2010-25119. Exemptions From Certain Prohibited Transaction Restrictions

AGENCY:

Employee Benefits Security Administration, Labor.

ACTION:

Grant of Individual Exemptions.

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 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This notice includes the following: 2010-28, John D. Simmons Individual Retirement Act (the IRA), D-11597; and 2010-29, Boston Carpenters Apprenticeship and Training Fund (the Fund), L-11624.

SUPPLEMENTARY INFORMATION:

A notice was published in the Federal Register of the pendency before the Department of a proposal to grant such exemption. The notice set forth a summary of facts and representations contained in the application for exemption and referred interested persons to the application for a complete statement of the facts and representations. The application has been available for public inspection at the Department in Washington, DC. The notice also invited interested persons to submit comments on the requested exemption to the Department. In addition the notice stated that any interested person might submit a written request that a public hearing be held (where appropriate). The applicant has represented that it has complied with the requirements of the notification to interested persons. No requests for a hearing were received by the Department. Public comments were received by the Department as described in the granted exemption.

The notice of proposed exemption was issued and the exemption is being granted solely by the Department because, effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), 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 exemption is administratively feasible;

(b) The exemption is in the interests of the plan and its participants and beneficiaries; and

(c) The exemption is protective of the rights of the participants and beneficiaries of the plan.

John D. Simmons Individual Retirement Account (the IRA) Located in West Chester, PA

[Prohibited Transaction Exemption 2010-28; Exemption Application No. D-11597]

Exemption

The sanctions resulting from the application of section 4975(c)(1)(A)-(E) of the Code, shall not apply to the sale (the Sale) by the IRA to John D. Simmons, a disqualified person with respect to the IRA,* of a 50 percent interest (the Interest) in a condominium, provided that the following conditions are satisfied:

(a) The terms and conditions of the Sale are at least as favorable to the IRA as those obtainable in an arm's length transaction with an unrelated party;

(b) The Sale is a one-time transaction for cash;

(c) As consideration, the IRA receives the fair market value of the Interest as determined by a qualified, independent appraiser in an updated appraisal on the date of Sale; and

(d) The IRA pays no commissions, costs, fees, or other expenses with respect to the Sale.

Written Comment

In the notice of proposed exemption, the Department invited all interested persons to submit written comments and requests for a hearing within 30 days from the date of publication of the notice of proposed exemption in the Federal Register. All comments and requests for a hearing were due by September 5, 2010. Although the Department received no comments or requests for a hearing during the comment period, the Department noticed that Condition (c) of the proposal needed to be revised for technical accuracy.

As drafted in the proposal, Condition (c) states that as consideration for the Sale of the Interest, the IRA will receive the lesser of $192,500 or the fair market value of the Interest as determined by a qualified, independent appraiser in an updated appraisal on the date of the Sale. The Department intended that the IRA should receive the fair market value for the Interest on the date of the Sale. Therefore, it has deleted the words “the lesser of $192,500 or” in Condition (c) of the final exemption and notes a corresponding change in Representation 11(b) in the notice of proposed exemption. The revised condition now reads as follows:

(c) As consideration, the IRA receives the fair market value of the Interest as determined by a qualified, independent appraiser in an updated appraisal on the date of the Sale;

After giving full consideration to the entire record, the Department has decided to grant the exemption. The complete application file is made available for public inspection in the Public Disclosure Room of the Employee Benefits Security Administration, Room N-1513, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210.

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 6, 2010 at 75 FR 47642.

FOR FURTHER INFORMATION CONTACT:

Mr. Anh-Viet Ly of the Department at [phone]. (This is not a toll-free number.)

Boston Carpenters Apprenticeship and Training Fund (the Fund) Located in Boston, Massachusetts

[Prohibited Transaction Exemption No. PTE 2010-29; Exemption Application No. L-11624]

Exemption

The restrictions of 406(b)(1), and 406(b)(2) of the Act shall not apply effective for the period from January 29, 2010, through June 30, 2010, to the lease (the Lease) by the Fund from the NERCC, LLC (the Building Corporation), a party in interest with respect to the Fund, of a condominium unit (the Condo) in a building (the Building) owned by the Building Corporation, where the New England Regional Council of Carpenters (the Union), also a party in interest with respect to the Fund, indirectly owns the only other condominium unit in the Building; provided that, at the time the transaction was entered into, the following conditions were satisfied:

(a) The exemption is conditioned upon satisfaction at all times of the terms and conditions of this exemption, and upon adherence to the material facts and representations, as described in the Notice of Proposed Exemption (the Notice), and, as set forth in application D-11624, and in application D-11558, including those representations that are required by 29 CFR 2570.34 and 29 CFR 2570.35 of the Department's regulations;

(b) Prior to entering into the Lease, the Fund sought legal advice from Aaron D. Krakow, Esq. (Mr. Krakow), acting as legal counsel on behalf of the Fund, who advised the Fund that it was permissible for the Fund to enter into a short term lease with the Building Corporation, and the Board of Trustees of the Fund (the Board) relied on Mr. Krakow's advice;

(c) The Lease which is the subject of this exemption and any other leasing arrangement of the Condo between the Fund and the Building Corporation and/or the Union terminated on June 30, 2010; and the Fund shall have no obligation to pay rent to the Union or to the Building Corporation after the date of such termination;

(d) Before the Fund entered into the Lease of the Condo, James F. Grosso, Esq. (Mr. Grosso), of O'Reilly, Grosso & Gross, PC, acting as attorney for the Fund, assisted in the negotiation of the terms of the Lease, reviewed and approved the terms of such Lease to ensure that such terms were at least as favorable to the Fund as an arm's length transaction with an unrelated party, determined that such terms were fair and reasonable, and selected an independent, qualified appraiser to determine the fair market rental value of the Condo;

(e) Mr. Grosso was responsible throughout the duration of the Lease for: (i) Monitoring the rent payments made by the Fund to ensure that such payments were consistent with the amount of rental specified under the terms of such Lease, (ii) monitoring the payments of the Fund's share of the expenses for taxes, insurance, and operating expenses (including repairs) to ensure that such payments represent a fair apportionment of such expenses; and (iii) determining that the Fund had sufficient assets to pay the rental amount and its portion of taxes, insurance, and operating expenses (including repairs);

(f) Throughout the duration of the Lease, the terms of the Lease of the Condo between the Fund and the Building Corporation were at all times satisfied;

(g) The rent paid by the Fund for the Condo under the terms of the Lease was at no time greater than the fair market rental value of the Condo, as determined by an independent, qualified appraiser selected by Mr. Grosso;

(h) Under the provisions of the Lease, the subject transaction was on terms and at all times remained on terms that were at least as favorable to the Fund as those that would have been negotiated under similar circumstances at arm's length with an unrelated third party;

(i) The transaction was appropriate and helpful in carrying out the purposes for which the Fund is established or maintained;

(j) The Board maintains, or causes to be maintained within the United States for a period of six (6) years in a manner that is convenient and accessible for audit and examination, such records as are necessary to enable the persons described, below, in paragraph (k)(1) of this exemption to determine whether the conditions of this exemption have been met; except that—

(1) If the records necessary to enable the persons described, below, in paragraph (k)(1) of this exemption to determine whether the conditions of this exemption have been met are lost or destroyed, due to circumstances beyond the control of the Board, then no prohibited transaction will be considered to have occurred solely on the basis of the unavailability of those records; and

(2) No party in interest, other than the Board shall be subject to the civil penalty that may be assessed under section 502(i) of the Act, or to the 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 (j) of this exemption; and

(k)(1) Except as provided, below, in paragraph (k)(2) of this exemption and notwithstanding any provisions of sections (a)(2) and (b) of section 504 of the Act, the records referred to in paragraph (j) of this exemption are unconditionally available at their customary location for examination during normal business hours by:

(A) Any duly authorized employee or representative of the Department, the Internal Revenue Service, or any other applicable federal or state regulatory agency;

(B) Any fiduciary of the Fund, or any duly authorized representative of such fiduciary;

(C) Any contributing employer to the Fund and any employee organization whose members are covered by the Fund, or any duly authorized employee or representative of these entities; or

(D) Any participant or beneficiary of the Fund, or any duly authorized representative of such participant or beneficiary.

(2) None of the persons described, above, in paragraph (k)(1)(B)-(D) of this exemption are authorized to examine trade secrets or commercial or financial information that is privileged or confidential.

For a more complete statement of the facts and representations supporting the Department's decision to grant this exemption refer to the Notice published on June 11, 2010, at 75 FR 33350.

FOR FURTHER INFORMATION CONTACT:

Angelena C. Le Blanc of the Department, telephone [phone] (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 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) This exemption is 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 this exemption is subject to the express condition that the material facts and representations contained in the application accurately describes all material terms of the transaction which is the subject of the exemption.

Signed at Washington, DC, this 1st day of October 2010.

Ivan Strasfeld,

Director of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor.

Footnotes

* Pursuant to 29 CFR 2510.3-2(d), the IRA is not within the jurisdiction of Title I of the Employee Retirement Income Security Act of 1974 (the Act). However, there is jurisdiction under Title II of the Act pursuant to section 4975 of the Code.