[Federal Register Volume 63, Number 241 (Wednesday, December 16, 1998)]
[Notices]
[Pages 69325-69327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33262]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-57; Exemption Application No. L-
10595, et al.]
Grant of Individual Exemptions; Service Employees International
Union Local 252 Welfare Fund
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.
Service Employees International Union Local 252 Welfare Fund (the Fund)
Located in Wynnewood, Pennsylvania
[Prohibited Exemption Application Number 98-57;
Exemption Application Number L-10595]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act shall not apply to the sale (the Sale) of certain improved real
property located in Wynnewood, Pennsylvania (the Property) to the
Service Employees International Union Local 252 (Local 252), a party in
interest with respect to the Fund, provided the parties adhere to the
following conditions:
(a) The Sale is a one-time transaction for cash;
(b) The terms and conditions of the Sale are at least as favorable
to the Fund as those obtainable in an arm's length transaction with an
unrelated party;
(c) The Sales price is an amount which represents the greater of:
(1) the total cost to the Fund of acquiring the Property; or (2) the
fair market value of the Property on the date of Sale as determined by
a qualified, independent appraiser; and
(d) The Fund does not incur any expenses with respect 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 in the Federal Register on
Friday, June 19, 1998, at 63 FR 33726.
Written Comments and Hearing Requests: The Department received one
written comment with respect to the proposed exemption. The comment
letter was submitted on behalf of the Brandywine Nursing and
Rehabilitation Center, Inc. (Brandywine), a party to a series of
collective bargaining agreements with the Service Employees
International Union Local 252 (Local 252). In the letter, Brandywine
raised several concerns regarding the proposed exemption.
First, Brandywine represented that the notice of proposed exemption
was not provided in a timely manner. Although this representation was
disputed by the applicant, the Department decided to provide Brandywine
with 30 days additional time to supplement its comments so as to avoid
any potential prejudice.
[[Page 69326]]
Second, Brandywine expressed its concern that the applicant failed
to provide current financial information for the Fund. Brandywine
pointed out that this lack of current accounting raises concerns in
light of certain developments in the amount of assets in the Funds.
Specifically, Brandywine represented that it reviewed the Fund's Form
5500 for fiscal years 1995 and 1996 and believes that the Property may
not have been properly accounted for by the Fund.
The applicant responded by stating that it provided the most
current information available when it submitted the two most recently
filed Form 5500s. In addition, the applicant has since supplemented the
file by providing a copy of the financial information used to complete
the Form 5500 for 1998 fiscal year. The applicant represented that the
value of the Property and any transaction related to the Property was
properly accounted for in the Fund's financial statements and the
report of the Independent Certified Public Accountant.
Third, the Commentator believed that the application failed to
accurately reflect the true cost of the building. The commentator noted
that the Fund represented purchasing the building for $725,000, but
that the financial statements used to prepare the ``Report of the
Independent Certified Public Accountant'' for the fiscal year 1997 Form
5500 indicate that the building cost approximately $740,000. In
addition, the commentator points to the same documents which indicate
that the Fund spent approximately $70,000 on improvements to the
Property.
In response, the applicant stated that the difference between the
$725,000 and the $740,000 amounts represent settlement costs of
approximately $15,000. Accordingly, the applicant agrees that these
costs should be included in the ``total cost of acquiring the
Property'' pursuant to paragraph (c)(1) of the conditions herein. With
respect to the approximately $70,000 spent by the Fund on improvements
to the Property, the applicant represents that the appraiser took these
improvements into consideration when valuing the Property at $725,000.
Fourth, the commentator questioned the validity of the appraisal.
Specifically, Brandywine questioned why the appraiser failed to discuss
the reason for the Property's 24% decline in value between July 1994
and the present. Brandywine also believed that the appraisal failed to
account for (1) the active real estate market in the vicinity of the
Property and (2) the improving quality of the commercial district where
the Property is located.
The applicant responded that the Property was appraised by a
qualified, independent real estate appraiser with approximately 25
years of experience. The applicant pointed out that the appraiser, Mr.
Paul J. Leis, is an MAI and CRE Member and is currently certified by
the states of Pennsylvania, New Jersey, Delaware, and Maryland. With
regard to the appraisal, the applicant represented that it is
comprehensive and that it consisted of the following: (1) An inspection
of the subject property, (2) comparable sales inspections, (3)
consideration of relevant economic and demographic data, (4)
consideration of relevant zoning and other restrictions, (5) highest
and best use analysis, (6) application of the appropriate valuation
methods, (7) reconciliation of value estimates and (8) a value
conclusion for the subject property. Based on the foregoing, the
applicant believes that the appraisal accurately reflects the fair
market value of the Property.
Fifth, the commentator argued that the supplemental information
provided by the applicant contains serious omissions regarding the
current state of Local 252 and its relationship with employers who have
historically contributed to the Fund. Specifically, the commentator
pointed to an unfair labor practice charge Brandywine filed against
Local 252 on May 5, 1998 with the Region Four Office of the National
Labor Relations Board (NLRB) located in Philadelphia, Pennsylvania.
Furthermore, Brandywine alleged that the Regional Director of the
Region Four office was in the process of filing a complaint against
Local 252.
In response, the applicant stated that it has not received any
complaint from the NLRB and that, even assuming one is issued, such
complaint, as alleged by Brandywine, has no bearing on this request or
to the subject matter of the application.
In summary, the Department has considered the entire record,
including the comment submitted and the applicant's response to the
comment, and has decided to grant the exemption as proposed in the
Federal Register.
FOR FURTHER INFORMATION CONTACT: Mr. James Scott Frazier, telephone
(202) 219-8881. (This is not a toll-free number).
Mohammad J. Iqbal Employee Profit Sharing Plan and Trust (the Plan)
Located in Elizabethtown, KY
[Prohibited Transaction Exemption 98-58;
Exemption Application Number D-10614]
Exemption
The restrictions of 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 cash sale (the Sale) of 12 Krugerrand gold coins (the
Coins) by the individually directed account (the Account) in the Plan
of Dr. Mohammad J. Iqbal (Dr. Iqbal), to Dr. Iqbal, a party in interest
and disqualified person with respect to the Plan, provided that the
following conditions are met:
(a) The Sale is a one-time transaction for cash;
(b) The terms and conditions of the Sale are as least as favorable
to the Account as those obtainable in an arm's length transaction with
an unrelated party;
(c) The Account receives the fair market value of the Coins as of
the date of Sale; and
(d) The Account is not required to pay any commissions, costs, or
other expenses in connection with 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 November 9, 1998 at 63 FR
60389.
FOR FURTHER INFORMATION CONTACT: Mr. James Scott Frazier, telephone
(202) 219-8881. (This is not a toll-free number).
Individual Retirement Accounts (Collectively, the IRAs) for William N.
Albright, Victor Hamre, and Richard Pearson (Collectively, the
Participants)
Located in Westerville, Ohio; Chicago, Illinois; and New York, New
York, respectively
[Prohibited Transaction Exemption 98-59;
Exemption Application No. D-10656, 10657, 10658]
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 cash sales (the Sales) of certain shares of
stock (the Stock) in the First Community Bancshares Corp. by each IRA
to its respective Participant, a disqualified person with respect to
the IRA,\1\ provided that the following conditions are met:
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\1\ There is no jurisdiction under 29 CFR Sec. 2510.3(b) since
the IRAs have only one participant. However, there is jurisdiction
under Title II of the Act pursuant to section 4975 of the Code.
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(a) The terms and conditions of the Sales will be at least as
favorable to each
[[Page 69327]]
IRA as those obtainable in arm's length transactions with an unrelated
party;
(b) The Sales will be one-time transactions for cash;
(c) The IRAs will receive the fair market value of the Stock as
established by a qualified, independent appraiser; and
(d) The IRAs will pay no commissions, costs or other expenses with
respect to the Sales.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption please
refer to the notice of proposed exemption published on November 9, 1998
at 63 FR 60389.
FOR FURTHER INFORMATION CONTACT: Mr. Christopher J. Motta of the
Department, telephone (202) 219-8891 (This is not a toll-free number).
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemptions does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, D.C., this 11th day of December, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 98-33262 Filed 12-15-98; 8:45 am]
BILLING CODE 4510-29-P
