needed will be
made by the Committee.
---------------------------------------------------------------------------
The applicant represents that the proposed transactions will
protect the integrity of the Plan as well as protect the participants
and beneficiaries of the Plan from any losses that might arise from the
GIC if Confederation does not satisfy its obligations. The Employer
represents that the transactions will enable the participants and
beneficiaries of the Plan to avoid losing confidence in the purpose of
the Plan for providing their respective retirement benefits.
5. In summary, the applicant represents that the proposed
transaction will satisfy the criteria for an exemption under section
408(a) of the Act because (a) the transactions will enable the Plan to
recover all amounts due with respect to the GIC; (b) the Advances will
enable the Plan to fund benefit payments, hardship withdrawals, and
investment fund transfers within the Plan; (c) repayment of the
Advances will be restricted to the GIC Proceeds; (d) repayments will be
waived by the Employer to the extent the Advances exceed the GIC
Proceeds; and (e) no interest payments or expenses will be incurred by
the Plan with respect to the transactions.
FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,
telephone (202) 219-8881. (This is a toll-free number.)
Universal Surety Company Profit Sharing Plan (the Plan) Located in
Lincoln, Nebraska
[Application No. D-10098]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and 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 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 (1) the proposed extensions of
credit in the form of guarantees and advances of funds (the Advances)
to the Plan by Universal Surety Company (the Employer), the sponsor of
the Plan, with respect to the Guaranteed Investment Contract No. 64238
(the GIC) issued by Confederation Life Insurance Company of Canada
(Confederation); and (2) the repayment of the Advances by the Plan to
the Employer; provided that the following conditions are satisfied: (a)
All terms and conditions of the transactions are no less favorable to
the Plan than those which the Plan would receive in arm's-length
transactions; (b) No interest payments or expenses will be incurred by
the Plan with respect to the transactions; (c) Repayment of the
Advances will be restricted to proceeds from the GIC (GIC Proceeds);
(d) Repayment of Advances will be waived by the Employer to the extent
that Advances exceed the GIC Proceeds; and (e) All unpaid principal and
earned interest of the GIC will be completely paid by the Advances to
the Plan by March 15, 2000.
Summary of Facts and Representations
1. The Employer is a privately-owned business that was incorporated
in Nebraska during the year of 1947. Its principal place of business is
located in Lincoln, Nebraska, where it is engaged in the business of
underwriting surety bonds for the construction industry. The Employer
currently has 18 employees.
2. The Plan is a defined contribution profit sharing plan,
providing for individually-directed participant accounts, which is
intended to qualify under section 401(a) of the Code. As of December
31, 1994, the Plan had 19 participants and total assets of
$2,472,583.00.
The Employer is the administer and named fiduciary as prescribed by
the
[[Page 52423]]
Act. Authority to administer and manage the Plan has been allocated by
the Employer to the Retirement Committee (the Committee), which is
appointed annually from the officers of the Employer by its Board of
Directors.\11\
\11\ Present members of the Committee are Thomas A. Tallman,
President of the Employer and Leon Harre, Secretary of the Employer.
---------------------------------------------------------------------------
With the respect to the Plan, the duties of the Committee include,
inter alia, selecting trustees, portfolio managers, and the investment
options for the participants, as well as monitoring the investment
performance of the assets of the Plan. In performing its duties, the
Committee has selected four different funds for the participants to
direct the investment of assets in their respective Plan accounts,
which include the following: (a) the Bond Fund, (b) the Equity Fund,
(c) the International Equity Fund, and (d) the Stable Value Fund.
The Bond Fund is managed by FirsTier Financial, Inc., a regional
multi-bank holding company incorporated and headquartered in Nebraska.
The assets of the Equity Fund offers three different investment
options: the Washington Mutual Investors Fund; the American Mutual
Funds; and E.B. Growth Stock Fund. The first two options are registered
mutual funds and the third is a bank collective trust fund managed by
FirsTier Financial, Inc. The three options are invested primarily in
shares of common stocks of U.S. corporations.
The International Equity Fund has all its assets invested in the
Templeton Foreign Fund, a registered mutual fund with its investments
in shares of common stock issued by foreign corporations.
The Stable Value Fund is managed by two different portfolio
managers. One of these portfolio managers is Norwest Corporation, a
bank holding company headquartered in Minneapolis, Minnesota with bank
branches in Nebraska. Norwest Corporation manages a pooled fund
invested in Guaranteed Investment Contracts and other short term
instruments issued by insurance companies, banks, and corporations. The
other portfolio manager for the Stable Value Fund is the FirsTier
Financial, Inc., which selects and manages the investments in
individual Guaranteed Investment Contracts issued by insurance
companies. As of December 31, 1994, the Stable Value Fund had 9
participant accounts with a value of $482,008.00 equalling 19.5 percent
of the total value of the Plan.
Wyoming Trust and Management Company, incorporated in Wyoming and a
subsidiary of FirsTier Financial, Inc., is the trustee of the Plan (the
Trustee), which provides the services as custodian of Plan assets and
as participant recordkeeper.
3. Among the Plan assets in the Stable Value Fund is the GIC issued
on March 15, 1991, by Confederation for the principal sum of
$500,000.00 to the nominee of FirsTier, Financial, Inc. as contract
holder for various employee benefit plans.\12\
\12\ The GIC was acquired as an investment by the Plan and 3
other employee benefit plans that are sponsored by the Employer and
2 other closely-held employers, respectively, all with some common
ownership. Each of the 4 employee benefit plans was allocated a
portion of the principal amount of the GIC with the Plan receiving
an allocation of $50,550.00 as its portion of the GIC.
---------------------------------------------------------------------------
The applicant represents that the GIC is a single-deposit non-
benefit-responsive contract, earning interest on the principal at the
annual rate of 8.47 percent. The contract provides for annual interest
payments, and has a maturity date of March 14, 1996. As of December 31,
1994, the Plan's allocated share of the principal and accumulated
interest of the GIC was $53,963.54, representing 11 percent of the
value of the Stable Value Fund.
The applicant represents that on August 11, 1994, the insurance
regulators of Canada seized the assets of Confederation, and on the
following day, August 12, 1994, the Ingham County Circuit Court,
Lansing, Michigan placed the assets of Confederation located in the
United States in conservatorship and rehabilitation, causing
Confederation to suspend all payments on its contracts, including the
GIC.\13\ The applicant further represents that Confederation did not
make its scheduled interest payment on the GIC for March 14, 1995, and
that it appears unlikely that Confederation will make payment of the
principal and interest to the Plan when the GIC matures on March 14,
1996.
\13\ The Department notes that the decision to acquire and hold
the GIC is governed by the fiduciary responsibility provisions of
Part 4, Subtitle B of Title I of the Act. In this regard, the
Department is not herein proposing relief for any violation of Part
4 which may have arisen as a result of the acquisition and holding
of the GIC by the Plan.
---------------------------------------------------------------------------
4. In order to protect the Plan and its participants and
beneficiaries, the Employer proposes to guarantee and advance funds for
the payment of the principal amount of the GIC plus interest at the
stated contract interest rate of 8.47 percent per annum through
December 31, 1994, and thereafter, at the quarterly interest rate
earned by the Plan's investment in a diversified Guaranteed Investment
Contract fund (the Stable Return Fund) managed by Norwest
Corporation.14 If the conservatorship and rehabilitation of
Confederation extends beyond March 14, 2000, the Employer represents
that it will make Advances on March 15, 2000, to satisfy any remaining
guaranteed amount so that the Plan has complete recovery of the
principal amount of the GIC and the earned interest as guaranteed by
the Employer.
\14\ The applicant represents that the quarterly return for the
Stable Return Fund for the calendar quarter ended March 31, 1995,
and June 30, 1995, was 1.51 percent 1.5 percent, respectively or
annually approximately 6.5 percent to 7 percent, respectively.
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The applicant represents that Advances will be made only if and
when needed by the Plan to satisfy liquidity requirements created by
withdrawals such as benefit payments and hardship withdrawals, or
transfer requests from participants.15 Repayment of Advances will
be restricted to GIC Proceeds, which are defined by the applicant to
consist of cash proceeds obtained by the Plan from Confederation or any
successor to Confederation, or from state guaranty funds, or any other
third-party making payments with respect to the obligations of
Confederation under the GIC. The final Advance will be made by the
Employer on March 15, 2000, to ensure that the Plan will have received
the principal amount of the GIC and the earned interest as guaranteed
by the Employer. The terms of the Advances will be evidenced in a
written agreement by and between the Plan and the Employer.
\15\ The determination as to when advances are needed will be
made by the Committee.
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The applicant represents that the proposed transactions will
protect the integrity of the Plan as well as protect the participants
and beneficiaries of the Plan from any losses that might arise from the
GIC if Confederation does not satisfy its obligations. The Employer
represents that the transactions will enable the participants and
beneficiaries of the Plan to avoid losing confidence in the purpose of
the Plan for providing their respective retirement benefits.
5. In summary, the applicant represents that the proposed
transaction will satisfy the criteria for an exemption under section
408(a) of the Act because (a) the transactions will enable the Plan to
recover all amounts due with respect to the GIC; (b) the Advances will
enable the Plan to fund benefit payments, hardship withdrawals, and
investment fund transfers within the Plan; (c) repayment of the
Advances will be restricted to the GIC Proceeds; (d) repayments will be
waived by the
[[Page 52424]]
Employer to the extent the Advances exceed the GIC Proceeds; and (e) no
interest payments or expenses will be incurred by the Plan with respect
to the transactions.
FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department,
telephone (202) 219-8881. (This is a toll-free number.)
Constructors, Inc. 401(k) Plan (the Plan) Located in Lincoln, NE
[Application No. D-10099]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and 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 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 (1) the proposed extensions of
credit in the form of guarantees and advances of funds (the Advances)
to the Plan by Constructors Inc. (the Employer), the sponsor of the
Plan, with respect to the Guaranteed Investment Contract No. 64238 (the
GIC) issued by Confederation Life Insurance Company of Canada
(Confederation); and (2) the repayment of the Advances by the Plan to
the Employer; provided that the following conditions are satisfied: (a)
All terms and conditions of the transactions are no less favorable to
the Plan than those which the Plan would receive in arm's-length
transactions; (b) No interest payments or expenses will be incurred by
the Plan with respect to the transactions; (c) Repayment of the
Advances will be restricted to proceeds from the GIC (GIC Proceeds);
(d) Repayment of Advances will be waived by the Employer to the extent
that Advances exceed the GIC Proceeds; and (e) All unpaid principal and
earned interest of the GIC will be completely paid by the Advances to
the Plan by March 15, 2000.
Summary of Facts and Representations
1. The Employer is a privately-owned Nebraska corporation that was
established in 1948. Its principal place of business located in
Lincoln, Nebraska. Employing approximately 300 individuals, the
Employer is primarily engaged in the business of highway construction,
traffic control, and limestone mining.
2. The Plan is a defined contribution profit sharing plan,
providing for individually-directed participant accounts, which is
intended to qualify under section 401(a) and 401(k) of the Code. As of
December 31, 1994, the Plan had 155 participants and total assets of
$1,831,751.95.
The Employer is the administer and named fiduciary as prescribed by
the Act. Authority to administer and manage the Plan has been allocated
by the Employer to the Retirement Committee (the Committee), which is
appointed annually from the officers of the Employer by its Board of
Directors.16 With the respect to the Plan, the duties of the
Committee include, inter alia, selecting trustees, portfolio managers,
and the investment options for the participants, as well as monitoring
the investment performance of the assets of the Plan. In performing its
duties, the Committee has selected four different funds for the
participants to direct the investment of assets in their respective
Plan accounts, which include the following: (a) the Bond Fund, (b) the
Equity Fund, (c) the International Equity Fund, and (d) the Stable
Value Fund.
\16\ Present members of the Committee are James W. Hewitt, Vice
President and General Counsel; Robert E. Miller, Vice President and
Director; Charles D. Meyer, Secretary/Treasurer; and Joyce A. Huff,
Corporate Benefits Manager.
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The Bond Fund is managed by FirsTier Financial, Inc., a regional
multi-bank holding company incorporated and headquartered in Nebraska.
The assets of the Equity Fund offers three different investment
options: the Washington Mutual Investors Fund; the American Mutual
Funds; and E.B. Growth Stock Fund. The first two options are registered
mutual funds and the third is a bank collective trust fund managed by
FirsTier Financial, Inc. The three options are invested primarily in
shares of common stocks of U.S. corporations.
The International Equity Fund has all its assets invested in the
Templeton Foreign Fund, a registered mutual fund with its investments
in shares of common stock issued by foreign corporations.
The Stable Value Fund is managed by two different portfolio
managers. One of these portfolio managers is Norwest Corporation, a
bank holding company headquartered in Minneapolis, Minnesota with bank
branches in Nebraska. Norwest Corporation manages a pooled fund
invested in Guaranteed Investment Contracts and other short term
instruments issued by insurance companies, banks, and corporations. The
other portfolio manager for the Stable Value Fund is the FirsTier
Financial, Inc., which selects and manages the investments in
individual Guaranteed Investment Contracts issued by insurance
companies. As of December 31, 1994, the Stable Value Fund had 59
participant accounts with a value of $599,704.89 equalling 32.7 percent
of the total value of the Plan.
Wyoming Trust and Management Company, incorporated in Wyoming and a
subsidiary of FirsTier Financial, Inc., is the trustee of the Plan (the
Trustee), which provides the services as custodian of Plan assets and
as participant recordkeeper.
3. Among the Plan assets in the Stable Value Fund is the GIC issued
on March 15, 1991, by Confederation for the principal sum of
$500,000.00 to the nominee of FirsTier, Financial, Inc. as contract
holder for various employee benefit plans.17 The applicant
represents that the GIC is a single-deposit non-benefit-responsive
contract, earning interest on the principal at the annual rate of 8.47
percent. The contract provides for annual interest payments, and has a
maturity date of March 14, 1996. As of December 31, 1994, the Plan's
allocated share of the principal and accumulated interest of the GIC
was $125,968.30, representing 21 percent of the value of the Stable
Value Fund.
\17\ The GIC was acquired as an investment by the Plan and 3
other employee benefit plans that are sponsored by the Employer and
2 other closely-held employers, respectively, all with some common
ownership. Each of the 4 employee benefit plans was allocated a
portion of the principal amount of the GIC with the Plan receiving
an allocation of $118,000.00 as its portion of the GIC.
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The applicant represents that on August 11, 1994, the insurance
regulators of Canada seized the assets of Confederation, and on the
following day, August 12, 1994, the Ingham County Circuit Court,
Lansing, Michigan placed the assets of Confederation located in the
United States in conservatorship and rehabilitation, causing
Confederation to suspend all payments on its contracts, including the
GIC.18 The applicant further represents that Confederation did not
make its scheduled interest payment on the GIC for March 14, 1995, and
that it appears unlikely that Confederation will make payment of the
principal and interest to the Plan when the GIC matures on March 14,
1996.
\18\ The Department notes that the decision to acquire and hold
the GIC is governed by the fiduciary responsibility provisions of
Part 4, Subtitle B of Title I of the Act. In this regard, the
Department is not herein proposing relief for any violation of Part
4 which may have arisen as a result of the acquisition and holding
of the GIC by the Plan.
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4. In order to protect the Plan and its participants and
beneficiaries, the Employer proposes to guarantee and advance funds for
the payment of the
[[Page 52425]]
principal amount of the GIC plus interest at the stated contract
interest rate of 8.47 percent per annum through December 31, 1994, and
thereafter, at the quarterly interest rate earned by the Plan's
investment in a diversified Guaranteed Investment Contract fund (the
Stable Return Fund) managed by Norwest Corporation.19 If the
conservatorship and rehabilitation of Confederation extends beyond
March 14, 2000, the Employer represents that it will make Advances on
March 15, 2000, to satisfy any remaining guaranteed amount so that the
Plan has complete recovery of the principal amount of the GIC and the
earned interest as guaranteed by the Employer.
\19\ The applicant represents that the quarterly return for the
Stable Return Fund for the calendar quarter ended March 31, 1995,
and June 30, 1995, was 1.51 percent 1.5 percent, respectively or
annually approximately 6.5 percent to 7 percent, respectively.
---------------------------------------------------------------------------
The applicant represents that Advances will be made only if and
when needed by the Plan to satisfy liquidity requirements created by
withdrawals such as benefit payments and hardship withdrawals, or
transfer requests from participants.20 Repayment of Advances will
be restricted to GIC Proceeds, which are defined by the applicant to
consist of cash proceeds obtained by the Plan from Confederation or any
successor to Confederation, or from state guaranty funds, or any other
third-party making payments with respect to the obligations of
Confederation under the GIC. The final Advance will be made by the
Employer on March 15, 2000, to ensure that the Plan will have received
the principal amount of the GIC and the earned interest as guaranteed
by the Employer. The terms of the Advances will be evidenced in a
written agreement by and between the Plan and the Employer.
\20\ The determination as to when advances are needed will be
made by the Committee.
---------------------------------------------------------------------------
The applicant represents that the proposed transactions will
protect the integrity of the Plan as well as protect the participants
and beneficiaries of the Plan from any losses that might arise from the
GIC if Confederation does not satisfy its obligations. The Employer
represents that the transactions will enable the participants and
beneficiaries of the Plan to avoid losing confidence in the purpose of
the Plan for providing their respective retirement benefits.
5. In summary, the applicant represents that the proposed
transaction will satisfy the criteria for an exemption under section
408(a) of the Act because (a) the transactions will enable the Plan to
recover all amounts due with respect to the GIC; (b) the Advances will
enable the Plan to fund benefit payments, hardship withdrawals, and
investment fund transfers within the Plan; (c) repayment of the
Advances will be restricted to the GIC Proceeds; (d) repayments will be
waived by the Employer to the extent the Advances exceed the GIC
Proceeds; and (e) no interest payments or expenses will be incurred by
the Plan with respect to the transactions.
FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,
telephone (202) 219-8881. (This is 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 that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Signed at Washington, DC, this 3rd day of October, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 95-24869 Filed 10-5-95; 8:45 am]
BILLING CODE 4510-29-P
