96-11744. Grant of Individual Exemptions; General Electric  

  • [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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    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
    
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    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
    
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    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
    
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    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
    
    

Document Information

Effective Date:
8/3/1994
Published:
05/10/1996
Department:
Pension and Welfare Benefits Administration
Entry Type:
Notice
Action:
Grant of individual exemptions.
Document Number:
96-11744
Dates:
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.
Pages:
21500-21504 (5 pages)
Docket Numbers:
Prohibited Transaction Exemption 96-34, Exemption Application No. D- 09880, et al.
PDF File:
96-11744.pdf