[Federal Register Volume 59, Number 60 (Tuesday, March 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7270]
[[Page Unknown]]
[Federal Register: March 29, 1994]
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DEPARTMENT OF LABOR
[Application No. D-9623]
Proposed Exemption; Hensel Phelps Construction Co. Profit Sharing
Plan
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.
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, NW., Washington, DC
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, NW., Washington, DC 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.
Hensel Phelps Construction Co. Profit Sharing Plan (the Plan) Located
in Greeley, Colorado
[Application No. D-9623]
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 the proposed cash sale (the Sale) of certain
real property (the Property) by the Plan to Hensel Phelps Construction
Co. (the Employer), a party in interest with respect to the Plan;
provided that (1) the Sale is a one-time transaction for cash; (2) the
Plan does not suffer any loss nor incur any expenses in the proposed
transaction; (3) the Plan receives as consideration the greater of
either the fair market value of the property as determined by an
independent appraiser on the date of the Sale, or receives all the
funds expended by the Plan in acquiring and maintaining the Property;
and (4) the trustee of the Plan has determined that the proposed Sale
is appropriate for the Plan and is in the best interests of the Plan
and its participants and beneficiaries.
Summary of Facts and Representations
1. The Plan is a defined contribution plan with total assets of
$19,877,932 and approximately 394 participants and beneficiaries, as of
November 30, 1993. The fiduciaries of the Plan consist of the Employer
and Bank One, Greeley, N.A., located in Greeley, Colorado (the
Trustee).
The Employer implements its responsibilities as fiduciary through
the appointment of the Administrative Committee, which currently
consists of the Employer's President and Chief Executive Officer, the
Vice President-Finance, and the Vice President-General Counsel. The
Administrative Committee responsibilities, inter alia, are to appoint
and monitor activities of the Trustee and arrange for the payment of
benefits by the Plan. The Trustee has complete discretionary authority
and responsibility for investing and reinvesting the assets of the
Plan.
The Employer is a Delaware corporation that is headquartered in
Greeley, Colorado with district offices in Santa Clara and Irvine,
California; Austin, Texas; and Little Rock, Arkansas. It is a 56-year-
old employee-owned company that specializes in commercial and
industrial construction and has approximately 1,600 employees. During
the fiscal year which ended May 31, 1993, the Employer generated
revenues of $645,597,000.
2. The Property is a condominium designated as Unit 34 in Writer
Square Condominiums located at 1512 Larimer Street, Denver, Colorado.
The Property was appraised at the request of the Trustee by an
independent appraiser, Gary L. Berz, SRA, of Berz Appraisal Group,
Ltd., located in Lakewood, Colorado, who determined the fair market
value to be $260,000, as of June 24, 1993. The Property is described by
Mr. Berz to consist of 2,624 square feet with 6 rooms, which include 3
bedrooms and 2.5 bathrooms. Parking facilities are provided underground
for two vehicles. Outer construction is brick. The location of Writer
Square Condominiums is described by Mr. Berz to be on busy downtown
streets with zoning classification for business-residential units.
The Employer served Writer Square, Inc., Englewood, Colorado, as
construction manager for the construction of Writer Square
Condominiums, which included the Property. Final payment by Writer
Square, Inc. to the Employer for its services as construction manager
was made to the Employer on October 23, 1981.
3. On March 18, 1983, at the direction of IntraWest Bank of
Greeley, Greeley, Colorado, as trustee of the Plan at that time with
discretionary authority, the Plan issued a loan for $275,000 to Rudy
and Betty J. Marich to enable them to purchase the Property from Writer
Square, Inc.1 The loan was secured by a first deed of trust,
paying 12.5 percent per year on the outstanding balance. The monthly
payments on the loan were $2,998.48, with the entire outstanding
balance due on June 1, 1990. When the Marichs defaulted on the final
payment on June 1, 1990, the successor trustee of the Plan agreed to
refinancing the loan with the same terms and conditions, except the
final payment on the outstanding balance would be due May 15, 1992.
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\1\The Department notes that the decisions to issue and reissue
a loan to the Marichs are governed by fiduciary responsibility
requirements of Part 4, Subtitle B, Title I of the Act. In this
regard the Department herein is not proposing relief for any
violations of Part 4 of the Act which may have arisen as a result of
the issuance and reissuance of the loan by the Plan.
The applicant represents that the Marichs are not parties in
interest with respect to the Plan.
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Again the Marichs defaulted on the loan and the Plan commenced
foreclosure proceedings to acquire title to the Property. At the
foreclosure sale on December 28, 1993, the Plan bid an amount to cover
the current balance due on the revised loan, including interest,
attorney's fees and foreclosure costs, in order to obtain clear title
to the Property upon the expiration of the 75 day redemption period on
March 13, 1994.
4. Upon obtaining clear title to the Property the Plan proposes to
sell the Property to the Employer for the greater of either the fair
market value of the Property on the date of the Sale as determined by a
qualified, independent appraiser, or for the total amount of the funds
the Plan expended in acquiring and maintaining the Property. The
applicant represents that the Plan will not suffer any loss nor incur
any expenses from the proposed transaction. The applicant further
represents that by the Employer acquiring the Property, the Plan will
avoid the impact of any future negative yields and fluctuations in the
rental and market values of the Property and costs associated with
leasing or selling the Property. Also, the applicant represents that
the Sale will provide the Plan with liquid assets that can be placed in
more diversified investments.
The Trustee of the Plan represents that, as of February 22, 1994,
the adjusted cost to the Plan for acquiring and maintaining the
Property is $338,622.73; and the Trustee represents that this figure
will be updated on the date of the Sale of the Property. The Trustee
further represents that an appraisal by Mr. Berz was made of the
Property on February 21, 1994, that determined the fair market value of
the Property to be $325,000. In addition, the Trustee represents that a
residential rental in Denver, Colorado is an asset that is an atypical
investment for a profit sharing plan.
5. In summary, the applicant represents that the proposed
transaction will satisfy the statutory criteria for an exemption under
section 408(a) of the Act because (a) the proposed Sale will be a one-
time transaction for cash; (b) the Plan will receive as consideration
for the Sale the greater of either the fair market value of the
Property as determined by an independent appraiser on the date of the
Sale, or will receive all of the funds expended by the Plan in
acquiring and maintaining the Property; (c) the Plan will not suffer
any losses nor incur any expenses in effecting the proposed
transaction; (d) the proposed transaction will enable the Plan to
diversify its assets to more liquid investments and avoid economic
risks associated with ownership of the Property; and (e) the Trustee
has determined that the proposed Sale is appropriate for the Plan and
is in the best interests of the Plan and its participants and
beneficiaries.
For Further Information Contact: Mr. C. E. Beaver of the
Department, telephone (202) 219-8881. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest 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 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, DC, this 23rd day of March, 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 94-7270 Filed 3-28-94; 8:45 am]
BILLING CODE 4510-29-P
