[Federal Register Volume 60, Number 70 (Wednesday, April 12, 1995)]
[Notices]
[Pages 18619-18621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8915]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-31; Exemption Application No. D-
09469, et al.]
Grant of Individual Exemptions; Financial Institutions Retirement
Fund., 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.
Financial Institutions Retirement Fund (the Fund) and Financial
Institutions Thrift Plan (the Thrift Plan) Located in White Plains, New
York
[Prohibited Transaction Exemption 95-31; Exemption Application No. D-
09469]
Exemption
Section I. Covered Transactions
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 provision of certain services, and the receipt
of compensation for such services, by Pentegra Services, Inc.
(Pentegra), a wholly-owned, for-profit subsidiary corporation of the
Fund, to employee benefit plans (the Plans) and to their sponsoring
employers (the Employers) that participate in the Fund and the Thrift
Plan; provided that the following conditions are met:
(a) A qualified, independent fiduciary of the Fund determines that
the services provided by Pentegra are in the best interests of the Fund
and are protective of the rights of the participants and beneficiaries
of the Fund;
(b) At the time the transactions are entered into, the terms of the
transactions are not less favorable to Pentegra than the terms
generally available in comparable arm's-length transactions between
unrelated parties;
(c) Pentegra receives reasonable compensation for the provision of
its services, as determined by the independent fiduciary;
(d) Prior to the offering of services, the independent fiduciary
will initially review the services to be provided by Pentegra and will
determine that such services are reasonable and appropriate for
Pentegra, taking into account such factors as: whether Pentegra has the
capability to perform such services, whether the fees to be charged
reflect arm's length terms, whether Pentegra personnel have the
qualifications to provide such services, and whether such arrangements
are reasonable based upon a comparison with similarly qualified firms
in the same or similar locales in which Pentegra proposes to operate;
(e) No services will be provided by Pentegra without the prior
review and approval of the independent fiduciary;
(f) Not less frequently than quarterly, the independent fiduciary
will perform periodic reviews to ensure that the services offered by
Pentegra remain appropriate for Pentegra and that the fees charged by
Pentegra represent reasonable compensation for such services;
(g) Not less frequently than annually, Pentegra will provide a
written report to the board of directors of the Fund describing in
detail the services it provided to employee benefit plans and/or their
sponsoring employers that participated in the Fund and the Thrift Plan,
a detailed accounting of the fees received for such services, and an
estimate of the fees Pentegra anticipates it will receive during the
following year from such plans and their sponsoring employers;
(h) Not less frequently than annually, the independent fiduciary
will conduct a detailed review of approximately 10 percent of all
completed transactions, which will include a reasonable cross-section
of all services performed; such transactions will be reviewed for
compliance with the terms and conditions of this exemption;
(i) Pentegra's financial statements will be audited each year by an
independent certified public accountant, and such audited statements
will be reviewed by the independent fiduciary;
(j) The independent fiduciary shall have the authority to prohibit
Pentegra from performing services that such fiduciary deems
inappropriate and not in the best interests of Pentegra and the Fund;
and
(k) Each Pentegra contract with a Fund or Thrift Plan employer, or
a plan of such employer, will be subject to termination without penalty
by Pentegra for any reason upon not more than 90 days written notice to
such employer or plan. [[Page 18620]]
Section II. Recordkeeping
(1) The independent fiduciary and the Fund will maintain, or cause
to be maintained, for a period of 6 years, the records necessary to
enable the persons described in paragraph (2) of this Section II to
determine whether the conditions of this exemption have been met,
except that (a) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of the independent
fiduciary and the Fund or their agents, the records are lost or
destroyed before the end of the six year period, and (b) no party in
interest other than the independent fiduciary and the Board of
Directors of the Fund 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 (2) below.
(2)(a) Except as provided in section (b) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to in paragraph (1) of this
Section II shall be unconditionally available at their customary
location during normal business hours by:
(1) Any duly authorized employee or representative of the
Department or the Internal Revenue Service;
(2) Any employer participating in the Fund or any duly authorized
employee or representative of such employer; and
(3) Any participant or beneficiary of the Fund or any duly
authorized representative of such participant or beneficiary.
(b) None of the persons described above in subparagraphs (a)(2) and
(a)(3) of this paragraph (2) shall be authorized to examine trade
secrets of the independent fiduciary, the Fund, or their affiliates, or
commercial or financial information which is privileged or
confidential.
(3) For purposes of this Section II, references to the Fund shall
also include Pentegra.
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 January 30, 1995, at 60
FR 5700.
Written Comments: With respect to the Notice of Proposed Exemption,
the Department did not receive any requests for a hearing but did
receive 8 telephone inquiries and 10 written comments. With regard to
the telephone inquiries, a representative of the Department spoke to
the callers and provided the information sought by the callers. Most of
the commentators did not raise specific objections with regard to the
proposed transactions, but sought further information from the
Department. A representative of the Department contacted such
commentators and responded to their requests for additional
information.
Several of the commentators raised the following issues:
(a) That as the Fund broadens its reach to employers other than
banks and thrifts, the safety and soundness of a financially secure
retirement fund should not be impaired;
(b) An objection to the additional expenses to be incurred by the
Fund in connection with Pentagra; and
(c) Using the Fund as a foundation for launching a for-profit
venture that may or may not be successful.
The applicant responded by stating that in its effort to maintain
favorable economies of scale in its performance, it seeks, by means of
the exemption to increase the number of employers and employee benefit
plans using the services of the Fund, and thereby, ensure the sound
financial condition of the Fund and its ability to meet its benefit
obligations to participants. In addition, the applicant states that the
operation of Pentegra will be under the aegis of the qualified,
independent fiduciary who is required to provide its prior review and
approval of any new service offered by Pentegra to employee benefit
plans sponsored by employers that participate in the Fund or the Thrift
Plan, or to such employers themselves. In addition to its initial
review of the services performed by Pentegra, the independent fiduciary
will be required to perform periodic and annual reviews of such
services to ensure that the services offered by Pentegra remain
appropriate for Pentegra to provide. Also, the independent fiduciary
will have the authority to prohibit Pentegra from undertaking and
performing services that the independent fiduciary deems inappropriate
and not in the best interests of Pentegra and the Fund.
The applicant has requested that the exemption be effective as of
January 30, 1995, the date the Notice of Pendency was published in the
Federal Register. The Department has agreed to the applicant's request.
Accordingly, after consideration the entire record, including the
telephone inquiries and written comments submitted, and the applicant's
response, the Department has determined to grant the exemption as it
was proposed.
EFFECTIVE DATE: This exemption is effective on January 30, 1995.
FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Profit Sharing Plan for Employees of Annis, Mitchell, Cockey, Edwards &
Roehn, P.A. (the Plan) Located in Tampa, Florida
[Prohibited Transaction Exemption 95-32; Exemption Application No. D-
09906]
Exemption
The restrictions of sections 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 sale by the Plan to Annis, Mitchell, Cockey,
Edwards & Roehn, P.A. (the Employer), of the Plan's interest (the
Interest) in a limited partnership (the Partnership), for $40,000 in
cash, provided the following conditions are satisfied: (a) The sale is
a one-time transaction for cash; (b) no commissions or other expenses
are paid by the Plan in connection with the sale; and (c) the Plan
receives not less than the fair market value of the Interest as of the
date of the sale as determined by a qualified, independent expert.
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 February 10, 1995 at 60
FR 8092.
Written Comments: The Department received one written comment with
respect to the proposed exemption, which was submitted by the applicant
to correct an erroneous representation. The applicant had represented
that no shareholder or employee of the Employer individually purchased
an interest in the Partnership (see rep. 2 of the notice of proposed
exemption). Subsequent to the publication of the proposed exemption,
the applicant learned that one shareholder (the SH) of the Employer
owns a one-quarter unit interest in the Partnership. The SH acquired
his interest at the same time that the Plan acquired its interest, on
June 30, 1988. At that time, the SH was not a shareholder of the
Employer, but he became one in March of the following year. The
applicant represents that the SH was not a trustee of the Plan, nor was
he otherwise involved in making investment decisions on behalf of the
Plan in 1988, when the Plan acquired its Interest. The applicant
further represents that the SH has not participated in any deliberation
or decision on behalf of the Plan as to [[Page 18621]] whether to
retain or sell the Plan's Interest.
The Department has considered the entire record, including the
written comment submitted by the applicant, and has determined to grant
the exemption as it was proposed.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz 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 accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, D.C., this 6th day of April, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 95-8915 Filed 4-11-95; 8:45 am]
BILLING CODE 4510-29-P
