E7-8183. Grant of Individual Exemptions Involving; Kern County Electrical Pension Trust (the Pension Plan), Kern County Electrical Joint Apprenticeship and Training Trust (the Apprenticeship Plan), Kern County Electrical Health and Welfare Plan (the ...

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).

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.

Kern County Electrical Pension Trust (the Pension Plan); Kern County Electrical Joint Apprenticeship and Training Trust (the Apprenticeship Plan); Kern County Electrical Health and Welfare Plan (the Welfare Plan) ¹ and The International Brotherhood of Electrical Workers Local Union 428 (the Local Union) Located in Bakersfield, California

Exemption

Section I: Transactions

(a) The restrictions of sections 406(a)(1)(A) through (D), 406(b)(1), and 406(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) ^[2] shall not apply to the sale by the Pension Plan of a parcel of unimproved real property (Parcel #1) to the Local Union, a party in interest with respect to the Pension Plan; provided that the conditions in section II(a),(d),(f),(h),and (i), as set forth below, are satisfied;

(b) The restrictions of sections 406(a)(1)(A) through (D), 406(b)(1), and 406(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) shall not apply to the sale to the Apprenticeship Plan by the Pension Plan of a parcel of unimproved real property (Parcel #2) which is adjacent to Parcel #1; provided that the conditions in section II(b),(c),(e),(g),(h),(i), and (j), as set forth below, are satisfied; and

(c) The restrictions of sections 406(a)(1)(A) through (D), 406(b)(1), and 406(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 Act shall not apply to the lease (the Lease) by the Apprenticeship Plan of office space (the Premises) in a training facility (the Training Center) to be constructed by the Apprenticeship Plan on (Parcel #2) to Construction Benefits Administration, Inc. (CBA), a party in interest with respect to the Plans, as service provider, whose directors are also trustees of the Plans and officers of the Local Union; provided that the conditions in section II(i),(k), (l),(m),(n), and (o), as set forth below, are satisfied.

Section II: Conditions

The relief, herein, is conditioned upon the adherence to the material facts and representations set forth in the application files and upon compliance with the conditions, as set forth in this exemption.

(a) The sale by the Pension Plan of Parcel #1 to the Local Union is a one-time transaction for cash;

(b) The sale by the Pension Plan of Parcel #2 to the Apprenticeship Plan is a one-time transaction for cash;

(c) An independent, qualified fiduciary (the I/F), acting on behalf of the Apprenticeship Plan:

(1) After negotiating, reviewing, and analyzing the terms of the purchase of Parcel #2, approves such purchase by the Apprenticeship Plan;

(2) After negotiating, reviewing, and analyzing the construction of the Training Center on Parcel #2, approves the construction of the Training Center by the Apprenticeship Plan;

(3) Determines that the acquisition of Parcel #2 and the construction of the Training Center by the Apprenticeship Plan would be feasible, in the interest of, and protective of the Apprenticeship Plan and its participants and beneficiaries; and

(4) Is responsible for monitoring compliance with the terms and condition of this exemption and the terms and conditions of the acquisition of Parcel #2 and the construction of the Training Center by the Apprenticeship Plan;

(d) The purchase price paid by the Local Union for Parcel #1 is equal to the fair market value of such parcel, as determined by an independent, qualified appraiser, as of the date of the sale;

(e) The purchase price paid by the Apprenticeship Plan for Parcel #2 is equal to the fair market value of such parcel, as determined by an independent, qualified appraiser, as of the date of the sale;

(f) The terms of the sale by the Pension Plan of Parcel #1 to the Local Union are no less favorable to the Pension Plan than terms negotiated under similar circumstances at arm's length with unrelated third parties;

(g) The terms of the sale by the Pension Plan of Parcel #2 to the Apprenticeship Plan are no less favorable to the Pension Plan and no less favorable to the Apprenticeship Plan than terms negotiated under similar circumstances at arm's length with unrelated third parties;

(h) The Plans will not provide any construction financing or permanent financing to the Local Union in connection with the acquisition by the Local Union of Parcel #1 and the construction of a building on Parcel #1 (the Union Building) by the Local Union, nor will the Pension Plan, the Welfare Plan, or the Local Union provide any construction financing or permanent financing to the Apprenticeship Plan in connection with the acquisition by the Apprenticeship Plan of Parcel #2 and the construction of the Training Center on Parcel #2 by the Apprenticeship Plan;

(i) The Plans will not pay any commissions, fees, or other similar payments to any party in connection with any of the subject transactions;

(j) The terms of any loan from an unrelated third party obtained by the Apprenticeship Plan for the purpose of acquiring Parcel #2 or constructing the Training Center provides recourse to such unrelated third party lender only against the Apprenticeship Plan's interest in Parcel #2 and not against the general assets of the Apprenticeship Plan;

(k) Prior to entering into the Lease, the I/F, acting on behalf of the Apprenticeship Plan, determines that the leasing transaction is feasible, in the interest of, and protective of the Apprenticeship Plan and its participants and beneficiaries; and approves the leasing transaction in accordance with the fiduciary provisions of the Act;

(l) Throughout the duration of the Lease, the I/F, acting on behalf of the Apprenticeship Plan, monitors compliance with the terms and conditions of the Lease, ensures that such terms and conditions are at all times satisfied, and is responsible for legally enforcing the payment of the rent and the proper performance by CBA under the terms of the Lease and for taking any and all steps necessary to ensure that the Apprenticeship Plan is protected, including but not limited to reviewing, negotiating, and approving the initial Lease and any amendment, renewal, or extension of such Lease;

(m) Under the provisions of the Lease, the leasing transaction is at all times on terms that are at least as favorable to the Apprenticeship Plan and to CBA, as terms that would have been negotiated under similar circumstances at arm's length with unrelated third parties;

(n) The rental rate under the terms of the initial Lease and under the terms of any amendment, renewal, or extension of the Lease, is adjusted at least every three (3) years in which such Lease is in effect, and the rental rate reflects the fair market rental value of the Premises, as determined by an independent, qualified appraiser; and

(o) Notwithstanding anything to the contrary in the Lease, the Apprenticeship Plan may at any time upon ninety (90) days prior written notice given to CBA, terminate the Lease and CBA's occupancy of the Premises, effective as of the date specified in such written notice, which date shall be at least ninety (90) days after the date such written notice is given to CBA.

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 19, 2007, at 72 Federal Register 6760.

FOR FURTHER INFORMATION CONTACT:

Angelena C. Le Blanc of the Department, telephone [phone] (This is not a toll-free number).

OPET Health Care and Life Insurance Plans RM3A and RM5A (together, the H&L Plans); and OPET Prescription Drug Plan RRX (Plan RRX; All Three Together, the Plans) Located in Portland, Oregon

Exemption

The restrictions of section 406(a) of the Act shall not apply to the purchase by the Plans' participants and beneficiaries of prescription drugs from the Labor Center Pharmacy (LCP), a party in interest with respect to the Plans, provided the following conditions are satisfied:

(a) The terms of the transactions are at least as favorable to the Plans as those the Plans could obtain in similar transactions with an unrelated party;

(b) Any decisions by the Plans to enter into agreements governing the subject purchases have been and will be made by Plan fiduciaries independent of LCP;

(c) At least 50% of the preferred providers participating in the Preferred Provider Network (PPN) involving LCP are unrelated to LCP or any other party in interest with respect to the Plans;

(d) LCP will be treated no differently than any other pharmacy participating in the PPN (e.g., subject to the same reimbursement rates and oversight as the other participating pharmacies); and

(e) The transactions are not part of an agreement, arrangement or understanding designed to benefit LCP or any other party in interest with respect to the Plans.

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 13, 2007 at 72 FR 6766.

DATES:

Effective Date: This exemption is effective as of January 1, 2001.

FOR FURTHER INFORMATION CONTACT:

Gary H. Lefkowitz 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 25th day of April, 2007.

Ivan Strasfeld,

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

Footnotes

1.  The Apprenticeship Plan, the Pension Plan, and the Welfare Plan are, herein, collectively referred to as the Plans.

2.  For purposes of this exemption, references to specific provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.