[Federal Register Volume 60, Number 213 (Friday, November 3, 1995)]
[Notices]
[Pages 55863-55868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27296]
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[[Page 55864]]
DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 95-100; Exemption Application No. D-
9500 , et al.]
Grant of Individual Exemptions; Fidelity Management Trust, et al.
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.
Fidelity Management Trust Company (FMTC) and its Affiliates
(collectively, Fidelity) Located in Boston, Massachusetts
[Prohibited Transaction Exemption 95-100; Application No. D-9500]
Section I--Exemption for Payment of Certain Fees to Fidelity
The restrictions of section 406(b)(1) and (b)(2) of the Act and the
taxes imposed by section 4975 of the Code, by reason of section
4975(c)(1)(E) of the Code, shall not apply to the payment of certain
performance fees (the Performance Fee) to Fidelity by employee benefit
plans for which Fidelity provides investment management or
discretionary trustee services (the Client Plans) pursuant to an
investment management or trust agreement (the Agreement) entered into
between Fidelity and the Client Plans either individually, through the
establishment of a single client separate account (Single Client
Account), or collectively as participants in a multiple client
commingled account (Multiple Client Account), provided that the
conditions set forth below in Section III are satisfied. (Single Client
Accounts and Multiple Client Accounts are collectively referred to
herein as Accounts.)
Section II--Exemption for Investments in a Multiple Client Account
The restrictions of section 406(a)(1) (A) through (D) of the Act
and the taxes imposed by section 4975 of the Code, by reason of section
4975(c)(1) (A) through (D) of the Code, shall not apply to any
investment by a Client Plan in a Multiple Client Account managed by
Fidelity, provided that the conditions set forth below in Section III
are satisfied.
Section III--General Conditions
(a) The investment of plan assets in a Single or Multiple Client
Account, including the terms and payment of any Performance Fee, shall
be approved in writing by a fiduciary of a Client Plan which is
independent of Fidelity (the Independent Fiduciary). Notwithstanding
the foregoing, Fidelity may authorize the transfer of cash from a
Single Client Account to a Multiple Client Account provided that: (1)
The Multiple Client Account has similar investment objectives and the
identical fee structure as the Single Client Account; (2) the Agreement
governing the Single Client Account authorizes Fidelity to invest in a
Multiple Client Account; (3) Fidelity receives no additional fees from
the Single Client Account for cash invested in the Multiple Client
Account; (4) a binding commitment to make the transfer to the Multiple
Client Account occurs within six months of the Independent Fiduciary's
decision to allocate assets to the Single Client Account or, in the
event Fidelity's binding commitment to make the transfer occurs more
than six months after such fiduciary's decision, Fidelity obtains an
additional authorization from the Independent Fiduciary; and (5) each
transfer of assets from the Single Client Account to the Multiple
Client Account occurs within sixty (60) days of the actual transfer of
such assets to the Single Client Account.
(b) The terms of any investment in an Account and of any
Performance Fee shall be at least as favorable to the Client Plans as
those obtainable in arm's-length transactions between unrelated
parties.
(c) At the time any Account is established and at the time of any
subsequent investment of assets (including the reinvestment of assets)
in such Account:
(1) Each Client Plan shall have total net assets with a value in
excess of $50 million or, alternatively, be represented by an
Independent Fiduciary that is responsible for the investment of at
least $50 million in ``plan assets'' subject to the provisions of the
Act; and
(2) No Client Plan shall invest, in the aggregate, more than five
percent (5%) of its total assets in any Account or more than ten
percent (10%) of its assets in all Accounts established by Fidelity.
(d) Prior to making an investment in any Account, the Independent
Fiduciary of each Client Plan investing in an Account shall receive
offering materials from Fidelity which disclose all material facts
concerning the purpose, structure, and operation of the Account,
including any fee arrangements.
(e) With respect to its ongoing participation in an Account, the
Independent Fiduciary of each Client Plan shall receive the following
written information from Fidelity:
(1) Audited financial statements of the Account prepared by
independent public accountants selected by Fidelity no later than
ninety (90) days after the end of the fiscal year of the Account;
(2) Quarterly and annual reports prepared by Fidelity relating to
the overall financial position of the Account and, in the case of a
Multiple Client Account, the value of such Client Plan's interest in
the Account. Each such report shall include a statement regarding the
amount of fees paid to Fidelity during the period covered by such
report;
(3) Annual reports indicating the fair market value of the
Account's assets
[[Page 55865]]
determined using market sources and valuation methodologies acceptable
to the Independent Fiduciary of the Client Plan for a Single Client
Account or the responsible independent fiduciaries of Client Plans and
other authorized persons acting for investors in a Multiple Client
Account (the Responsible Independent Fiduciaries, as defined in Section
IV(c) below), or if market sources are not available, values determined
by a qualified appraiser independent of Fidelity which has been
approved by the Independent Fiduciary or Responsible Independent
Fiduciaries. However, no independent appraisals shall be required
unless such appraisals are necessary for purposes of determining any
compensation due to Fidelity based on the value of the assets in the
Account for that period; and
(4) In the case of any Multiple Client Account, a list of all other
investors in the Account.
(f) The total fees paid to Fidelity shall constitute no more than
reasonable compensation.
(g) The Performance Fee shall be payable after the Client Plan has
received distributions from the Account in excess of an amount equal to
100% of its invested capital plus a pre-specified annual compounded
cumulative rate of return (the Threshold Amount), except that in the
case of Fidelity's removal or resignation, Fidelity shall be entitled
to receive a Performance Fee payable either at the time of removal, or
in the event of Fidelity's resignation, on the scheduled termination
date of the Account, subject to the requirements of paragraph (j)
below, as determined by a deemed distribution of the assets of the
Account based on an assumed sale of such assets at their fair market
value (in accordance with market sources or independent appraisals as
described in paragraph (k) below), only to the extent that the Client
Plan would receive distributions from the Account in excess of an
amount equal to the Threshold Amount at the time of Fidelity's removal
or resignation. Both the Threshold Amount and the amount of the
Performance Fee, expressed as a percentage of the amount distributed
(or deemed distributed) from the Account in excess of the Threshold
Amount, shall be established by the Agreement and agreed to by the
Independent Fiduciary of the Client Plan.
(h) The Threshold Amount for any Performance Fee shall include at
least a minimum rate of return to the Client Plan, as defined below in
Section IV(d). The Independent Fiduciary acting for a Client Plan shall
specifically agree in writing with Fidelity, prior to any investment in
the Account, that it would be appropriate for the minimum rate of
return applicable to the Account to be based upon the rate of change in
the consumer price index (CPI) during the period specified in the
Agreement, as described in Section IV(d).
(i) For any sale of an asset in an Account which shall give rise to
the payment of a Performance Fee to Fidelity prior to the termination
of the Account, the sale price of the asset shall be at least equal to
a target amount (the Target Amount), as defined in Section IV(e), in
order for Fidelity to sell the asset and receive its Performance Fee
without further approvals. If the proposed sale price of the asset is
less than the Target Amount, the proposed sale shall be disclosed to
and approved by the Independent Fiduciary for a Single Client Account
or the Responsible Independent Fiduciaries for a Multiple Client
Account, in which event Fidelity will be entitled to sell the asset and
receive its Performance Fee. If the proposed sale price is less than
the Target Amount and the Independent Fiduciary's or Responsible
Independent Fiduciaries' approval is not obtained, Fidelity shall still
have the authority to sell the asset, if the Agreement provides
Fidelity with complete investment discretion for the Account, provided
that the Performance Fee that would have been payable to Fidelity by
reason of the sale of the asset is paid only at the termination of the
Account.
(j) In the event Fidelity resigns as investment manager or trustee
of an Account, the Performance Fee shall be calculated at the time of
resignation based upon a deemed distribution of the assets of the
Account at their fair market value (determined using market sources or
independent appraisals as described in paragraph (k) below). The amount
arrived at by this calculation shall be multiplied by a fraction, the
numerator of which shall be the sum of the disposition proceeds of all
assets in the Account received prior to the termination date plus the
fair market value of the assets remaining in the Account on the
termination date and the denominator of which shall be the aggregate
value of the assets in the Account used in determining the amount of
the Performance Fee as of the date of resignation, provided that this
fraction shall never exceed 1.0. The resulting amount shall be the
Performance Fee payable to Fidelity on the scheduled termination date
of the Account.
(k) With respect to the valuation of the assets in an Account for
purposes of determining any Performance Fee based on a deemed
distribution of such assets, Fidelity shall establish the fair market
value for the assets using market sources and valuation methodologies
disclosed to, and approved in writing by, the Independent Fiduciary for
a Single Client Account or the Responsible Independent Fiduciaries for
a Multiple Client Account. In the event market sources are not
available for the valuation of assets in the Account, the fair market
value of such assets shall be determined by an independent qualified
appraiser approved by either the Independent Fiduciary for a Single
Client Account or the Responsible Independent Fiduciaries for a
Multiple Client Account prior to any valuation of the assets. If a new
appraiser for an asset is chosen by Fidelity, the appraiser shall be
approved by such Fiduciaries prior to any valuation of the asset. In
any event, the fair market value of all assets involved in any deemed
distribution shall be based on the current market value of such assets
as of the date of the transactions giving rise to the payment of the
Performance Fee.
(l) Fidelity shall maintain, for a period of six years, the records
necessary to enable the persons described in paragraph (m) of this
Section III to determine whether the conditions of this exemption have
been met, except that: (1) A prohibited transaction will not be
considered to have occurred if, due to circumstances beyond the control
of Fidelity, the records are lost or destroyed prior to the end of the
six year period, and (2) no party in interest, other than Fidelity,
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 (m) below.
(m)(1) Except as provided in paragraph (m)(2) and notwithstanding
any provisions of sections 504(a)(2) and (b) of the Act, the records
referred to in paragraph (l) of this Section III shall be
unconditionally available at their customary location for examination
during normal business by:
(i) Any duly authorized employee or representative of the
Department or the Internal Revenue Service;
(ii) Any fiduciary of a Client Plan or any duly authorized employee
or representative of such fiduciary;
(iii) Any contributing employer to any Client Plan or any duly
authorized employee or representative of such employer; and
(iv) Any participant or beneficiary of any Client Plan, or any duly
authorized employee or representative of such participant or
beneficiary.
[[Page 55866]]
(2) None of the persons described above in paragraph (m)(1) (ii)-
(iv) shall be authorized to examine the trade secrets of Fidelity or
any commercial or financial information which is privileged or
confidential.
Section IV--Definitions
(a) An ``affiliate'' of a person includes:
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with the person;
(2) Any officer, director, employee, relative of, or partner of any
such person; and
(3) Any corporation or partnership of which such person is an
officer, director, partner or employee.
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(c) The term ``Responsible Independent Fiduciaries'' means with
respect to a Multiple Client Account the Independent Fiduciary of
Client Plans invested in the Account and other authorized persons
acting for investors in the Account which are not employee benefit
plans as defined under section 3(3) of the Act (such as governmental
plans, university endowment funds, etc.) that are independent of
Fidelity and that collectively hold at least 50% of the interests in
the Account.
(d) The term ``Threshold Amount'' means with respect to any
Performance Fee an amount which equals all of a Client Plan's capital
invested in an Account plus a pre-specified annual compounded
cumulative rate of return that is at least a minimum rate of return
determined as follows:
(1) A non-fixed rate which is at least equal to the rate of change
in the CPI during the period from the deposit of the Client Plan's
assets in the Account until distributions of the Client Plan's assets
from the Account equal or exceed the Threshold Amount; or
(2) A fixed rate which is at least equal to the average annual rate
of change in the CPI over some period of time specified in the
Agreement, which shall not exceed 10 years.
(e) The term ``Target Amount'' means a value assigned to each asset
in the Account established by Fidelity either (1) at the time the asset
is acquired, by mutual agreement between Fidelity and the Independent
Fiduciary for a Single Client Account or the Responsible Independent
Fiduciaries for a Multiple Client Account, or (2) pursuant to an
objective formula approved by such fiduciaries at the time the Account
is established. However, in no event will such value be less than the
acquisition price of the asset.
(f) The term ``Account'' means any Single Client Account or
Multiple Client Account established with Fidelity, under a written
investment management or trust agreement, that is invested primarily
(i.e. more than 50%) in securities or other assets which are not
publicly-traded equity securities or publicly-traded, investment grade
debt securities, pursuant to written instructions and guidelines
established and approved by an Independent Fiduciary for the Client
Plan prior to any investment by the Client Plan in the Account. For
purposes of an ``Account'' meeting the 50% test for assets which are
not ``publicly-traded equity securities'' or ``publicly-traded,
investment grade debt securities'', any private market securities held
by the Account that become publicly-traded securities shall not be
considered as such for a period of thirty (30) months following the
date such securities become publicly-traded so as to allow Fidelity
sufficient time to dispose of such securities in order for the Account
to remain primarily invested in assets which are not publicly-traded
securities, including for such purposes any publicly-traded debt
securities which are not investment grade.
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 (the Proposal) published on June 15,
1995, at 60 FR 31501.
Written Comments and Modifications
The Department received one comment letter from interested persons
regarding the Proposal. The comment letter was from Russell L. Olson,
Director, Pension Investment, Worldwide, Eastman Kodak Company in
Rochester, New York (the Commenter).
The Commenter made two recommendations regarding the conditions
contained in the Proposal.
First, the Commenter notes that Section III(c)(1) of the Proposal
requires that each Client Plan must have total net assets with a value
in excess of $50 million. The Commenter states that the Proposal's
language would foreclose the use of such a Fidelity performance-fee
based Account to a small pension fund whose named fiduciary is the same
as that which is named fiduciary of a multi-billion dollar pension
fund, but with which the smaller pension fund is not commingled. The
Commenter believes that such an Account may be equally as appropriate
for the small pension fund as for the large, provided that the smaller
pension fund is represented by a sophisticated fiduciary. Thus, the
Commenter recommends that Section III(c)(1) be revised to require only
that each Client Plan be represented by an Independent Fiduciary that
is responsible for the investment of more than $50 million of ``plan
assets'' subject to the provisions of the Act.1
\1\See 29 CFR 2510.3-101 for the Department's regulations
defining ``plan assets'' that are subject to Title I of the Act.
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Second, the Commenter notes that Section III(i) of the Proposal
requires, in pertinent part, that
``* * * If the proposed sale price of an asset is less than the
Target Amount, the proposed sale shall be disclosed to and approved
by the Independent Fiduciary * * * or [if the] Independent
Fiduciary's * * * approval is not obtained, Fidelity shall still
have the authority to sell the asset, if the Agreement provides
Fidelity with complete investment discretion for the Account,
provided that the Performance Fee that would have been payable to
Fidelity by reason of the sale of the asset is paid only at the
termination of the Account.''
The Commenter recommends that this provision be eliminated. In this
regard, the Commenter states that this condition would make it more
cumbersome for Fidelity to sell a less successful investment. The
Commenter represents that, as an investor, it would view any such
impediment as counter to the best interest of plan participants.
By letter dated August 16, 1995, Fidelity responded to the comments
made by the Commenter. Fidelity expressed support for the Commenter's
suggested revisions to the Proposal to the extent the Department would
be willing to adopt such changes. However, Fidelity noted that it would
also be willing to accept an exemption as proposed on these issues to
avoid any material delay in the processing of a final exemption.
With respect to the first recommendation made by the Commenter, and
Fidelity's response thereto, the Department believes that a Client
Plan's interests in connection with the proposed payment of Performance
Fees to Fidelity should be represented by an Independent Fiduciary
which has sufficient knowledge, experience and expertise to enable such
fiduciary to adequately protect the interests of the Client Plan.2
[[Page 55867]]
Thus, the Department believes that the Commenter's recommendations have
merit as long as the Client Plan's interests are protected by a
sophisticated fiduciary that is thoroughly familiar with the
Performance Fee arrangement and monitors such arrangement for the
Client Plan. In this regard, the Department expects that a particular
sophisticated fiduciary which initially acts for a Client Plan as an
Independent Fiduciary for the Plan's approval of a Performance Fee for
Fidelity should continue to serve in that role throughout the duration
of such Plan's participation in the Account.
\2\As noted in Footnote 3 of Paragraph 3 in the Summary of Facts
and Representations in the Proposal, the Department expects a plan
fiduciary, prior to entering into any performance-based compensation
arrangement with an investment manager, to fully understand the
risks and benefits associated with the compensation formula
following disclosure by the investment manager of all relevant
information pertaining to the proposed arrangement. In addition, a
plan fiduciary must be capable of periodically monitoring the
actions taken by the investment manager in the performance of its
duties and must consider, prior to entering into the arrangement,
whether such plan fiduciary is able to provide oversight of the
investment manager during the course of the arrangement.
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Therefore, the Department has determined to modify the language of
Section III(c)(1) as follows:
``* * * Each Client Plan shall have total net assets with a
value in excess of $50 million or, alternatively, be represented by
an Independent Fiduciary that is responsible for the investment of
at least $50 million in ``plan assets'' subject to the provisions of
the Act. [emphasis added]
With respect to the second recommendation made by the Commenter,
and Fidelity's response thereto, the Department does not believe that
elimination of requirements in Section III(i) of the Proposal is
warranted. In general, the Department views the payment of a
Performance Fee as a reward for superior investment performance for
assets acquired by an Account. The ``Target Amount'' concept (as
defined in Section IV(e) of the Proposal) ensures that Fidelity will
only receive a Performance Fee if each particular asset has at least
reached its intended or ``targeted'' value at the time of sale. Thus,
the Department believes that after the Threshold Amount (as defined in
Section IV(d) of the Proposal) has been reached, the sale of any asset
by an Account at a price which is less than the Target Amount
established for such asset should not entitle Fidelity to the receipt
of a Performance Fee at the time of sale unless an Independent
Fiduciary is made aware of, and specifically approves, the sale at that
time. Accordingly, the Department has determined not to adopt the
Commenter's recommendations with respect to the provisions of Section
III(i) of the Proposal.
In addition to the issues raised by the Commenter, the applicant
(i.e. Fidelity) submitted the following comments and/or requests for
modifications regarding the Proposal.
First, Fidelity states that Section III(e)(3) of the Proposal
requires, in pertinent part, that no independent appraisals will be
required for assets acquired for an Account within the twelve (12)
months preceding the end of the period covered by the report, unless
such appraisals are necessary for purposes of determining any
compensation due to Fidelity based on the value of the assets in the
Account for that period. Fidelity notes that this condition seems to
suggest that independent appraisals will be required for assets after
the twelve (12) month period mentioned therein, even where Fidelity's
fees are not based on the value of the assets in the Account. In this
regard, Fidelity states that in certain instances it's Base Fee for an
Account may be based on the amount of capital invested in the Account,
rather than on the value of the assets in the Account [see Footnote 7
in Paragraph 5 of the Summary of Facts and Representations (the
Summary) in the Proposal]. Thus, Fidelity requests that the words ``* *
* for assets acquired for the Account within the twelve (12) months
preceding the end of the period covered by the report * * *'' in
Section III(e)(3) of the Proposal be deleted in order to clarify that
no appraisals will be required for assets held in an Account at any
time unless compensation payable to Fidelity is based on the ``value''
of the assets in the Account.
The Department concurs with Fidelity's requested clarification and
has so modified the language of the Proposal.
Second, with respect to the condition set forth in Section III(j)
dealing with the calculation and payment of any Performance Fee in the
event Fidelity resigns as investment manager or trustee of an Account,
Fidelity states that there is a fraction which is used to reduce the
amount of the Performance Fee calculated at the time of resignation to
reflect the ultimate value realized by the Account for the assets held
in the Account at the time of resignation. The numerator of this
fraction equals the sum of the disposition proceeds of all assets in
the Account received prior to the termination date of the Account plus
the fair market value of the assets remaining in the Account on the
termination date. In this regard, Fidelity wishes to clarify for the
record that the disposition proceeds which would be included in the
numerator of this fraction are disposition proceeds which are received
on and after the date of resignation and which arise from the
disposition of assets which were included in the Account on the
resignation date. However, Fidelity does not believe that any change is
required to the language of Section III(j) of the Proposal.
The Department notes the applicant's clarification.
Third, Fidelity states that the first sentence in Footnote 6 in
Paragraph 4 of the Summary requires a minor clarification. Footnote 6
states that an Account will not invest in or use any swap transactions
(including caps, floors, collars, or options relating thereto), forward
contracts, exchanged-traded futures transactions, or options (other
than covered call options). Fidelity's comment letter reaffirms its
previous representation regarding the exclusion of swap transactions,
forward contracts, and exchanged-traded futures transactions. However,
Fidelity states that the exclusion with respect to the use of all
``options'' (which do not relate to swap transactions), as stated in
Footnote 6, is too broad. In this regard, Fidelity represents that an
Account may need to either: (i) Purchase an option to permit the
Account to acquire an asset from, or sell an asset to, a third party at
a later date, or (ii) sell an option which permits a third party to
acquire an asset owned by the Account at a later date (i.e. so-called
``covered'' call options). In addition, Fidelity represents that an
Account may need to enter into certain contracts which require the
Account to acquire or sell, and a third party to sell or acquire, an
asset owned or to be acquired by the Account at a later date.
Specifically, Fidelity states that an Account may use such options, or
enter into such contracts, to acquire or sell the following: (i) Real
estate; (ii) mortgages; (iii) interests in real estate; (iv)
partnership interests; (v) joint venture interests; (vi) securities
which are not publicly-traded at the time of purchase; or (vii) loans
or other debt instruments (whether or not considered ``securities'')
which are not rated as investment grade. Fidelity states further that
an Account will not use any ``exchange-traded'' options or options
which relate to either publicly-traded equity securities or publicly-
traded investment grade debt securities. Finally, Fidelity states that
in no event will an Account engage in the sale of any ``naked''
options.
The Department notes the applicant's clarification.
No other comments on the Proposal, and no requests for a hearing,
were received by the Department during the comment period.
[[Page 55868]]
Accordingly, the Department has determined to grant the proposed
exemption as modified herein.
FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)
Michael Elkin Individual Retirement Account (the IRA) Located in New
York, New York
[Prohibited Transaction Exemption 95-101; Application No. D-10022]
Exemption
The sanctions resulting from the application of section 4975 of the
Code, by reason of section 4975(c)(1) (A) through (E) of the Code,
shall not apply to the proposed purchase for cash of a certain limited
partnership interest in the Medallion Fund (the Interest) by the IRA
from Michael Elkin, a disqualified person with respect to the
IRA,3 provided the following conditions are met:
3 Pursuant to 29 CFR 2510.3-2(d), there is no jurisdiction
with respect to the IRA under Title I of the Act. However, there is
jurisdiction under Title II of the Act pursuant to section 4975 of
the Code.
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(a) The purchase is a one-time transaction for cash;
(b) The terms and conditions of the purchase are at least as
favorable to the IRA as those obtainable in an arm's-length transaction
with an unrelated party;
(c) The IRA pays no more than the fair market value of the
Interest, as established by an independent qualified appraiser at the
time of the transaction;
(d) The IRA is not required to pay any commissions, costs or other
expenses in connection with the transaction; and
(e) The fair market value of the Interest is based on an
independent valuation of the total net asset value of the Fund and does
not represent more than 25% of the total assets of the IRA at the time
of the transaction.
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 Notice published on September 21,
1995, 60 FR 49022.
FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)
The Age-Based Profit Sharing Plan and Trust of Carolina OB-GYN Care,
P.A. (the Plan) Located in Spartanburg, South Carolina
[Prohibited Transaction Exemption 95-102; [Application No. D-10061]
Exemption
The restrictions of section 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 proposed sale by the individual account (the
Account) in the Plan of James C. Montgomery, M.D., of a parcel of real
property (the Property) to Dr. Montgomery, a party in interest with
respect to the Plan, and the assumption by Dr. Montgomery of the
Account's current indebtedness with respect to the Property, provided
that the following conditions are satisfied: (a) The purchase price is
the greater of $120,000 or the fair market value of the Property as of
the date of the sale; (b) the fair market value of the Property is
determined by a qualified, independent appraiser as of the date of the
sale; and (c) the Account pays 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 September 25, 1995 at 60
FR 49425.
FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng 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 are true and complete and accurately describe all material
terms of the transaction which is the subject of the exemption. In the
case of continuing exemption transactions, if any of the material facts
or representations described in the application change after the
exemption is granted, the exemption will cease to apply as of the date
of such change. In the event of any such change, application for a new
exemption may be made to the Department.
Signed at Washington, D.C., this 31st day of October, 1995.
Ivan Strasfeld,
Director of Exemption Determinations Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 95-27296 Filed 11-2-95; 8:45 am]
BILLING CODE 4510-29-P
