[Federal Register Volume 64, Number 102 (Thursday, May 27, 1999)]
[Notices]
[Pages 28838-28843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13496]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-20; Exemption Application No. D-
10622, et al.]
Grant of Individual Exemptions; VECO Corporation (VECO), 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, DC. 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.
VECO Corporation (VECO)
Located in Anchorage, Alaska
[Prohibited Transaction Exemption 99-20
Exemption Application Number D-10622]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (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 sale (the Sale) of a certain parcel of
unimproved real property (the Property) from the VECO Corporation
Profit Sharing Plan and Trust (the Plan) to Norcon, Inc. (Norcon), a
party in interest with respect to the Plan, provided that the following
conditions are met:
(a) The terms and conditions of the Sale will be at least as
favorable to the Plan as those obtainable in an arm's length
transaction with an unrelated party;
(b) Norcon will pay the greater of $2,940,000 or the fair market
value of the Property on the date of the Sale as established by a
qualified, independent appraiser;
(c) The Sale will be a one-time transaction for cash;
(d) The Plan will pay no fees or commissions with respect to the
Sale; and
(e) An independent fiduciary acting on behalf of the Plan has
reviewed the terms of the Sale and has represented that the transaction
is in the best interest of the Plan and protective of the Plan's
participants and beneficiaries.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on March 8, 1999 at 64 FR 11052.
Written Comments: The Department received three letters signed by
49 current or former participants in the Plan endorsing the transaction
as proposed in the Notice.
[[Page 28839]]
FOR FURTHER INFORMATION CONTACT: Mr. Chris Motta of the Department,
telephone (202) 219-8881. (This is not a toll-free number.
Citibank, N.A. (Citibank) and Salomon Smith Barney Inc. (SSB)
Located in New York, NY
[Prohibited Transaction Exemption 99-21;
Exemption Application No. D-10674]
Exemption
The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1)
and (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 October 8, 1998, to (1) the
past and continued lending of securities to SSB and affiliated U.S.
registered broker-dealers of SSB or Citibank (together, SSB/U.S.) and
certain foreign affiliates (the Foreign Affiliates) of SSB and Citibank
which are broker-dealers or banks based in the United Kingdom (SB/
U.K.), Japan (SSB/Asia), Germany (SSB/Germany), Canada (SSB/Canada) and
Australia (SSB/Australia), including their affiliates or
successors,1 by employee benefit plans (the Client Plans) or
commingled investment funds holding Client Plan assets, for which
Citibank or any U.S. affiliate of Citibank, acts as securities lending
agent (or sub-agent), including those Client Plans for which Citibank
also acts as directed trustee or custodian of the securities being
lent; and (2) to the receipt of compensation by Citibank or any U.S.
affiliate of Citibank in connection with these transactions, provided
that the following conditions are met:
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\1\ Unless otherwise noted, SSB/U.S. and the Foreign Affiliates
are collectively referred to as SSB.
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(a) For each Client Plan, neither Citibank, SSB nor any of their
affiliates either has or exercises discretionary authority or control
with respect to the investment of the Client Plan assets involved in
the transaction, or renders investment advice (within the meaning of 29
CFR 2510.3-21(c)) with respect to those assets.
(b) Any arrangement for Citibank to lend Client Plan securities to
SSB in either an agency or sub-agency capacity is approved in advance
by a Client Plan fiduciary who is independent of SSB and
Citibank.2 In this regard, the independent Client Plan
fiduciary also approves the general terms of the securities loan
agreement (the Loan Agreement) between the Client Plan and SSB,
although the specific terms of the Loan Agreement are negotiated and
entered into by Citibank and Citibank acts as a liaison between the
lender and the borrower to facilitate the lending transaction.
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\2\ The Department, herein, is not providing exemptive relief
for securities lending transactions engaged in by primary lending
agents, other than Citibank and its affiliates, beyond that provided
pursuant to Prohibited Transaction Exemption (PTE) 81-6 (46 FR 7527,
January 23, 1981, as amended at 52 FR 18754, May 19, 1987) and PTE
82-63 (47 FR 14804, April 6, 1982).
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(c) The terms of each loan of securities by a Client Plan to SSB is
at least as favorable to such Client Plans as those of a comparable
arm's length transaction between unrelated parties.
(d) A Client Plan may terminate the agency or sub-agency
arrangement at any time without penalty to such Client Plan on five
business days notice.
(e) The Client Plan receives from SSB (either by physical delivery
or by book entry in a securities depository located in the United
States, wire transfer or similar means) by the close of business on or
before the day the loaned securities are delivered to SSB, collateral
consisting of cash, securities issued or guaranteed by the United
States Government or its agencies or instrumentalities, or irrevocable
United States bank letters of credit issued by a person other than
Citibank, SSB or an affiliate thereof, or any combination thereof, or
other collateral permitted under PTE 81-6, as it may be amended or
superseded.
(f) As of the close of business on the preceding business day, the
fair market value of the collateral initially equals at least 102
percent of the market value of the loaned securities and, if the market
value of the collateral falls below 100 percent, SSB delivers
additional collateral on the following day such that the market value
of the collateral again equals at least 102 percent.
(g) Prior to entering into the Loan Agreement, SSB furnishes
Citibank its most recently available audited and unaudited financial
statements, which are, in turn, provided to a Client Plan, as well as a
representation by SSB, that as of each time it borrows securities,
there has been no material adverse change in its financial condition
since the date of the most recently-furnished statement that has not
been disclosed to such Client Plan; provided, however, that in the
event of a material adverse change, Citibank does not make any further
loans to SSB unless an independent fiduciary of the Client Plan is
provided notice of any material adverse change and approves the loan in
view of the changed financial condition.
(h) In return for lending securities, the Client Plan either--
(1) Receives a reasonable fee, which is related to the value of the
borrowed securities and the duration of the loan; or
(2) Has the opportunity to derive compensation through the
investment of cash collateral. (Under such circumstances, the Client
Plan may pay a loan rebate or similar fee to SSB, if such fee is not
greater than the fee the Client Plan would pay in a comparable arm's
length transaction with an unrelated party.)
(i) All procedures regarding the securities lending activities
conform to the applicable provisions of Prohibited Transaction
Exemptions PTE 81-6 and PTE 82-63 as such class exemptions may be
amended or superseded as well as to applicable securities laws of the
United States, the United Kingdom, Japan, Germany, Canada or Australia.
(j) Each SSB borrower indemnifies and holds harmless each lending
Client Plan in the United States against any and all losses, damages,
liabilities, costs and expenses (including attorney's fees) which the
Client Plan may incur or suffer directly arising out of the use of
securities of such Client Plan by such SSB borrower or the failure of
such borrower to return such securities to the Client Plan. In the
event that the Foreign Affiliate defaults on a loan, Citibank, as agent
for the lending Client Plan, will liquidate the loan collateral to
purchase identical securities for the Client Plan. With respect to a
default by a Foreign Affiliate, if the collateral is insufficient to
accomplish such purchase, Citibank will indemnify the Client Plan for
any shortfall in the collateral plus interest on such amount and any
transaction costs incurred. Alternatively, with respect to a default by
the Foreign Affiliate, if such identical securities are not available
on the market, Citibank will pay the Client Plan cash equal to (1) the
market value of the borrowed securities as of the date they should have
been returned to the Client Plan, plus (2) all the accrued financial
benefits derived from the beneficial ownership of such loaned
securities as of such date, plus (3) interest from such date to the
date of payment. (The amounts paid shall include the cash collateral or
other collateral that is liquidated and held by Citibank on behalf of
the Client Plan.)
(k) The Client Plan receives the equivalent of all distributions
made to holders of the borrowed securities during the term of the loan,
including, but not limited to, cash dividends, interest payments,
shares of stock as a result of stock splits and rights to purchase
additional securities, or other distributions.
(l) Prior to the approval of the lending of its securities to SSB
by a new Client
[[Page 28840]]
Plan, copies of the notice of proposed exemption (the Notice) and, once
published in the Federal Register, the final exemption, are provided to
such Client Plan.
(m) Each Client Plan receives monthly reports with respect to its
securities lending transactions, including, but not limited to the
information described in Representation 28 of the Notice so that an
independent fiduciary of the Client Plan may monitor such transactions
with SSB.
(n) Only Client Plans with total assets having an aggregate market
value of at least $50 million are permitted to lend securities to SSB;
provided, however, that--
(1) In the case of two or more Client Plans which are maintained by
the same employer, controlled group of corporations or employee
organization (the Related Client Plans), whose assets are commingled
for investment purposes in a single master trust or any other entity
the assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the
Plan Asset Regulation), which entity is engaged in securities lending
arrangements with SSB, the foregoing $50 million requirement shall be
deemed satisfied if such trust or other entity has aggregate assets
which are in excess of $50 million; provided that if the fiduciary
responsible for making the investment decision on behalf of such master
trust or other entity is not the employer or an affiliate of the
employer, such fiduciary has total assets under its management and
control, exclusive of the $50 million threshold amount attributable to
plan investment in the commingled entity, which are in excess of $100
million.
(2) In the case of two or more Client Plans which are not
maintained by the same employer, controlled group of corporations or
employee organization (the Unrelated Client Plans), whose assets are
commingled for investment purposes in a group trust or any other form
of entity the assets of which are ``plan assets'' under the Plan Asset
Regulation, which entity is engaged in securities lending arrangements
with SSB, the foregoing $50 million requirement is satisfied if such
trust or other entity has aggregate assets which are in excess of $50
million (excluding the assets of any Client Plan with respect to which
the fiduciary responsible for making the investment decision on behalf
of such group trust or other entity or any member of the controlled
group of corporations including such fiduciary is the employer
maintaining such Client Plan or an employee organization whose members
are covered by such Client Plan). However, the fiduciary responsible
for making the investment decision on behalf of such group trust or
other entity--
(i) Has full investment responsibility with respect to plan assets
invested therein; and
(ii) Has total assets under its management and control, exclusive
of the $50 million threshold amount attributable to plan investment in
the commingled entity, which are in excess of $100 million. (In
addition, none of the entities described above are formed for the sole
purpose of making loans of securities.)
(o) With respect to each successive two-week period, on average, at
least 50 percent or more of the outstanding dollar value of securities
loans negotiated on behalf of Client Plans will be to unrelated
borrowers.
(p) In addition to the above, all loans involving the Foreign
Affiliates have the following supplemental requirements:
(1) Such Foreign Affiliate is registered as a broker-dealer or bank
with--
(i) The Securities and Futures Authority of the United Kingdom in
the case of SB/U.K.;
(ii) The Ministry of Finance and the Tokyo Stock Exchange in the
case of SSB/Asia;
(iii) The Deutsche Bundesbank and the Federal Banking Supervisory
Authority in the case of SSB/Germany;
(iv) The Ontario Securities Commission and the Investment Dealers
Association in the case of SSB/Canada; and
(v) The Australian Securities & Investments Commission and the
Australian Stock Exchange Limited in the case of SSB/Australia.
(2) Such broker-dealer or bank is in compliance with all applicable
rules and regulations thereof as well as with all requirements of Rule
15a-6 (Rule 15a-6) (17 CFR 240.15a-6) under the Securities Exchange Act
of 1934 (the 1934 Act) which provides foreign broker-dealers and banks
a limited exemption from United States registration requirements and
interpretations and amendments thereof to Rule 15a-6 by the Securities
and Exchange Commission (the SEC), to the extent applicable;
(3) All collateral is maintained in United States dollars or
dollar-denominated securities or letters of credit;
(4) All collateral is held in the United States and Citibank
maintains the situs of the securities Loan Agreements in the United
States under an arrangement that complies with the indicia of ownership
requirements under section 404(b) of the Act and the regulations
promulgated under 29 CFR 2550.404(b)-1; and
(5) The Foreign Affiliate provides SSB (i.e., Salomon Smith Barney
Inc.) a written consent to service of process in the United States for
any civil action or proceeding brought in respect of the securities
lending transaction, which consent provides that process may be served
on such borrower by service on SSB (i.e., Salomon Smith Barney Inc.).
(q) Citibank and its affiliates maintain, or cause to be maintained
within the United States for a period of six years from the date of
such transaction, in a manner that is convenient and accessible for
audit and examination, such records as are necessary to enable the
persons described in paragraph (r)(1) to determine whether the
conditions of the exemption have been met, except that--
(1) A prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Citibank and/or
its affiliates, the records are lost or destroyed prior to the end of
the six year period; and
(2) No party in interest other than Citibank 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 below by paragraph (r)(1).
(r)(1) Except as provided in subparagraph (r)(2) 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 (q) are
unconditionally available at their customary location during normal
business hours for examination by:
(i) Any duly authorized employee or representative of the
Department, the Internal Revenue Service or the SEC;
(ii) Any fiduciary of a participating Client Plan or any duly
authorized representative of such fiduciary;
(iii) Any contributing employer to any participating Client Plan or
any duly authorized employee representative of such employer; and (iv)
Any participant or beneficiary of any participating Client Plan, or any
duly authorized representative of such participant or beneficiary.
(r)(2) None of the persons described above in paragraphs
(r)(1)(ii)-(r)(1)(iv) of this paragraph (r)(1) are authorized to
examine the trade secrets of SSB or commercial or financial information
which is privileged or confidential.
EFFECTIVE DATE: This exemption is effective as of October 8, 1998.
[[Page 28841]]
For a more complete statement of the facts and representations
supporting Department's decision to grant this exemption, refer to the
notice of proposed exemption (the Notice) published on March 4, 1999 at
64 FR 10493.
Written Comments
The Department received one written comment with respect to the
Notice. The comment was submitted by Citibank and SSB (hereinafter, the
Applicants) and it requests modifications to the conditional language
and the Summary of Facts and Representations (the Summary) of the
Notice for purposes of clarification or to revise several typographical
errors. Following is a discussion of the Applicants' comments, the
Department's responses to these comments and a comment made by the
Department on its own initiative.
1. Paragraph (g) of the Notice. On page 10494 of the Notice,
paragraph (g) provides, in part, that prior to entering the Loan
Agreement, SSB will furnish Citibank its most recently available
``audited and unaudited statements'' which will be provided to the
Client Plan. To clarify that the statements will be of a financial
nature, the Applicants suggest that the word ``financial'' be inserted
in the condition after the phrase ``audited and unaudited.'' The
Applicants also suggest that the verb ``is'', which follows the word
``which'' be replaced with the verb ``are.''
In response to this comment, the Department has revised the
beginning of paragraph (g) to read as follows:
(g) Prior to entering into the Loan Agreement, SSB furnishes
Citibank its most recently available audited and unaudited financial
statements, which are in turn, * * *
2. Paragraph (l) of the Notice. On page 10494 of the Notice,
paragraph (l) states that prior to the approval of the lending of its
securities to SSB by a new Client Plan, copies of the proposed
exemption and the final exemption will be provided to such Client Plan.
The Applicants recommend that the Department revise this condition to
clarify that copies of the final exemption will be made available to
Client Plans once they are published in the Federal Register.
In response to this comment, the Department has revised paragraph
(l) of the Notice to read as follows:
(l) Prior to the approval of the lending of its securities to
SSB by a new Client Plan, copies of the notice of proposed exemption
(the Notice) and, once published in the Federal Register, the final
exemption, are provided to such Client Plan.
3. Paragraph (r)(1) of the Notice. On page 10495 of the Notice,
paragraph (r)(1) provides that the records Citibank is required to
maintain for purposes of the requested exemption are to be made
available at their customary location during normal business hours for
certain designated persons (i.e., the Service, the Department, a Client
Plan fiduciary, etc.) and their authorized representatives. For
purposes of clarification, the Applicants suggest that the phrase ``for
examination'' be inserted in the condition immediately following the
phrase ``normal business hours.''
The Department concurs with this clarification and has modified
paragraph (r)(1) of the Notice, accordingly.
4. Preamble and General Summary Changes. On page 10495 of the
Notice, the Preamble describes the 1998 merger (the Merger) between
Citicorp Inc. (Citicorp) and a subsidiary of the Travelers Group
(Travelers), the restructuring of Travelers as a bank holding company
and its redesignation as ``Citigroup, Inc.'' (Citigroup). The Preamble
also discusses the Applicants' request that the exemption apply
retroactively to pre-existing securities lending arrangements between
Citibank and broker-dealers associated with Citigroup which became
affiliated with Citibank following the Merger.
To clarify more accurately the status of Citibank with respect to
securities lending arrangements before the Merger, the Applicants have
requested that the Department modify the third sentence of the second
paragraph of the Preamble to read as follows:
Although prior to the Merger Citibank did not lend Client Plan
securities to any of its then-current affiliates, upon consummation
of the Merger, loans to SSB entity borrowers * * *
In addition, the Applicants request that the Department change
references to the word ``Travelers'' appearing in the Preamble and
elsewhere in the Summary to ``Citigroup'' to reflect the new name for
the entity.
The Department concurs with the requested changes and has modified
the Preamble and made corresponding changes to Representation 1(a), (b)
and (d) of the Summary.
5. Representation 1 of the Summary. On page 10495 of the Notice,
Representation 1 of the Summary provides descriptions of the Applicants
and their Foreign Affiliates. To clarify that SSB is a New York
corporation and not a Delaware corporation, the Applicants request that
the Department modify the first sentence of the first paragraph of
Representation 1(a), accordingly.
In addition, the Applicants wish to revise the sixth sentence of
the first paragraph of Representation 1(a) as follows to reflect the
updated financial information obtained for Citicorp:
* * * As of December 31, 1998, Citigroup had approximately $668
billion in assets and approximately $42.7 billion in shareholders'
equity.
In response to these comments, the Department has made the changes
suggested by the Applicants.
6. Representation 2 of the Summary. On page 10496 of the Notice,
Representation 2 of the Summary describes the governmental entities
regulating the Foreign Affiliates. The Applicants, however, wish to
point out that due to a typographical error, the verb ``is'' was
omitted from the third sentence of the first paragraph of
Representation 2 following the reference to ``SSB/Asia.''
In response to this comment, the Department has revised
Representation 2 by inserting the missing word.
7. Representations 4 and 5 and Footnote 8 of the Summary. On page
10497 of the Notice, Representations 4 and 5 and Footnote 8 of the
Summary describe Rule 15a-6 of the 1934 Act and its applicability to
and compliance by the Foreign Affiliates. In order to be consistent
with the requirements of Rule 15a-6, the Department has, on its own
initiative, revised references to the terms ``U.S. major institutional
investor'' and ``major institutional investor,'' which appear in
Representations 4 and 5 and in Footnote 8 of the Summary, to the term
``major U.S. institutional investor.'' Moreover, for purposes of
clarification, the Department has inserted the following language at
the beginning of Footnote 8:
Note that the categories of entities that qualify as ``major
U.S. institutional investors'' has been expanded by a SEC No-Action
letter.
The Applicants have concurred with the foregoing changes made by
the Department.
8. Representation 12 of the Summary. On pages 10498 and 10499 of
the Notice, Representation 12 of the Summary describes the various
forms of securities lending agreements that may be entered into by
Client Plans with Citibank and the relevant terms of such agreements.
However, to correct a typographical error, the Applicants suggest that
the Department change the reference to ``Representation 10,'' in the
second sentence of the third paragraph of Representation 12, to
``Representation 11.''
[[Page 28842]]
In response to this comment, the Department has made the requested
modification.
9. Footnote 17 of the Summary. On page 10499 of the Summary,
Footnote 17 discusses the capital adequacy requirements for the
Applicants' U.S.-domiciled and Foreign Affiliates. To correct a
typographical error appearing in the footnote, the Applicants request
that the Department change the reference to ``SSB,'' appearing in the
first sentence of Footnote 17, to ``SSB/U.S.'' In addition, the
Applicants request that the Department delete one of the duplicate
references to SSB/Canada, appearing in the first sentence of the second
paragraph of the footnote, and substitute the Foreign Affiliate, ``SSB/
Australia,'' in its stead.
In response to these comments, the Department has made the
suggested changes.
10. Representation 16 of the Summary. On page 10499 of the Notice,
Representation 16 of the Summary provides further details regarding the
terms of the Agency Agreement and the Primary Lending Agreement,
including the compensation paid to Citibank for its services as lending
agent, custodian and manager of the cash collateral received. To
emphasize that Citibank may also serve as a ``directed trustee'' to a
Client Plan, the Applicants recommend that the term ``directed
trustee'' be inserted immediately preceding the word ``custodian'' in
the second sentence of the first paragraph of Representation 16.
In response, the Department has made the suggested change.
11. Representations 29 and 30 of the Summary. On page 10501 of the
Notice, Representation 29 of the Summary describes the functions of the
monthly report that will be provided to each Client Plan participating
in the Applicants' securities lending program. The Applicants, however,
request that the second sentence of Representation 29 be modified by
inserting the phrase ``upon the request of the Client Plan''
immediately following the phrase ``In addition'' in order to be
consistent with previously-agreed to language.
In addition, on page 10502 of the Notice, Representation 30 of the
Summary discusses the requirements for securities lending by two or
more Unrelated Client Plans whose assets are commingled in a group
trust or a ``plan assets'' investment entity and describes an ``outside
business test'' that will be imposed on the fiduciary exercising
investment discretion over the commingled entity.
To correct a typographical error appearing in the Notice, the
Applicants request that the Department insert the phrase ``member of
the controlled group of corporations'' immediately following the phrase
``or other entity or any'' in the second paragraph of Representation
30.
In response to the comments discussed above, the Department has
made the requested changes.
For further information regarding the Applicants' comment letter or
other matters discussed herein, interested persons are encouraged to
obtain copies of the exemption application file (Exemption Application
No. D-10674) the Department is maintaining in this case. The complete
application file, as well as all supplemental submissions received by
the Department, are made available for public inspection in the Public
Documents Room of the Pension and Welfare Benefits Administration, Room
N-5638, U.S. Department of Labor, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210.
Accordingly, after giving full consideration to the entire record,
including the written comment provided by the Applicants, the
Department has made the aforementioned changes to the Notice and has
decided to grant the exemption subject to the modifications described
above.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Operating Engineers Local 324 Journeyman and Apprentice Training
Fund (the Plan)
Located in Howell, Michigan
(Prohibited Transaction Exemption 99-22
Exemption Application No. L-10645)
Exemption
The restrictions of sections 406(a), 406(b)(1) and (2) of the Act
shall not apply to: (1) the proposed loan of $1,500,000 (the Loan) to
the Plan by the International Union of Operating Engineers Local 324,
AFL-CIO (the Union), a party in interest with respect to the Plan, for
the repayment of certain outstanding loans (the Original Loans) made to
the Plan by the Michigan National Bank (the Bank), an unrelated party;
and (2) as of March 12, 1998, the pledging of certificates of deposit
by the Union as security for the Original Loans; provided that the
following conditions are met:
(a) The terms and conditions of the Loan are at least as favorable
to the Plan as those which the Plan could have obtained in an arm's-
length transaction with an unrelated party;
(b) The Plan's trustees determine that the Loan is appropriate for
the Plan and in the best interests of the Plan's participants and
beneficiaries;
(c) An independent fiduciary acting on behalf of the Plan (the
Independent Fiduciary) reviews the terms of the Loan and determines
that the Loan is protective of and in the best interests of the Plan;
(d) The Independent Fiduciary monitors the Loan, as well as the
conditions of this exemption, and takes whatever actions are necessary
to safeguard the interests of the Plan under the Loan;
(e) The Loan is repaid by the Plan solely with funds the Plan
retains after paying all of its operational expenses; and
(f) The terms and conditions relating to the pledging of the
certificates of deposit by the Union as security for the Original Loans
were in the best interest of the Plan and its participants and
beneficiaries.
EFFECTIVE DATE: This exemption is effective as of March 12, 1998.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on January 21, 1999 at 64 FR 3356.
FOR FURTHER INFORMATION CONTACT: Christopher J. Motta of the
Department, telephone (202) 219-8883 (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
[[Page 28843]]
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 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, D.C., this 24th day of May, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 99-13496 Filed 5-26-99; 8:45 am]
BILLING CODE 4510-29-P
