[Federal Register Volume 61, Number 92 (Friday, May 10, 1996)]
[Notices]
[Pages 21500-21504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11744]
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[[Page 21501]]
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 96-34; Exemption Application No. D-
09880, et al.]
Grant of Individual Exemptions; General Electric
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.
General Electric Pension Trust (the Trust), Located in Fairfield,
Connecticut
[Prohibited Transaction Exemption 96-34; Application No. D-09880]
Exemption
The restrictions of sections 406(a), 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 Code,
shall not apply effective August 3, 1994, to the past and continued
lease (the Lease) by the Trust of office space in a commercial office
building located at 201 Mission Street in San Francisco, California
(the Property), to GE Capital Aviation Services, Inc. (GE Aviation), a
party in interest with respect to employee benefit plans participating
in the Trust, provided the following conditions are met:
(a) All terms and conditions of the Lease are at least as favorable
to the Trust as those which the Trust could have obtained in an arm's-
length transaction with an unrelated party at the time the Lease was
executed;
(b) The rent paid by GE Aviation to the Trust under the Lease is
not less than the fair market rental value of the office space, as
established by an independent qualified real estate appraiser;
(c) David P. Rhoades (Mr. Rhoades), acting as a qualified,
independent fiduciary for the Trust (the Independent Fiduciary),
reviewed all terms and conditions of the Lease prior to the
transaction, as well as any subsequent modifications to the Lease, and
determined that such terms and conditions would be in the best
interests of the Trust at the time of the transaction; and
(d) The Independent Fiduciary represents the interests of the Trust
for all purposes under the Lease as a qualified, independent fiduciary
for the Trust, monitors the performance of the parties under the terms
and conditions of the Lease and the exemption, and takes whatever
action is necessary to safeguard the interests of the Trust throughout
the duration of the Lease.
EFFECTIVE DATE: The exemption is effective for the period from August
3, 1994, until the scheduled termination date of the Lease, as it may
be renewed or extended by the parties subject to the review and
approval of the Independent Fiduciary, or, if earlier, the date the
Lease is actually terminated by the parties.
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 June 15, 1995, at 60 FR
31512.
NOTICE TO INTERESTED PERSONS: The applicant represents that it was
unable to notify interested persons within the time period specified in
the Federal Register notice published on June 15, 1995. However,
pursuant to an agreement between the applicant and the Department, the
Trust notified all interested persons (including active employees,
former employees and retirees of General Electric Company (GE) and its
affiliates) no later than March 11, 1996.\1\ Interested persons were
advised that they had until April 10, 1996 to comment and/or request a
hearing on the proposed exemption.
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\1\ The applicant represents that notice of the proposed
exemption was provided to the active employees of GE and its
affiliates who are participants and beneficiaries of the plans
participating in the Trust by posting a notice (along with a copy of
the proposed exemption as published in the Federal Register) at GE
locations, in areas that are customarily used for notices to
employees with regard to employee benefits or labor relations
matters, on or before March 11, 1996. Former employees and retirees,
along with other employees, were notified by means of publication of
a notice in the 1994 Summary Annual Reports which were distributed
to such persons during September and October 1995 via first class
mail.
WRITTEN COMMENTS AND MODIFICATIONS: By letter dated November 27, 1995,
the applicant submitted the following comments and requests for
modifications regarding the notice of proposed exemption (the
Proposal).
The Effective Date paragraph in the Proposal states that the
exemption, if granted, will be effective until the scheduled
termination date of the Lease (i.e. September 16, 1999) or, if earlier,
the date the Lease is actually terminated by the parties.
The applicant states that Paragraph 10 of the Summary of Facts and
Representations in the Proposal (the Summary) contemplates that Mr.
Rhoades, as the independent fiduciary acting for the Trust (i.e. the
Independent Fiduciary), will oversee, review and approve any renewals
or extensions of the Lease, if such renewals or extensions are in the
best interests of the Trust. The applicant states further that
Condition (c) of the Proposal indicates that the Independent Fiduciary
will be responsible for reviewing any subsequent modifications to the
Lease and determining that such
[[Page 21502]]
modifications would be in the best interests of the Trust.
The applicant represents that it is likely that the parties will
negotiate whether to renew or extend the Lease at its termination, and
such a renewal or extension may be in the best interests of the Trust
depending on the then-current real estate market. Therefore, the Trust
requests that the exemption be effective until the termination of the
Lease, as it may be renewed or extended by the parties subject to the
review and approval of the Independent Fiduciary.
The applicant represents further that if Mr. Rhoades, the current
Independent Fiduciary, is no longer able to serve in that capacity, the
Trust would retain a replacement Independent Fiduciary with the same
qualifications as Mr. Rhoades and his firm. The replacement Independent
Fiduciary would be required to make the same representations made by
Mr. Rhoades regarding experience, independence from the GE and its
affiliates, and understanding the duties, liabilities and
responsibilities such person would have as a fiduciary under the Act.
In addition, the replacement Independent Fiduciary would be required to
enter into the same form of Independent Fiduciary Agreement used by Mr.
Rhoades.
In response to the applicant's comments, the Department has
modified the Effective Date paragraph in the Proposal by inserting,
after the reference to the scheduled termination date of the Lease, the
phrase ``... as it may be renewed or extended by the parties subject to
the review and approval of the Independent Fiduciary''. The Department
has also modified Conditions (c) and (d) of the Proposal by inserting
``Independent Fiduciary'' as a capitalized term in reference to Mr.
Rhoades, which is meant to incorporate the applicant's concerns
regarding the possibility of a replacement for Mr. Rhoades in the
future.
The Department received two comment letters and various telephone
calls from employees of GE who did not fully understand the Proposal's
effect on benefits provided to participants and beneficiaries of the GE
Pension Plan and other plans in the GE Trust (the GE Plans). In this
regard, the applicant states that a special telephone line was
established by GE to respond to such inquiries by participants and
beneficiaries of the GE Plans. The applicant represents that GE
received over 150 telephone calls in response to the Proposal and that
additional information was provided to interested persons when
requested.
The Department also received two comment letters from interested
persons who oppose the granting of an exemption. One of the commenters
objects to the transaction because the commenter believes that the
Lease involves ``....the risking of GE Pension funds to be used in lieu
of operating capital from the various GE businesses'' and exposes the
GE Trust to ``high risks''. The other commenter does not approve of the
Proposal but did not express any reasons for objecting to the
transaction and could not be reached for further comments.
The applicant has responded to these comments by letter dated April
24, 1996. The applicant represents that the subject transaction does
not involve the use of assets of the GE Pension Plan in lieu of
operating capital of GE. Rather, the applicant states that the
transaction involves the lease of space in an office building currently
owned by the Trust to a GE subsidiary (i.e. GE Aviation) at terms
equivalent to an arm's-length transaction, as reviewed and approved by
a qualified independent fiduciary. The applicant notes that if the GE
subsidiary had not entered into the Lease, the office space likely
would have remained vacant for a longer period, resulting in loss of
income to the Trust (including the GE Pension Plan). Therefore, the
applicant maintains that the transaction is in the best interests of
the Trust and does not in any way expose the Trust to higher risks than
it would have been exposed to absent this transaction. The applicant
concludes that there are sufficient safeguards in place to protect the
interests of the Trust and its participants and beneficiaries.
No other comments, and no requests for a hearing, were received by
the Department from interested persons.
Therefore, 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.)
NBD Bancorp, Located in Detroit, Michigan
[Prohibited Transaction Exemption 96-35 Exemption Application No. D-
09986]
Exemption
The restrictions of sections 406(b)(2) of the Act shall not apply
to the merger of the INB Principal Stability Fund (the PS Fund) into
the NBD Stable Asset Income Fund (the SAI Fund); \2\ provided the
following requirements are satisfied:
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\2\ For purposes of this exemption, the PS Fund and the SAI Fund
described herein are collectively referred to as the Funds.
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(1) On the date the merger is executed, the assets in the PS Fund
and the assets in the SAI Fund will be valued in the same manner, under
identical guidelines, by the same individuals;
(2) Upon completion of the merger of the PS Fund into the SAI Fund,
the aggregate fair market value of the interests of the employee
benefit plans (the Plans) participating in the SAI Fund immediately
following the merger, together with any cash received in lieu of
fractional units, equals the aggregate fair market value of each
participating Plans' interest in such Funds immediately before the
merger;
(3) The assets of each of the participating Plans are invested in
the same type of investments both before and after the proposed merger;
(4) Neither NBD Bancorp nor any of its affiliates receives fees or
commissions in connection with the merger;
(5) The Plans will pay no sales commissions or fees, as a result of
the transaction; and
(6) A fiduciary who is acting on behalf of each affected Plan and
who is independent of and unrelated to NBD Bancorp and any of its
affiliates receives advance written notice of the merger of the PS Fund
into the SAI Fund.
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 March 5, 1996, at 61 FR
8670.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883 (This is not a toll-free number.)
Spreckels Industries, Inc. Employee Stock Ownership Plan (the ESOP);
Spreckels Industries, Inc. Incentive Savings Plan for Union Hourly
Employees (the Hourly Plan); and
Spreckels Industries, Inc. Employees' Incentive Savings Plan (the
Incentive Plan; Collectively, the Plans), Located in Pleasanton,
California
[Prohibited Transaction Exemption 96-36, Exemption Application Nos. D-
09999 through D-10001]
Exemption
The restrictions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2),
407(a), 406(b)(1), and 406(b)(2) of the Act and the sanctions resulting
from the
[[Page 21503]]
application of section 4975 of the Code, by reason of section
4975(c)(1) (A) and (E) of the Code, shall not apply to the acquisition,
holding or exercise by the Plans of certain warrants (the Warrants) for
the purchase of Class A new common stock (the New Common Stock) of
Spreckels Industries, Inc. (the Employer), a party in interest with
respect to the Plans; provided that the following conditions are
satisfied:
(a) An independent fiduciary (the I/F) will manage the Warrants and
monitor the value of the Warrants at all times and will be empowered to
assign, transfer, sell, and exercise the Warrants in order to serve the
best interest of the Plans and their participants and beneficiaries;
(b) The fair market value of the Warrants will at no time exceed
twenty-five percent (25%) of the value of the total assets of the
Hourly Plan or the Incentive Plan;
(c) The Warrants that the Plans will acquire resulted from a
bankruptcy proceeding, in which all holders of the Class A old common
stock in Spreckels Industries, Inc. were treated in a like manner,
including the Plans;
(d) The Plans will not incur any expenses or fees in connection
with the proposed transactions;
(e) Any assignment, sale, or other transfer of the Warrants will
not involve a party in interest with respect to the Plans, as defined
in section 3(14) of the Act, unless such transfer is to the Employer,
pursuant to an exercise of the Warrants; and
(f) The I/F will determine the fair market value of the Warrants
upon acquisition by the Plans, and an independent qualified appraiser
will determine the fair market value of the Warrants on a periodic
basis (but not less frequently than annually).
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department of
Labor (the Department) invited all interested persons to submit written
comments and requests for a hearing on the proposed exemption within
forty-five (45) days of the date of the publication of the Notice in
the Federal Register on January 31, 1996. All comments and requests for
hearing were due by March 18, 1996.
During the comment period, the Department received no requests for
hearing. However, the Department did receive a comment letter from the
applicant, dated April 8, 1996, which informed the Department of
changes in the facts as represented in the proposed exemption. In this
regard, the Employer has engaged Consulting Fiduciaries, Inc. (CFI) to
replace L. Scott Maclise (Mr. Maclise), a registered investment advisor
with Linsco/Private Ledger Financial Services, who was appointed to
serve as the I/F on behalf of the Plans for the purposes of the
exemption. In the comment letter, the Employer requested concurrence
from the Department that the exemption would be granted notwithstanding
the replacement of Mr. Maclise as the I/F for the Plans.
Attached to the comment letter, the applicant included: (1) A copy
of a letter, dated April 2, 1996, which details the agreement between
the Employer and CFI concerning the engagement of CFI to provide
certain services as independent fiduciary on behalf of the Plans; and
(2) a letter, dated April 2, 1996, from CFI to the Department in which
CFI made certain representations. In this regard, CFI has accepted
appointment as I/F on behalf of the Plans for the purposes of the
transactions which are the subject of this exemption and, except in the
event of discharge or resignation as described in the agreement with
the Employer, will serve throughout the duration of the transactions.
CFI represents that it is qualified to serve as I/F, in that it is
a registered investment adviser under the Investment Advisers Act of
1940 and provides professional, independent fiduciary decision making,
consultation, and alternative dispute resolution services to plans,
plan sponsors, trustees, and investment advisers. Further, CFI is
experienced in representing clients as a fiduciary in stock
transactions.
CFI represents that it has the power to negotiate and act
independently of the Employer and its officers, directors,
shareholders, agents and representatives with respect to the
transactions which are the subject of this exemption. In this regard,
CFI is not affiliated with the Employer and the income CFI receives
from the Employer is expected to represent less than one percent (1%)
on an annualized basis of its income over the life of its engagement as
I/F.
CFI represents that it understands its duties as I/F under the Act
and the Code and will assume all duties, responsibilities, and
obligations imposed on it as I/F of the Plans in connection with the
transactions which are the subject of this exemption. In this regard,
CFI represents that it will take whatever acts are necessary to review,
analyze, negotiate, monitor, and approve or disapprove the transactions
and will be responsible for the Plans' acquisition and holding of the
Warrants. Bearing in mind its fiduciary duties under the Act, CFI
represents that it will determine whether the transactions: (a) Are
prudent and for the exclusive purpose of providing benefits to
participants; (b) are fair to the Plans from a financial point of view;
and (c) are in accordance with the terms and conditions as set forth in
the Notice.
CFI will decide on behalf of the Plans (a) whether or not the Plans
should acquire and hold the Warrants; and (b) when, if at all, the
Warrants should be exercised to acquire New Common Stock or sold and
the proceeds used to acquire such stock. With respect to the
acquisition of the Warrants, CFI represents that it will conduct due
diligence to evaluate whether the Plans should enter into the
transactions which are the subject of this exemption. CFI represents
that it bears full power to manage and monitor the value of the
Warrants at all times. In this regard, CFI represents that it will
determine the fair market value of the Warrants upon acquisition by the
Plans.
With respect to the holding of the Warrants by the Plans, CFI
represents that such holding will not impair the diversification,
prudence, or liquidity of the Plans. In this regard, CFI represents
that it will be responsible, as appropriate, for insuring that the
Warrants will be appraised on a periodic basis (but not less frequently
than annually).
CFI represents that it is empowered to assign, transfer, sell, and
exercise the Warrants in order to serve the best interests of
participants and beneficiaries of the Plan. In this regard, CFI
represents that it will not in any way transfer, assign, or sell the
Warrants to a ``party in interest'' within the meaning of section 3(14)
of the Act or section 4975(e)(2) of the Code, unless such a transfer is
to the Employer pursuant to an exercise of such Warrants.
After giving full consideration to the entire record, including the
written comment from the applicant, the Department has decided to grant
the exemption, as described and concurred in above. In this regard, the
comment letter submitted by the applicant to the Department has been
included as part of the public record of the exemption application. The
complete application file, including all supplemental submissions
received by the Department, is made available for public inspection in
the Public Documents Room of the Pension Welfare Benefits
Administration, Room N-5638, U.S. Department of Labor, 200 Constitution
Avenue, N.W., Washington, D.C. 20210.
For a more complete statement of the facts and representations
supporting the
[[Page 21504]]
Department's decision to grant this exemption refer to the Notice
published on January 31, 1996 at 61 FR 3470.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883 (This is not a toll-free number.)
Budge Clinic Profit Sharing Plan and Trust (the Plan), Located in
Logan, Utah
[Prohibited Transaction Exemption 96-37; Exemption Application No. D-
10142]
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 of certain improved real property located
in Logan, Utah (the Property) by the Plan to IHC Health Services, Inc.,
a party in interest with respect to the Plan; provided that the
following conditions are satisfied:
(A) All terms and conditions of the transaction are no less
favorable to the Plan than those which the Plan could obtain in an
arm's-length transaction with an unrelated party;
(B) The Plan receives a cash purchase price for the Property which
is no less than the fair market value of the Property as of the sale
date; and
(C) The Plan does not incur any expenses or suffer any loss with
respect to the transaction.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on March 12, 1996 at 61 FR 10015.
FOR FURTHER INFORMATION CONTACT: Ronald Willett 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 May, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 96-11744 Filed 5-9-96; 8:45 am]
BILLING CODE 4510-29-P
